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UNITED STATES
 
 SECURITIES AND EXCHANGE COMMISSIONWashington, D.C 20549

FORM 10-K

(Mark One)

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



| |  | For the fiscal year ended December 31, 1999
| |  | -------------------------------------------



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

Commission File Number: 1-9037

The IT Group, Inc.(Exact name of registrant as specified in its charter)

| | Delaware(State or other jurisdiction of
   
   incorporation or organization) |  | 33-0001212
   (I.R.S. Employer
   
   Identification No.) | 
| | ----------------------------------------------------------------------------- |  | --------------------------------------------------------- | 
|
| | 2790 Mosside Boulevard, Monroeville, Pennsylvania
     15146-2792             | 
| | (Address of principal executive offices)                                      |  | (Zip Code)                                                | 





Registrant's telephone number, including area code:
   (412) 372-7701

Securities registered pursuant to Section 12(b) of the
   Act:

| | Title of each class                                  |  | Name of each exchange on which
     registered | 
| | ---------------------------------------------------- |  | ---------------------------------------------- | 
| | Common Stock, $.01 Par Value                         |  | New York Stock Exchange; Pacific
     Exchange | 
| | Preferred Stock Depositary Shares                    |  | New York Stock Exchange; Pacific
     Exchange | 
| | 8% Convertible Subordinated Debentures due
     2006 |  | NASDAQ                                         | 



Securities registered pursuant to Section 12(g) of the
   Act:

11 1⁄4% Senior Subordinated Notes due 2009

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 if disclosure of delinquent filers pursuant to
   Item 405 of Regulation S-K is not contained herein, and will not be
   contained, to the best of registrant's knowledge, in definitive proxy or
   information statements incorporated by reference in Part III of this Form
   10-K or any amendment to this Form 10-K.   x

The aggregate market value of the registrant's voting
   common stock held by non-affiliates of the registrant at March 24, 2000, was
   approximately $141,787,745 (based upon the closing sale price of its common
   stock on the New York Stock Exchange as reported by The Wall Street Journal
   on such date.)

At March 24, 2000 the registrant had issued and
   outstanding an aggregate of 22,968,560 shares of its common stock, including
   62,997 shares held in treasury.

Documents Incorporated by Reference

Certain information included in the registrant's
   definitive proxy statement to be filed with the Securities and Exchange
   Commission for the Annual Meeting of Stockholders of the registrant to be
   held on June 8, 2000 is incorporated by reference into Part III hereof.



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THE IT GROUP, INC.
 
 ANNUAL REPORT ON FORM 10-K
 
 FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS.

Overview

The IT Group, Inc. (we or IT or the Company) is a leading provider of
   diversified, value-added services in the areas of consulting, engineering
   and construction, remediation, and facilities management. Through our
   diverse group of highly specialized companies, with over 7,000 employees in
   over 80 domestic offices and 15 international offices, clients can take
   advantage of a single, fully integrated delivery system and our extensive
   expertise to meet their global environmental needs. Our broad range of
   services includes the identification of contaminants in soil, air and water
   and the subsequent design and execution of remedial solutions. We also
   provide project and facilities management capabilities and other related
   services to non-environmental civil construction, watershed restoration and
   the outsourcing privatization markets. We have, and plan to continue to,
   diversify by pursuing selective acquisitions in the infrastructure and other
   non-environmental services industries complementary to our core business and
   client base.We do not own active hazardous waste disposal
   facilities.

We
   provide services through seven principal business lines: Government
   Services, Energy and Nuclear Operations, Commercial Engineering and
   Construction, Consulting and Technology, Solid Waste, Outsourced Services,
   and International. These business lines comprise four reportable segments
   for financial reporting: Engineering & Construction, Consulting &
   Technology, Outsourced Services, and International.

Government Services

Our Government Services business line provides turnkey engineering and
   construction services to U.S. government agencies, primarily the Department
   of Defense (DOD). The Government Services business line performs site
   assessments, remedial designs, construction remediation, operation and
   maintenance services, facilities management, and site closures. We have
   expanded and diversified our capabilities into non-traditional environmental
   markets involving civil works projects and restoration of natural
   ecosystems, such as the Florida Everglades.

Energy and Nuclear Operations

Our
   Energy and Nuclear Operations (ENO) business line provides low-level
   radiological and mixed waste services, primarily to the Department of Energy
   (DOE) in support of their on-going waste operations and nuclear facility
   stabilization requirements, and expects to have increasing opportunities
   from private utility clients. Services provided include characterization,
   transition/stabilization, decontamination/decommissioning and waste
   processing disposition.

Commercial Engineering and Construction

Our Commercial Engineering and Construction (CEC) business line
   provides turnkey engineering and construction services to private-sector
   clients, and state and local government agencies. Using a
   vertically-integrated service approach, CEC performs site assessments,
   remedial designs, construction remediation, operation and maintenance and
   site closures, and has expanded into non-environmental markets involving
   civil works projects and watershed restoration.

Consulting and Technology

Our Consulting and Technology (C&T) business line provides
   specialized consulting services in the areas of environmental health and
   safety compliance (EH&S), risk and cost allocation determination,
   life-cycle planning, product registration, due diligence support for asset
   transactions and strategic environmental planning. We develop strategies to
   evaluate risks associated with underlying environmental and health and
   safety issues and prepare cost effective science-based solutions. Using our
   comprehensive regulatory expertise, we
 develop long-term compliance strategies designed to meet future regulatory
   requirements or assist in the implementation of certification programs, such
   as ISO 14001. Our sophisticated information technology applications
   integrate the latest information management tools to increase or enhance
   operational efficiencies.

Additionally, through our recently-acquired e-Com Solutions
   subsidiary, we provide Web-based technologies to enhance client operational
   efficiencies through training, knowledge management and supply chain
   management systems, and EH&S applications ranging from environmental
   monitoring to enterprise resource planning systems.

Solid Waste

Adding EMCON in 1999 to our existing solid waste capabilities, our
   Solid Waste business line provides turnkey services including engineering,
   permitting, design/build construction, equipment fabrication, landfill
   products, sampling monitoring, and facility and system operation and
   maintenance. Our capabilities range from site investigation through landfill
   design and construction to post-closure operations and maintenance or
   redevelopment, for complete life-cycle management of solid waste.

Outsourced Services

Our
   Outsourced Services business line provides program/construction management,
   general contracting, housing management, design/build construction, facility
   planning and management, and maintenance renovation. We also provide
   facility support services and operations management support at military
   installations and other facilities, such as the Kennedy Space
   Center.

International

Our International business line provides comprehensive environmental
   and infrastructure services to multinational and foreign-based clients
   through offices managed in the United States and staffed by our local
   professionals in Taiwan, Australia, Canada, Italy, and the United Kingdom,
   as well as project offices throughout the world. We have established local
   partnerships and affiliations to selectively pursue future work in Mexico,
   Peru, South Korea, Japan, and Europe where we do not have a local presence.
   We believe a strategic mix of in-house resources and multinational
   partnerships provides us with global resources to support our multinational
   client base.

Employees

At December 31, 1999, we employed approximately 7,000 employees. Many
   of these are professional level employees, including over 800 engineers, 250
   environmental scientists, 400 geologists and 700 other specialists in
   related fields. In addition, our professional employees hold in the
   aggregate over 950 masters degrees and 150 PhD's. Our ability to retain,
   expand and utilize our staff, including those employees that have primary
   responsibility for maintaining client relationships, will be a significant
   factor in our future success. None of our employees are represented by labor
   unions under Company-wide collective bargaining agreements. However, we do
   employ union labor from time to time on a project-specific basis. We
   consider our relations with our employees to be good.

Environmental Industry Overview

Demand for our environmental services is driven by a number of
   factors, including:

| |  | our clients' need to comply with federal, state and
     municipal environmental regulations and enforcement regarding the quality
     of the environment;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the needs of the DOD and DOE to restore sites
     formerly used for weapons production or military bases;
| | - | ----------------------------------------------------------------------------------------------------------



| |  | our clients' need to bring aging and new production
     facilities into compliance with current environmental
     regulations;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| |  | our clients' need to minimize waste generation on an
     ongoing basis; and
| | - | ----------------------------------------------------------------------------



| |  | our clients' need to reduce or forestall liability
     associated with pollution-related injury and damage.
| | - | ------------------------------------------------------------------------------------------------------------



A significant portion of future DOD and DOE environmental expenditures
   will be directed to cleaning up hundreds of domestic and international
   military bases, and to restore former nuclear weapons facilities. DOD has
   stated that there is a need to ensure that the hazardous wastes present at
   these sites, often located near population centers, do not pose a threat to
   the surrounding population, and, in connection with the closure of many
   military bases, there is an economic incentive to make sure that the
   environmental restoration enables these sites to be developed commercially
   by the private sector. DOE has long recognized the need to stabilize and
   safely store nuclear weapons materials and to clean up areas contaminated
   with hazardous and radioactive waste. According to federal government
   publications, the DOD's budget for environmental remediation will be
   approximately $2 billion annually for the next five years and the DOE's
   budget will be approximately $6 billion annually for the same period.

Traditionally DOD has maintained most of its own facilities and
   support systems, but it is now in the process of transferring many of these
   responsibilities to private contractors and private owners. A privatization
   market has been created by the government's sales of assets or revenue
   streams, such as military housing, electric, water and wastewater utilities
   on a military base, to a private company, which is then responsible for its
   maintenance and operation of site activities currently conducted by
   government, often military, personnel.

Significant environmental laws have been enacted in the U.S. in
   response to public concern about the environment. These laws and the
   implementing regulations affected nearly every industrial activity, and
   efforts to comply with the requirements of these laws create demand for our
   services.

For more discussion of the regulatory environment in which we operate,
   and the principal federal legislation that has created a substantial market
   for us, see "Business-Regulatory".

Clients and Concentration of
   Revenues

Our clients are federal, state, and local governments and commercial
   businesses worldwide. We obtained 57% of our revenues for the twelve months
   ended December 31, 1999 from the U. S. government agencies through more than
   100 contracts that range in length from one to ten years. In addition, we
   serve more than 1,500 commercial clients on projects which range in length
   from one month to more than one year. Through acquisitions and bidding
   strategies, we have intentionally reduced our U. S. government revenue
   concentration, particularly with the DOD. We intend to continue our
   diversification, with a target of 50% non-U. S. government revenues. As of
   December 31, 1999 we employed over 7,000 persons in a network of over 80
   domestic and 15 international offices. Approximately 86% of our backlog at
   December 31, 1999 was under U. S. government programs and approximately 84%
   is expected to be charged to our clients on a cost-reimbursable basis.
   Additionally, many of our commercial contracts automatically renew every
   year and are typically not part of our backlog.

The table below sets forth the percentage concentration of revenues we
   receive from U. S. government contracts as a percentage of our consolidated
   revenues.

|Source                                      | Twelve Months Ended
   
   December 31, 1999 | Nine Months Ended
   
   December 25,
   
   1998 | Twelve Months
   
   Ended
   
   March 27,
   
   1998
|------------------------------------------- | -------------------------------------------- | ------------------------------------------------- | -------------------------------------------------------
|U.S. government:                            |                                              |                                                   |                                                        
|DOD                                         | 41%                                          | 52%                                               | 47%                                                    
|DOE                                         | 9                                            | 10                                                | 9                                                      
|Other federal
     agencies                 | 7                                            | 7                                                 | 2                                                      
|                                            |                                              |                                                   |                                                        
|                                            | 57                                           | 69                                                | 58                                                     
|Commercial, and state and local governments | 43                                           | 31                                                | 42                                                     
|                                            |                                              |                                                   |                                                        
|Total                                       | 100%                                         | 100%                                              | 100%                                                   
|                                            |                                              |                                                   |                                                        

Federal Government Clients

U. S. government contracts are typically awarded through competitive
   bidding pursuant to federal procurement regulations and involve several
   bidders. After a successful bidder is selected, there is usually a period
   for contract negotiations. Government contracts also typically have annual
   funding provisions, may be terminated at the discretion of the government
   agency and are limited by public sector budgeting constraints. Many of these
   government contracts are multi-year Indefinite Delivery Order (IDO)
   agreements. These programs provide estimates or a maximum of what the agency
   expects to spend, and our program management and technical staffs work
   closely with the client to define the scope and amount of work required.
   While these contracts do not initially provide us with any specific amount
   of work, as projects are defined, the work is typically awarded to us
   without further formal competitive bidding. Approximately 40% of our
   revenues for the twelve months ended December 31, 1999 were from IDO
   agreements.

Although we generally serve as the prime contractor on our federal
   government contracts, or as a part of a joint venture which is the prime
   contractor, we also serve as a subcontractor to other prime contractors on
   some federal government programs. As has become typical in the environmental
   industry, we have entered and may continue to enter into joint venture or
   teaming arrangements with competitors when bidding on the largest, most
   complex contracts.

Commercial, and State and Local Government Clients

We serve numerous commercial and state and local government clients
   including chemical, petroleum and other manufacturing firms, utilities, real
   estate and transportation service companies and law firms. Much of our
   commercial work represents new contracts awarded by existing clients. Our
   strategy is to increase the commercial portion of our business. In 1999,
   through acquisitions and bidding strategies, we increased our commercial and
   state and local government revenues to 43% from 31% over the prior fiscal
   year. No single commercial client accounted for 10% or more of our
   consolidated revenues in the twelve months ended December 31, 1999, the nine
   months ended December 25, 1998, or the twelve months ended March 27, 1998.
   Although in recent years enforcement of the Comprehensive Environmental
   Response, Compensation and Liability Act of 1980 (CERCLA) has diminished
   (see "Business-Regulatory"), clients are still seeking strategic,
   integrated solutions to their environmental problems, which we seek to
   provide.

Contracts

We enter into various types of contracts with our clients, including
   fixed-price and cost-reimbursable plus fixed fee and award fee contracts.
   For the twelve months ended December 31, 1999, 30% of our revenue was
   derived from fixed-price contracts and 70% from cost-reimbursable plus fixed
   fee and award fee contracts. Under a fixed-price contract, the client agrees
   to pay a specified price for our performance of the entire contract. Under a
   cost-plus contract, we charge clients negotiated rates based on our direct
   and indirect costs plus a fee component. Our ability to perform profitably
   under fixed-price and other types of contracts often depends in part on our
   ability to avoid, and once encountered, to identify, manage and recover on
   claims for, differing and unanticipated conditions and other changes.
   Fixed-price contracts have inherent risks. These risks include:

| |  | underestimation of costs;
| | - | -------------------------



| |  | problems with the appropriate choice of
     technologies;
| | - | ----------------------------------------------------------



| |  | unforeseen costs or difficulties;
| | - | ---------------------------------



| |  | delays beyond our control; and
| | - | ------------------------------



| |  | economic and other changes that may occur during the
     contract period.
| | - | --------------------------------------------------------------------------



The risks we face under fixed-price contracts could have a material
   adverse effect on our business.

Generally, our contracts do not require that we provide performance
   bonds. A performance bond, issued by a surety company, guarantees the
   contractor's performance under the contract. If the contractor defaults
   under the contract, the surety will, in its discretion, step in
 to finish the job or pay the client the amount of the bond. We have signed
   indemnity agreements with our sureties to indemnify them from obligations
   under bonds that arise from our failure to perform under contracts for which
   bonds are issued. If, however, the contractor does not have a performance
   bond and defaults in the performance of a contract, the contractor is
   responsible for all damages resulting from the breach of contract. These
   damages include the cost of completion, together with possible consequential
   damages such as lost profits. To date, we have not incurred material damages
   beyond the coverage of any performance bond, and we have never had a bond
   called where the surety has been required to take over a project or pay
   damages.

For the twelve months ended December 31, 1999 subcontractor costs
   comprised approximately 25% of our revenues. We typically seek performance
   bonds from our subcontractors consistent and in parallel to the requirements
   in our prime contract. The absence of qualified subcontractors with whom we
   have a satisfactory relationship could adversely affect the quality of our
   services and our ability to perform under some of our contracts.

We have a set of company-wide estimating and proposal development
   procedures designed to provide consistency across all business lines during
   the preparation of proposals. Our shared services group implements these
   procedures and provides resources to our business lines for preparation of
   cost estimates, proposals and bid submittals. Each of our business lines has
   responsibility for responding to customer solicitations. The final decision
   requires coordination between operations management, business development
   personnel and corporate management. Before our bid is submitted to a client,
   the approach and pricing are reviewed by operations and estimating
   management, which performs a risk evaluation of terms and conditions and
   technical aspects of the opportunity.

Regulatory

Our clients and we are subject to extensive environmental laws and
   regulations. The level of enforcement of these laws and regulations affects
   the demand for many of our services and creates certain significant risks
   and potential opportunities for us in providing our services. Regulatory
   enforcement and changes may also affect our inactive disposal sites in
   Northern California. See "Business-Risk Factors-Environmental
   Contractor Risks" and the Notes to Consolidated Financial
   Statements-Note 14. "Discontinued Operations."

Over the past several years, interested parties have proposed a number
   of significant changes to existing environmental laws. Most of the proposed
   changes have been delayed in Congress. The proposals would overhaul the
   government regulatory process, require regulatory risk assessments and
   cost-benefit analyses and reduce requirements for reporting to the
   government. Although the impact of these proposed changes on our business
   cannot yet be fully predicted, the proposed changes in regulations and the
   perception that enforcement of current environmental laws has been reduced
   may decrease the demand for some of our services, as clients anticipate and
   adjust to the potential changes. Proposed changes could result in increased
   or decreased demand for some of our services. For example, if regulatory
   changes decrease the cost of remediation projects or result in more funds
   being spent for actual remediation, that portion of our business could
   increase while amounts spent for studies could decrease. The ultimate impact
   of the proposed changes will depend upon a number of factors, including the
   overall strength of the economy and clients' views on the cost-effectiveness
   of remedies available under the changed regulations. These factors have been
   partially offset by an increased desire on the part of commercial clients
   for strategic environmental services, which:

| |  | provide an integrated, proactive approach to
     environmental issues, and
| | - | ---------------------------------------------------------------------------



| |  | are driven by economic, as opposed to legal or
     regulatory concerns.
| | - | ------------------------------------------------------------------------

In addition, there is a growing international market arising from the
   increased awareness on the part of foreign governments and private sector
   entities of the need for additional and/or initial environmental
   regulations, studies and remediation.

The principal environmental legislation and proposed changes in those
   laws affecting us and our clients is described below:

Comprehensive Environmental Response, Compensation and Liability
   Act of 1980. CERCLA established the Superfund program to clean up
   existing, often abandoned, hazardous waste sites and provides for penalties
   and significant damages for noncompliance with EPA orders. CERCLA's
   Superfund taxing authority expired in December 1995, and CERCLA's authority
   to expend funds originally expired in September 1994. However, Congress has
   extended the EPA's authority to use funds on an interim basis. Congress to
   date has linked long-term
 reinstatement of Superfund's taxing and spending authority to comprehensive
   reauthorization and revision of CERCLA. The Congressional Budget Office
   estimates that the Superfund trust fund has sufficient funds for the CERCLA
   program through the government's fiscal year 2001, which begins in October
   2000.

A number of changes in CERCLA have been proposed. We believe Congress'
   failure to reauthorize CERCLA, and continuing uncertainty concerning the
   details of the legislation, have resulted in project delays and/or the
   failure of clients to initiate projects. Arguments over state participation
   in CERCLA programs and provisions for damages to natural resources make
   passage of a bill reauthorizing CERCLA more uncertain. Potential exhaustion
   of the monies in the Superfund trust may accelerate the passage of
   legislation reauthorizing CERCLA.

In response to Congressional and private sector pressure and, in part,
   to avoid more sweeping changes by Congress, the EPA has relaxed regulatory
   requirements and enforcement. For example, the EPA has attempted, through
   various regulatory initiatives, to make it easier to redevelop
   "brownfields," i.e., lightly to moderately contaminated urban
   sites. Brownfields sites nationally have been estimated to number in the
   hundreds of thousands. Similar legislation has also been introduced, and a
   number of states have initiated similar programs. The EPA is currently
   attempting to raise funds for brownfields programs through bond programs.
   While we believe such programs offer additional opportunities, we cannot
   predict the ultimate impact of these programs.

Resource Conservation and Recovery Act of 1976.RCRA restricts
   the land disposal of certain wastes, prescribes more stringent management
   standards for hazardous waste disposal sites, sets standards for underground
   storage tank (UST) management and provides for corrective action procedures.
   RCRA also imposes liability and stringent management standards on generators
   or transporters of hazardous waste and owners or operators of waste
   treatment, storage or disposal facilities.

RCRA's requirement that USTs be upgraded to double-walled tanks with
   leak detection systems became effective on December 22, 1998. We believe
   that increased state and EPA enforcement actions for UST noncompliance will
   prompt increased repair or replacement of these tanks. Further, in November
   1998, the EPA adopted its new Hazardous Waste Identification Rule
   regulation, allowing more flexible and cost-effective approaches to site
   cleanups. In particular, the final rule streamlines permitting, treatment
   and technological requirements for waste remediation.

Clean Air Legislation.The Clean Air Act requires compliance
   with National Ambient Air Quality Standards for specific pollutants and
   empowers the EPA to establish and enforce limits on the emission of various
   pollutants from specific types of facilities. The Clean Air Act Amendments
   of 1990 modified the Clean Air Act in a number of significant areas. Among
   other changes, these amendments

| |  | established emissions allowances for sulfur and
     nitrogen oxides,
| | - | ---------------------------------------------------------------------



| |  | established strict requirements applicable to
     emissions of air toxics,
| | - | ---------------------------------------------------------------------------



| |  | established a facility-wide operating permit program
     for all major sources of regulated pollutants,
| | - | --------------------------------------------------------------------------------------------------------



| |  | established requirements for management of accidental
     releases of toxic air pollutants, and
| | - | ------------------------------------------------------------------------------------------------



| |  | created significant new penalties, both civil and
     criminal, for violations of the Clean Air Act.
| | - | -----------------------------------------------------------------------------------------------------

Although the EPA recently promulgated regulations significantly
   tightening standards for ozone and particulate emissions, and these
   regulations might eventually increase demand for our air quality services,
   one court recently invalidated them as unconstitutional. Also, while world
   leaders recently agreed to the "Kyoto Protocol" to reduce
   greenhouse gas emissions, and these proposals could increase demand for our
   air quality services, they have also met with substantial opposition, and
   their ultimate fate remains uncertain. Also uncertain are the fate and
   impact of proposals for tax credits for greenhouse gas emission reductions
   as an alternative to the Kyoto Protocol.

The Price Anderson Act (PAA).Approximately 6% of our $4.3
   billion in backlog consists of projects in our energy and nuclear services
   business. We service the need of the DOE in converting its weapons
   facilities to civilian purposes and the need of the nuclear power industry
   in the decontamination and decommissioning of nuclear power plants. We
   expect this portion of our business to continue to grow as up to 35
   operating commercial power plants reach the end of their useful lives over
   the next 20 years.

The PAA promotes and regulates the nuclear power industry in the U.S.
   The PAA comprehensively regulates the manufacture, use and storage of
   radioactive materials, and promotes the nuclear power industry by offering
   broad indemnification to nuclear power plant operators and DOE contractors.
   While the PAA's indemnification provisions are broad, it has not been
   determined whether they apply to all liabilities that might be incurred by a
   radioactive materials cleanup contractor such as us. Also, the PAA expires
   in 2002. Because nuclear power remains controversial and no new nuclear
   plants are planned in the U.S., it is not clear that the PAA and its
   indemnification provisions will be extended beyond 2002. Our business could
   be adversely affected if the PAA were not extended beyond 2002.

The Food Quality Protection Act (FQPA) of 1996.FQPA has
   created an increased demand for agricultural chemical registration and
   defense services. JSC, one of our recent acquisitions, is a leading supplier
   of these services. Also, the regulatory initiatives incorporated in FQPA,
   including more comprehensive risk evaluation and management for hazardous
   chemicals, are likely to influence future EPA policies and practices. Such
   regulatory developments may increase demand for our services.

The Clean Water Act of 1972. The Clean Water Act established a
   system of standards, permits and enforcement procedures for the discharge of
   pollutants to surface water from industrial, municipal and other wastewater
   sources.

Other Federal and State Environmental Laws.Our clients also
   use our services in complying with, and our operations are subject to
   regulation under, among others, the following federal laws:

| |  | the Toxic Substances Control Act,
| | - | ---------------------------------



| |  | the Safe Drinking Water Act,
| | - | ----------------------------



| |  | the Occupational Safety and Health Act, and
| | - | -------------------------------------------



| |  | the Hazardous Materials Transportation
     Act.
| | - | ------------------------------------------------

Many states also have passed legislation and other regulations and
   policies similar to the federal laws mentioned to cover more detailed
   aspects of environmental and hazardous materials management.

Technology Development and Patents

We emphasize several technologies including bioremediation and in situ
   oxidation. For example, we have led the industry in the use of Monitored
   Natural Attenuation to demonstrate the recovery of the subsurface
   environment through the use of naturally-occurring degradation processes for
   hydrocarbon and chlorinated solvents contamination. We have completed 17
   pilot-scale field demonstrations and three full-scale implementations of our
   PermOX-IT(sm) process which uses permanganate oxidation technology for the
   in situ destruction of dense non-aqueous phase liquids such as
   trichloroethylene and perchloroethylene. In addition, we have obtained a
   service mark for our RAPIDGAS (sm) process used to rapidly assess fuel spill
   sites for treatment options . We have licensed from a third party
   "barrier wall and reactive gate technology," which assists in the
   decomposition of contaminants, and continue to apply it to client projects.
   The EPA has also extended for a third time our multi-year contract to
   operate its Test & Evaluation Facility in Cincinnati, Ohio. The facility
   provides the EPA with treatability testing and process development services
   on contaminated waste waters, sludges and soils. This facility is also
   available for private party-sponsored technology evaluations. Major efforts
   this year focused on safe drinking water and water treatment processes
   including filtration and disinfection technologies. We also have improved
   our environmental information management technologies. We hold over 20
   patents for various environmental technologies, and we have received
   extensive patent coverage for the Manage IT system, which we use to manage
   and track hazardous waste at client sites. Through the use of proprietary
   and other environmental information management systems, we have become a
   leading provider of advanced data base management technology to serve
   clients' needs.

Insurance

We maintain liability insurance programs in the ordinary course of
   business that are structured to provide coverage for major and catastrophic
   losses. Effective April 1, 1999, our commercial general liability insurance
   program provides for coverage of up to $75 million with a $500,000
   deductible. We also carry pollution liability insurance with policy limits
   of up to $35 million with a $1 million deductible.

In preceding years, our insurance program required us to self-insure
   for the first $5 million retention for each of its general liability,
   automobile liability and contractor's pollution liability coverages. We are
   obligated to indemnify our insurance carriers against liabilities and costs
   of defense, subject to certain limitations for each of these kinds of
   coverage, up to that $5 million limit. Financial guarantee bonds support
   this indemnity commitment.

Although we believe our insurance program is appropriate for the
   management of our risks, our insurance policies may not fully cover our
   operations. Policy coverage exclusions, retaining risks through deductible
   and self-insured retention programs, or losses in excess of the coverage may
   cause all or a portion of one or more losses not to be covered by our
   insurance.

Risk Factors

The following provides a summary of some of the significant risk
   factors which may affect our business and our results of operations,
   liquidity and financial condition.

Significant Acquisitions and Management of Growth

From 1991 to 1999, our industry has experienced substantial
   consolidation. This consolidation has been driven by:

| |  | the benefits of economies of scale;
| | - | -----------------------------------



| |  | growing demand for full service business oriented
     solutions;
| | - | -----------------------------------------------------------------



| |  | the delays in the reauthorization of major
     environmental laws and the perceived relaxation in the enforcement of
     current laws;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| |  | the shift from commercial to government procurement
     of environmental services as a result of the conversion of military sites
     to peaceful uses.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------

We have actively participated in this industry consolidation. Since
   March 1997, we have acquired nine firms representing aggregate revenues of
   approximately $1 billion at the time of acquisition. For further information
   on the impact of our acquisitions to our results of operations, see
   "Management's Discussion and Analysis of Results of Operations and
   Financial Condition."

We believe our recent acquisitions add capabilities that are
   complementary to our existing services, and offer us cost savings and other
   synergies. We also believe that our matrix organization and our
   comprehensive management information system allow us to:

| |  | efficiently integrate acquired operations,
| | - | ------------------------------------------



| |  | eliminate duplicative costs,
| | - | ----------------------------



| |  | centralize common functions,
| | - | ----------------------------



| |  | consolidate locations that serve the same common
     areas, and
| | - | ----------------------------------------------------------------



| |  | use our low cost structure to bid successfully on new
     projects.
| | - | --------------------------------------------------------------------

Although we believe we have benefited financially from, for example,
   the economies of scale offered by our larger acquisitions, going forward, we
   intend to pursue a highly selective acquisition strategy and have less
   growth from acquisitions. This change in emphasis is due in part to our
   substantial leverage. Target opportunities are expected to be smaller and
   present diversification that would place us into new markets that are
   complementary to our core businesses and client base.

Our acquisition strategy presents a number of risks. For example:

| |  | We may not be able to identity suitable acquisition
     candidates or to acquire additional companies on favorable terms;
| | - | --------------------------------------------------------------------------------------------------------------------------



| |  | We may not be able to obtain the necessary financing,
     on favorable terms or at all, to finance any of our potential
     acquisitions.;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| |  | We may fail to successfully integrate or manage
     acquired companies due to differences in business backgrounds or corporate
     cultures or inadequate internal systems or controls;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Acquired companies may not perform as we
     expect.
| | - | -----------------------------------------------------

Substantial Leverage

We have a significant amount of indebtedness. During 1999, we issued
   $225 million of ten year, 11.25% senior subordinated notes (see
   "Management's Discussion and Analysis of Results of Operations and
   Financial Condition-Liquidity and Capital Resources" and Notes to
   Consolidated Financial Statements-Note 5. "Long-term debt"). The
   following chart shows certain important credit statistics as of December 31,
   1999:

|                     | At December 31, 1999
|-------------------- | --------------------
|Total indebtedness   | $645,812            
|Stockholders' equity | $271,812            
|Debt to equity ratio | 2.38:1              

On March 8, 2000, we obtained from the lenders under our bank credit
   facilities an additional $100 million, seven year term loan, without
   reducing availability under the revolving portion of the credit facility,
   primarily to address working capital fluctuations. See "Management's
   Discussion and Analysis of Results of Operations and Financial
   Condition-Liquidity and Capital Resources", and Notes to Consolidated
   Financial Statements-Note 16. "Subsequent events".

Our substantial indebtedness could have important consequences. For
   example, it could:

| |  | increase our vulnerability to general adverse
     economic conditions;
| | - | -----------------------------------------------------------------------



| |  | limit our ability to make further acquisitions;
| | - | -----------------------------------------------



| |  | limit our flexibility in planning for, or reacting
     to, changes in our business and the environmental services
     industry;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| |  | place us at a competitive disadvantage compared to
     our competitors that have less debt; and
| | - | ------------------------------------------------------------------------------------------------



| |  | limit, along with the financial and other restrictive
     covenants in our various credit agreements, our ability to borrow
     additional funds. And, failing to comply with those covenants could result
     in an event of default which, if not cured or waived, could have a
     material adverse effect on us.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Ability to Service Debt

Our indebtedness will require us to dedicate a substantial portion of
   our cash flow from operations to payments on our indebtedness, thereby
   reducing the availability of our cash flow to fund working capital, capital
   expenditures, and other general corporate purposes. Our success in
   generating cash is dependent upon our results of operations, which are
   heavily dependent on various factors, including managing utilization of our
   professional staff, properly executing projects and successfully bidding new
   contracts at adequate margin levels. This, to a certain extent, is also
   subject to general economic, financial, competitive, legislative, regulatory
   and other factors that are beyond our
 control. If we do not generate sufficient cash flow to meet our debt service
   and working capital requirements, we may need to seek additional financing
   or sell assets.

Based
   on our current level of operations, we believe our cash flow, available cash
   and available borrowings under our credit facilities including the $100
   million increase funded on March 8, 2000 will be adequate to meet our future
   liquidity needs, excluding major acquisitions, for the next twelve months.

We can make no assurance, however, that our business will generate
   sufficient cash flow from operations or that future borrowings will be
   available to us under our credit facilities in an amount sufficient to
   enable us to pay our indebtedness or to fund our other liquidity needs.

Competition

We believe that the principal competitive factors in our business are:

| |  | technical proficiency,
| | - | ----------------------



| |  | operational experience,
| | - | -----------------------



| |  | price,
| | - | ------



| |  | breadth of services offered, and
| | - | --------------------------------



| |  | local presence.
| | - | ---------------

We compete with a diverse array of small and large organizations
   including the following:

| |  | national or regional environmental management
     firms;
| | - | ---------------------------------------------------------



| |  | national, regional and local architectural,
     engineering and construction firms;
| | - | ------------------------------------------------------------------------------------



| |  | environmental management divisions or subsidiaries of
     international engineering, construction and systems companies;
     and
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| |  | waste generators that have developed in-house
     capabilities.
| | - | ----------------------------------------------------------------

Increased competition, combined with changes in client procurement
   procedures, has resulted in, among other things:

| |  | lower contract margins,
| | - | -----------------------



| |  | more fixed-price or unit-price contracts,
     and
| | - | --------------------------------------------------



| |  | contract terms that increasingly require us to
     indemnify our clients against damages or injuries to third parties and
     property and environmental fines and penalties.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The entry of large systems contractors and international engineering
   and construction firms into the environmental services industry has
   increased competition for major federal government contracts and programs,
   which have been our primary source of revenue in recent years. We cannot
   assure that we will be able to compete successfully given the intense
   competition and trends in our industry.

Environmental Contractor Risks

Although we believe that we generally benefit from increased
   environmental regulation, and from enforcement of those regulations,
   increased regulation, enforcement and private litigation also create
   significant risks for us. These risks include potentially large civil and
   criminal liabilities from violations of environmental laws and regulations
   and liabilities to clients and to third parties for damages arising from
   performing services for clients. Our
 failure to observe the laws or the terms and conditions of licenses and
   permits we hold could adversely impact our ability to carry on our business
   as presently conducted.

> Liabilities Arising out of Environmental Laws and
>    Regulations

Our operations are subject to regulation by a number of federal and
   other laws and agencies. As such, we may be held directly liable for failure
   to abide by these laws. Any such failure could lead to our debarment or
   suspension as a government contractor. Companies that are subject to
   environmental liabilities have also sought to expand the reach of CERCLA,
   RCRA and similar state statutes to make contractor firms responsible for
   cleanup costs. These companies claim that environmental contractors are
   owners or operators of hazardous waste facilities or that they arranged for
   treatment, transportation or disposal of hazardous substances. If we are
   held responsible under CERCLA or RCRA for damages caused while performing
   services or otherwise, we may be forced to bear this liability by ourselves,
   notwithstanding the potential availability of contribution or
   indemnification from other parties. Further, one of our businesses involves
   the purchase and redevelopment of environmentally impaired property. As the
   owner of such properties, we may be required to clean up all contamination
   at these sites, even if we did not place it there. We use insurance and
   other risk mitigation techniques to manage these risks but we cannot
   guarantee the adequacy of those measures.

> Potential Liabilities to Clients and Third Parties

In performing services for our clients, we could become liable for
   breach of contract, personal injury, property damage, negligence and other
   causes of action. The damages available to a client are potentially large
   and could include consequential damages.

Many potential clients, particularly in connection with projects
   involving large scale cleanups, try to shift to contractors the risk of
   completing the project, if the contamination is either more extensive or
   difficult to resolve than they anticipated. In this competitive market,
   clients increasingly try to pressure contractors to accept greater risks of
   performance, liability for damage or injury to third parties or property and
   liability for fines and penalties. We have from time to time been involved
   in claims and litigation involving disputes over such issues.

Environmental management contractors also potentially face liabilities
   to third parties for property damage or personal injury stemming from a
   release of toxic substances resulting from a project performed for clients.
   These liabilities could arise long after completion of a project.

Over the past several years, the EPA and other federal agencies have
   constricted significantly the circumstances under which they will indemnify
   their contractors against liabilities incurred in connection with CERCLA
   projects and continue their attempts to renegotiate previously agreed
   indemnities.

Government Contractor Risks

As a major provider of services to governmental agencies, we face the
   risks associated with government contracting. For example, a reduction in
   spending by federal government agencies could limit the continued funding of
   our existing contracts with these agencies and could limit our ability to
   obtain additional contracts, which could have a material adverse effect on
   our business. The risks of government contracting also include the risk of
   civil and criminal fines and penalties for violations of applicable
   regulations and the risk of public scrutiny of our performance at high
   profile sites.

As a result of our government contracting business, we have been, are
   and will be in the future, the subject of audits by the Defense Contract
   Audit Agency (the DCAA). Additionally, we have been, and may in the future
   be, the subject of investigations by governmental agencies such as the EPA's
   Office of Inspector General (EPAOIG). During the course of an audit, the
   DCAA may disallow costs if it determines that we improperly accounted for
   such costs in a manner inconsistent with Cost Accounting Standards. Under
   the type of "cost reimbursable" government contracts that we
   typically perform, only those costs that are reasonable, allocable and
   allowable are recoverable under the Federal Acquisition Regulations and Cost
   Accounting Standards.

At present, our incurred cost rate submissions have been audited
   through the twelve month period ending March 27, 1998 and we have final
   negotiated rates for the twelve months ending March 27, 1994. With regard to
   OHM Corporation, the incurred cost rate submissions have been audited
   through May 1998 and final negotiated
 rates have been agreed to through calendar year 1997. We expect to complete
   rate negotiations for all reporting periods up to and through March 27, 1998
   and May 1998 for the Company and OHM Corporation, respectively, during 2000.
   Although we believe that there will not be any significant disallowance of
   unaudited and to be negotiated claimed costs for the periods noted above,
   the disallowance of a significant amount of our costs could have a material
   adverse effect on the consolidated financial condition, liquidity and
   results of operations of the Company.

In addition, the failure to comply with the terms of one or more of
   our government contracts could result in our suspension or debarment from
   future government contract projects for a significant period of time. This
   could result in a material adverse effect on our business. On or about
   September 2, 1998, OHM Corporation and The IT Group entered into a five year
   Compliance Agreement with the EPA to address alleged past practices by OHM
   that, according to the EPA, may constitute a basis for suspension and/or
   debarment. A breach of the Compliance Agreement by us or any of our
   subsidiaries is potentially cause for immediate suspension from work and/or
   debarment. We have not received any notice of noncompliance regarding the
   September 2, 1998 Compliance Agreement and believe OHM and The IT Group have
   been compliant.

International Operations

For the twelve months ended December 31, 1999, approximately 5% of our
   revenues came from international operations. Our international operations in
   general are subject to a number of risks including:

| |  | foreign currency risks,
| | - | -----------------------



| |  | work stoppages,
| | - | ---------------



| |  | transportation delays and interruptions,
| | - | ----------------------------------------



| |  | political instability,
| | - | ----------------------



| |  | expropriation and nationalization,
| | - | ----------------------------------



| |  | tariffs and import and export controls,
| | - | ---------------------------------------



| |  | differing licensing and permit
     requirements,
| | - | -------------------------------------------------



| |  | compliance with applicable laws.
| | - | --------------------------------

We cannot predict what effect, if any, these risks would have on our
   business.

Fluctuations in our Quarterly Operating Results

Our quarterly revenues, expenses and operating results and working
   capital requirements may fluctuate significantly due to a number of factors,
   including:

| |  | the seasonality of the spending cycle of our public
     sector clients, notably the federal government;
| | - | --------------------------------------------------------------------------------------------------------



| |  | employee utilization and hiring rates;
| | - | --------------------------------------



| |  | the number and significance of client projects
     commenced and completed during a quarter;
| | - | ---------------------------------------------------------------------------------------------



| |  | delays incurred in connection with projects;
| | - | --------------------------------------------



| |  | the ability of our clients to terminate projects
     without penalties;
| | - | ------------------------------------------------------------------------



| |  | weather conditions.
| | - | -------------------

Variations in any of these factors could cause significant
   fluctuations in our operating results from quarter to quarter and could
   result in net losses.

In November 1996, The Carlyle Group and some of its affiliates
   acquired 45,000 shares of our 6% cumulative convertible participating
   preferred stock and warrants to purchase 1,250,000 shares of our common
   stock. As a result of paid-in-kind dividends, paid through December 25,
   1998, Carlyle now holds 46,095 shares of convertible preferred stock, which
   totals approximately 21%, or approximately 24% assuming the warrants are
   exercised, of the voting power of the Company. The terms of our convertible
   preferred stock provide that until November 20, 2001, the holders of our
   convertible preferred stock have the right to elect a majority of the Board
   of Directors, as long as they continue to hold at least 20% of the voting
   power of the Company. In addition, the sale by Carlyle of its interests
   under specific conditions constitute events of default under our credit
   facilities. For more information on our relationship with Carlyle, see the
   Notes to Consolidated Financial StatementsNote 9. "Preferred
   Stock-Carlyle Investment."

Recent History of Losses

As of December 31, 1999, we have recorded six consecutive profitable
   quarters, however we have previously recognized recurring losses to our
   common stockholders. The following table shows the losses we have incurred
   prior to our current fiscal year. We cannot assure you that we will not
   incur losses in the future. For a more detailed discussion of our operating
   results and special charges recorded in prior years, see "Management's
   Discussion and Analysis of Results of Operations and Financial Condition
   ".

|                                                                                 |                                                            |  |                                                          |                     |                       |   |                       |   |          |  
|-------------------------------------------------------------------------------- | ---------------------------------------------------------- |  | -------------------------------------------------------- | ------------------- | --------------------- | - | --------------------- | - | -------- | -
|                                                                                 | Twelve Months
   
   Ended
   
   December 31,
   
   1999 |  | Nine Months
   
   Ended
   
   December 25,
   
   1998 | Twelve Months Ended
|                                                                                 |                                                            |  | March 27,
   
   1998                                    |                     | March 28,
   
   1997 |   | March 29,
   
   1996
|                                                                                 | (In thousands)                                            
|Net income (loss) applicable to common
   
     stock                            | $32,318                                                    |  | $(12,091                                                 | )                   | $(23,193              | ) | $(13,693              | ) | $ (3,654 | )
|Net income (loss) applicable to common
   
     stock, excluding special charges | $32,318                                                    |  | $ 11,200                                                 |                     | $   2,800             |   | $  (5,300             | ) | $  4,600 |  

Closure of Inactive Disposal Sites and Potential CERCLA
   Liabilities

Before 1987, we were a major provider of hazardous waste
   transportation, treatment and disposal operations in California. In December
   1987, we adopted a strategic restructuring program that included a formal
   plan to divest our transportation, treatment and disposal operations and we
   stopped taking new business. For further information on our inactive
   disposal sites within our discontinued operations, see the Notes to the
   Consolidated Financial Statements-Note 14. "Discontinued Operations
   ".

DISCONTINUED OPERATIONS

In December 1987, we adopted a strategic restructuring program which
   included a formal plan to divest the transportation, treatment and disposal
   operations through sale of some facilities and closure of others. Subsequent
   to this date, we ceased obtaining new business for these operations. We have
   funded previously accrued costs of $9 million for the twelve months ended
   December 31, 1999, $11 million for the nine months ended December 25, 1998
   and $15 million in the twelve months ended March 27, 1998

relating to our closure plans and construction and PRP
   matters. At December 31, 1999, our consolidated balance sheet included
   accrued liabilities of $14 million for closure costs, insurance program
   costs and the PRP matters net of anticipated insurance settlement proceeds.
   See our Notes to Consolidated Financial StatementsNote 14.
   "Discontinued Operations" for more information on the financial
   implications of our discontinued operations.

ITEM 2. PROPERTIES

We own or lease
   property domestically at 122 sites in 37 states and the District of
   Columbia, and internationally at 18 sites located principally in Canada and
   Australia. Excluding discontinued operations, we own approximately 73 acres
   and lease approximatley 2.1 million square feet of property for various
   uses, including

 regional and project offices,

 technology and process development
   laboratores,

field remediation support service facilities,
   and

 corporate offices.

We consider these
   facilities adequate for our present and anticipated activites.

Additionally, we own
   approximately 2,800 acres related to discontinued operations, principally in
   Northern California, of which approximately 900 acres were used for
   hazardous waste disposal facilities and approximately 1,900 are adjacent to
   those facilities, but were never used for waste disposal.

ITEM 3. LEGAL PROCEEDINGS.

Continuing Operations Legal Proceedings

We are subject from time to time to a number
   of different types of claims arising in the ordinary course of our business,
   including contractual disputes with clients, subcontractors and suppliers,
   claims for professional negligence, environmental claims, governmental
   audits and investigations and claims for personal injuries and property
   damage. We do not believe that any of these claims will have a material
   adverse effect on our business. See the Notes to Consolidated Financial
   StatementsNote 8. "Commitments and
   ContingenciesContingencies" for information
   regarding the legal proceedings related to our continuing operations.

Discontinued Operations Legal Proceedings

We have been, are and may in the future be
   subject from time to time to a number of different types of claims arising
   out of our discontinued operations including environmental claims for
   recovery of all or a portion of the cleanup costs at sites wep reviosuly
   owned or operated or to which we took our or a client's wastes, including
   claims for personal injuries and property damage. We do not believe any of
   these claims will have a material adverse effct onour business. See the
   Notes to Conslidated Financial StatementsNote 14. "Discontinued Operations
   " for information regarding the legal proceedings related to our
   transportation, treatment and disposal discontinued operations.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
   SHAREHOLDERS.

> There were no matters submitted to a vote of our shareholders during
>    the fourth quarter of the fiscal year ended December 31, 1999.









ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.

The following table provides information regarding our executive
   officers and the positions they hold. Our officers are appointed annually by
   our Board of Directors.



|Name                | Age | Position                                                                             | First elected officer of
   the Company
|------------------- | --- | ------------------------------------------------------------------------------------ | ---------------------------------------
|Anthony J. DeLuca   | 52  | Chief Executive Officer and President                                                | 1990                                   
|David L. Backus     | 58  | Senior Vice President, Outsourced Services and
     International                    | 1998                                   
|M. Scott Bonta      | 41  | Senior Vice President, Consulting and Technology, and
     Chief Information Officer | 1995                                   
|Stephen J. Connolly | 55  | Senior Vice President, Shared Services                                               | 1999                                   
|Dennis N. Galligan  | 51  | Senior Vice President, Solid Waste                                                   | 1998                                   
|Gary L. Gardner     | 45  | Senior Vice President, Commercial Engineering and
     Construction                  | 1998                                   
|James G. Kirk       | 61  | Senior Vice President, General Counsel and
     Secretary                            | 1996                                   
|Ann P. Harris       | 51  | Senior Vice President, Human Resources                                               | 1997                                   
|Thomas R. Marti     | 48  | Senior Vice President, Energy and Nuclear
     Operations                            | 1995                                   
|Kevin R. Smith      | 46  | Senior Vice President, Business Development,
   
   Marketing and Strategic Planning | 1995                                   
|Harry J. Soose      | 48  | Senior Vice President, Chief Financial
     Officer                                  | 1995                                   
|Enzo M. Zoratto     | 43  | Senior Vice President, Government Services                                           | 1995                                   



Mr. DeLuca was named our Chief Executive Officer and President on July
   22, 1997 and President and our Acting Chief Executive Officer and a Director
   as of July 1, 1996. Prior thereto, Mr. DeLuca had been our Senior Vice
   President and Chief Financial Officer since March 1990. Before joining us,
   Mr. DeLuca had been a partner at the public accounting firm Ernst &
   Young LLP.

Mr. Backus joined us as Senior Vice President, Outsourced Services and
   International in December 1998 in connection with the GTI acquisition. Mr.
   Backus joined GTI in 1992 as Vice President of GTI's western operations.
   Prior to joining GTI, Mr. Backus was employed by Morrison Knudsen
   Corporation from 1975 to 1992 in various executive positions, including
   Group Vice President of Morrison Knudsen's environmental group.

Mr. Bonta joined us in 1986, and has been Chief Information Officer
   since 1995. In March 2000 Mr. Bonta was elected a Senior Vice President.
   Prior to joining us, he was employed by Bechtel Power as the Manager of
   Computer Operations and Data Communications.

Mr. Connolly joined us in 1998 in connection with our acquisition of
   Jellinek, Schwartz and Connolly, Inc., where he served as President since
   1979. Mr. Connolly was named Vice President of our shared services group in
   June 1999 and a Senior Vice President in March 2000.

Mr. Galligan joined us in 1998 through our acquisition of OHM, where
   he had been a Vice President since 1995. Mr. Galligan was elected a Senior
   Vice President in March 2000. From 1991 to 1995, he was Vice President of
   Marketing and Sales at Chem-Nuclear Systems.

Mr. Gardner joined us in 1998, also in connection with the OHM merger,
   where he was employed for eleven years, most recently as Vice President,
   Northern Region. In March 2000 he was elected a Senior Vice
   President.

Mr. Kirk, who joined us as General, Eastern Operations, in 1991, was
   named Vice president, General Counsel and Secretary in September 1996 and
   Senior Vice President in July 1999. Prior to joining the Company, Mr. Kirk
   served as Vice President and General Counsel for Limbach Constructors from
   1978 to 1991. From 1973 to 1978, Mr. Kirk was Assistant General Counsel for
   Dravo Corporation.

Ms. Harris, who joined us in 1975, was a human resource manager in our
   Knoxville, Tennessee and Pittsburgh, Pennsylvania offices prior to being
   appointed Vice President, Human Resources in 1997 and Senior Vice President,
   Human Resources, in July 1999.

Mr. Marti joined us in 1990 as a Director of Projects. He was named
   Vice President in 1995 and Vice President, Construction and Remediation
   Projects and Services in 1996. In 1999, he was named Vice President, and in
   March 2000, Senior Vice President, Energy and Nuclear Operations.

Mr. Smith joined us in 1986 and served in various capacities including
   Program Director and Director of Project Development. In 1995 he was named
   Vice President, Business Development and a Senior Vice President in March
   2000.

Mr. Soose, who joined us in 1991 as Controller of our Construction and
   Remediation Division, was appointed Vice President, Controller of the
   Company in 1995 and Senior Vice President and Chief Financial Officer in
   July 1999. Prior to joining us, Mr. Soose served as Controller of Gulf
   Stream Communities, Inc. and of Dravo Corporation.

Mr. Zoratto joined us in 1984 from D'Appolonia Waste Management
   Systems, where he had been a Project Manager since 1981. He was named Vice
   President, Government Services in 1995 and a Senior Vice President in March
   2000.



> 



PART II

|ITEM 5. |  | MARKET FOR THE REGISTRANT'S COMMON STOCK AND
   
   RELATED SHAREHOLDER MATTERS.
|------- |  | --------------------------------------------------------------------------------

Our common
   stock is listed on the New York Stock Exchange (NYSE) and Pacific Stock
   Exchange under the symbol ITX. The following table sets forth thehigh and
   low sale prices of the common stock, as reported by the NYSE for the periods
   indicated.



|Quarter ended      | High    |  | Low   
|------------------ | ------- |  | ------
|June 26, 1998      | 11 1/2  |  | 8 7/8 
|September 25, 1998 | 10 1/4  |  | 5     
|December 25, 1998  | 11 1/2  |  | 5 1/2 
|March 26, 1999     | 15      |  | 11 1/8
|June 25, 1999      | 17 1/4  |  | 11    
|October 1, 1999    | 16 7/16 |  | 9 9/16
|December 31, 1999  | 10 7/16 |  | 7 3/4 

On March 24, 2000, the closing sale price of the common
   stock on the NYSE as reported by The Wall Street Journalwas $6.3125
   per share. On that date there were 1,864 stockholders of record.

We have not paid a cash dividend on our common stock for the twelve
   months ended December 31, 1999, the nine months ended December 25, 1998, or
   the twelve months ended March 27, 1998. We have no present intention to pay
   cash dividends on our common stock in the foreseeable future in order to
   retain all earnings for investment in our business. Our credit agreements
   prohibit cash dividends on common stock.

|ITEM 6. |  | SELECTED FINANCIAL DATA.
|------- |  | ------------------------

The following table sets forth income statement
   information for the Company's continuing operations and other financial
   information for the fiscal year ended December 31, 1999, the nine months
   ended December 25, 1998 (the transition period as a result of our change in
   fiscal year) and the fiscal years ended March 27, 1998, March 28, 1997, and
   March 29, 1996. Share and per share data have been restated to reflect the
   one-for-four reverse stock split effective November 21, 1996.



|                                                                                     |                                            |  |          |   |          |   |          |   |          |  
|------------------------------------------------------------------------------------ | ------------------------------------------ |  | -------- | - | -------- | - | -------- | - | -------- | -
|                                                                                    
|                                                                                    
|                                                                                     | (In thousands, except per share
     data)
|INCOME STATEMENT INFORMATION                                                         |                                            |  |          |   |          |   |          |   |          |  
|Revenues                                                                             | $1,314,251                                 |  | $757,435 |   | $442,216 |   | $362,131 |   | $400,042 |  
|Gross margin                                                                         | 185,858                                    |  | 90,961   |   | 51,090   |   | 38,138   |   | 58,152   |  
|Special charges                                                                      |                                           |  | 24,971   |   | 14,248   |   | 8,403    |   |         |  
|Income (loss) from continuing operations
   
     (net of preferred stock dividends) | 38,678                                     |  | (12,091  | ) | (12,527  | ) | (13,693  | ) | (3,654   | )
|Income (loss) per common share from
   
     continuing operations - diluted         | 1.20                                       |  | (0.63    | ) | (1.28    | ) | (1.48    | ) | (0.41    | )
|Weighted average shares outstanding                                                  | 31,192                                     |  | 19,149   |   | 9,737    |   | 9,227    |   | 8,982    |  
|OTHER FINANCIAL INFORMATION                                                          |                                            |  |          |   |          |   |          |   |          |  
|Working capital                                                                      | $138,503                                   |  | $120,260 |   | $74,924  |   | $110,705 |   | $89,174  |  
|Costs in excess of net assets of acquired
   
     Businesses                        | 525,052                                    |  | 356,619  |   | 211,878  |   | 9,363    |   | 8,770    |  
|Total assets                                                                         | 1,280,871                                  |  | 948,606  |   | 709,217  |   | 342,531  |   | 315,314  |  
|Long-term debt                                                                       | 621,772                                    |  | 405,059  |   | 284,697  |   | 65,874   |   | 65,611   |  
|Long-term accrued liabilities                                                        | 29,268                                     |  | 31,979   |   | 27,528   |   | 15,184   |   | 30,223   |  
|Stockholders' equity                                                                 | 271,812                                    |  | 238,168  |   | 148,150  |   | 168,853  |   | 140,865  |  

No cash dividends were paid on common shares for any
   period.



|ITEM 7. |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
     OPERATIONS AND FINANCIAL CONDITION.
|------- |  | -------------------------------------------------------------------------------------------

RESULTS OF OPERATIONS

Overview

We are a leading provider of diversified, value-added services in the
   areas of consulting, engineering, construction, remediation, and facilities
   management. Through our diverse group of highly specialized companies,
   clients can take advantage of a single, fully integrated delivery system and
   our extensive expertise. We have a strong reputation for both the high
   quality of our work and the breadth of the services we provide.

During 1999, in response to market conditions, we realigned our
   operating structure. We now operate seven principal business lines in a
   market/client focused structure, which comprise Government Services, Energy
   and Nuclear Operations (ENO), Commercial Engineering and Construction (CEC),
   Solid Waste, Consulting and Technology, Outsourced Services, and
   International. These business lines comprise four reportable segments of
   Engineering & Construction, Consulting & Technology, Outsourced
   Services, and International. Our results of operations are analyzed on this
   basis. The Engineering and Construction segment provides comprehensive
   environmental engineering and construction services to both government and
   commercial clients, and includes the Government Services, ENO, CEC and Solid
   Waste business lines. The Consulting & Technology segment provides a
   wide range of services in the areas of environmental health and safety
   compliance including Web-enabled knowledge management systems and training,
   risk and cost allocation determination, life-cycle planning, chemical
   product development and regulatory certification, due diligence, strategic
   environmental planning, and real estate restoration services. The Outsourced
   Services segment provides program/construction management, general
   contracting services, design/build construction, facility planning and
   management, maintenance and renovation. The International segment provides
   comprehensive environmental and infrastructure services to foreign-based
   clients through controlled entities and joint ventures, with principal
   operations in Canada, Europe, Australia and Taiwan.

Our clients are federal, state and local governments in the U.S. and
   commercial businesses worldwide. We obtained 57% of our revenues for the
   twelve months ended December 31, 1999 from the federal government through
   more than 100 contracts that range in length from one to ten years. In
   addition, we serve 1,500 commercial clients on projects which range in
   length from one month to more than one year. For the twelve months ended
   December 31, 1999, our revenues were $1.3 billion. Approximately 86% of our
   backlog at December 31, 1999 was under federal government programs, and
   approximately 84% is expected to be charged to our clients on a
   cost-reimbursable basis. Additionally, many of our commercial contracts
   renew automatically and are typically not part of our backlog.

In the course of providing our services, we routinely subcontract
   services. These subcontractor costs are passed through to clients and, in
   accordance with industry practice, are included in our revenue. Our cost of
   revenue includes subcontractor costs, salaries, direct and indirect overhead
   costs such as rents, utilities and travel directly attributable to projects.
   Our selling, general and administrative expenses are comprised primarily of
   costs related to the executive offices, corporate accounting, information
   technology, marketing and bid and proposal costs. These costs are generally
   unrelated to specific client projects. In addition, we include in these
   expenses amortization of intangible assets such as goodwill resulting from
   acquisitions.



Acquisitions

Since fiscal 1997, we made the following significant acquisitions to
   expand and diversify our business to meet our strategic objectives.



|Date of
   
   Acquisition |  | Name                                  |  | Location(s)                                                          |  | Business                                                                                                                                               | Most Recent
   
   Fiscal Year
   
   Revenues
   
   Prior to Acquisition
|-------------------------- |  | ------------------------------------- |  | -------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------
|                           |  |                                       |  |                                                                      |  |                                                                                                                                                       
|                           |  |                                       |  |                                                                      |  |                                                                                                                                                        |                                                                           
|Feb. and
   
   June 1998  |  | OHM Corporation                       |  | Over 30 regional offices                                             |  | Diversified environmental and remediation
     firm
   
     providing a broad range of services for governmental
   
     and private sector clients. | $525                                                                      
|                           |  |                                       |  |                                                                      |  | Leading provider of operations, maintenance
     and
   
     construction outsourcing services                                                        |                                                                           
|                           |  |                                       |  |                                                                      |  |                                                                                                                                                        |                                                                           
|Dec. 1998                  |  | Groundwater
   
   Technology, Inc.   |  | Over 30 offices in
   
   North America,
   
   Europe and Australia |  | Broad-based environmental services
     firm                                                                                                           | $200                                                                      
|                           |  |                                       |  |                                                                      |  |                                                                                                                                                        |                                                                           
|June 1999                  |  | EMCON                                 |  | Over 20 offices in North America                                     |  | Environmental engineering, design and
     construction
   
     focused on the solid waste industry                                                   | $151                                                                      
|                           |  |                                       |  |                                                                      |  |                                                                                                                                                        |                                                                           
|April 1999                 |  | EFM Group                             |  | Over 10 offices in North America                                     |  | Environmental remediation, program
     management and
   
     technical support for federal government and private
   
     sector clients           | $106                                                                      
|                           |  |                                       |  |                                                                      |  |                                                                                                                                                        |                                                                           
|March 1999                 |  | Roche Limited
   
   Consulting Group |  | Quebec City, Canada                                                  |  | Engineering and construction services to
     wastewater,
   
     paper, mining and transportation industries worldwide                               | $28                                                                       
|                           |  |                                       |  |                                                                      |  |                                                                                                                                                        |                                                                           

Change in Fiscal Year

In June 1998, we changed our fiscal year-end from the last Friday in
   March to the last Friday in December of each year effective with the nine
   months ended December 25, 1998. Accordingly, the following discussions
   compare financial results for the full twelve month period ended December
   31, 1999 with the nine-month period ended December 25, 1998, and also for
   the nine month period to the full twelve-month year ended March 27, 1998.
   Likewise, the financial results for the nine-month period ended December 25,
   1998 include OHM's results for the entire nine-month period while the
   financial results for the twelve-month period ended March 27, 1998 include
   only one month of OHM financial results because we acquired 54% of OHM on
   February 25, 1998. Based on the significance of the OHM acquisition, we
   believe that the periods described above represent the most appropriate
   basis of comparison for analysis of our results of operations.

Twelve Months Ended December 31, 1999 Compared to Nine
   Months Ended December 25, 1998

Revenues and Gross Margin

Company.Revenues for the twelve months ended December 31,
   1999 were $1.3 billion, a 74% increase over the nine months ended December
   25, 1998 of $757 million. This increase is due to the full twelve months
   operating results and the result of increases from the GTI, Roche, EFM and
   EMCON acquisitions.

Our gross margin for the twelve months ended December 31, 1999
   increased to 14.1% of revenues, compared to 12.0% for the nine months ended
   December 25, 1998. The increase in gross margins was due to a favorable mix
   of higher margin revenue, contract performance, and overhead efficiencies.
   Our ability to maintain or improve our gross margin levels is heavily
   dependent on various factors including utilization of professional staff,
   proper execution of projects, successful bidding of new contracts at
   adequate margin levels and continued overhead cost controls.



A significant percentage of our revenues continue to be earned from
   federal government contracts with various federal agencies. However, as a
   percentage of revenues, we have reduced our reliance on revenues earned from
   federal government contracts. Revenues from federal government contracts
   accounted for 57% of our consolidated revenues in the twelve months ended
   December 31, 1999 and 69% in the nine months ended December 25, 1998,
   reflecting a 12% revenue mix shift to the commercial sector. Although the
   percentage of revenues from federal government contracts decreased, the
   absolute dollar amount of federal government revenues increased to $743
   million in the twelve months ended December 31, 1999 compared to $525
   million in the nine months ended December 25, 1998. This increase in revenue
   dollars is attributable primarily to the full twelve month period, and also
   to the acquisition of EFM. Federal government revenues are derived
   principally from work performed for the Department of Defense (DOD) and, to
   a lesser extent, the Department of Energy (DOE).

Engineering & Construction.Revenues from the
   Engineering & Construction segment increased $434 million, or 67%, to
   $1.1 billion in the twelve months ended December 31, 1999. This increase was
   due to the full twelve months of operating results for fiscal 1999 when
   compared to the prior nine month transition period, and also due to the
   acquisitions of GTI, EFM and EMCON. Our Engineering & Construction
   segment includes revenues from the DOD, DOE, other government agencies and
   commercial clients serviced by our Government Services, ENO, CEC and Solid
   Waste business lines. These business lines draw personnel, equipment and
   other project resource requirements from our national shared services
   organization.

We expect to continue to earn a substantial portion of our Engineering
   & Construction segment revenues from DOD indefinite delivery order
   contracts, which are primarily related to remedial action work. We
   anticipate our Engineering & Construction segment will experience
   limited growth as DOD spending is projected to remain at approximately 1999
   levels. For our ENO business line, recent bidding results on new DOE
   contract awards have been impacted by significant competition, which will
   affect our DOE revenue growth from new awards in the near term. However,
   longer term we expect ENO revenue growth from commercial utility
   decontamination and decommissioning opportunities. In addition, we expect to
   increase our revenues from the DOE due to an expected transition by the DOE
   over the next several years to emphasize site closures, as opposed to
   studies, combined with our favorable experience in winning and executing
   similar work for the DOD. Revenue growth from the commercial sector is
   expected to continue to be more directly related to the economy and to the
   desire on the part of our clients for strategic environmental services that
   provide an integrated, proactive approach to environmental issues that are
   driven by economic, as opposed to regulatory concerns. To address this trend
   in industry spending, we have undertaken a strategy of expanding through
   acquisitions our integrated environmental service capabilities to provide
   additional proactive and cost-effective environmental solutions based on
   economic rather than regulatory considerations.

For the twelve months ended December 31, 1999, revenues from
   Government Services increased $152 million, or 42%, to $512 million; ENO
   revenues, derived principally from the DOE, increased $38 million, or 43%,
   to $126 million; and commercial revenues increased $244 million, or 124%, to
   $440 million. The increases in revenues were partially attributable to the
   full twelve months of operating results in 1999 compared to the nine months
   ended December 25, 1998. The increase in Government Services revenues was
   also the result of the EFM acquisition. ENO revenues also increased due to
   the transition to the operations phase of a $122 million project to perform
   the excavation, pretreatment and drying of an estimated one million tons of
   materials for the DOE's Fernald Environmental Management Project (Fernald
   Project). Commercial revenues also increased due to the GTI, EFM and EMCON
   acquisitions.

Our Engineering & Construction segment profit margin for the
   twelve months ended December 31, 1999 was $141 million, or 13.0% of segment
   revenues, compared to $71 million, or 11.1% of segment revenues for the nine
   months ended December 25, 1998. Segment profit margin represents revenues,
   less cost of revenues and selling general and administrative expenses
   (excluding goodwill) directly attributable to operations. Government
   Services margins were 11.3% for the twelve months ended December 31, 1999
   compared to 10.8% for the nine months ended December 25, 1998. ENO margins
   were 13.3% for 1999 compared to 11.1% for the nine months ended December 25,
   1998. Commercial margins were 15.0% for 1999 compared to 11.6% for the nine
   months ended December 25, 1998. Improvements in margin percentages were
   primarily due to cost synergies and realized overhead efficiencies from the
   integration of the GTI, EFM and EMCON acquisitions, along with revenue mix
   and contract performance. We do not expect the overall improvement
   experienced in 1999 in Engineering & Construction segment profit margins
   to recur.



Consulting & Technology.Revenues from our Consulting
   & Technology (C&T) segment increased $26 million, or 77%, to $59
   million for the twelve months ended December 31, 1999. Most of the revenues
   in C&T are derived from commercial clients, and increased primarily due
   to the GTI and EMCON acquisitions, and also due to the full twelve months of
   operating results in 1999.

Our C&T segment profit margin was $10 million, or 16.8% of segment
   revenues for the twelve months ended December 31, 1999, and $4 million, or
   10.9% of segment revenues, for the nine months ended December 25, 1998.
   Within the C&T segment, the real estate restoration business completed
   transactions in 1999 which improved segment profit margins when compared to
   the prior period. The timing of transactions in real estate restoration is
   dependent on a number of factors, not all of them within our control, which
   can cause significant fluctuations in segment profit margins in the periods
   in which transactions close. Improved margins were also the result of
   overhead efficiency gains related to acquisitions.

Outsourced Services.Revenues from Outsourced Services
   increased $44 million, or 62%, to $114 million for the twelve months ended
   December 31, 1999. Aside from increases due to the full twelve month period
   compared to the nine month transition period in the prior year, the increase
   is primarily attributable to increased contract volume at our Beneco
   subsidiary. Beneco specializes in program/construction management, general
   contracting services, design/build construction, facility planning and
   management, maintenance and renovation to the DOD as well as state and local
   government agencies. Segment revenues also increased due to our EFM
   acquisition which provides similar services for NASA and other government
   agencies. We expect segment revenue growth to continue based on strong
   levels of bidding opportunities and market growth.

Our Outsourced Services segment profit margin for the twelve months
   ended December 31, 1999 was $11 million, or 9.5% of segment revenues,
   compared to $6 million, or 9.0% of segment revenues for the nine months
   ended December 25, 1998. Margins at our Beneco subsidiary decreased slightly
   due to a shift in contract mix to larger, longer term contracts that have
   lower overall profit margins. This margin decrease was more than offset by
   operating results from projects and capabilities obtained with the EFM
   acquisition. We expect to maintain our Outsourced Services segment profit
   margins at 1999 levels.

International.International revenues were $63 million for
   the twelve months ended December 31, 1999 compared to $10 million for the
   nine months ended December 25, 1998, and increased primarily due to the
   acquisitions of GTI in December 1998 and Roche in March 1999. The GTI
   acquisition included approximately $80 million of contract backlog for work
   to be performed for the U.S. Air Force Center for Environmental Excellence
   under a worldwide five-year indefinite delivery order cost-reimbursable
   contract.

Our International segment profit margin was $4 million, or 6.5% of
   revenues for the twelve months ended December 31, 1999 compared to a segment
   loss of $0.3 million for the nine months ended December 25, 1998. This
   segment profit margin improvement is primarily due to the GTI and Roche
   acquisitions.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were 5.4% of revenues for
   the twelve months ended December 31, 1999 compared to 5.5% of revenues for
   the nine months ended December 25, 1998. Due to the seasonal nature of our
   business, SG&A expenses as a percentage of revenue are usually highest
   in the first calendar quarter of the year, which was excluded from the
   comparison with our nine month transition period ended December 25, 1998. On
   a calendar year comparison, 1998 SG&A expenses were 5.9% of revenues.
   This annual decrease from 1998 is primarily attributable to a decreasing
   proportion of fixed overhead costs in relation to an increasing revenue
   base.

Selling, general and administrative expenses include goodwill
   amortization expense of $14.8 million for the twelve months ended December
   31, 1999 and $7.0 million for the nine months ended December 25, 1998. The
   significant increase to goodwill amortization is primarily due to the GTI,
   Roche, EFM and EMCON acquisitions. Selling, general and administrative
   expenses (excluding goodwill) were 4.3% of revenues for the twelve months
   ended December 31, 1999 compared to 4.6% of revenues for the nine months
   ended December 25, 1998, and compared to 5.0% for the calendar twelve month
   period ended December 25, 1998. The decrease as a percentage of revenues for
   the periods noted is primarily attributable to a decreasing proportion of
   fixed overhead costs in relation to an increasing revenue base.



Special Charges

There were no special charges for the twelve months ended December 31,
   1999. We recorded $25.0 million of non-cash special charges for the nine
   months ended December 25, 1998, including $10.6 million (net of cash
   proceeds of $5.8 million) related to the sale of our investment in
   Quanterra, Incorporated and $14.4 million, related to the write-down of
   assets associated with the HTTS® business. All write downs were
   completed in the nine month transition period. A summary of the special
   charges incurred is outlined below:

Quanterra. On May 27, 1998, our Board of Directors
   considered and approved the divestiture of certain non-core assets including
   our 19% common stock ownership interest in Quanterra, Incorporated, an
   environmental laboratory business. This charge of $10.6 million represented
   the net book value of our investment in Quanterra less proceeds of $5.8
   million from a sale completed in June 1998.

Hybrid Thermal Treatment System®. On May 27, 1998, our
   Board of Directors considered and approved the divestiture of the assets
   associated with our Hybrid Thermal Treatment System® (HTTS®)
   business. This resulted in a charge of $14.4 million representing the net
   book value of these assets less estimated salvage value.

Interest, Net

Net interest expense was $54 million, or 4.1% of revenues for the
   twelve months ended December 31, 1999 compared to $25 million, or 3.3% of
   revenues for the nine months ended December 25, 1998. The increase in net
   interest expense is due principally to the April 9, 1999 issuance of $225
   million, 11.25%, ten year senior subordinated notes which financed the Roche
   and EFM acquisitions and working capital requirements, and also due to
   financing the EMCON acquisition in June 1999 with our revolving credit
   facility.

Income Taxes

For the twelve months ended December 31, 1999, the income tax
   provision was $22 million, reflecting an income tax rate of approximately
   40.5% on income of $61 million and a $3 million benefit from a reduction in
   the deferred tax asset valuation allowance attributable to utilization of
   tax attributes previously reserved and certain fiscal 1999 changes in
   financial accounting and tax rules.

For the nine months ended December 25, 1998, we reported a loss from
   continuing operations of $0.7 million and recorded an income tax charge of
   $9.7 million before adjusting for the special charge. We also provided a
   deferred tax asset valuation adjustment for a portion of the special charges
   and recognized a tax benefit of $3.0 million on the divestiture of the HTTS
   ® business (see "Special Charges"). The total net tax charge
   was $6.7 million. Our effective income tax rate from continuing operations
   for the nine months ended December 25, 1998 was more than the federal
   statutory rate primarily due to the valuation adjustment for the above
   charge and amortization of cost in excess of net assets of acquired
   businesses (see Notes to Consolidated Financial Statements"Note 6.
   Income taxes").

We will need to have approximately $320 million of future earnings to
   fully realize our deferred tax asset of $121 million (net of a valuation
   allowance of $57 million) at December 31, 1999, assuming a net 38% federal
   and state tax rate. We evaluate the adequacy of the valuation allowance and
   the realizability of the deferred tax asset on an ongoing basis. Because of
   our position in the industry, recent acquisitions and restructuring, and
   existing backlog, management expects that our future taxable income will
   more likely than not allow us to fully realize our recorded net deferred tax
   asset of $121 million. The increase in the net deferred tax asset is
   primarily due to acquisitions.

Dividends

Our reported dividends for the twelve months ended December 31, 1999
   were $6.4 million, and were $4.7 million for the nine months ended December
   25, 1998. Our reported dividends for the nine months ended December 25, 1998
   include imputed dividends on our 6% Convertible Preferred Stock of $0.9
   million which are not payable in cash or stock. Commencing with November 21,
   1998, our outstanding Convertible Preferred Stock is entitled to a 6%
   cumulative cash dividend payable quarterly. We reported cash dividends on
   our outstanding depositary shares each representing 1/100 of a share of our
   7% cumulative convertible exchangeable preferred stock (the 7% Preferred
 Stock) of $3.6 million in the twelve months ended December 31, 1999 and $2.7
   million in the nine months ended December 25, 1998. The $0.9 million
   increase in cash dividends between the December 31, 1999 and December 25,
   1998 fiscal periods is due to the shortened 1998 nine month fiscal period.

Our dividends are summarized below:



|                                                     |        |  |       
|---------------------------------------------------- | ------ |  | ------
|                                                    
|                                                    
|7% Cumulative convertible exchangeable cash dividend | $3,592 |  | $2,697
|6% Cumulative convertible participating              |        |  |       
|Cash dividend                                       | 2,768  |  | 213   
|Imputed non-cash
     dividend                      |       |  | 860   
|In kind 3% stock
     dividend                      |       |  | 894   
|                                                     |        |  |       
|Total                                                | $6,360 |  | $4,664
|                                                     |        |  |       

Nine Months Ended December 25, 1998 Compared to Twelve
   Months Ended March 27, 1998

Revenues and Gross Margin

Company.Revenues for the nine months ended December 25,
   1998 were $757 million, an increase of approximately 71%, when compared to
   the $442 million in revenues reported in the twelve months ended March 27,
   1998. This increase is primarily attributable to higher revenues in the
   Engineering & Construction segment resulting from the OHM acquisition.
   Our gross margin for the nine months ended December 25, 1998 was 12.0%,
   slightly higher than the 11.6% gross margin reported in the twelve months
   ended March 27, 1998.

Engineering & Construction.Revenues from the
   Engineering & Construction segment were $644 million for the nine months
   ended December 25, 1998 compared to $388 million for the twelve months ended
   March 27, 1998, an increase of approximately 66%. Our Engineering &
   Construction segment includes revenues from the Department of Defense (DOD),
   Department of Energy (DOE) and commercial clients serviced by our Government
   Services, Energy and Nuclear Operations (ENO), Commercial Engineering and
   Construction and Solid Waste business lines. Revenues from Government
   Services were $360 million in the nine months ended December 25, 1998 or
   $167 million greater than the $193 million of Government Services revenues
   in the twelve months ended March 27, 1998. ENO revenues of $88 million in
   the nine months ended December 25, 1998 were $46 million higher than the $42
   million of ENO revenues reported in the twelve months ended March 27, 1998.
   Commercial revenues were $196 million in the nine months ended December 25,
   1998 or $43 million higher than the $153 million of commercial revenues
   reported in the twelve months ended March 27, 1998.

A substantial percentage of our revenues continue to be earned from
   federal governmental contracts. Revenues from federal governmental contracts
   accounted for 69% of our revenues in the nine months ended December 25, 1998
   compared to 58% in the twelve months ended March 27, 1998. The increase in
   government revenues for the nine months ended December 25, 1998 both in
   absolute dollars and as a percentage of revenue is primarily attributable to
   the OHM acquisition. Federal governmental revenues are derived principally
   from work performed for the DOD and, to a lesser extent, the DOE and are
   thus included in our Engineering & Construction segment. We believe that
   we have begun to benefit from this transition by the DOE with the
   commencement in 1998 of a $122 million project to perform the excavation,
   pretreatment and drying of an estimated one million tons of materials for
   the DOE's Fernald Environmental Management Project. The increase in
   commercial revenues for the nine months ended December 25, 1998 is primarily
   attributable to the OHM acquisition.

Our Engineering & Construction segment profit was
   $71 million for the nine months ended December 25, 1998, an increase of 78%
   when compared to the $40 million segment profit for the twelve months ended
   March 27, 1998. This increase is primarily attributable to the OHM
   acquisition. The Engineering & Construction segment profit was 11.1% of
   Engineering & Construction revenues for the nine months ended December
   25, 1998 and 10.3% for the twelve months ended March 27, 1998.



Consulting & Technology.Revenues from our Consulting
   & Technology (C&T) segment were $34 million for the nine months
   ended December 25, 1998 compared to $38 million reported during the twelve
   months ended March 27, 1998, a decrease of approximately 12%. Most of the
   revenues from C&T are derived from commercial clients. The increase in
   these revenues on an annualized basis is primarily due to four acquisitions
   of specialized companies during the twelve months ended March 27, 1998 as
   well as the GTI acquisition during the nine months ended December 25, 1998.

Our C&T segment profit was $3.7 million for the nine months ended
   December 25, 1998, a decrease of 10% when compared to the $4.1 million
   segment profit reported in the twelve months ended March 27, 1998. The
   Consulting segment profit margin was 10.9% and 10.7% of revenues for the
   nine months ended December 25, 1998 and the twelve months ended March 27,
   1998, respectively. The annualized increase in absolute dollars, and as a
   percentage of revenue is primarily attributable to the acquisitions of JSC
   and GTI.

Outsourced Services.Outsourced Services revenues were $70
   million for the nine months ended December 25, 1998 compared to $7 million
   reported in the twelve months ended March 27, 1998. This increased revenue
   is almost entirely attributable to the OHM acquisition and the inclusion of
   its outsourcing operations in our results of operations for the nine months
   ended December 25, 1998, as opposed to the one month of results included in
   the twelve months ended March 27, 1998. Outsourced Services operations
   provide a range of project, program and construction management services to
   the DOD as well as state and local government agencies.

Our Outsourced Services segment profit improved to $6.4 million for
   the nine months ended December 25, 1998, an increase of $5.9 million when
   compared to the $0.5 million segment profit reported in the twelve months
   ended March 27, 1998. This increase is also a result of the OHM acquisition.

International.International revenues, primarily from our
   50.1% investment in Chi Mei IT, a subsidiary operating in Taiwan, were $9.8
   million for the nine months ended December 25, 1998 compared to $9.6 million
   for the twelve months ended March 27, 1998. The increase, on an annualized
   basis, is the result of Chi Mei's increased project volume and the GTI
   acquisition on December 3, 1998.

Our International segment reported a loss of $0.3 million for both the
   nine months ended December 25, 1998 and the twelve months ended March 27,
   1998. Our present method of reporting segment profit in 1999 included the
   effects of minority ownership interest in internally reported segment
   results, and also the revised allocation of indirect expenses. These
   reporting changes, which included restatement of prior periods, resulted in
   a reduced loss in the International segment for both the nine months ended
   December 25, 1998 and the twelve months ended March 27, 1998. Through the
   Chi Mei board of directors, we undertook to improve management oversight,
   project management skills and change order negotiation efforts. We believe
   these efforts will minimize future potential losses and provide the basis
   for profitable Chi Mei operations. The GTI acquisition increased the size of
   the International segment with operations primarily in Australia, the United
   Kingdom and Italy. The GTI acquisition included approximately $80.0 million
   of contract backlog for work to be performed for the U.S. Air Force Center
   for Environmental Excellence under a worldwide five-year indefinite delivery
   order cost-reimbursable contract.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were 5.5% of revenues for
   the nine months ended December 25, 1998 compared to 7.2% of revenues in the
   twelve months ended March 27, 1998. This decrease is primarily attributable
   to the elimination of certain duplicative overhead functions and other cost
   savings achieved as a result of the OHM acquisition.

Selling, general and administrative expenses include goodwill
   amortization expense of $7.0 million for the nine months ended December 25,
   1998 and $1.4 million for the twelve months ended March 27, 1998. The
   significant increase to goodwill amortization is primarily due to the OHM
   acquisition. Selling, general and administrative expenses (excluding
   goodwill) were 4.6% of revenues for the nine months ended December 25, 1998
   and 6.9% of revenues for the twelve months ended March 27, 1998.



Special Charges

We recorded special charges of $25.0 million for the nine months ended
   December 25, 1998 compared to $14.2 million for the twelve months ended
   March 27, 1998. For the nine months ended December 25, 1998 we recorded a
   non-cash charge of $25.0 million, including $10.6 million (net of cash
   proceeds of $5.8 million)related to the sale of our investment in Quanterra,
   Incorporated and $14.4 million related to the write-down of assets
   associated with the HTTS® business. A summary of the special charges
   incurred during the nine months ended December 25, 1998 is outlined below:



|                                                                                |         |  |           |   |          |  |     | 
|------------------------------------------------------------------------------- | ------- |  | --------- | - | -------- |  | --- | 
|                                                                               
|                                                                               
|                                                                                |         |  |           |   |         
|Write-off of the Quanterra Investment                                           | Noncash |  | $ (10,550 | ) | $ 10,550 |  | $  | 
|Write-down of the assets-Primarily the  
      Hybrid Thermal Treatment System® | Noncash |  | (14,421   | ) | 14,421   |  |    | 
|                                                                                |         |  |           |   |          |  |     | 
|Total                                                                           |         |  | $ (24,971 | ) | $ 24,971 |  | $  | 
|                                                                                |         |  |           |   |          |  |     | 

Quanterra. On May 27, 1998, our Board of Directors
   considered and approved the divestiture of certain non-core assets including
   our 19% common stock ownership interest in Quanterra, Incorporated, an
   environmental laboratory business. This charge of $10.6 million represented
   the net book value of our investment in Quanterra less proceeds of $5.8
   million from a sale completed in June 1998. No additional cash was expended
   in connection with the writeoff.

Hybrid Thermal Treatment System®. On May 27, 1998, our
   Board of Directors considered and approved the divestiture of the assets
   associated with our Hybrid Thermal Treatment System® (HTTS®)
   business. This resulted in a charge of $14.4 million representing the net
   book value of these assets less estimated salvage value.

The special charges of $14.2 million recorded in the twelve months
   ended March 27, 1998 included $5.7 million for integration costs associated
   with the acquisition of OHM, a $3.9 million non-cash charge related to a
   project claim settlement, a $2.8 million charge associated with the
   relocation of our corporate headquarters, and a $1.8 million loss from the
   sale of a small remediation services business. A summary of the special
   charges incurred during the twelve months ended March 27, 1998 is outlined
   below:



|                                     |         |  |          |   |         |  |         |  
|------------------------------------ | ------- |  | -------- | - | ------- |  | ------- | -
|                                    
|                                    
|                                    
|Integration costs-OHM acquisition    |         |  |          |   |         |  |         |  
|Severance                            | Cash    |  | $(2,197  | ) | $2,197  |  |        |  
|Duplicative offices/assets           | Cash    |  | (2,478   | ) | 1,226   |  | $(1,252 | )
|Other                                | Cash    |  | (1,019   | ) | 1,019   |  |        |  
|                                     |         |  |          |   |         |  |         |  
|                                     |         |  |          |   |         |  |         |  
|Claim Settlement                     |         |  |          |   |         |  |         |  
|Helen Kramer                         | Noncash |  | (3,943   | ) | 3,943   |  |        |  
|                                     |         |  |          |   |         |  |         |  
|                                     |         |  |          |   |         |  |         |  
|Relocation of Corporate Headquarters |         |  |          |   |         |  |         |  
|Severance and relocation             | Cash    |  | (1,743   | ) | 1,743   |  |        |  
|Duplicative offices/assets           | Cash    |  | (710     | ) | 710     |  |        |  
|Other                                | Cash    |  | (358     | ) | 358     |  |        |  
|                                     |         |  |          |   |         |  |         |  
|                                     |         |  |          |   |         |  |         |  
|Sale of remediation business         | Noncash |  | (1,800   | ) | 1,800   |  |        |  
|                                     |         |  |          |   |         |  |         |  
|Total                                |         |  | $(14,248 | ) | $12,996 |  | $(1,252 | )
|                                     |         |  |          |   |         |  |         |  





OHM Acquisition.The $5.7 million special charge for
   integration costs associated with the acquisition of OHM included $2.2
   million of costs for severance and $3.5 million of costs and other related
   items for closing and eliminating duplicative offices. As part of the plan
   of integration, we laid-off more than 100 employees, primarily in the
   operating group and administrative support functions. In addition, as part
   of the plan we closed three leased facilities, reduced the size of three
   more facilities and subleased a portion of eight additional facilities. As
   of December 25, 1998, $1.3 million of the integration charge remained to be
   paid. The remaining costs relate to the facility closures and office
   consolidations and will be paid over the remaining terms of the leases. Most
   of these lease commitments will be paid within the next three years. One
   lease requires payments over the next seven years.

Helen Kramer.In December 1997, we settled a contract claim
   which has been outstanding in excess of five years with the US Army Corps of
   Engineers, the Environmental Protection Agency and the Department of Justice
   (jointly Government) arising out of work performed by our joint venture with
   Davy International at the Helen Kramer Superfund project. On December 26,
   1997, the joint venture received a $14.5 million payment from the Government
   to resolve all outstanding project claims related to additional work
   resulting from differing site conditions. In early January 1998, the joint
   venture paid $4.3 million to the Government to resolve related civil claims
   by the Government. Our share of the joint venture results is 60%,
   accordingly, we received net cash of $6.0 million, our proportionate share
   of the settlement. In December 1997, we recorded a non-cash pre-tax charge
   of $3.9 million because the cash received was less than the receivables
   related to this project which totaled approximately $9.9 million.

Relocation of Corporate Headquarters and Sale of Remediation
   Business.The special charges that occurred in the first quarter of the
   twelve months ended March 27, 1998 resulted from the relocation of our
   corporate headquarters from Torrance, California to Monroeville
   (Pittsburgh), Pennsylvania and the sale of our California based small
   project remediation services business. The headquarters relocation
   consolidated the corporate overhead functions with our largest operations
   office. As a result of this relocation, we incurred a pre-tax charge of $2.8
   million. The relocation charge included $0.8 million of costs for severance,
   $0.9 million of costs for the relocation of some employees, $0.7 million of
   costs related to the closure of the offices in Torrance, California and $0.4
   million of other related costs. As part of this relocation, 32 employees
   were laid off, primarily corporate management and administrative support
   personnel. As of December 25, 1998, these amounts have been paid. In May
   1997, we incurred a non-cash pre-tax charge of $1.8 million to sell our
   California based small projects remediation services business.

Interest, Net

Net interest expense was $24.9 million, or 3.3% of revenues for the
   nine months ended December 25, 1998 and $8.0 million, or 1.8% for the twelve
   months ended March 27, 1998. The increase in interest expense is primarily
   attributable to the credit facilities used in the OHM acquisition (see Notes
   to Consolidated Financial StatementsNote 5. "Long-term debt
   ").

Income Taxes

For the nine months ended December 25, 1998, we reported a loss from
   continuing operations of $0.7 million and recorded an income tax charge of
   $9.7 million before adjusting for the special charge. We also provided a
   deferred tax asset valuation adjustment for a portion of the special charges
   and recognized a tax benefit of $3.0 million on the divestiture of the HTTS
   ® business (see "Special Charges"). The total net tax charge
   is $6.7 million. Our effective income tax rate from continuing operations is
   more than the federal statutory rate primarily due to the valuation
   adjustment for the above charge and amortization of cost in excess of net
   assets of acquired businesses (see Notes to Consolidated Financial Statements
   Note 6. "Income taxes").

For the twelve months ended March 27, 1998, we reported a loss from
   continuing operations before income taxes and an extraordinary item of $2.2
   million and recorded an income tax charge of $4.2 million after adjusting
   for the special charge and a $2.3 million deferred tax asset valuation
   adjustment prior to the acquisition of OHM. We also recognized a tax benefit
   of $3.5 million on an extraordinary charge for the early extinguishment of
   debt and a $3.0 million benefit for a loss from disposition of a
   discontinued operation. The total net tax benefit is $2.4 million. Our
   effective income tax rate from continuing operations is more than the
   federal statutory rate primarily due to the above charge, state income taxes
   and nondeductible expenses (see Notes to Consolidated Financial Statements
   Note 6. "Income taxes").



Extraordinary Item

For the twelve months ended March 27, 1998, we recorded a $5.7 million
   charge, net of income tax benefit of $3.5 million, for the early
   extinguishment of $65.0 million of senior debt which was refinanced in
   connection with the acquisition of OHM. We incurred a $5.6 million payment
   for the make whole interest provision as a result of retiring our $65.0
   million senior debt, in accordance with the loan agreement. In addition, we
   also expensed approximately $3.6 million related to the unamortized loan
   origination expenses associated with issuing the $65.0 million senior debt.

Dividends

Our reported dividends for the nine months ended December 25, 1998
   were $4.7 million and $6.2 million for the twelve months ended March 27,
   1998. Our reported dividends include imputed dividends on our Convertible
   Preferred Stock of $0.9 million for the nine months ended December 25, 1998
   and $2.1 million for the twelve months ended March 27, 1998, which are not
   payable in cash or stock. Commencing with November 21, 1997, our Convertible
   Preferred Stock outstanding accrued a 3% in-kind stock dividend for one year
   during which the statement of operations also included an imputed dividend
   at a rate of approximately 3% per annum. This additional imputed dividend of
   $0.9 million for the nine months ended December 25, 1998 and $0.5 million
   for the twelve months ended March 27, 1998, will never be paid in cash,
   except for fractional shares, and represents the amortization of the fair
   market value adjustment recorded since the date of issuance. Commencing with
   November 21, 1998, our outstanding Convertible Preferred Stock is entitled
   to a 6% cumulative cash dividend payable quarterly. We reported cash
   dividends on our outstanding depositary shares each representing 1/100 of a
   share of our 7% cumulative convertible exchangeable preferred stock (the 7%
   Preferred Stock) of $2.7 million in the nine months ended December 25, 1998
   and $3.6 million for the twelve months ended March 27, 1998. The decrease in
   cash dividends between the March 27, 1998 and December 25, 1998 fiscal
   periods of $0.9 million is due to the shortened fiscal period.

Our dividends are summarized below:

|Nine Months
   
   Ended
   
   December 25,
   
   1998 |                | Twelve Months
   
   Ended
   
   March 27,
   
   1998
|-------------------------------------------------------- | -------------- | -------------------------------------------------------
|                                                         | (In thousands)
|7% Cumulative convertible exchangeable cash dividend     | $2,697         |                                                        
|6% Cumulative convertible participating                  |                |                                                        
|Cash
     dividend                                      | 213            |                                                        
|Imputed
     non-cash dividend                          | 860            |                                                        
|In kind 3%
     stock dividend                          | 894            |                                                        
|                                                         |                |                                                        
|Total                                                    | $4,664         |                                                        
|                                                         |                |                                                        



Acquisition of Businesses

Through our growth strategy, we have acquired nine significant
   businesses since fiscal 1997. These businesses had aggregate revenues of $1
   billion in their fiscal year prior to acquisition. In connection with these
   acquisitions, as of December 31, 1999, we have intangible assets of $525
   million of cost in excess of net assets of acquired businesses, which
   represents 41% of our total assets and 193% of our stockholders' equity. We
   believe that our acquisition strategy provides future benefits for an
   indefinite period, and we amortize the cost in excess of net assets of
   acquired businesses over 20 to 40 year periods.



Discontinued Operations

At December 31, 1999, our consolidated balance sheet included accrued
   liabilities of $14 million for closure costs, insurance program costs and
   the PRP matters net of anticipated insurance settlement proceeds. In the
   twelve months ended December 31, 1999, we renegotiated our financial
   assurance requirements on closure and thirty year post-closure obligations
   with the California EPA Department of Toxic Substances Control (DTSC) to
   enable the use of a performance bond to replace restricted trust fund
   assets, and we also purchased environmental insurance which provides for our
   reimbursement of post-closure costs up to the insurance policy limits, which
   are in excess of our current estimates for post-closure costs, during the
   policy's thirty one year term. As a result of obtaining the performance bond
   and the insurance, in October 1999 we obtained the release of the trust fund
   assets and received cash of $15 million which had previously provided
   financial assurance to the DTSC. For further information regarding our
   discontinued operations, see Notes to Consolidated Financial Statements
   Note 14. "Discontinued operations."



THE IT GROUP, INC.

LIQUIDITY AND CAPITAL RESOURCES

Working capital increased $38 million or 32% to $158 million at
   December 31, 1999 from $120 million at December 25, 1998 as a result of the
   acquisitions of EFM and EMCON. The current ratio was 1.44:1 at both dates.

Cash provided by operating activities for the twelve months ended
   December 31, 1999 totaled $47 million compared to $15 million of cash used
   for operating activities for the nine months ended December 25, 1998. This
   $62 million increase in positive cash flow is principally due to improved
   operating results in 1999, and is also due to a $17 million net change in
   discontinued operations cash flow as a result of the 1999 release of
   previously restricted trust fund assets of discontinued operations (see
   Notes to Consolidated Financial StatementsNote 14. ''Discontinued
   operations"). We expect our discontinued operations cash usage for the
   twelve months ended December 29, 2000 to be approximately $8 million.

Capital expenditures were $22 million, $7 million and $5 million for
   the twelve months ended December 31, 1999, the nine months ended December
   25, 1998 and the twelve months ended March 27, 1998, respectively. Capital
   expenditures for the twelve months ended December 31, 1999 were $15 million
   higher than the nine months ended December 25, 1998 due primarily to
   acquisition related computer system and communication requirements. We
   expect capital expenditures to be approximately $15 million in fiscal year
   2000 primarily to undertake a series of information technology enhancements
   designed to increase productivity and commercialize our Web-based
   environmental health and safety services.

Cash used for the acquisition of businesses, net of cash acquired was
   $209 million and $101 million for the twelve months ended December 31, 1999
   and the nine months ended December 25, 1998, respectively. In 1999, we
   acquired Roche for $10 million, EFM for $74 million and EMCON for $62
   million, which collectively represented $146 million in initial acquisition
   costs. Additionally, we paid acquisition related liabilities including
   employee severance, relocation and facility closure costs of $27 million,
   acquisition transaction costs of $13 million, pre-acquisition liabilities of
   acquired companies of $12 million, and contingent consideration of $11
   million relating to previously acquired businesses. The nine months ended
   December 25, 1998 included $35 million as part of the consideration to
   acquire the balance of OHM, $69 million for the acquisition of GTI (or $40
   million net of $29 million in cash acquired), and $20 million for
   acquisition-related liabilities. Total potential future contingent payments
   range from a low of $2 million to a maximum of approximately $16 million
   through 2001, and are payable primarily in cash.

We do not expect to pay significant cash income taxes over the next
   several years due to our net operating loss carryforwards. (See Notes to
   Consolidated Financial StatementsNote 6. "Income taxes" and
   "Management's Discussion and Analysis of Results of Operations and
   Financial ConditionIncome Taxes".)

Long-term debt of $622 million at December 31, 1999 increased from
   $405 million at December 25, 1998 primarily due to the issuance of $225
   million in ten year senior subordinated notes (Senior Notes), which were
   used for the acquisitions of EFM and Roche, and to refinance our existing
   indebtedness. Long-term debt also increased due to borrowings under the
   revolving credit facility to finance the EMCON acquisition, See Notes to
   Consolidated Financial StatementsNote 2. "Business Acquisitions
   ". Our ratio of total debt, including current portion, to equity was
   2.38:1 at December 31, 1999, 1.77:1 at December 25, 1998 and 2.03:1 at March
   27, 1998. The Senior Notes have a 11.25% fixed rate of interest payable
   semiannually in cash commencing October 1999. There are no mandatory sinking
   fund payments, and the Senior Notes have a stated maturity of April 2009.
   The Senior Notes are general unsecured obligations, subordinated to our
   credit facilities (see Senior Notes to Consolidated Financial Statements
   Note 5. "Long-term debt") and other senior indebtedness and
   pari passu with other existing and future indebtedness unless the terms of
   that indebtedness expressly provide otherwise.

Due to conditions existent in the long-term credit markets during the
   second half of 1999, we utilized our revolving credit facility to finance
   the acquisition of EMCON. As a result of the utilization of funds for
   acquisition purposes and working capital requirements of the seasonal
   aspects of our business, we had limited average availability under our
   revolving credit facilities. On March 8, 2000, we obtained from our lenders
   under the credit facilities an additional $100 million, seven year term loan
   (Term C loan), which is payable in twelve semi-annual installments of $1
   million and four quarterly payments of $22 million commencing in September
   2006 through June 2007 (see Notes to Consolidated Financial Statements
   Note 16. "Subsequent events").



The Term C loan net proceeds of approximately $97
   million were used to pay down outstanding borrowings under the revolving
   credit facility portion of the credit facilities without reducing
   availability under the revolving portion of the credit facility, which will
   be used to support seasonal business pattern working capital requirements
   and growth from our prior acquisitions.

Based on our current level of operations, we believe our cash flow,
   available cash and available borrowings under our credit facilities
   including the $100 million increase funded on March 8, 2000 will be adequate
   to meet our future liquidity needs, excluding major acquisitions, for the
   next twelve months. We continue to have significant cash requirements
   including the service of our substantial indebtedness. Meeting the
   requirements of our debt agreements may from time to time affect our ability
   to balance operational and other cash requirements. We are continuing with
   our ongoing efforts to identify acquisition candidates and simultaneously
   the capital sources which will be required to complete any major acquisition
   transaction.

Backlog

Our total funded and unfunded backlog at December
   31, 1999 was $4.3 billion, including $0.6 billion relating to our share of
   joint venture backlog. At December 25, 1998 our backlog was approximately
   $3.5 billion. The increase in backlog was primarily attributable to our EFM
   acquisition. Our backlog at December 31, 1999 includes approximately $1.2
   billion of funded backlog, of which $0.9 billion is expected to be completed
   during 2000, and $0.3 billion of unfunded project work expected to be
   defined and performed during 2000 under existing indefinite delivery order
   contracts. We expect to earn revenues from our backlog primarily over the
   next one to five years, with a substantial portion of the backlog consisting
   of governmental contracts, many of which are subject to annual funding and
   definition of project scope. The backlog at both December 31, 1999 and
   December 25, 1998 includes $3.1 billion and $2.7 billion, respectively, of
   future work we estimate we will receive (based on historical experience)
   under existing indefinite delivery order programs. In accordance with
   industry practices, substantially all of our contracts are subject to
   cancellation, delay or modification by the customer. The composition of our
   backlog at December 31, 1999 expected to be charged to our clients on a
   cost-reimbursable basis is approximately 84%. Additionally, many of our
   commercial contracts automatically renew annually and are not part of our
   backlog. The predictability and stability of our backlog permits us to
   manage our fixed costs appropriately, minimize our overhead and bid
   selectively on new work.

Our backlog at any given time is subject to changes in scope of
   services which may lead to increases or decreases in backlog amounts. These
   scope changes have led to a number of contract claims requiring negotiations
   with clients in the ordinary course of business. (See Notes to Consolidated
   Financial StatementsNote 1. "Summary of significant accounting
   policiesContract accounting and accounts receivable").

Year 2000

We completed our Year 2000 readiness plan in the fourth quarter of
   1999. Through March 2000, we have experienced no Year 2000 problems. The
   total cost expended in the Year 2000 readiness plan was approximately $6
   million. Certain portions of these expenditures included the replacement of
   systems at acquired companies, which were capitalized in accordance with our
   normal policies.

ITEM 7a. Quantitative and Qualitative Disclosures About
   Market Risk.

The following discussion of our exposure to various market risks
   contains "forward looking statements" that involve risks and
   uncertainties. These projected results have been prepared utilizing certain
   assumptions considered reasonable in the circumstances and in light of
   information currently available to us. Nevertheless, because of the inherent
   unpredictability of interest rates, actual results could differ materially
   from those projected in such forward-looking information.

At December 31, 1999, we had fixed-rate debt totaling $265 million in
   principal amount and having a fair value of $254 million. These instruments
   are fixed rate and, therefore, do not expose us to the risk of earnings loss
   due to changes in market interest rates. However, the fair value of these
   instruments would decrease to approximately $240 million if interest rates
   were to increase by 10% from their levels at December 31, 1999. At December
   25, 1998, we had fixed rate debt totaling $45 million which had a fair value
   of $41 million, which would have decreased to $40 million had interest rates
   increased 10% from their December 25, 1998 levels.



At December 31, 1999, we had floating-rate long-term debt totaling
   $363 million in principal amount and having a fair value of $363 million.
   These borrowings are under our Bank Credit Facilities (see Notes to
   Consolidated Financial StatementsNote 5, "Long-term debt").
   We have entered into a swap agreement with a notional amount of $126 million
   as required by our credit facilities and to reduce our exposure to adverse
   fluctuations in interest rates relating to this debt. The swap converts the
   $126 million notional amount from floating rate to fixed rate debt, and at
   December 31, 1999 has a mark-to-market benefit to us of $1.2 million. We
   have not entered into any other derivative financial instruments for trading
   purposes. If floating rates were to increase by 10% from December 31, 1999
   levels, we would incur additional interest expense of approximately $1.8
   million.

FORWARD LOOKING STATEMENTS

Statements of our intentions, beliefs, expectations or predictions for
   the future, denoted by the words "anticipate," "believe,
   " "estimate," "expect," "project,"
   "imply," "intend," "foresee," and similar
   expressions are forward-looking statements that reflect our current views
   about future events and are subject to risks, uncertainties and assumptions.
   Such risks, uncertainties and assumptions include those identified in the
   "Business" section of this report and the following:

| |  | changes in laws or regulations affecting our
     operations, as well as competitive factors and pricing pressures,
| | - | -------------------------------------------------------------------------------------------------------------------



| |  | bidding opportunities and success,
| | - | ----------------------------------



| |  | project results, including success in pursuing claims
     and change orders,
| | - | -----------------------------------------------------------------------------



| |  | management of our cash resources, particularly in
     light of our substantial leverage,
| | - | -----------------------------------------------------------------------------------------



| |  | the constraints placed on our operations,
     acquisitions and working capital by the terms of our debt
     agreements,
| | - | -------------------------------------------------------------------------------------------------------------------------



| |  | funding of backlog,
| | - | -------------------



| |  | matters affecting contracting and engineering
     businesses generally, such as the seasonality of work and the impact of
     weather and clients' timing of projects,
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our ability to generate a sufficient level of future
     earnings to utilize our deferred tax assets,
| | - | ------------------------------------------------------------------------------------------------------



| |  | the ultimate closure costs and post-closure costs of
     our discontinued operations,
| | - | --------------------------------------------------------------------------------------



| |  | the success of our acquisition strategy, including
     the effects of the integration of recent acquisitions and any future
     acquisitions and achievement of expected cost savings and other synergies
     therefrom, and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | industry-wide market factors and other general
     economic and business conditions.
| | - | -------------------------------------------------------------------------------------





Our actual results could differ materially from those projected in
   these forward-looking statements as a result of these factors, many of which
   are beyond our control.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
   FINANCIAL STATEMENTSCHEDULE FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999,
   THE NINEMONTHS ENDED DECEMBER 25, 1998 AND THE TWELVE MONTHS
   ENDED MARCH 27,1998

Consolidated Financial Statements.



|                                                                                   | Page
|---------------------------------------------------------------------------------- | ----
|Report of Ernst & Young LLP, Independent Auditors                                  | 33  
|Consolidated Balance SheetsDecember 31, 1999 and December 25,
     1998           | 34  
|Consolidated Statements of OperationsYear Ended December 31,
     1999, Nine      |     
|Months Ended December 25, 1998 and Year
     Ended March 27, 1998                  | 35  
|Consolidated Statements of Stockholders' EquityYear Ended
     December 31, 1999, |     
|Nine Months Ended December 25, 1998 and Year
     Ended March 27, 1998             | 36  
|Consolidated Statements of Cash FlowsYear Ended December 31,
     1999,           |     
|Nine Months Ended December 25, 1998 and Year
     Ended March 27, 1998             | 37  
|Notes to Consolidated Financial Statements                                         | 38  
|                                                                                   |     
|Financial Statement Schedule.                                                      |     
|                                                                                   |     
|II. Valuation and qualifying accounts                                              | 75  

Schedules not filed herewith are omitted because of the absence in all
   material respects of conditions under which they are required or because the
   information called for is shown in the consolidated financial statements or
   notes thereto.



REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS

The Board of DirectorsThe IT Group, Inc.

We have audited the accompanying consolidated balance sheets of The IT
   Group, Inc. as of December 31, 1999 and December 25, 1998 and the related
   consolidated statements of operations, stockholders' equity, and cash flows
   for the year ended December 31, 1999, the nine months ended December 25,
   1998 and the year ended March 27, 1998. Our audits also included the
   financial statement schedule listed in the index at Item 8. These
   consolidated financial statements and schedule are the responsibility of the
   Company's management. Our responsibility is to express an opinion on these
   financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to
   above present fairly, in all material respects, the consolidated financial
   position of The IT Group, Inc. at December 31, 1999 and December 25, 1998
   and the consolidated results of its operations and its cash flows for the
   year ended December 31, 1999, the nine months ended December 25, 1998 and
   the year ended March 27, 1998 in conformity with accounting principles
   generally accepted in the United States. Also, in our opinion, the related
   financial statement schedule, when considered in relation to the basic
   financial statements taken as a whole, presents fairly in all material
   respects the information set forth therein.

| | ERNST & YOUNG LLP
| | -----------------



Pittsburgh, PennsylvaniaFebruary 18, 2000, except for Note 16, as towhich the date is March 8, 2000



THE IT GROUP, INC.

CONSOLIDATED BALANCE SHEETS(In thousands, except for share data)



|December 31,
   
   1999                                 |                                                                                                                                  | December 25,
   
   1998                                                                                       |            
|-------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -----------
|                                                         | ASSETS                                                                                                                           |                                                                                                                |            
|Current assets:                                          |                                                                                                                                  |                                                                                                                |            
|                                                         | Cash and cash equivalents                                                                                                        | $    29,529                                                                                                    |            
|                                                         | Accounts receivable, less allowance for
     doubtful accounts of $18,023 and $18,958,   respectively                            | 427,427                                                                                                        |            
|                                                         | Prepaid expenses and other current
     assets                                                                                   | 30,664                                                                                                         |            
|                                                         | Deferred income taxes                                                                                                            | 26,336                                                                                                         |            
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  | Total current assets                                                                                           | 513,956    
|Property, plant and equipment, at
     cost:             |                                                                                                                                  |                                                                                                                |            
|                                                         | Land, buildings and improvements                                                                                                 | 15,601                                                                                                         |            
|                                                         | Machinery and equipment                                                                                                          | 104,019                                                                                                        |            
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  |                                                                                                                | 119,620    
|                                                         |                                                                                                                                  | Less accumulated depreciation and
     amortization                                                            | 54,769     
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  | Net property,
     plant and equipment                                                                         | 64,851     
|Cost in excess of net assets of acquired
     businesses | 525,052                                                                                                                          |                                                                                                                | 356,619    
|Other assets                                             | 41,830                                                                                                                           |                                                                                                                | 17,469     
|Deferred income taxes                                    | 95,134                                                                                                                           |                                                                                                                | 93,719     
|Long-term assets of discontinued
     operations         | 40,048                                                                                                                           |                                                                                                                | 40,048     
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  | Total assets                                                                                                   | $ 1,280,871
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         | LIABILITIES AND STOCKHOLDERS'
     EQUITY                                                                                        |                                                                                                                |            
|Current liabilities:                                     |                                                                                                                                  |                                                                                                                |            
|                                                         | Accounts payable                                                                                                                 | $    206,068                                                                                                   |            
|                                                         | Accrued wages and related liabilities                                                                                            | 43,296                                                                                                         |            
|                                                         | Billings in excess of revenues                                                                                                   | 17,614                                                                                                         |            
|                                                         | Other accrued liabilities                                                                                                        | 65,435                                                                                                         |            
|                                                         | Short-term debt, including current portion
     of long-term debt                                                                | 24,040                                                                                                         |            
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  | Total current liabilities                                                                                      | 356,453    
|Long-term debt                                           | 621,772                                                                                                                          |                                                                                                                | 405,059    
|Other long-term accrued liabilities                      | 29,268                                                                                                                           |                                                                                                                | 31,979     
|Minority interest                                        | 1,566                                                                                                                            |                                                                                                                | 579        
|Commitments and contingencies                            |                                                                                                                                  |                                                                                                                |            
|Stockholders' equity:                                    |                                                                                                                                  |                                                                                                                |            
|                                                         | Preferred stock, $100 par value; 180,000
     shares authorized                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  | 7% cumulative convertible exchangeable,
     20,556 issued and outstanding,
   
      24,000 shares authorized | 2,056      
|                                                         |                                                                                                                                  | 6% cumulative convertible participating,
     46,095 shares issued and outstanding                             | 4,609      
|                                                         | Common stock, $.01 par value; 50,000,000
     shares authorized; 22,830,909 and
   
      22,675,917 shares issued, respectively | 228                                                                                                            |            
|                                                         | Treasury stock at cost, 61,222 and 47,484
     shares, respectively                                                              | (946                                                                                                           | )          
|                                                         | Additional paid-in capital                                                                                                       | 350,627                                                                                                        |            
|                                                         | Deficit                                                                                                                          | (84,666                                                                                                        | )          
|                                                         | Accumulated other comprehensive income
     (deficit)                                                                            | (96                                                                                                            | )          
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  | Total stockholders' equity                                                                                     | 271,812    
|                                                         |                                                                                                                                  |                                                                                                                |            
|                                                         |                                                                                                                                  | Total liabilities and stockholders' equity                                                                     | $ 1,280,871
|                                                         |                                                                                                                                  |                                                                                                                |            

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



THE IT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)



|                                                                                            |                                                                  |                     |          |            |          |            |  
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------- | -------- | ---------- | -------- | ---------- | -
|                                                                                            |                                                                 
|                                                                                           
|Revenues                                                                                    | $1,314,251                                                       |                     | $757,435 |            | $442,216 |           
|Cost and expenses:                                                                          |                                                                  |                     |          |            |          |           
|                                                                                            | Cost of revenues                                                 | 1,128,393           |          | 666,474    |          | 391,126    |  
|                                                                                            | Selling, general and administrative expenses                     | 71,141              |          | 41,828     |          | 31,774     |  
|                                                                                            | Special charges                                                  |                    |          | 24,971     |          | 14,248     |  
|                                                                                            |                                                                  |                     |          |            |          |           
|Operating income                                                                            | 114,717                                                          |                     | 24,162   |            | 5,068    |           
|Other income, net                                                                           |                                                                 |                     |         |            | 716      |           
|Interest, net                                                                               | 54,115                                                           |                     | 24,895   |            | 7,969    |           
|                                                                                            |                                                                  |                     |          |            |          |           
|Income (loss) from continuing operations before
   
     income taxes                       | 60,602                                                           |                     | (733     | )          | (2,185   | )         
|Provision for income taxes                                                                  | 21,924                                                           |                     | 6,694    |            | 4,175    |           
|                                                                                            |                                                                  |                     |          |            |          |           
|Income (loss) from continuing operations                                                    | 38,678                                                           |                     | (7,427   | )          | (6,360   | )         
|Discontinued operationsclosure costs (net of
   
     $3,040 income tax benefit)           |                                                                 |                     |         |            | 4,960    |           
|                                                                                            |                                                                  |                     |          |            |          |           
|Income (loss) before extraordinary item                                                     | 38,678                                                           |                     | (7,427   | )          | (11,320  | )         
|Extraordinary itemearly extinguishment of debt
   
     (net of $3,497 income tax benefit) |                                                                 |                     |         |            | 5,706    |           
|                                                                                            |                                                                  |                     |          |            |          |           
|Net income (loss)                                                                           | 38,678                                                           |                     | (7,427   | )          | (17,026  | )         
|Less preferred stock dividends                                                              | (6,360                                                           | )                   | (4,664   | )          | (6,167   | )         
|                                                                                            |                                                                  |                     |          |            |          |           
|Net income (loss) applicable to common stock                                                | $    32,318                                                      |                     | $(12,091 | )          | $(23,193 | )         
|                                                                                            |                                                                  |                     |          |            |          |           
|Net income (loss) per share basic:                                                          |                                                                  |                     |          |            |          |           
|                                                                                            | Continuing operations (net of preferred stock  
      dividends) | $        1.42       |          | $    (0.63 | )        | $    (1.28 | )
|                                                                                            | Discontinued operations                                          |                    |          |           |          | (0.51      | )
|                                                                                            | Extraordinary itemearly extinguishment of debt                  |                    |          |           |          | (0.59      | )
|                                                                                            |                                                                  |                     |          |            |          |            |  
|                                                                                            |                                                                  | $       
      1.42 |          | $    (0.63 | )        | $    (2.38 | )
|                                                                                            |                                                                  |                     |          |            |          |            |  
|                                                                                            | Net income (loss) per share diluted:                             | $       
      1.20 |          | $    (0.63 | )        | $    (2.38 | )
|                                                                                            |                                                                  |                     |          |            |          |            |  

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





THE IT GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYFor the Twelve Months Ended December 31, 1999,the Nine Months Ended December 25, 1998,and the Twelve Months Ended March 27, 1998(In thousands)



|7%
   
   cumulative
   
   convertible
   
   exchangeable
   
   preferred
   
   stock |                                                                                        | 6%
   
   cumulative
   
   convertible
   
   participating
   
   preferred
   
   stock |         | Common
   
   stock |      | Treasury
   
   stock |       | Additional
   
   paid-in
   
   capital |           | Deficit |           | Accumulated
   
   Other
   
   Comprehensive
   
   Income
   
   (Deficit) |         | Totals |          |        
|----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------- | ------------------- | ---- | --------------------- | ----- | ---------------------------------------- | --------- | ------- | --------- | ---------------------------------------------------------------------------- | ------- | ------ | -------- | -------
|Balance at March 28, 1997                                                                 | $ 2,056                                                                                |                                                                                            | $ 4,204 |                     | $ 97 |                       | $ (74 | )                                        | $ 244,287 |         | $ (81,700 | )                                                                            | $ (17   | )      | $168,853 |        
|                                                                                          | Comprehensive income:                                                                  |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          |                                                                                        | Net loss                                                                                   |        |                     |     |                       |      |                                          |          |         |          |                                                                              | (17,026 | )      |         |        
|                                                                                          |                                                                                        | Foreign currency
   
       translation adjustments
   
       net of tax                  |        |                     |     |                       |      |                                          |          |         |          |                                                                              |        |        | (151     | )      
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          | Comprehensive loss                                                                     |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          | (17,177
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          | Restricted stock                                                                       |                                                                                           |         |                    |      |                      |       |                                         |           | 223     |           |                                                                             |         |       |          | 223    
|                                                                                          | Dividends on preferred stock                                                           |                                                                                           |         | 247                 |      |                      |       |                                         |           | 2,232   |           | (6,167                                                                       | )       |       |          | (3,688 
|                                                                                          | Stock options exercised                                                                |                                                                                           |         |                    |      |                      |       |                                         |           | (61     | )         |                                                                             |         |       |          | (61    
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|Balance at March 27, 1998                                                                 | 2,056                                                                                  |                                                                                            | 4,451   |                     | 97   |                       | (74   | )                                        | 246,681   |         | (104,893  | )                                                                            | (168    | )      | 148,150  |        
|                                                                                          | Comprehensive income:                                                                  |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          |                                                                                        | Net loss                                                                                   |        |                     |     |                       |      |                                          |          |         |          |                                                                              | (7,427  | )      |         |        
|                                                                                          |                                                                                        | Foreign currency
   
       translation adjustments
   
       net of tax                  |        |                     |     |                       |      |                                          |          |         |          |                                                                              |        |        | (292     | )      
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          | Comprehensive loss                                                                     |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          | (7,719 
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          | Restricted stock                                                                       |                                                                                           |         |                    |      |                      |       |                                         |           | 38      |           |                                                                             |         |       |          | 38     
|                                                                                          | Dividends on preferred stock                                                           |                                                                                           |         | 158                 |      |                      |       |                                         |           | 1,421   |           | (4,664                                                                       | )       |       |          | (3,085 
|                                                                                          | IT shares issued in exchange for
   
     OHM stock, net of stock issue
   
     costs |                                                                                           |         |                    |      | 130                   |       |                                         |           | 100,654 |           |                                                                             |         |       |          | 100,784
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|Balance at December 25, 1998                                                              | 2,056                                                                                  |                                                                                            | 4,609   |                     | 227  |                       | (74   | )                                        | 348,794   |         | (116,984  | )                                                                            | (460    | )      | 238,168  |        
|                                                                                          | Comprehensive income:                                                                  |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          |                                                                                        | Net income                                                                                 |        |                     |     |                       |      |                                          |          |         |          |                                                                              | 38,678  |        |         |        
|                                                                                          |                                                                                        | Foreign currency
   
       translation adjustments
   
       net of tax                  |        |                     |     |                       |      |                                          |          |         |          |                                                                              |        |        | 364      |        
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          | Comprehensive income                                                                   |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          | 39,042 
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|                                                                                          | Dividends on preferred stock                                                           |                                                                                           |         |                    |      |                      |       |                                         |           |        |           | (6,360                                                                       | )       |       |          | (6,360 
|                                                                                          | Restricted stock, net                                                                  |                                                                                           |         |                    |      |                      |       | (659                                     | )         | (207    | )         |                                                                             |         |       |          | (866   
|                                                                                          | Stock options exercised                                                                |                                                                                           |         |                    |      | 1                     |       | (754                                     | )         | 1,854   |           |                                                                             |         |       |          | 1,101  
|                                                                                          | Shares issued in business
   
     combinations and other items                        |                                                                                           |         |                    |      |                      |       | 541                                      |           | 186     |           |                                                                             |         |       |          | 727    
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        
|Balance at December 31, 1999                                                              | $ 2,056                                                                                |                                                                                            | $ 4,609 |                     | $228 |                       | $(946 | )                                        | $350,627  |         | $ (84,666 | )                                                                            | $(96    | )      | $271,812 |        
|                                                                                          |                                                                                        |                                                                                            |         |                     |      |                       |       |                                          |           |         |           |                                                                              |         |        |          |        

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



THE IT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)



|                                                          |                                                                                                                                                      |                                                                                                          |                                                            |         | Twelve MonthsEnded
   
   December 31,
   
   1999 |         | Nine Months
   
   Ended
   
   December 25,
   
   1998 |         | Twelve Months
   
   Ended
   
   March 27,
   
   1998 |  
|--------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------- | -------------------------------------------------- | ------- | -------------------------------------------------------- | ------- | ------------------------------------------------------- | -
|Cash flows from operating activities:                     |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                         
|                                                          | Net income (loss)                                                                                                                                    |                                                                                                          | $38,678                                                    |         | $(7,427                                            | )       | $(17,026                                                 | )      
|                                                          |                                                                                                                                                      | Adjustments to reconcile net income (loss) to net
     cash provided by (used for) operating activities: |                                                            |         |                                                    |         |                                                          |         |                                                        
|                                                          |                                                                                                                                                      |                                                                                                          | Net loss from discontinued operations                      |         |                                                   |         |                                                         |         | 4,960                                                   |  
|                                                          |                                                                                                                                                      |                                                                                                          | Extraordinary charge for early retirement
   
     of debt |         |                                                   |         |                                                         |         | 3,640                                                   |  
|                                                          |                                                                                                                                                      |                                                                                                          | Depreciation and amortization                              |         | 30,369                                             |         | 20,094                                                   |         | 13,158                                                  |  
|                                                          |                                                                                                                                                      |                                                                                                          | Non-recurring special charges                              |         |                                                   |         | 24,971                                                   |         | 5,743                                                   |  
|                                                          |                                                                                                                                                      |                                                                                                          | Deferred income taxes                                      |         | 18,924                                             |         | 6,187                                                    |         | 678                                                     |  
|                                                          |                                                                                                                                                      |                                                                                                          | Other                                                      |         | 2,662                                              |         | 13                                                       |         | (980                                                    | )
|                                                          | Changes in operating assets and liabilities
   
     providing (using)cash, net of effects from
   
     acquisitions and dispositionsof businesses: |                                                                                                          |                                                            |         |                                                    |         |                                                          |        
|                                                          |                                                                                                                                                      | Accounts receivable                                                                                      |                                                            | (75,771 | )                                                  | (88,612 | )                                                        | 386     |                                                        
|                                                          |                                                                                                                                                      | Prepaid expenses and other current assets                                                                |                                                            | (10,577 | )                                                  | (364    | )                                                        | (717    | )                                                      
|                                                          |                                                                                                                                                      | Accounts payable                                                                                         |                                                            | 41,669  |                                                    | 65,359  |                                                          | (7,687  | )                                                      
|                                                          |                                                                                                                                                      | Accrued wages and related liabilities                                                                    |                                                            | (13,864 | )                                                  | (14,825 | )                                                        | (4,471  | )                                                      
|                                                          |                                                                                                                                                      | Billings in excess of revenues                                                                           |                                                            | 6,121   |                                                    | 4,496   |                                                          | (4,634  | )                                                      
|                                                          |                                                                                                                                                      | Other accrued liabilities                                                                                |                                                            | 4,257   |                                                    | (10,252 | )                                                        | 1,591   |                                                        
|                                                          |                                                                                                                                                      | Other long-term accrued liabilities                                                                      |                                                            | (1,211  | )                                                  | (3,126  | )                                                        | 733     |                                                        
|                                                          |                                                                                                                                                      | Discontinued operations                                                                                  |                                                            | 5,796   |                                                    | (11,069 | )                                                        | (14,914 | )                                                      
|                                                          |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                          |         |                                                        
|                                                          |                                                                                                                                                      | Net cash provided by (used for) operating  
      activities                                             |                                                            | 47,053  |                                                    | (14,555 | )                                                        | (19,540 | )                                                      
|Cash flows from investing activities:                     |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                         
|                                                          | Capital expenditures                                                                                                                                 |                                                                                                          | (21,762                                                    | )       | (6,860                                             | )       | (4,766                                                   | )      
|                                                          | Proceeds from sale of equity interest in
     Quanterra                                                                                              |                                                                                                          |                                                           |         | 5,750                                              |         |                                                         |        
|                                                          | Proceeds from disposition of business                                                                                                                |                                                                                                          |                                                           |         |                                                   |         | 2,800                                                    |        
|                                                          | Acquisition of businesses, net of cash acquired                                                                                                      |                                                                                                          | (208,860                                                   | )       | (101,270                                           | )       | (163,189                                                 | )      
|                                                          | Other, net                                                                                                                                           |                                                                                                          | (1,101                                                     | )       | 1,003                                              |         | (4,896                                                   | )      
|                                                          |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                          |        
|                                                          | Net cash used by investing activities                                                                                                                |                                                                                                          | (231,723                                                   | )       | (101,377                                           | )       | (170,051                                                 | )      
|Cash flows from financing activities:                     |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                         
|                                                          | Financing costs                                                                                                                                      |                                                                                                          | (8,612                                                     | )       | (6,179                                             | )       | (4,113                                                   | )      
|                                                          | Repayments of long-term borrowings                                                                                                                   |                                                                                                          | (316,952                                                   | )       | (409,690                                           | )       | (68,666                                                  | )      
|                                                          | Long-term borrowings                                                                                                                                 |                                                                                                          | 525,575                                                    |         | 531,015                                            |         | 210,940                                                  |        
|                                                          | Dividends paid on preferred stock                                                                                                                    |                                                                                                          | (7,258                                                     | )       | (2,714                                             | )       | (2,702                                                   | )      
|                                                          | Issuances of common stock, net                                                                                                                       |                                                                                                          | 181                                                        |         |                                                   |         |                                                         |        
|                                                          |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                          |        
|                                                          | Net cash provided by financing activities                                                                                                            |                                                                                                          | 192,934                                                    |         | 112,432                                            |         | 135,459                                                  |        
|                                                          |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                         
|Net increase (decrease) in cash and cash
     equivalents |                                                                                                                                                      | 8,264                                                                                                    |                                                            | (3,500  | )                                                  | (54,132 | )                                                       
|Cash and cash equivalents at beginning of
     period     |                                                                                                                                                      | 21,265                                                                                                   |                                                            | 24,765  |                                                    | 78,897  |                                                         
|                                                          |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                         
|Cash and cash equivalents at end of period                |                                                                                                                                                      | $29,529                                                                                                  |                                                            | $21,265 |                                                    | $24,765 |                                                         
|                                                          |                                                                                                                                                      |                                                                                                          |                                                            |         |                                                    |         |                                                         

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







THE IT GROUP, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of significant accounting policies:

Basis of presentation and principles of consolidation

The
   consolidated financial statements include The IT Group, Inc. (IT or the
   Company) and its wholly-owned and majority-owned subsidiaries. The Company
   uses the equity method to account for certain joint ventures in which the
   Company does not have in excess of 50% of voting control. Intercompany
   transactions are eliminated.

On June 9,
   1998, the Board of Directors of IT approved a change in fiscal year end from
   the last Friday in March of each year to the last Friday of December of each
   year. The report covering the transition period is IT's Annual Report on
   Form 10-K for the nine months ended December 25, 1998.

Estimates used in the preparation of the consolidated financial
   statements

The preparation
   of consolidated financial statements in conformity with generally accepted
   accounting principles requires management to make estimates and assumptions
   that affect the amounts reported in the financial statements and the
   accompanying notes. Actual results inevitably will differ from those
   estimates and such differences may be material to the consolidated financial
   statements.

Recent Accounting Pronouncements

In June of
   1999, the Financial Accounting Standards Board (FASB) issued Statement No.
   137, "Accounting for Derivative Instruments and Hedging Activities -
   Deferral of Effective Date of FASB Statement No. 133" which deferred
   for a one year period the required adoption of FASB Statement No. 133 to
   fiscal years beginning after June 15, 2000. As a result, the Company intends
   to adopt FASB Statement No. 133 in the first fiscal quarter of the year
   2001, although earlier adoption is permitted. The statement requires the
   swap agreements, used by the Company to manage the interest rate risks
   associated with the variable nature of the Company's Credit Facilities, to
   be recorded at fair market value and reflected in earnings. The Company has
   evaluated its existing interest rate contracts and management does not
   believe that the effect of market volatility on interest rates will have a
   material effect on earnings for the existing contracts including anticipated
   modifications.





The Company elected to change its fiscal year-end from the last
   Friday in March to the last Friday in December effective for the nine months
   ended December 25, 1998. Comparative information for the twelve months ended
   December 25, 1998, and December 26, 1997 is as follows:



|Twelve Months Ended                                                       
|--------------------------------------------------------------------------
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Revenues                                                                  
|Cost of revenues                                                          
|                                                                          
|Gross profit                                                              
|Selling, general and administrative expenses                              
|Special charges                                                           
|                                                                          
|Operating income                                                          
|Interest, net                                                             
|                                                                          
|Income (loss) from continuing operations
   
     before income taxes     
|Provision for income taxes                                                
|                                                                          
|Income (loss) from continuing operations                                  
|                                                                          
|Diluted income (loss) per common share
   
     from continuing operations
|                                                                          

Cash equivalents

Contract accounting and accounts receivable

Revenues from time-and-material and cost-reimbursement contracts are
   recognized as costs are incurred. Estimated fees on such contracts and
   revenues on fixed-price and certain unit-bid contracts are recognized under
   the percentage-of-completion method determined based on the ratio of costs
   incurred to estimated total costs. Anticipated losses on contracts are
   recorded as identified. Certain contracts include provisions for revenue
   adjustments to reflect scope changes and other matters, including claims,
   which require negotiations with clients to settle the amounts in the
   ordinary course of business, leading to some estimates of claim or scope
   change amounts being included in revenues. When such amounts are finalized,
   any changes from the estimates are reflected in earnings.

Included in
   accounts receivable, net of allowance for doubtful accounts at December 31,
   1999 are billed receivables, unbilled receivables and retention in the
   amounts of $345 million, $67 million and $15 million, respectively. Billed
   receivables, unbilled receivables and retention from the U.S. Government as
   of December 31, 1999 were $171 million, $47 million and $4 million,
   respectively. At December 25, 1998, billed receivables, unbilled receivables
   and retention were $269 million, $61 million and $9 million, respectively.
   Billed receivables, unbilled receivables and retention from the U.S.
   Government as of December 25, 1998 were $146 million, $38 million and $2
   million, respectively.



Unbilled receivables
   typically represent amounts earned under the Company's contracts but not yet
   billable according to the contract terms, which usually consider the passage
   of time, achievement of certain milestones, negotiation of change orders or
   completion of the project. Generally, unbilled receivables are expected to
   be billed and collected in the subsequent year. Billings in excess of
   revenues represent amounts billed in accordance with contract terms, which
   are in excess of the amounts includable in revenue.

Included in
   accounts receivable at December 31, 1999 is approximately $37 million
   associated with claims and unapproved change orders, which are believed by
   management to be probable of realization. Most of these claims and change
   orders are being negotiated or are in arbitration. This amount includes
   contract claims in litigation (see Note 8. "Contingencies"). While
   management believes no material loss will be incurred related to these
   claims and change orders, the actual amounts realized could be materially
   different than the amount recorded.

The Company
   performs periodic evaluations of its clients' financial condition and
   generally does not require collateral. At December 31, 1999, accounts
   receivable are primarily concentrated in federal, state and local
   governmental entities and in commercial clients in which the Company does
   not believe there is any undue credit risk.

Property, plant and equipment

Interest

Interest income is principally earned on the
   Company's investments in cash equivalents and was $1.8 million, $1.0 million
   and $2.8 million for the twelve months ended December 31, 1999, the nine
   months ended December 25, 1998, and the twelve months ended March 27, 1998,
   respectively.

Intangible assets

Cost in excess
   of net assets of acquired businesses is amortized over 20 to 40 years on a
   straight-line basis. At December 31, 1999 and December 25, 1998, accumulated
   amortization is $31 million and $17 million, respectively. On an ongoing
   basis, when there are indicators of impairment such as recurring operating
   losses, the Company periodically evaluates the recoverability of intangibles
   resulting from business acquisitions. When indicators exist, the Company
   compares the carrying value of intangibles and other long-lived assets to
   the estimated future undiscounted cash flows expected to be generated from
   the businesses acquired over the remaining life of the unamortized
   intangibles. If the undiscounted cash flows are less than the carrying value
   of the these assets, the cash flows will be discounted to fair value and the
   long-lived assets will be reduced to that amount. There has been no
   impairment in the twelve months ended December 31, 1999, the nine months
   ended December 25, 1998, or the twelve months ended March 27, 1998. Other
   intangibles, arising principally from acquisitions, are amortized on a
   straight-line basis over periods not exceeding 20 years.



Stock-based compensation

Changes
   in Presentation of Comparative Financial Statements

Risks and uncertainties

The Company does not believe there are currently any
   material environmental liabilities related to continuing operations not
   already recorded or disclosed in its financial statements. The Company
   anticipates that its compliance with various laws and regulations relating
   to the protection of the environment will not have a material effect on its
   capital expenditures, future earnings or competitive position.

The Company's
   revenue from U. S. governmental agencies accounted for 57%, 69%, and 58% of
   revenue for the twelve months ended December 31, 1999, the nine months ended
   December 25, 1998 and the twelve months ended March 27, 1998, respectively.
   Because of its dependence on government contracts, the Company also faces
   the risks associated with such contracting, which could include civil and
   criminal fines and penalties. As a result of its government contracting
   business, the Company has been, is and may in the future be subject to
   audits and investigations by government agencies. The fines and penalties
   which could result from noncompliance with the Company's government
   contracts or appropriate standards and regulations, or the Company's
   suspension or debarment from future government contracting, could have a
   material adverse effect on the consolidated financial condition, liquidity
   and results of operations of the Company. The dependence on government
   contracts will also continue to subject the Company to significant financial
   risk and an uncertain business environment caused by any federal budget
   reductions.

In addition to
   the above, there are other risks and uncertainties that involve the use of
   estimates in the preparation of the Company's consolidated financial
   statements. (See Note 2. "Business Acquisitions" and Note 8.
   "Commitments and contingencies").



Fair value of financial instruments

> Cash and
>    cash equivalents: The carrying amount reported in the balance sheet
>    approximates its fair value.

Long and
   short-term debt: The fair value of the 11.25% senior subordinated notes
   and the 8% convertible subordinated debentures was based on quoted market
   prices at the applicable dates presented. The carrying amount of the credit
   agreement and other debt approximates its fair value.

The carrying
   amounts and estimated fair values of the Company's financial instruments
   are:



|
|
|
|
|
|
|
|
|
|
|
|
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2. Business Acquisitions:

On June 15, 1999, the Company
    acquired all of the outstanding capital stock of EMCON, Inc. (EMCON) for
    approximately $62 million plus $2 million in transaction costs. EMCON,
    based in San Mateo, California, was an environmental consulting,
    engineering, design, construction and related outsourced services firm
    serving primarily the private sector with a focus on the solid waste
    service market. For the twelve months ended December 31, 1998, EMCON had
    revenues of $151 million.

The
    transaction was accounted for as a purchase in accordance with Accounting
    Principles Board (APB) Opinion No. 16, "Business Combinations".
    The excess of the purchase price over the fair value of assets acquired and
    liabilities assumed of $43 million is classified as cost in excess of net
    assets of acquired businesses and is being amortized over twenty five
    years. The EMCON purchase price allocation is preliminary and is based upon
    information currently available. Management is continuing to gather and
    evaluate information regarding the valuation of assets and liabilities at
    the date of the acquisition. Management does not anticipate material
    changes to the preliminary allocation.

The estimated
    fair value of the assets acquired and liabilities assumed of EMCON, as
    adjusted, are as follows:



|Description                                         | Amount        
|--------------------------------------------------- | --------------
|                                                    | (In thousands)
|Current assets                                      | $   44,601    
|Property and equipment                              | 11,749        
|Cost in excess of net assets of acquired businesses | 43,467        
|Other long term assets                              | 16,508        
|Current liabilities                                 | 39,989        
|Long term liabilities, primarily debt               | 12,225        



As a result of
    the acquisition of EMCON, the Company has adopted a plan and commenced the
    process of closing specific overlapping facilities and reducing
    consolidated employment. The acquired balance sheet includes an accrual of
    $15 million for the estimated EMCON severance, office closure and lease
    termination costs of which $6 million has been paid through December 31,
    1999. The balance of these costs will principally be paid over the next
    three years.

> EFM Group

On April 9,
    1999, the Company acquired specified assets of EFM Group (EFM) from ICF
    Kaiser International, Inc. (Kaiser) for $82 million, representing $74
    million in cash net of $8 million of working capital retained by Kaiser.
    EFM provides environmental remediation, program management and technical
    support for United States Government agencies including the Department of
    Defense, National Aeronautics and Space Administration and the Department
    of Energy, as well as private sector environmental clients. EFM had
    revenues of approximately $106 million for the calendar year ended December
    31, 1998.

The
    transaction was accounted for as a purchase in accordance with APB Opinion
    No. 16. The EFM net assets acquired were $2 million. The excess of the
    purchase price over the adjusted fair value of assets acquired and
    liabilities assumed of $89 million is classified as cost in excess of net
    assets of acquired businesses, and is being amortized over twenty five
    years. The EFM purchase price allocation is preliminary and is based upon
    information currently available. Management is continuing to gather and
    evaluate information regarding the valuation of assets and liabilities at
    the date of the acquisition. Management does not anticipate material
    changes to the preliminary allocation.

As a result of
    the acquisition of EFM, the Company has adopted a plan and commenced the
    process of closing specific overlapping facilities and reducing
    consolidated employment. The acquired balance sheet includes an accrual of
    $5 million for the estimated EFM severance, office closure and lease
    termination costs of which $4 million has been paid through December 31,
    1999. The balance will be paid over the next two years.

> Roche

On March 31,
    1999, the Company acquired all of the outstanding capital stock of Roche
    Limited Consulting Services (Roche) for $10 million plus $0.5 million in
    transaction costs, and potential future earnout payments ranging from zero
    to $9 million. Roche is based in Quebec City, Canada and provides
    engineering and construction services to wastewater, paper, mining and
    transportation industries worldwide. Roche had revenues of approximately
    $28 million for the year ended December 31, 1998.

The
    transaction was accounted for as a purchase in accordance with APB Opinion
    No. 16. The excess of the purchase price over the fair value of assets
    acquired and liabilities assumed of $5 million is classified as cost in
    excess of net assets of acquired businesses, and is being amortized over
    twenty years. The Roche purchase price allocation is preliminary and is
    based upon information currently available. Management is continuing to
    gather and evaluate information regarding the valuation of assets and
    liabilities at the date of the acquisition. Management does not anticipate
    material changes to the preliminary allocation.

The estimated
    fair value of the assets acquired and liabilities assumed of Roche, as
    adjusted, are as follows:



|Description                                         | Amount        
|--------------------------------------------------- | --------------
|                                                    | (In thousands)
|Current assets                                      | $  12,287     
|Property and equipment                              | 1,711         
|Cost in excess of net assets of acquired businesses | 5,160         
|Other long term assets                              | 3,616         
|Current liabilities                                 | 11,439        
|Long term liabilities, primarily debt               | 664           





Groundwater Technology, Inc.

The estimated fair value of the assets acquired and liabilities
    assumed of GTI are as follows:



|Amount                                                                          
|--------------------------------------------------------------------------------
|                                                                                
|Current assets                                                                  
|Property and equipment                                                          
|Intangibles, primarily cost in excess of
      net assets of acquired businesses
|Other long term assets                                                          
|Current liabilities                                                             

As a result of
    the merger with GTI, the Company has adopted a plan and commenced the
    process of closing specific overlapping facilities and reducing
    consolidated employment. The acquired balance sheet includes an accrual of
    $15 million for the estimated GTI severance, office closure costs and lease
    termination costs of which $10 million has been paid through December 31,
    1999. The balance will be paid primarily over the next twelve months.

OHM Acquisition

This transaction was accounted for as a
    step acquisition and therefore the effects of the first phase of the merger
    were included in the March 27, 1998 financial statements and the effects of
    both phases were included in the December 25, 1998 financial statements.
    The excess of the purchase price over the fair value of assets acquired and
    liabilities assumed in the merger of $346 million is classified as cost in
    excess of net assets of acquired businesses with amortization over forty
    years.

The estimated
    fair value of the assets acquired and liabilities assumed of OHM as
    adjusted are as follows:



|Description                                         | Amount        
|--------------------------------------------------- | --------------
|                                                    | (In thousands)
|Current assets                                      | $105,096      
|Property and equipment                              | 18,344        
|Cost in excess of net assets of acquired businesses | 346,299       
|Other long term assets                              | 78,229        
|Current liabilities                                 | 136,558       
|Long term liabilities, primarily debt               | 107,924       





As a result of the merger with OHM (the OHM Merger), the Company
    adopted a plan and has commenced the process of closing specific
    overlapping facilities and reducing consolidated employment. The acquired
    balance sheet includes an accrual of $20 million for the estimated OHM
    severance, office closure costs and lease termination costs of which $17
    million has been paid through December 31, 1999. The balance is anticipated
    to be paid over the next seven years.

Pro Forma Effects of
    Acquisitions



|                                                                              |                                             |  |            |  
|----------------------------------------------------------------------------- | ------------------------------------------- |  | ---------- | -
|                                                                              |                                             |  |            |  
|                                                                             
|                                                                              | (In thousands, except
      per share data)
|Revenues                                                                      | $1,405,915                                  |  | $1,123,952 |  
|Income (loss) from continuing operations
    
      before extraordinary item | 55,412                                      |  | (14,845    | )
|Net income (loss)                                                             | 35,245                                      |  | (16,026    | )
|Net income (loss) applicable to common stock                                  | 28,885                                      |  | (20,690    | )
|Income (loss) per share:                                                      |                                             |  |            |  
|Basic                                                                         | 1.27                                        |  | (0.91      | )
|Diluted                                                                       | 1.08                                        |  | (0.91      | )



Other Acquisitions

Business Acquisition accruals

For the acquisitions of OHM, GTI, EFM and EMCON, the following table
    summarizes the activity of acquisition-related integration accruals for
    liabilities recognized in connection with purchase business combinations
    for the twelve months ended December 31, 1999



|                                                       |           |  |            |  |            |   |            
|------------------------------------------------------ | --------- |  | ---------- |  | ---------- | - | -----------
|                                                      
|                                                      
|                                                       |           |  |            |  |            |   |            
|Severance                                              | $   2,600 |  | $  10,282  |  | $   (7,868 | ) | $    5,014 
|Office closure, lease termination and
    
      other | 13,308    |  | 18,868     |  | (19,238    | ) | 12,938     
|                                                       |           |  |            |  |            |   |            
|Total                                                  | $  15,908 |  | $   29,150 |  | $  (27,106 | ) | $    17,952
|                                                       |           |  |            |  |            |   |            





3.   Consolidated statements of cash flows supplemental
    disclosures:



|                                             |                |          |         
|-------------------------------------------- | -------------- | -------- | --------
|                                            
|                                             | (In thousands)
|Interest paid, net of amounts capitalized    | $  46,993      | $ 24,634 | $ 11,060
|Interest received                            | 729            | 1,008    | 2,652   
|Income taxes paid                            | 1,945          | 335      | 770     
|Income tax refunds received                  | 196            |         | 3       
|Acquisition liabilities assumed              | 90,436         | 66,050   | 218,440 
|Stock issued in connection with acquisitions | 278            | 103,810  |        



4.   Special Charges:

Twelve Months Ended March 27, 1998:Special charges of $14.2 million were recorded in the twelve months
    ended March 27, 1998. The charges include $5.7 million for integration
    costs associated with the acquisition of OHM, a $3.9 million non-cash
    charge related to a project claim settlement, a $2.8 million charge
    associated with the relocation of the Company's corporate headquarters, and
    a $1.8 million loss from the sale of a small remediation services business.
    The significant components of these special charges are discussed below.

OHM.
    The $5.7 million special charge for integration costs associated with the
    acquisition of OHM included $2.2 million of costs for severance and $3.5
    million of costs and other related items for closing and consolidating the
    Company's offices with OHM offices. As part of the plan of integration, the
    Company identified slightly more than 100 IT employees, primarily in the
    operating group and administrative support functions, to be laid-off. In
    addition, the Company approved a plan for restructuring IT offices in which
    it would close three leased facilities, reduce the size of three more
    facilities and sublease a portion of eight additional facilities. As of
    December 31, 1999, $0.3 million of the integration charge representing
    facility lease commitments remained to be paid.

Helen
    Kramer. In December 1997, the Company settled a contract claim which
    had been outstanding in excess of five years with the US Army Corps of
    Engineers, the U.S. Environmental Protection Agency (USEPA) and the
    Department of Justice (jointly, the Government) arising out of work
    performed by the joint venture of IT and Davy International at the Helen
    Kramer Superfund project. The joint venture received a $14.5 million
    payment from the Government to resolve all outstanding project claims
    related to additional work resulting from differing site conditions, net of
    joint venture payments of $4.3 million to the Government to resolve related
    civil claims by the Government. IT's share of the joint venture results was
    60%, accordingly, IT received net cash of $6.0 million, its proportionate
    share of the settlement. The Company recorded a non-cash pre-tax charge of
    $3.9 million as the cash received was less than the accounts receivable
    related to this project.

Relocation.The Company recorded a pre-tax charge of $2.8 million for the
    relocation of the Company's corporate headquarters from Torrance,
    California to Monroeville (Pittsburgh), Pennsylvania. The headquarters
    relocation consolidated the corporate overhead functions with the Company's
    largest operations office. The relocation charge included $0.8 million of
    costs for severance, $0.9 million of costs for the relocation of IT
    employees, $0.7 million of costs related to the closure of the offices in
    Torrance, California and $0.4 million of other related costs. As part of
    this relocation, 32 employees were laid off, primarily corporate management
    and administrative support personnel. As of December 25, 1998, these
    amounts has been paid.

5.      Long-term debt:

Long-term debt consists of the following:



|                                                           |                                 |                        |                
|---------------------------------------------------------- | ------------------------------- | ---------------------- | ---------------
|                                                           |                                 | December 31, 1999      |                
|                                                           |                                 | (In thousands)        
|Credit Agreement Debt:                                     |                                 |                        |                
|                                                           | Revolver borrowings outstanding |                        | $       142,000
|                                                           | Term Loan                       |                        | 221,250        
|11.25% Senior Subordinated NotesDue April 1, 2009         |                                 | 225,000                |                
|8% Convertible Subordinated DebenturesDue October 1, 2006 |                                 | 40,248                 |                
|Other                                                      |                                 | 17,314                 |                
|                                                           |                                 |                        |                
|                                                           |                                 | 645,812                |                
|Less current portion                                       |                                 | 24,040                 |                
|                                                           |                                 |                        |                
|                                                           |                                 | $      
       621,772 |                
|                                                           |                                 |                        |                

Aggregate maturity of long-term debt, including annual mandatory
    sinking fund payments for the 8% convertible subordinated debentures, for
    the five fiscal years following December 31, 1999 is: 2000, $24 million;
    2001, $11 million; 2002, $9 million; 2003, $9 million; 2004, $199 million
    and thereafter $394 million.

The convertible subordinated debentures are convertible into 45.04
    shares of common stock and $107.50 cash per $1,000 unit with interest
    payable semiannually on April 1 and October 1, and are redeemable at the
    option of the Company. The convertible subordinated debentures require
    annual mandatory sinking fund payments of 7.5% (approximately $4 million
    per annum) of the original principal amount which commenced in 1996, and
    continue through October 1, 2005. Sinking fund requirements may be met by
    open market purchases of debentures for retirement.

IT executed the OHM Tender Offer with a $240 million credit facility
    (the credit facilities). The credit facilities were used to complete the
    Tender Offer, to refinance IT's $65 million principal amount of senior
    notes and for working capital purposes during the period from the Tender
    Offer closing date of February 25, 1998 until the merger closing date of
    June 11, 1998. Loans made under the credit facilities bore interest at a
    rate equal to LIBOR plus 2.50% per annum (or the Bank's base rate plus
    1.50% per annum) through June 10, 1998, at the Company's option and
    required no amortization. The Company recorded an extraordinary charge of
    $9.2 million, reduced by $3.5 million of deferred tax benefit, as the
    result of the early extinguishment of existing debt necessary to obtaining
    the credit facilities. On June 11, 1998, upon consummation of the second
    step of the OHM acquisition (see Note 2. "Business Acquisitions
    "), the Company's credit facilities were refinanced.

As amended, the credit facilities currently consist of an eight-year
    amortizing term loan (term loans) of $228 million and a six-year revolving
    credit facility (revolving loans) of $185 million that contains a sublimit
    of $25 million for letter of credit issuance. The term loans made under the
    credit facilities currently bear interest at a rate equal to LIBOR plus
    2.75% per annum (or the lender's base rate plus 1.75% per annum) and
    amortize on a semi-annual basis in aggregate annual installments of $4.5
    million through June 2004, with the remainder payable in eight equal
    quarterly installments. The revolving loans made under the credit
    facilities currently bear interest at a rate equal to LIBOR plus 2.25% per
    annum (or the lender's base rate plus 1.25% per annum). The interest rate
    spreads on the term loans and revolving loans are subject to downward
    adjustments, if applicable, based upon the ratio of the Company's
    consolidated debt to consolidated earnings before interest, taxes,
    depreciation and amortization (EBITDA). The credit facilities, as amended,
    provide that excess proceeds from the issuance of subordinated notes
    utilized to reduce the revolving credit facility portion of the credit
    facilities would not affect the future availability to the Company under
    the revolving facility. Paydowns of the Company's revolving facility allow
    for subsequent re-borrowing under the facility. The credit facilities are
    secured by a security interest in substantially all of the assets of the
    Company and its subsidiaries. In addition, the facilities include
    representations, warranties and covenants customary for facilities of this
    type and include various financial covenants, including maintaining a ratio
    of total consolidated debt to EBITDA, and limitations (subject to certain
    exceptions) on indebtedness, lease obligations, mergers and acquisitions
    and other fundamental changes, prohibit the payment of cash dividends on
    common stock and limit capital expenditures. The credit facilities also
    include customary events of default. Events constituting default include a
    change of control of IT including among other things, the disposition under
    certain circumstances of the Company's 6% Cumulative Convertible
    Participating Preferred Stock and warrants on or after the funding of

the credit facilities on June 11, 1998 to a person
    other than the Preferred Stock Group (see Note 9. "Preferred stock
    ").

As required by the credit facilities, on August 11, 1998, the Company
    executed a six year swap agreement with a large multi national banking
    organization. The swap agreement, as amended on August 11, 1999 is based
    upon a notional amount of $126 million wherein the Company, the fixed-rate
    payer, pays (receives) the difference between 3-month LIBOR and a fixed
    rate of 5.54% with its swap counter-party, the floating-rate payer. The
    LIBOR rate is adjusted quarterly and amounts owing or due are settled at
    each quarterly reset date. The Company charges (credits) amounts exchanged
    under the swap to interest expense. The net effects of the swap to both the
    twelve months ended December 31, 1999 and the nine months ended December
    25, 1998 were not material. The swap agreement contains a one time
    cancellation option for the counter-party and an imbedded interest rate cap
    for the Company. At any quarterly reset date beginning with November 11,
    2000, the counter-party, at its option, may cancel the swap agreement for
    the remaining term. If the counter-party elects to exercise its
    cancellation option, the Company receives the benefit of an interest rate
    cap on the notional amount of $126 million. The terms of the interest rate
    cap allow the Company to utilize the interest rate cap for any five
    quarterly periods during the term of the swap agreement remaining after
    exercise of the cancellation option by the counter-party. The terms of the
    agreement provide for the Company to receive 3-month LIBOR on the notional
    amount of the $126 million beginning at any quarterly period when 3-month
    LIBOR is 7% or higher. The obligation of the counter-party under the cap is
    subject to a 3-month LIBOR interest rate ceiling of 8%. The mark to market
    value of the swap at December 31, 1999 represents a benefit to the Company
    of $1.2 million.

On April 9, 1999, the Company issued $225 million of
    ten year senior subordinated notes (Notes). The Company received $216
    million in proceeds, net of expenses of $9 million. The Notes have an
    11.25% fixed rate of interest payable every six months in cash commencing
    in October 1999. There are no mandatory sinking fund payments, and the
    Notes have a stated maturity of April 1, 2009. The Notes are wholly or
    partially redeemable at the Company's option at a premium after 2004. Upon
    the issuance of capital stock prior to April 1, 2002, up to 35% of the
    Notes are redeemable at the Company's option at 111.25% of face value. The
    Notes are general unsecured obligations of the Company, subordinated to the
    Company's credit facilities and other senior indebtedness and pari passu
    with other existing and future indebtedness unless the terms of that
    indebtedness expressly provide otherwise. The proceeds of the Notes were
    used to fund the Roche and EFM acquisitions (see Note 2, "Business
    Acquisitions") and to refinance existing indebtedness under the
    Company's revolving credit facility.

The Company also has various miscellaneous other borrowings and
    capital lease obligations totaling $17 million, which mature at various
    dates through 2003, at interest rates ranging from 6.9% to 9.5%. Letters of
    credit outstanding at December 31, 1999 were $6.5 million, of which $2.7
    were issued under the revolving credit facility.

6.       Income
    taxes:

> Income tax provision (benefit), net
>     of changes in the deferred tax valuation allowance, consists of the
>     following:



|          |                           |                                                   |               |                                                 |                       |                                     
|--------- | ------------------------- | ------------------------------------------------- | ------------- | ----------------------------------------------- | --------------------- | ------------------------------------
|          |                           | Twelve Months
    
    EndedDecember 31,
    1999 |               | Nine Months
    
    EndedDecember 25,
    1998 |                       | Twelve Months
    EndedMarch 27,1998
|          |                           | (In thousands)                                   
|Current:  |                           |                                                   |               |                                                 |                       |                                     
|          | Federal                   |                                                   | $         500 |                                                 | $          
       57 |                                     
|          | State                     |                                                   | 2,400         |                                                 | 450                   |                                     
|          | Foreign                   |                                                   | 100           |                                                 |                      |                                     
|          |                           |                                                   |               |                                                 |                       |                                     
|          |                           | 3,000                                             |               | 507                                             |                       | 613                                 
|          |                           |                                                   |               |                                                 |                       |                                     
|Deferred: |                           |                                                   |               |                                                 |                       |                                     
|          | Federal                   |                                                   | 15,778        |                                                 | 5,696                 |                                     
|          | State                     |                                                   | 1,862         |                                                 | 491                   |                                     
|          | Foreign                   |                                                   | 1,284         |                                                 |                      |                                     
|          |                           |                                                   |               |                                                 |                       |                                     
|          |                           | 18,924                                            |               | 6,187                                           |                       | (2,975                              
|          |                           |                                                   |               |                                                 |                       |                                     
|          | Total provision (benefit) |                                                   | $    21,924   |                                                 | $      6,694          |                                     
|          |                           |                                                   |               |                                                 |                       |                                     

Income tax provision (benefit) is included in the
    statements of operations as follows:



|                                                       |                           |                                                   |                        |                                                  |                      |                                                 |                         
|------------------------------------------------------ | ------------------------- | ------------------------------------------------- | ---------------------- | ------------------------------------------------ | -------------------- | ----------------------------------------------- | ------------------------
|                                                       |                           | Twelve Months
    
    EndedDecember 31,
    1999 |                        | Nine Months
    
    Ended
    December 25, 1998 |                      | Twelve Months
    
    Ended
    March 27, 1998 |                         
|                                                       | (In thousands)           
|Continuing operations before extraordinary items       |                           | $        21,924                                   |                        | $       6,694                                    |                      | $          
       4,175                        |                         
|Extraordinary item: early extinguishment of
      debt |                           |                                                  |                        |                                                 |                      | (3,497                                          | )                       
|                                                       |                           |                                                   |                        |                                                  |                      |                                                 |                         
|                                                       |                           | 21,924                                            |                        | 6,694                                            |                      | 678                                             |                         
|Discontinued operations                                |                           |                                                  |                        |                                                 |                      | (3,040                                          | )                       
|                                                       |                           |                                                   |                        |                                                  |                      |                                                
|                                                       | Total provision (benefit) |                                                   | $       
       21,924 |                                                  | $      
       6,694 |                                                 | $        
        (2,362
|                                                      
|                                                      
|                                                       |                           |                                                   |                        |                                                  |                      |                                                 |                         
|                                                      

A reconciliation of the provision (benefit) for income taxes computed
    by applying the federal statutory rate of 35% to the results of continuing
    operations before income taxes and the reported provision (benefit) for
    income taxes is as follows:



|                                                                                               |                           |                                              |            |                                            |          |                                                     |             
|---------------------------------------------------------------------------------------------- | ------------------------- | -------------------------------------------- | ---------- | ------------------------------------------ | -------- | --------------------------------------------------- | ------------
|                                                                                               |                           | Twelve Months
    
    EndedDecember 31,1999 |            | Nine Months
    
    EndedDecember 25,1998 |          | Twelve Months
    
    Ended
    
    March 27,1998 |             
|                                                                                               | (In thousands)           
|Income tax provision (benefit) computed at
      statutory federal
    
       income tax rate |                           | $   21,211                                   |            | $     (257                                 | )        | $       
       (765                                | )           
|State income taxes, net of federal tax benefit, if
      any                                   |                           | 3,460                                        |            | 346                                        |          | 456                                                 |             
|Equity in income of foreign subsidiaries                                                       |                           |                                             |            |                                           |          | 125                                                 |             
|Amortization of cost in excess of net assets of
      acquired
    
      businesses           |                           | 4,045                                        |            | 2,639                                      |          | 295                                                 |             
|Extraordinary itemearly extinguishment of debt                                                |                           |                                             |            |                                           |          | (3,221                                              | )           
|Discontinued operations                                                                        |                           |                                             |            |                                           |          | (2,800                                              | )           
|Federal deferred tax asset valuation allowance
      adjustment                                |                           | (2,685                                       | )          | 6,059                                      |          | 1,906                                               |             
|Research and development tax credits                                                           |                           | (4,025                                       | )          | (2,540                                     | )        |                                                    |             
|Other                                                                                          |                           | (82                                          | )          | 447                                        |          | 1,642                                              
|                                                                                               |                           |                                              |            |                                            |          |                                                     |             
|                                                                                               | Total provision (benefit) |                                              | $   21,924 |                                            | $  6,694 |                                                     | $     (2,362
|                                                                                               |                           |                                              |            |                                            |          |                                                     |             

The income tax benefit resulting from a reduction in the deferred tax
    asset valuation allowance is attributable to utilization of tax attributes
    previously reserved and certain fiscal 1999 changes in financial accounting
    and tax rules.



At December 31, 1999 and December 25, 1998, the Company had deferred tax assets and liabilities as
    follows:



|                          |                                                 |                                |           |          |                            |          |          |  
|------------------------- | ----------------------------------------------- | ------------------------------ | --------- | -------- | -------------------------- | -------- | -------- | -
|                          |                                                 | December 31,
    
    1999     |           |          | December 25,
    
    1998 |         
|                          | (In thousands)                                 
|Deferred tax assets:      |                                                 |                                |           |          |                            |         
|                          | Closure accrualsdiscontinued operations        |                                | $   4,188 |          |                            | $ 11,229 |         
|                          | NOL carryforwards                               |                                | 90,804    |          |                            | 64,490   |         
|                          | Capital loss carryover                          |                                | 15,822    |          |                            | 17,446   |         
|                          | Alternative minimum tax credit carryforwards    |                                | 5,157     |          |                            | 3,458    |         
|                          | Investment and other tax credit carryforwards   |                                | 24,172    |          |                            | 12,750   |         
|                          | Asset basis differenceacquisitions             |                                | 86,840    |          |                            | 62,292   |         
|                          | Other, net                                      |                                | 4,312     |          |                            | 28,711   |         
|                          |                                                 |                                |           |          |                            |          |         
|                          |                                                 | Gross deferred tax asset       |           | 231,295  |                            |          | 200,376  |  
|                          | Valuation allowance for deferred tax asset      |                                | (57,415   | )        |                            | (50,267  | )       
|                          |                                                 |                                |           |          |                            |          |         
|                          |                                                 | Total deferred tax asset       |           | 173,880  |                            |          | 150,109  |  
|Deferred tax liabilities: |                                                 |                                |           |          |                            |         
|                          | Tax depreciation in excess of book depreciation |                                | (39,999   | )        |                            | (17,120  | )       
|                          | Asset basis differencediscontinued operations  |                                | (12,063   | )        |                            | (11,576  | )       
|                          | Other, net                                      |                                | (348      | )        |                            | (11,775  | )       
|                          |                                                 |                                |           |          |                            |          |         
|                          |                                                 | Total deferred tax liabilities |           | (52,410  | )                          |          | (40,471  | )
|                          |                                                 |                                |           |          |                            |          |          |  
|                          |                                                 | Net deferred tax asset         |           | $121,470 |                            |          | $109,638 |  
|                          |                                                 |                                |           |         
|Net current asset         |                                                 | $  26,336                      |           |          | $  15,919                  |         
|Net noncurrent asset      |                                                 | 95,134                         |           |          | 93,719                     |         
|                          |                                                 |                                |          
|                          | Net deferred tax asset                          |                                | 121,470   |          |                            | $109,638 |         
|                          |                                                 |                                |           |          |                            |          |          |  

Approximately $28.3 million, $5.7 million, $4.8 million and $1.9
    million of the valuation allowance relates to the OHM, GTI, EMCON and EFM
    acquisitions, respectively. Tax benefits subsequently recognized that are
    related to these amounts will reduce cost in excess of net assets of
    acquired businesses.

At December 31, 1999, the Company had net operating losses (NOL's),
    tax credit carryforwards and capital losses with expiration dates as
    follows:



|                 |                |                      |           |                                   |         |              |        |                      
|---------------- | -------------- | -------------------- | --------- | --------------------------------- | ------- | ------------ | ------ | ---------------------
|Expiration Dates |                | NetOperatingLosses   |           | ResearchandDevelopmentTax Credits |         | OtherCredits |        | CapitalLossCarry Over
|                 | (In thousands)
|20002004        |                | $           
       |           | $ 3,686                           |         | $1,219       |        | $39,953              
|20052009        |                | 27,301               |           | 7,105                             |         |             |        |                     
|20102014        |                | 77,974               |           | 3,686                             |         |             |        |                     
|20152019        |                | 121,864              |           | 9,324                             |         |             |        |                     
|Indefinite       |                |                     |           |                                  |         | 5,157        |        |                     
|                 |                |                      |           |                                   |         |              |        |                      
|                 | Total          |                      | $ 227,139 |                                   | $23,801 |              | $6,376 |                      
|                 |                |                      |           |                                   |         |              |        |                      

During the twelve months ended December 31, 1999, the Company
    increased its deferred tax asset valuation allowance from $50 million to
    $57 million. The increase was attributable to acquisitions. Because of the
    Company's position in the industry, recent restructuring and acquisitions,
    and existing backlog, management expects that its future taxable income
    will more likely than not allow the Company to fully realize its net
    deferred tax asset. The Company evaluates the adequacy of the valuation
    allowance and the realizability of the deferred tax asset on an ongoing
    basis.

During the nine months ended December 25, 1998, the Company increased
    its deferred tax asset valuation allowance from $32 million to $50 million.
    The increase was principally related to the acquisition of OHM and GTI
    corporations, respectively, and based on the Company's assessment of the
    uncertainty as to when it will generate a sufficient level of future
    earnings of applicable character to realize a portion of the deferred tax
    asset created by the special charges.



During the twelve months ended March 27, 1998,the Company increased its deferred tax asset valuation
    allowance from $10 million to $32 million. The increase was principally
    related to the acquisition of OHM corporation and the Company's assessment
    of its ability to fully utilize the deferred tax asset. During 1998, prior
    to the acquisition of OHM, the Company increased its valuation allowance to
    offset increases in the deferred tax asset balance. During the quarter
    ended March 27, 1998, the Company acquired OHM (see Note 2. "Business
    AcquisitionsOHM Acquisition") which substantially increased
    projected taxable income.

7.       Earnings per
    share

The following table sets forth the computation of basic and diluted
    earnings per share:



|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | -------------------------------------------- | ------------ | ---------------------------------------------------- | ------------ | ----------------------------------------- | -
|                                                   |                                                                                                                            |                                             | Twelve MonthsEndedDecember 31,
    
    1999 |              | Nine Months
    
    EndedDecember 25,
    
    1998 |              | Twelve MonthsEndedMarch 27,
    
    1998 |  
|                                                   |                                                                                                                            | (In thousands, except per share
      data)
|Numerator:                                         |                                                                                                                            |                                             |                                              |              |                                                      |              |                                          
|                                                   | Income (loss) from continuing operations and before
    
       extraordinaryitems and discontinued operations             |                                             | $     38,678                                 |              | $    (7,427                                          | )            | $     
       (6,360                      | )
|                                                   | Preferred stock dividends                                                                                                  |                                             | (6,360                                       | )            | (4,664                                               | )            | (6,167                                    | )
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|                                                   | Numerator for basic earnings per sharenet
      income (loss)available to common stockholders                             |                                             | 32,318                                       |              | (12,091                                              | )            | (12,527                                   | )
|                                                   | Discontinued operationsclosure costs (net of
      incometax benefit)                                                     |                                             |                                             |              |                                                     |              | (4,960                                    | )
|                                                   | Extraordinary charge for early retirement of debt
      (net of
    
       incometax benefit)                             |                                             |                                             |              |                                                     |              | (5,706                                    | )
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|Net income (loss) applicable to common
      stock |                                                                                                                            | $     32,318                                |                                              | $    (12,091 | )                                                    | $    (23,193 | )                                        
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|                                                   | Effect of conversion of dilutive
      securities:                                                                         |                                             |                                              |              |                                                      |              |                                           |  
|                                                   | Preferred stock dividends                                                                                                  |                                             | 2,768                                        |              |                                                     |              |                                          |  
|                                                   | Convertible subordinated
      debentures                                                                                  |                                             | 2,219                                        |              |                                                     |              |                                          |  
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|                                                   | Numerator for diluted earnings per sharenet
    
      income (loss)available to common stockholders                      |                                             | $     37,305                                 |              | $    (12,091                                         | )            | $    (23,193                              | )
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|Denominator:                                       |                                                                                                                            |                                             |                                              |              |                                                      |              |                                          
|                                                   | Weighted-average number of common shares
    
      outstanding forbasic earnings per share                                |                                             | 22,718                                       |              | 19,149                                               |              | 9,737                                     |  
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|                                                   | Effect of conversion of dilutive
      securities:                                                                         |                                             |                                              |              |                                                      |              |                                           |  
|                                                   | Common equivalent shares                                                                                                   |                                             | 443                                          |              |                                                     |              |                                          |  
|                                                   | Convertible preferred stock                                                                                                |                                             | 6,073                                        |              |                                                     |              |                                          |  
|                                                   | Convertible subordinated
      debentures                                                                                  |                                             | 1,958                                        |              |                                                     |              |                                          |  
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|                                                   | Denominator for diluted earnings per share
    
      adjusted weightedaverage shares and
    
      assumed conversions |                                             | 31,192                                       |              | 19,149                                               |              | 9,737                                     |  
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|Net income (loss) per share basic:                 |                                                                                                                            |                                             |                                              |              |                                                      |              |                                          
|                                                   | Continuing operations (net of preferred stockdividends)                                                                    |                                             | $       1.42                                 |              | $      (0.63                                         | )            | $      (1.28                              | )
|                                                   | Discontinued operations                                                                                                    |                                             |                                             |              |                                                     |              | (0.51                                     | )
|                                                   | Extraordinary itemearly extinguishment of
      debt                                                                      |                                             |                                             |              |                                                     |              | (0.59                                     | )
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|Net income (loss) per share                        |                                                                                                                            | $      
       1.42                         |                                              | $      (0.63 | )                                                    | $      (2.38 | )                                        
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  
|Net income (loss) per share diluted                |                                                                                                                            | $      
       1.20                         |                                              | $      (0.63 | )                                                    | $      (2.38 | )                                        
|                                                   |                                                                                                                            |                                             |                                              |              |                                                      |              |                                           |  

In June 1998, approximately 12.9 million shares were issued in
    connection with the second step of the OHM Merger. (See Note 2.
    "Business Acquisitions".)



Stock options to purchase 750,954 shares of common stock at prices
    ranging from $13.00 to $28.00 per share were outstanding at December 31,
    1999, but were not included in the computation of net income per share
    diluted since the option exercise prices were greater than the average
    market price of the common stock for the twelve months ended December 31,
    1999.

8.       Commitments and
    contingencies:

Lease commitments

The Company's operating lease obligations are principally for
    buildings and equipment. Most leases contain renewal options at varying
    terms. Generally, the Company is responsible for property taxes and
    insurance on its leased property. At December 31, 1999, future minimum
    rental commitments under noncancelable leases with terms longer than one
    year aggregate $145 million and require payments in the five succeeding
    years and thereafter of $44 million, $34 million, $25 million, $18 million,
    $11 million, and $13 million, respectively. A portion of these leases
    represent duplicative facilities and equipment resulting from the
    acquisitions of OHM, GTI, EFM and EMCON for which accruals have been
    established and included in the cost in excess of net assets of acquired
    business. See Note 2. "Business Acquisitions". The Company is
    currently and actively involved in attempting to sublease duplicate
    facilities and equipment.

Rental expense related to continuing operations was
    $36 million for the twelve months ended December 31, 1999, $29 million for
    the nine months ended December 25, 1998 and $12 million (including $1.2
    million of the special charges) for the twelve months ended March 27, 1998.

Contingencies

Coakley Landfill Action

On March 9, 1998, the Coakley Landfill PRP Steering Committee
    terminated, allegedly for cause, IT Corporation's contract to perform
    design and remediation services at the Coakley Landfill and sued IT for
    damages for delay, redesign, regrading, repair costs, as well as for
    possible exposure to penalties by the USEPA. (The Coakley Landfill Group
    v. IT Corporation v. Gary W. Blake, Inc., et al.,U.S.D.C., D.N.H.,
    Case No. 98-167-JD) IT disputes that the Steering Committee is entitled to
    terminate the agreement for cause and believes the termination action arose
    from IT's pending change order request which is now approximately $7.2
    million. IT has answered and counterclaimed for damages for wrongful
    termination, issuing defective plans and specifications, breach of contract
    and unfair trade practices. Discovery of the case is ongoing, and although
    trial has been set for September 2000, the ultimate outcome of this matter
    cannot yet be predicted. The Company recently received, in its favor,
    partial summary judgment for $1.1 million on its claim for unpaid
    fees.

Occidental Chemical Litigation

OHM is in litigation in the U.S. District Court for the Western
    District of New York with Occidental Chemical Corporation (Occidental)
    relating to the Durez Inlet Project performed in 1993 and 1994 for
    Occidental in North Tonawanda, New York. (Occidental Chemical
    Corporation v. OHM Remediation Services Corporation,U.S.D.C., W.D.N.Y,
    Case No 94-0955(H)) OHM's account receivables at December 31, 1999 include
    a claim receivable of $8.7 million related to this matter. OHM's work was
    substantially delayed and its costs of performance were substantially
    increased as a result of conditions at the site that OHM believes were
    materially different than as represented by Occidental. Occidental's
    amended complaint seeks $8.8 million in damages primarily for alleged costs
    incurred as a result of project delays and added volumes of incinerated
    waste. OHM's counterclaim seeks an amount in excess of $9.2 million
    (inclusive of $8.7 million of claim receivable) for damages arising from
    Occidental's breach of contract, misrepresentation and failure to pay
    outstanding contract amounts. The parties have completed discovery in the
    case and filed motions for summary judgement against each other. Although
    the court may rule on the matter at any time, its ultimate outcome cannot
    be predicted.

Other

The Company is subject to other claims and lawsuits in
    the ordinary course of its business. In the opinion of management, all such
    other pending claims are either adequately covered by insurance or, if not
    insured, will not individually or in the aggregate result in a material
    adverse effect on the consolidated financial condition, liquidity and
    results of operations of the Company. In the course of the Company's
    business, there is always risk and uncertainty in pursuing and defending
    claims and litigation and, not withstanding the reserves currently
    established, adverse future results in litigation or other proceedings
    could have a material adverse effect upon the Company's consolidated
    financial condition, liquidity and results of operations.

9.      Preferred stock:

Carlyle Investment

At the November 20, 1996 Annual Meeting of Stockholders, IT's
    shareholders voted to approve a $45.0 million investment (the Carlyle
    Investment) by The Carlyle Group (Carlyle), a Washington, D.C. based
    merchant banking firm. The Carlyle Investment consists of 45,000 shares of
    6% Cumulative Convertible Participating Preferred Stock, par value $100 per
    share (Convertible Preferred Stock) and detachable warrants to purchase
    1,250,000 shares of IT common stock, par value $.01 per share (Carlyle
    Warrants). The net proceeds to IT (after related offering costs of $4.4
    million) from the Carlyle Investment were $40.6 million.

Carlyle holds approximately 21% (approximately 24% assuming exercise
    of the Carlyle Warrants) of the voting power of IT. The terms of the
    Convertible Preferred Stock provide that, until November 20, 2001, the
    holders of the Convertible Preferred Stock have the right to elect a
    majority of the Board of Directors of the Company, provided that Carlyle
    continues to own at least 20% of the voting power of the Company.

The Convertible Preferred Stock ranks, as to dividends and
    liquidation, pari passu to the Company's 7% Preferred Stock (see "7%
    Preferred Stock") and prior to the Company's common stock. The
    Convertible Preferred Stock is entitled to cumulative annual dividends. No
    dividends were payable in the first year; dividends were payable quarterly
    in kind for the second year at the rate of 3% per annum and, through
    November 1998, Carlyle was paid dividends of an additional 1,095 shares of
    Convertible Preferred Stock. Commencing November 21, 1998, dividends are
    payable quarterly in cash at the rate of 6% per annum. The Convertible
    Preferred Stock is entitled to a liquidation preference of $1,000 per
    share.

The Convertible Preferred Stock and detachable warrants may at any
    time, at the option of Carlyle, be converted into IT common shares. At
    December 31, 1999, 6,073,016 and 1,250,000 common shares are issuable upon
    conversion of the Convertible Preferred stock and Carlyle Warrants,
    respectively. The conversion price of the Convertible Preferred Stock is
    $7.59 per share and the exercise price of the warrants is $11.39 per share.
    The Company will be entitled at its option to redeem all of the Convertible
    Preferred Stock at its liquidation preference plus accumulated and unpaid
    dividends on or after November 21, 2003.

Although the first two years' dividends were paid at a
    rate of 0% and 3%, respectively, dividends were imputed during this period
    at a rate of approximately 6% per annum. Imputed dividends were $0.9
    million and $2.1 million in the nine months ended December 25, 1998 and the
    twelve months ended March 27, 1998, respectively. Any imputed dividends
    will never be paid in cash or stock.

7% Preferred stock

In a September 1993 public offering, the Company issued 2,400,000
    depositary shares, each representing a 1/100th interest in a share of the
    Company's 7% Cumulative Convertible Exchangeable Preferred Stock (7%
    Preferred Stock). The depositary shares entitle the holder to all
    proportional rights and preferences of the 7% Preferred Stock, including
    dividend, liquidation, conversion, redemption and voting rights and
    preferences.

The 7% Preferred Stock ranks, as to dividends and liquidation, pari
    passu to the Convertible Preferred Stock (see "Carlyle Investment
    ") and prior to the Company's common stock. The dividend per annum and
    liquidation preference for each share of 7% Preferred Stock are $175 and
    $2,500, respectively, and for each depositary share are $1.75 and $25,
    respectively. Dividends on the 7% Preferred Stock and depositary shares are
    cumulative and payable quarterly.

The 7% Preferred Stock is convertible at the option of the holder
    into shares of the Company's common stock at a conversion price of $23.36
    per share, subject to adjustment under certain circumstances. At December
    31, 1999, 2,199,903 shares of common stock are issuable upon conversion of
    the 7% Preferred stock. On any dividend payment date, the 7% Preferred
    Stock is exchangeable at the option of the Company, in whole but not in
    part, for 7% Convertible Subordinated Debentures Due 2008 in a principal
    amount equal to $2,500 per share of Preferred Stock (equivalent to $25 per
    depositary share). The 7% Preferred Stock may be redeemed at any time, at
    the option of the Company, in whole or in part, initially at a price of
    $2,622.50 per share of Preferred Stock (equivalent to $26.225 per
    depositary share) and thereafter at prices declining to $2,500 per share of
    Preferred Stock (equivalent to $25 per depositary share) on or after
    September 30, 2003.

Additionally, the 7% Preferred Stock has a special conversion right
    that becomes effective in the event of certain significant transactions
    affecting ownership or control of the Company. In such situations, the
    special conversion right would, for a limited period, reduce the then
    prevailing conversion price to the greater of the market value of the
    common stock or $12.68 per share. The Carlyle Investment (see "Carlyle
    Investment") triggered this special conversion right. On January 9,
    1997, holders of 344,308 depositary shares elected to convert such shares
    to 678,816 shares of IT common stock.

The 7% Preferred Stock is non-voting, except that holders are
    entitled to vote as a separate class to elect two directors if the
    equivalent of six or more quarterly dividends (whether consecutive or not)
    on the 7% Preferred Stock are in arrears. Such voting rights will continue
    until such time as the dividend arrearage on the 7% Preferred Stock has
    been paid in full.

10.     Stock incentive plans:

Summary

At the November 20, 1996 Annual Meeting of
    Stockholders, IT's shareholders voted to approve the Company's 1996 Stock
    Incentive Plan (1996 Plan) which provides for the issuance of the Company's
    common stock or any other security or benefit with a value derived from the
    value of its common stock. Options are granted at exercise prices equal to
    or greater than the quoted market price at the date of grant. During the
    twelve months ended December 31, 1999, 651,954 stock options were granted
    under the 1996 Plan, which expire in fiscal year 2009. At December 31,
    1999, the maximum number of shares of the Company's common stock that may
    be issued pursuant to awards granted under the 1996 Plan is 178,991. At the
    first day of each fiscal year, the maximum number of shares available for
    award under the 1996 Plan may be increased by Board approval by an amount
    which represents up to 2% of the number of the Company's common stock which
    are issued and outstanding at that date.

The
    Company's 1991 Stock Incentive Plan (1991 Plan) and 1983 Stock Incentive
    Plan (1983 Plan) provided for the granting of incentive and non-qualified
    stock options and the issuance of the Company's common stock or any other
    security or benefit with a value derived from the value of its common
    stock. Also, in conjunction with the OHM acquisition, approximately 188,000
    OHM stock options (OHM options) converted into 262,125 IT stock options on
    June 11, 1998. At December 31, 1999, 115,559 OHM options remain
    outstanding. No shares are available for grant under the 1983 Plan, the
    1991 Plan, or relating to the OHM acquisition.

Changes in the number of shares represented by outstanding options
    under the 1996 Plan, the 1991 Plan, the 1983 Plan, and converted OHM
    options during the twelve months ended December 31, 1999, the nine months
    ended December 25, 1998, and the twelve months ended March 27, 1998 are
    summarized as follows:



|                                                                          |  |           |   |         |  |           |   |         |  |          |   |        
|------------------------------------------------------------------------- |  | --------- | - | ------- |  | --------- | - | ------- |  | -------- | - | -------
|                                                                          |  |           |  
|                                                                         
|                                                                         
|                                                                          |  |           |   |         |  |           |   |         |  |          |   |        
|Outstanding at beginning of year                                          |  | 1,311,676 |   | $11.11  |  | 770,457   |   | $13.99  |  | 747,679  |   | $15.32 
|Converted                                                                 |  |          |   |        |  | 262,125   |   | $  7.00 |  |         |   |       
|Granted                                                                   |  | 651,954   |   | $13.23  |  | 331,000   |   | $10.02  |  | 132,921  |   | $  7.29
|Exercised                                                                 |  | (243,233  | ) | $  7.88 |  | (750      | ) | $10.24  |  |         |   |       
|Forfeited                                                                 |  | (129,387  | ) | $11.89  |  | (51,156   | ) | $22.73  |  | (110,143 | ) | $19.69 
|                                                                          |  |           |   |         |  |           |   |         |  |          |   |        
|                                                                          |  |           |   |         |  |           |   |         |  |          |   |        
|Outstanding at end of year                                                |  | 1,591,010 |   | $12.42  |  | 1,311,676 |   | $11.11  |  | 770,457  |   | $13.99 
|                                                                          |  |           |   |         |  |           |   |         |  |          |   |        
|                                                                          |  |           |   |         |  |           |   |         |  |          |   |        
|Options exercisable at year-end                                           |  | 668,589   |   | $13.21  |  | 776,500   |   | $12.39  |  | 486,520  |   | $16.95 
|Weighted-average fair value of options
    
      granted during the year |  |           |   | $  7.35 |  |           |   | $  6.19 |  |          |   | $  4.79

The
    following table summarizes information about stock options outstanding at
    December 31, 1999 under the 1983 Plan, the 1991 Plan, the 1996 Plan, and
    converted OHM options:



|                                  |  |                             |  |                                                             |  |                                |  |                   |  |                               
|--------------------------------- |  | --------------------------- |  | ----------------------------------------------------------- |  | ------------------------------ |  | ----------------- |  | ------------------------------
|Outstanding                       |  | Exercisable                
|Range of
    
    Exercise Prices |  | Shares
    
    Outstanding |  | Weighted-Average
    
    RemainingContractual Life (Years) |  | Weighted-AverageExercise Price |  | SharesExercisable |  | Weighted-AverageExercise Price
|                                  |  |                             |  |                                                             |  |                                |  |                   |  |                               
|$  5.38- $  8.50                  |  | 169,921                     |  | 5.7                                                         |  | $  5.71                        |  | 112,010           |  | $  6.64                       
|$  8.51- $12.50                   |  | 670,135                     |  | 7.2                                                         |  | $10.04                         |  | 331,579           |  | $10.30                        
|$12.51- $16.50                    |  | 581,329                     |  | 8.8                                                         |  | $13.85                         |  | 55,375            |  | $15.49                        
|$16.51- $28.00                    |  | 169,625                     |  | 2.9                                                         |  | $22.50                         |  | 169,625           |  | $22.50                        
|                                  |  |                             |  |                                                             |  |                                |  |                   |  |                               
|                                  |  | 1,591,010                   |  |                                                             |  |                                |  | 668,589           |  |                               
|                                  |  |                             |  |                                                             |  |                                |  |                   |  |                               

Compensation cost

The Company has elected to follow Accounting Principles Board Opinion
    No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
    related interpretations in accounting for its employee stock options
    because, as discussed below, the alternative fair value accounting provided
    for under Financial Accounting Standards Board Statement No. 123,
    "Accounting for Stock-Based Compensation," (SFAS No. 123)
    requires use of option valuation models that were not developed for use in
    valuing employee stock options. Under APB 25, because the exercise price of
    the Company's employee stock options equals the market price of the
    underlying stock on the date of grant, no compensation expense is
    recognized.

SFAS No. 123 provides that, if its optional method of accounting for
    stock options is not adopted (and which the Company has not adopted),
    disclosure is required of pro forma net income and net income per share. In
    determining the pro forma information for stock options granted, the fair
    value for these options were estimated at the date of grant using a
    Black-Scholes option pricing model with the following weighted average
    assumptions:



|                                                                               |  | Twelve Months
    
    Ended
    
    December 31,
    
    1999 |   | Nine Months EndedDecember 25,
    1998 |   | Twelve Months EndedMarch 27,
    
    1998 |  
|------------------------------------------------------------------------------ |  | ---------------------------------------------------------------- | - | -------------------------------------- | - | ------------------------------------------ | -
|Risk free interest rate based upon
    
       zero-coupon U.S. Treasury Notes |  | 6.6                                                              | % | 6.0                                    | % | 6.0                                        | %
|Dividend yield                                                                 |  | None                                                             |   | None                                   |   | None                                       |  
|Expected volatility of the Company's
    
       common stock                  |  | 41.4                                                             | % | 44.3                                   | % | 39.5                                       | %
|Expected life of each option (in years)                                        |  | 7.3                                                              |   | 7.4                                    |   | 6.7                                        |  

> 

> 

The Black-Scholes option valuation model wasdeveloped for use in estimating the fair value of
    traded options which have no vesting restrictions and are fully
    transferable. In addition, option valuation models require the input of
    highly subjective assumptions including the expected stock price
    volatility. Because the Company's employee stock options have
    characteristics significantly different from those of traded options, and
    because changes in the subjective input assumptions can materially affect
    the fair value estimate, in management's opinion, the existing models do
    not necessarily provide a reliable single measure of the fair value of its
    employee stock options.

If compensation cost for the Company's stock options had been
    determined based on the fair value at the grant dates as defined by SFAS
    No. 123, the Company's net income (loss) applicable to common stock and net
    income (loss) per common share would have changed to the following pro
    forma amounts:



|                                                   |                                                        |  |                                                      |   |                                                               |  
|-------------------------------------------------- | ------------------------------------------------------ |  | ---------------------------------------------------- | - | ------------------------------------------------------------- | -
|                                                   | Twelve MonthsEnded
    
    December 31,
    
    1999 |  | Nine Months
    
    Ended
    
    December 25,1998 |   | Twelve Months
    
    Ended
    
    March 27,
    
    1998 |  
|
|                                                   | (In thousands, except per share
      data)           
|Net income (loss) applicable to common
      stock |                                                        |  |                                                      |   |                                                               |  
|As reported                                        | $32,318                                                |  | $  (12,091                                           | ) | $   (23,193                                                   | )
|                                                   |                                                        |  |                                                      |   |                                                               |  
|Pro forma                                          | $31,617                                                |  | $(12,367                                             | ) | $(23,386                                                      | )
|                                                   |                                                        |  |                                                      |   |                                                               |  
|Net income (loss) per common share,
      diluted  |                                                        |  |                                                      |   |                                                               |  
|As reported                                        | $    1.20                                              |  | $    (0.63                                           | ) | $    (2.38                                                    | )
|                                                   |                                                        |  |                                                      |   |                                                               |  
|Pro forma                                          | $    1.17                                              |  | $    (0.65                                           | ) | $    (2.40                                                    | )
|                                                   |                                                        |  |                                                      |   |                                                               |  

> 

Additionally, in the twelve months ended March 27, 1998, under the
    1991 Plan the Company awarded shares of nonvested restricted stock to
    officers and key employees. Vesting of awards was dependent upon continued
    employment and, in the case of certain performance-related awards, the
    sustained level of a target market price for the Company's common stock
    that exceeds the related market price on the date of grant. On December 31,
    1999, the total number of shares of restricted stock outstanding was
    36,650. The cost of restricted stock awards is generally expensed over the
    vesting period, which ranges from two to five years, and amounted to $0.2
    million, $0.2 million and $0.5 million for the twelve months ended December
    31, 1999, the nine months ended December 25, 1998 and the twelve months
    ended March 27, 1998, respectively.

In 1998, the Company enacted an incentive compensation plan which
    provides fixed cash awards to certain senior executives based on the
    Company's common stock achieving various sustained levels of target market
    prices. The Company records the compensation cost when the attainment of a
    target price level is considered probable. Compensation cost of the plan
    was $0.6 million for the twelve months ended December 31, 1999. The
    aggregate maximum amount of potential incentive compensation cost which may
    be incurred under the plan at December 31, 1999 is approximately $2.8
    million.

11.     Employee benefit
    plans:

The Company has a defined contribution, contributory pension and
    profit sharing plan (the Plan), covering all employees with one year of
    continuous service. The Company amended the Plan, effective December 25,
    1998, to discontinue the minimum annual contribution of 3% of participants'
    eligible compensation. Additionally, beginning January 1, 1999, the Company
    amended its voluntary 401(k) savings plan. The Company now contributes up
    to 4% of participants' eligible compensation by matching 100% of each
    participants' contribution (up to 4% of eligible compensation). Prior to
    January 1, 1999, the Company contributed up to 2% of participants' eligible
    compensation by matching 50% of each participant's contribution (up to 4%
    of eligible compensation) to the Company's voluntary 401(k) savings plan.
    The Plan currently allows a maximum contribution of up to 15% of
    participants' eligible compensation up to $10,000 annually. The Company
    funds current costs as accrued, and there are no unfunded vested benefits.

Pension and profit sharing expense was $10 million, $4 million and $4
    million for the twelve months ended December 31, 1999, the nine months
    ended December 25, 1998 and the twelve months ended March 27, 1998,
    respectively.



12.      Operating segments:

Organization

The IT Group, Inc. has four reportable segments: Engineering &
    Construction (E & C), Consulting & Technology, Outsourced Services
    and International. In 1999 in response to market conditions, the Company
    realinged its organizational structure, altering its four reportable
    segments and its internal segment reporting of indirect operating expenses
    and segment profit margin. Prior period segment information is presented on
    the new basis, which did not materially impact overall segment profit
    margins or comparability between the periods presented.The Engineering and Construction segment provides
    comprehensive environmental engineering and construction services to both
    government and commercial clients, and includes the Government Services,
    Energy and Nuclear Operations, Commercial Engineering and Construction and
    Solid Waste business lines. The Consulting & Technology segment
    provides a wide range of services in the areas of environmental health and
    safety compliance including Web-enabled knowledge management systems and
    training, risk and cost allocation determination, life-cycle planning,
    chemical product development and regulatory certification, due diligence
    and strategic environmental planning, and real estate restoration services.
    The Outsourced Services segment provides program/construction management,
    general contracting services, design/build construction, facility planning
    and management, maintenance and renovation. The International segment
    provides comprehensive environmental and infrastructure services to
    multi-national and foreign industries through controlled entities and joint
    ventures, with principal operations in Canada, Europe, Australia and
    Taiwan.

Segment Information



|                                      |                |  |         |                    |           |               |          |       |            
|------------------------------------- | -------------- |  | ------- | ------------------ | --------- | ------------- | -------- | ----- | -----------
|                                      | E & C          |  |         | OutsourcedServices |           | International |          | Total
|                                      | (In thousands)
|Twelve Months Ended December 31, 1999 |                |  |         |                    |           |               |          |       |            
|Revenues                              | $1,077,728     |  | $59,395 |                    | $113,877  |               | $63,251  |       | $1,314,251 
|Segment
      profit                  | 140,461        |  | 9,997   |                    | 10,846    |               | 4,116    |       | 165,420    
|Depreciation
      expense            | 7,941          |  | 757     |                    | 165       |               | 863      |       | 9,726      
|Segment
      assets                  | 348,186        |  | 19,255  |                    | 15,504    |               | 26,335   |       | 409,280    
|Nine Months Ended December 25, 1998   |                |  |         |                    |           |               |          |       |            
|Revenues                              | $   643,667    |  | $33,583 |                    | $  70,400 |               | $  9,785 |       | $   757,435
|Segment profit
      (loss)           | 71,367         |  | 3,652   |                    | 6,371     |               | (328     | )     | 81,062     
|Depreciation
      expense            | 7,174          |  | 477     |                    | 162       |               | 69       |       | 7,882      
|Segment
      assets                  | 262,224        |  | 13,612  |                    | 11,697    |               | 8,539    |       | 296,072    
|Twelve Months Ended March 27, 1998    |                |  |         |                    |           |               |          |       |            
|Revenues                              | $   387,639    |  | $38,147 |                    | $   6,819 |               | $  9,611 |       | $  442,216 
|Segment profit
      (loss)           | 40,079         |  | 4,064   |                    | 462       |               | (265     | )     | 44,340     
|Depreciation
      expense            | 5,520          |  | 469     |                    | 22        |               | 116      |       | 6,127      
|Segment assets                        | 197,262        |  | 13,475  |                    | 6,226     |               | 4,118    |       | 221,081    





|Twelve Months
    
    Ended
    
    December 31,
    
    1999                                                                                |               | Nine MonthsEnded
    
    December 25,
    
    1998 |            | Twelve MonthsEndedMarch 27,1998 |           
|----------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ---------------------------------------------------- | ---------- | ------------------------------- | ----------
|
|Profit or Loss                                                                                                                                  |               |                                                      |            |                                 |           
|Total profit for
      reportable segments .                                                                                                    | $  165,420    |                                                      | $  81,062  |                                 | $ 44,340  
|Unallocated
      amounts:                                                                                                                      |               |                                                      |            |                                 |           
|Corporate selling, general and
    
                
         administrative expense                                                            | (50,703       | )                                                    | (31,929    | )                               | (24,308   
|Special charges (a)                                                                                                                             |              |                                                      | (24,971    | )                               | (14,248   
|Interest expense, net                                                                                                                           | (54,115       | )                                                    | (24,895    | )                               | (7,969    
|                                                                                                                                                |               |                                                      |            |                                 |           
|Income (loss) before income taxes,
    
                
         extraordinary item and discontinued
    
                
         operations | $     60,602  |                                                      | $    (733  | )                               | $  (2,185 
|                                                                                                                                                |               |                                                      |            |                                 |           
|Assets (b)                                                                                                                                      |               |                                                      |            |                                 |           
|Assets for
      reportable segments                                                                                                            | $   409,280   |                                                      | $296,072   |                                 | $221,081  
|Other assets                                                                                                                                    | 871,591       |                                                      | 652,534    |                                 | 488,136   
|                                                                                                                                                |               |                                                      |            |                                 |           
|Total consolidated assets                                                                                                                       | $1,280,871    |                                                      | $948,606   |                                 | $709,217  
|                                                                                                                                                |               |                                                      |            |                                 |           
|Depreciation Expense                                                                                                                            |               |                                                      |            |                                 |           
|Depreciation for
      reportable segments                                                                                                      | $       9,726 |                                                      | $    7,882 |                                 | $    6,127
|Depreciation on
      corporate assets (c)                                                                                                      | 3,961         |                                                      | 2,059      |                                 | 2,606     
|                                                                                                                                                |               |                                                      |            |                                 |           
|Total depreciation expense                                                                                                                      | $     13,687  |                                                      | $    9,941 |                                 | $    8,733
|                                                                                                                                                |               |                                                      |            |                                 |           

---

|(a) |  | See Notes to Consolidated Financial Statements
      Note 4. "Special Charges". These special charges are
      excluded from segment profit (loss) because most of these items can not
      be identified with a particular segment and because management does not
      include special charges when analyzing the Company's business segments.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Segment assets include accounts receivable of each
      business segment. Other assets are principally long-term assets including
      property and equipment, cost in excess of net assets of acquired
      businesses, income tax assets and assets of discontinued operations.

|    |  |                                                                                                                                                                                                                              
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) |  | Depreciation on corporate assets includes corporate
      facilities, furniture and equipment and the Company's mainframe computer
      hardware and software which have not been allocated to the operating
      segments.



Geographic Information



|                  |                |  |          |  |          |  |          |  |          |  |         
|----------------- | -------------- |  | -------- |  | -------- |  | -------- |  | -------- |  | --------
|                 
|
|                 
|                  | (In thousands)
|United States     | $1,255,562     |  | $632,296 |  | $746,992 |  | $458,233 |  | $431,599 |  | $358,973
|Foreign countries | 58,689         |  | 39,485   |  | 10,443   |  | 3,573    |  | 10,617   |  | 2,831   
|                  |                |  |          |  |          |  |          |  |          |  |         
|                  | $1,314,251     |  | $671,781 |  | $757,435 |  | $461,806 |  | $442,216 |  | $361,804
|                  |                |  |          |  |          |  |          |  |          |  |         

---

|(a) |  | Revenues are attributed to countries based on the
      location of the subsidiary.                
|--- |  | ---------------------------------------------------------------------------------------------------
|    |  |                                                                                                    
|(b) |  | Long-lived assets include non-current assets of the
      Company, excluding deferred income taxes.



Major Clients

The Company's revenues attributable to the U.S. government were $743
    million, $525 million and $256 million for the twelve months ended December
    31, 1999, the nine months ended December 25, 1998 and the twelve months
    ended March 27, 1998, respectively. All four of the Company's operating
    segments report revenues from the U.S. government. No other customer
    accounted for 10% or more of the Company's consolidated revenues in any
    fiscal period.



Revenues byProducts and Services



|                                                   |                                                                           |  |                                                                         |  |                                                                       
|-------------------------------------------------- | ------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- |  | ----------------------------------------------------------------------
|                                                   | Twelve
    
    Months
    
    Ended
    
    December 31,
    
    1999 |  | Nine
    
    Months
    
    Ended
    
    December 25,
    
    1998 |  | Twelve
    
    Months
    
    Ended
    
    March 27,
    
    1998
|
|                                                   | (In thousands)                                                           
|Engineering and construction services              | $1,130,329                                                                |  | $607,682                                                                |  | $355,754                                                              
|Project, program and construction
      management | 113,877                                                                   |  | 70,400                                                                  |  | 6,819                                                                 
|Consulting services                                | 70,045                                                                    |  | 79,353                                                                  |  | 79,643                                                                
|                                                   |                                                                           |  |                                                                         |  |                                                                       
|                                                   | $1,314,251                                                                |  | $757,435                                                                |  | $442,216                                                              
|                                                   |                                                                           |  |                                                                         |  |                                                                       



13.   Quarterly results of operations
    (unaudited):



|                                             |                                             |                                             |  |                    |  |                    |  |                   
|-------------------------------------------- | ------------------------------------------- | ------------------------------------------- |  | ------------------ |  | ------------------ |  | ------------------
|                                             |                                             | Firstquarter                                |  | Secondquarter      |  | Thirdquarter       |  | Fourthquarter (a) 
|                                             |                                             | (In thousands, except per share
      data)
|Twelve Months Ended December 31,
      1999: |                                             |                                             |  |                    |  |                    | 
|                                             | Revenues                                    | $257,974                                    |  | $301,290           |  | $394,148           |  | $360,839          
|                                             | Gross margin                                | 33,297                                      |  | 44,607             |  | 55,080             |  | 52,874            
|                                             | Income from continuing
      operations     | 5,783                                       |  | 8,788              |  | 12,336             |  | 11,771            
|                                             | Net income applicable to common
      stock | 4,193                                       |  | 7,198              |  | 10,746             |  | 10,181            
|                                             | Net income per share:                       |                                             |  |                    |  |                    |  |                   
|                                             | Basic                                       | $     
       0.19                          |  | $     
       0.32 |  | $     
       0.47 |  | $     
       0.45
|                                             |                                             |                                             |  |                    |  |                    |  |                   
|                                             | Diluted                                     | $     
       0.17                          |  | $     
       0.27 |  | $     
       0.39 |  | $     
       0.37
|                                             |                                             |                                             |  |                    |  |                    |  |                   



|                                           |                                                    |                                             |   |                    |  |                   
|------------------------------------------ | -------------------------------------------------- | ------------------------------------------- | - | ------------------ |  | ------------------
|                                           |                                                    | First
    quarter (b)                       |   | Secondquarter      |  | Thirdquarter      
|                                           |                                                    | (In thousands, except per share
      data)
|Nine Months Ended December 25,
      1998: |                                                    |                                             |   |                    | 
|                                           | Revenues                                           | $225,188                                    |   | $260,187           |  | $272,060          
|                                           | Gross margin                                       | 27,058                                      |   | 30,553             |  | 33,350            
|                                           | Income (loss) from continuing operations           | (19,291                                     | ) | 5,468              |  | 6,396             
|                                           | Net income (loss) applicable to common
      stock | (20,860                                     | ) | 3,899              |  | 4,870             
|                                           | Net income (loss) per share:                       |                                             |   |                    |  |                   
|                                           | Basic                                              | $    
       (1.76                          | ) | $     
       0.17 |  | $     
       0.22
|                                           |                                                    |                                             |   |                    |  |                   
|                                           | Diluted                                            | $    
       (1.76                          | ) | $     
       0.16 |  | $     
       0.19
|                                           |                                                    |                                             |   |                    |  |                   



|(a) |  | The fourth quarter of 1999 benefited by $0.03 per
      share diluted from a change in accounting and tax rules reducing income
      tax expense, and was also favorably impacted by $0.02 per share diluted
      from the net effect of adjustments to certain contracts in progress and
      incentive compensation accruals.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                   
|(b) |  | See Note 4. "Special Charges" for
      information relating to the Nine Months Ended December 25,
      1998.                                                                                                                                                                                                                    

14.   Discontinued operations:

Overview

Prior to December 1987 the Company was a major provider of hazardous
    waste transportation, treatment, and disposal operations in California. In
    December 1987, the Company's Board of Directors adopted a strategic
    restructuring program which included a formal plan to divest the
    transportation, treatment and disposal operations through sale of some
    facilities and closure of certain other facilities. Subsequent to this
    date, the Company ceased obtaining new business for these operations.
    During the quarter ended March 27, 1998, the Company recorded an increase
    in the provision for loss on disposition of $8 million or $5 million, net
    of income tax benefit of $3 million,
  primarily for additional closure costs related to the approval of the closure
    plan by the California EPA, Department of Toxic Substance Control (DTSC)
    for the Panoche disposal site. Through the twelve months ended December 31,
    1999, the Company cumulatively recorded a provision for loss on disposition
    (including the initial provision and three subsequent adjustments) in the
    amount of $165 million, net of income tax benefit of $36 million for site
    closure costs, post-closure monitoring costs, and other potentially
    responsible party (PRP) liabilities arising from the Company's
    transportation, treatment and disposal discontinued operations. During the
    twelve months ended December 31, 1999, the nine months ended December 25,
    1998 and the twelve months ended March 27, 1998, the Company funded
    previously accrued costs of $9 million, $11 million and $15 million,
    respectively, relating to the closure plans and construction and PRP
    matters.

In October 1999, the Company renegotiated its financial assurance
    requirements on closure and thirty year post-closure obligations for the
    Company's Northern California Facilities with the DTSC to enabled the use
    of a performance bond to replace restricted trust fund assets. The
    renegotiated requirements included purchasing environmental insurance and a
    performance bond with an internationally recognized insurance carrier for
    the Company's obligations at its Northern California Facilities. As a
    result of obtaining the insurance and the performance bond, in October 1999
    the Company obtained the release of trust fund assets, and received $15
    million in cash which had previously provided financial assurance to the
    DTSC. Separately, the trustee also transferred to the insurance company
    annuities held in the trust funds. Under the performance bond, the Company
    is required to perform, at its cost, the remaining closure activities at
    the Panoche disposal site. Closure activities at the other three Northern
    California Facilities are complete. Under the environmental insurance
    policy, the Company will perform post-closure activities at the four
    inactive Northern California Facilities, and will be reimbursed by the
    insurance policy, up to the policy limits which are in excess of the
    Company's estimates for post-closure costs, during the policy's thirty-one
    year term. At December 31, 1999, the Company's consolidated balance sheet
    included accrued liabilities of approximately $14 million for closure costs
    of its disposal facilities, insurance program premium costs and the PRP
    matters. The cost provision on disposition of transportation, treatment and
    disposal discontinued operations is based on various assumptions and
    estimates, including those discussed below. The adequacy of the cost
    provision is periodically reevaluated in light of the developments since
    the adoption of the divestiture plan, and management believes that the
    provision as adjusted is reasonable; however, the ultimate effect of the
    divestiture on the consolidated financial condition, liquidity and results
    of operations of the Company is dependent upon future events, the outcome
    of which cannot be determined at this time. Closure and post-closure costs
    could be higher than estimated if regulatory agencies were to require
    closure and/or post-closure procedures significantly different than those
    in the approved plans, or if the Company is required to perform unexpected
    remediation work at the facilities in the future or to pay penalties for
    alleged noncompliance with regulations or permit conditions. Outcomes
    significantly different from those used to estimate the provision for loss
    could result in a material adverse effect on the consolidated financial
    condition, liquidity and results of operations of the Company. It is
    reasonably possible that additional, material losses could be realized
    which relate to the disposition of the Company's transportation, treatment
    and disposal discontinued operations. Based on the uncertainties regarding
    future events as described above, it is not possible to estimate a range of
    loss for these uncertainties.

Northern California Facilities

As a part of the Company's discontinued operations, the Company
    operated a series of treatment, storage and disposal facilities in
    California, including four major disposal facilities. Closure plans for all
    four of these facilities have now been approved by all applicable
    regulatory agencies. Closure construction has been formally completed at
    three of these facilities (Montezuma Hills, Benson Ridge, and Vine Hill).

On March 18, 1998, the DTSC certified the Environmental Impact Report
    and approved the Closure Plan for the Panoche facility. The approved plans
    provide for submittal of technical studies that are being utilized to
    determine final aspects, details and costs of closure construction and
    monitoring programs. While the approved closure plans have substantially
    reduced future cost uncertainties to complete the closure of the Panoche
    facility, the ultimate costs will depend upon the results of the technical
    studies as completed and actual site conditions. Closure construction for
    the plan is scheduled to be substantially completed in the fall of 2000.

The carrying value of the long-term assets of discontinued operations
    of $40 million at December 31, 1999 is principally comprised of unused
    residual land at the inactive disposal facilities and assumes that land
    sales will occur at market prices estimated by the Company based on certain
    assumptions (entitlements, etc.). In June 1999, a local community's review
    of its growth strategy resulted in limitations, in line with the Company's
    expectations, on the Company's ability
  to develop a portion of the residual land, and the Company believes that
    local land values continue to support the Company's carrying value for the
    property. There is no assurance as to the timing of development or sales of
    any of the Company's residual land, or, until sold, the Company's ability
    to ultimately liquidate the land for the estimated sale prices. If the
    assumptions used to determine such prices are not realized, the value of
    the land could be materially different from the current carrying value.

In addition to the environmental insurance policy for post-closure
    costs, the Company maintains Environmental Impairment Liability coverage
    for the Northern California Facilities through the Company's captive
    insurance company. The limits of the policy are $32 million which meet the
    current requirements of both federal and state law.

Operating Industries, Inc. Superfund Site

In June 1986, USEPA notified a number of entities,
    including the Company, that they were PRPs with respect to the Operating
    Industries, Inc. (OII) Superfund site in Monterey Park, California. Between
    October 1995 and April 1996, the Company, the USEPA and the Steering
    Committee agreed to settlements of the Company's alleged liability for
    certain prior response costs incurred by the USEPA. While resolving the
    Company's alleged liability for these response costs, the settlement did
    not include a release of liability for future or final OII remedies. The
    USEPA has requested, and the Steering Committee and the Company have
    submitted, proposals to work cooperatively with interested parties on the
    final remedy. While the USEPA has estimated response costs for the final
    remedy to approximate $162 million, and the USEPA has alleged the Company
    generated 2% by volume of the manifested hazardous wastes disposed of at
    the site, the Company believes that USEPA's final remedy cost estimates are
    substantially overstated. The Company expects that offers to pay for or
    perform the final remedy will be made in 2000. Should the costs of the
    final remedy be greater than the amounts recognized or should the Company
    be forced to assume a disproportionate share of the costs of the final
    remedy, the cost to the Company of concluding this matter could materially
    increase.

GBF Pittsburg Site

In September 1987, the Company and 17 others were served with a
    Remedial Action Order (RAO) issued by the DTSC, concerning the GBF
    Pittsburg landfill site near Antioch, California. From the 1960's through
    1974, a predecessor to IT Corporation operated a portion of one of the two
    parcels as a liquid hazardous waste site.

In June 1997, the DTSC completed and released a final Remedial Action
    Plan (RAP) selecting DTSC's preferred pump-and-treat remedial alternative,
    which the Company then estimated to cost up to $18 million based on DTSC's
    prior estimates. As part of the RAP, the DTSC also advised the PRP group of
    its position that all PRPs, including the Company, are responsible for
    paying the future closure and postclosure costs of the overlying municipal
    landfill, which have been estimated at approximately $4 million. (The DTSC
    also sought approximately $1.0 million in oversight costs from all PRPs,
    and the DTSC's claims against the PRP group were recently settled for $0.4
    million.) The PRP group continues to believe that its preferred alternative
    of continued limited site monitoring, which was estimated to cost
    approximately $4 million, is appropriate and has filed an application with
    the appropriate Regional Water Quality Control Board (RWQCB) for
    designation of the site as a containment zone which, if approved, would
    facilitate the PRP group's preferred remedial alternative.

The Company and the PRP group initiated litigation (Members of the
    GBF/Pittsburg Landfill(s) Respondents Group, etc., et al, v. State of
    California Environmental Protection AgencyContra Costa County,
    California Superior Court Case No. C97-02936) challenging the final RAP,
    and the PRP group and the DTSC agreed to stay this litigation and
    implementation of major RAP elements pending the RWQCB's review of the
    containment zone application. The PRP group continues to work with the
    RWQCB and the DTSC on the application. A decision on the application is
    expected in 2000.

In the final RAP the DTSC assigned the Company and the other members
    of the PRP group collective responsibility (on a non-binding basis) for 50%
    of the site's response costs. The PRP group continues to believe that the
    DTSC allocation is inappropriate and current owner/operators should pay a
    larger portion of the site's response costs and the PRP group has initiated
    litigation (Members of the GBF/Pittsburg Landfill(s) Respondents Group,etc., et al, v. Contra Costa Waste Service,etc., et al.U.S.D.C., N.D. CA, Case No. C96-03147SI) against the owner/operators of
    the site and other non-cooperating PRPs to cause them to bear their
    proportionate share of site
  remedial costs. The owner/operators are vigorously defending the PRP group's
    litigation, and the outcome of the litigation cannot be determined at this
    time. Discovery in this litigation has been suspended while negotiations
    between the owner/operators and the PRP group continue. During 1999, the
    Company finalized arrangements with the other members of the PRP group to
    share approximately 50% of site costs, which was consistent with previous
    interim agreements. Should settlement talks prove unsuccessful, trial in
    this matter has been scheduled for July 2000.

Failure of the PRP group to effect a satisfactory resolution with
    respect to the choice of appropriate remedial alternatives or to obtain an
    appropriate contribution towards site remedial costs from the current
    owner/operators of the site and other non-cooperating PRPs, could
    substantially increase the cost to the Company of remediating the site.

Other Site Cleanup Actions

The Company, as a major provider of hazardous waste transportation,
    treatment and disposal operations in California prior to the December 1987
    adoption of its strategic restructuring program, has been named a PRP at a
    number of other sites and may from time to time be so named at additional
    sites (and has recently been named as a PRP at the Casmilia Landfill in
    Santa Barbara County, California and at the West County Landfill in
    Richmond, California) and may also face damage claims by third parties for
    alleged releases or discharges of contaminants or pollutants arising out of
    its transportation, treatment and disposal discontinued operations. The
    Company has either denied responsibility and/or is participating with
    others named by the USEPA and/or the DTSC in conducting investigations as
    to the nature and extent of contamination at the sites. Based on the
    Company's experience in resolving claims against it at a number of sites
    and upon current information, in the opinion of management, with advice of
    counsel, claims with respect to sites not described above at which the
    Company has been notified of its alleged status as a PRP will not
    individually or in the aggregate result in a material adverse effect on the
    consolidated financial condition, liquidity and results of operations of
    the Company.

The Company has initiated against a number of its past insurers
    claims for recovery of certain damages and costs with respect to both its
    Northern California sites and certain PRP matters. The carriers dispute
    their allegations to the Company and the Company expects them to continue
    to contest the claims. The Company has included in its provision for loss
    on disposition of discontinued operations (as adjusted) an amount that, in
    the opinion of management, with advice of counsel, represents a probable
    recovery with respect to those claims.

15.      Financial
    information for subsidiary guarantors

The Company's payment obligations under the Notes are fully and
    unconditionally guaranteed on a joint and several basis by substantially
    all of the Company's wholly owned domestic subsidiaries. The Notes have not
    been guaranteed by the Company's captive insurance subsidiary nor any of
    the Company's foreign subsidiaries. The following summarized financial
    information presents separately the composition of the Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries. Separate complete financial
    statements of the respective Guarantor Subsidiaries are not presented
    because management has determined that they would not provide additional
    material information that would be useful in assessing the financial
    composition of the guarantors and non-guarantors. The principal elimination
    entries eliminate investments in subsidiaries and intercompany balances and
    transactions.

Summarized Condensed Financial InformationTwelve Months Ended December 31, 1999



|                                                               | Parent            |   | Guarantor
    
    Subsidiaries |   | Non-
    
    Guarantor
    
    Subsidiaries |   | Eliminations |   | Consolidated |  
|-------------------------------------------------------------- | ----------------- | - | ------------------------------- | - | --------------------------------------------- | - | ------------ | - | ------------ | -
|                                                               |                   |   |                                 |   | (In thousands)                                |   |              |   |              |  
|Current assets                                                 | $        
       |   | $   455,242                     |   | $39,966                                       |   | $      (252  | ) | $  494,956   |  
|Non current assets                                             | 19,449            |   | 1,228,885                       |   | 39,829                                        |   | (502,248     | ) | 785,915      |  
|Current liabilities                                            | 7,774             |   | 319,456                         |   | 33,103                                        |   | (3,880       | ) | 356,453      |  
|Revenues                                                       |                  |   | 1,255,562                       |   | 58,974                                        |   | (285         | ) | 1,314,251    |  
|Gross margin                                                   |                  |   | 180,849                         |   | 5,294                                         |   | (285         | ) | 185,858      |  
|Net income (loss) from continuing
    
      operations        | (14,450           | ) | 44,816                          |   | 2,919                                         |   | (967         | ) | 32,318       |  
|Net income (loss)                                              | (14,450           | ) | 44,816                          |   | 2,919                                         |   | (967         | ) | 32,318       |  
|Net cash provided by (used in)
    
      operatng activities  | 5,647             |   | 42,345                          |   | (3,649                                        | ) | 2,710        |   | 47,053       |  
|Net cash used in investing activities                          |                  |   | (496,428                        | ) | (28,087                                       | ) | 292,792      |   | (231,723     | )
|Net cash provided by (used in)
    
      financing activities | 212,750           |   | (22,236                         | ) | 1,710                                         |   | 710          |   | 192,934      |  

Summarized Condensed Financial InformationNine Months Ended December 25, 1998



|                                                               | Parent             |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |   | Eliminations        |   | Consolidated |  
|-------------------------------------------------------------- | ------------------ | - | --------------------- | - | ------------------------- | - | ------------------- | - | ------------ | -
|                                                               |                    |   |                       |   | (In thousands)            |   |                     |   |              |  
|Current assets                                                 | $         
       |   | $375,907              |   | $17,484                   |   | $      
       (310 | ) | $393,081     |  
|Non current assets                                             | 12,474             |   | 735,924               |   | 12,441                    |   | (205,314            | ) | 555,525      |  
|Current liabilities                                            | 2,127              |   | 258,232               |   | 19,110                    |   | (6,648              | ) | 272,821      |  
|Revenues                                                       |                   |   | 746,740               |   | 11,148                    |   | (453                | ) | 757,435      |  
|Gross margin                                                   |                   |   | 90,281                |   | 1,133                     |   | (453                | ) | 90,961       |  
|Net income (loss) from continuing
    
      operations        | (2,852             | ) | (4,013                | ) | 1,995                     |   | (2,557              | ) | (7,427       | )
|Net income (loss)                                              | (2,852             | ) | (4,013                | ) | 1,995                     |   | (2,557              | ) | (7,427       | )
|Net cash provided by (used in)
     operating activities       | 800                |   | (20,592               | ) | 3,185                     |   | 2,052               |   | (14,555      | )
|Net cash provided by (used in)
    
     investing activities  | 2,583              |   | (144,774              | ) | (7,073                    | ) | 47,887              |   | (101,377     | )
|Net cash provided by (used in)
    
      financing activities | 10,462             |   | 102,191               |   | (221                      | ) |                    |   | 112,432      |  

Summarized Condensed Financial InformationTwelve Months Ended March 27, 1998



|                                                               | Parent         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |   | Eliminations |   | Consolidated |  
|-------------------------------------------------------------- | -------------- | - | --------------------- | - | ------------------------- | - | ------------ | - | ------------ | -
|                                                               | (In thousands)
|Revenues                                                       | $             |   | $432,462              |   | $ 11,142                  |   | $ (1,388     | ) | $ 442,216    |  
|Gross margin                                                   |               |   | 52,284                |   | (621                      | ) | (573         | ) | 51,090       |  
|Net income (loss) from continuingoperations                    | (808           | ) | (3,615                | ) | 126                       |   | (2,063       | ) | (6,360       | )
|Net income (loss)                                              | (808           | ) | (14,281               | ) | 126                       |   | (2,063       | ) | (17,026      | )
|Net cash provided by (used in)
     operating activities       | 1,315          |   | (23,785               | ) | 2,021                     |   | 909          |   | (19,540      | )
|Net cash provided by (used in)
    
     investing activities  | 27             |   | (249,464              | ) | (7,402                    | ) | 86,788       |   | (170,051     | )
|Net cash provided by (used in)
    
      financing activities | 53,788         |   | 81,867                |   | (196                      | ) |             |   | 135,459      |  

16.      Subsequent events:

On
    March 8, 2000, the Company obtained from its lenders under the credit
    facilities an additional $100 million, seven year term loan (Term C loan),
    which is payable in twelve semi-annual installments of $1.0 million and
    four quarterly payments of $22 million commencing in September 2006 through
    June 2007. The Term C loan bears interest at variable rates, currently at
    LIBOR plus 3% per annum (or the Bank's base rate plus 2% per annum).



|ITEM 9. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- |  | -------------------------------------------------------------------------------------------

There were none.

PART III





ITEM 10. 
       DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT.





The section entitled Election of
    Directors in our Definitive Proxy Statement to be filed with the
    Securities and Exchange Commission for the Annual Meeting of Stockholders
    scheduled for June 8, 2000 is incorporated herein by reference. See also
    Executive Officers of the Company in Part I of this report for
    certain information concerning our executive officers.





ITEM 11. 
       EXECUTIVE COMPENSATION.





The section entitled Executive
    Compensation in our Proxy Statement is incorporated herein by
    reference.





ITEM 12. 
       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT.





The section entitled Beneficial
    Ownership of Shares in our Proxy Statement is incorporated herein by
    reference.





ITEM 13. 
       CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS.





The section entitled Certain
    Transactions in our Proxy Statement is incorporated herein by
    reference.


PART
    IV





ITEM 14. 
       EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
  
               
           FORM 8-K.





Exhibits





These Exhibits are numbered in accordance
    with the Exhibit Table of Item 601 of Regulation S-K.





Parentheses indicate the date on or
    instrument pursuant to which the Exhibit was previously filed with the
    Securities and Exchange Commission. All Exhibits (including previously
    filed Exhibits) are incorporated by reference in this Annual Report on Form
    10-K.





|Exhibit
    
    No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2                    |  | Omitted
      Inapplicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                    
|3(i)                 |  | Certificate of
      Incorporation of the Registrant as amended by the Amendment to
    
    Certificate of Incorporation filed September 17, 1987, with the Delaware
      Secretary
    
    of State (Filed as an Exhibit to the Registrants Annual Report on
      Form 10-K for
    
    the year ended March 31, 1988 (No. 1-9037)), and by the Certificate of
      Amendment
    
    to Certificate of Incorporation filed June 19, 1998 (Filed as an Exhibit to
    
    Registrants Annual Report on Form 10-K for the year ended March 27,
      1998), with
    
    the Delaware Secretary of State and by the Certificate of Amendment of
    
    Certification of Incorporation of International Technology Corporation,
      dated as of
    
    December 21, 1998, as filed with the Delaware Secretary of State on
      December 23,
    
    1998. (Filed as an Exhibit to the Registrants Current Report on Form
      8-K dated
    
    December 23, 1998.)
|                    
|3(ii)                |  | Amended and
      Restated Bylaws of the Registrant as amended through June 12, 1998.
    
    (Filed as an Exhibit to Registrants Annual Report on Form 10-K for
      the year ended
    
    March 27, 1998.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                    
|4(i)                 |  | 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                    
|                     |  | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                    
|4(ii)                |  | 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|Exhibit
    
    No. |  | Description
|-------------------- |  | -----------
|                     |  | 2.         
|                    
|                     |  | 3.         
|                    
|                     |  | 4.         
|                    
|                     |  | 5.         
|                    
|                     |  | 6.         
|                    
|                     |  | 9.         
|                    
|10(ii)               |  | 1.         
|                    
|                     |  | 2.         
|                    
|                     |  | 3.         
|                    
|                     |  | 4.         
|                    
|                     |  | 5.         

|Exhibit
    
    No. |  | Description
|-------------------- |  | -----------
|                     |  | 6.         
|                    
|                     |  | 7.         
|                    
|                     |  | 8.         
|                    
|                     |  | 9.         
|                    
|                     |  | 10.        
|                    
|                     |  | 11.        
|                    
|                     |  | 12.        
|                    
|                     |  | 13.        
|                    
|                     |  | 14.        

|Exhibit
    
    No. |  | Description
|-------------------- |  | -----------
|                    
|                     |  | 15.        
|                    
|                     |  | 16.        
|                    
|                     |  | 17.        
|                    
|                     |  | 18.        
|                    
|                     |  | 19.        
|                    
|                     |  | 20.        
|                    
|                    
|                     |  | 21.        
|                    
|                     |  | 22.        
|                    
|                     |  | 23.        
|                    

|Exhibit
    
    No. |  | Description
|-------------------- |  | -----------
|                    
|                     |  | 24.        
|                    
|10(iii)              |  | 1.         
|                    
|                     |  | 2.         
|                    
|                     |  | 3.         
|                    
|                     |  | 4.         
|                    
|                     |  | 5.         
|                    
|                     |  | 6.         
|                    
|                     |  | 7.         

|Exhibit
    
    No. |  | Description
|-------------------- |  | -----------
|                     |  | 8.         
|                    
|                     |  | 9.         
|                    
|                     |  | 10.        
|                    
|                     |  | 11.        
|                    
|                     |  | 12.        
|                    
|                     |  | 13.        
|                    
|                     |  | 14.        
|                    
|                     |  | 15.        
|                    
|                     |  | 16.        
|                    
|                     |  | 17.        
|                    
|                     |  | 18.        
|                    
|                     |  | 19.        

|Exhibit
    
    No. |  | Description
|-------------------- |  | -----------
|                     |  | 20.        
|                    
|                     |  | 21.        
|                    
|                     |  | 22.        
|                    
|                     |  | 23.        
|                    
|                     |  | 24.        
|                    
|                     |  | 25.        
|                    
|                     |  | 26.        
|                    
|                     |  | 27.        
|                    
|                     |  | 28.        
|                    
|                     |  | 29.        
|                    
|                     |  | 30.        
|                    
|                     |  | 31.        

|Exhibit
    
    No. |  | Description
|-------------------- |  | -----------
|                     |  | 32.        
|                    
|                     |  | 33.        
|                    
|                     |  | 34.        
|                    
|                     |  | 35.        
|                    
|                     |  | 36.        
|                    
|                     |  | 37.        
|                    
|                     |  | 38.        
|                    
|                     |  | 39.        
|                    
|                     |  | 40.        
|                    
|                     |  | 41.        
|                    
|                     |  | 42.        

|Exhibit
    
    No. |  | Description                 
|-------------------- |  | ----------------------------
|                     |  | 43.                         
|                    
|                     |  | 44.                         
|                    
|                     |  | 45.                         
|                    
|                     |  | 46.                         
|                    
|                     |  | 47.                         
|                    
|                     |  | 48.                         
|                    
|                     |  | 49.                         
|                    
|                     |  | 50.                         
|                    
|                     |  | 51.                         
|                    
|                     |  | 52.                         
|                    
|11                   |  | Omitted
      Inapplicable.
|                    
|12                   |  | Omitted
      Inapplicable.
|                    
|13                   |  | Omitted
      Inapplicable.
|                    
|16                   |  | Omitted
      Inapplicable.

|Exhibit
    
    No. |  | Description                                                        
|-------------------- |  | -------------------------------------------------------------------
|18                   |  | Omitted
      Inapplicable.                                       
|                    
|20                   |  | Omitted
      Inapplicable.                                       
|                    
|21                   |  | List of the
      Registrants subsidiaries.                       
|                    
|22                   |  | Omitted
      Inapplicable.                                       
|                    
|23                   |  | 1. Consent of
      Ernst & Young LLP, Independent Auditors.       
|                    
|24                   |  | Omitted
      Inapplicable.                                       
|                    
|27                   |  | Financial Data
      Schedule for the year ended December 31, 1999.
|                    
|28                   |  | Omitted
      Inapplicable.                                       
|                    
|99                   |  | Omitted
      Inapplicable.                                       




|* | Filed as a
      management compensation plan or arrangement per Item 14(a)(3) of the
      Securities Exchange Act.
|- | --------------------------------------------------------------------------------------------------------------------




Reports on Form
    8-K





None.




#### THE IT GROUP, INC.

#### SCHEDULE II-VALUATION AND QUALIFYING
    ACCOUNTS

#### (In thousands)



|                                     |                                            | Balance at
    
    Beginning
    
    of period |  | Provision
    
    (benefit)charged
    
    to income |   | AccountsWritten
    
    off |   | Other       |   | Balance
    
    at end
    
    of period | 
|------------------------------------ | ------------------------------------------ | ------------------------------------------------ |  | ------------------------------------------------------ | - | ---------------------------- | - | ----------- | - | ------------------------------------------ | 
|                                     |                                            |                                                 
|Year ended December 31, 1999:        |                                            |                                                  |  |                                                        |   |                              |   |             |   |                                           
|                                     | Allowance for doubtful accounts            | $18,958                                          |  | $2,464                                                 |   | $(4,155                      | ) | $     756(1 | ) | $18,023                                    | 
|                                     | Valuation allowance for deferred tax asset | $50,267                                          |  | ($2,473                                                | ) | $      
                    |   | $9,621(4    | ) | $57,415                                    | 
|                                     |                                            |                                                  |  |                                                        |   |                              |   |             |   |                                           
|Nine months ended December 25, 1998: |                                            |                                                  |  |                                                        |   |                              |   |             |   |                                           
|                                     | Allowance for doubtful accounts            | $19,026                                          |  | $1,203                                                 |   | $(3,101                      | ) | $  1,830(2  | ) | $18,958                                    | 
|                                     | Valuation allowance for deferred tax asset | $31,865                                          |  | $6,059                                                 |   | $      
                    |   | $12,343(5   | ) | $50,267                                    | 
|                                     |                                            |                                                  |  |                                                        |   |                              |   |             |   |                                           
|Year ended March 27, 1998:           |                                            |                                                  |  |                                                        |   |                              |   |             |   |                                           
|                                     | Allowance for doubtful accounts            | $ 2,055                                          |  | $   206                                                |   | $(1,147                      | ) | $17,912(3   | ) | $19,026                                    | 
|                                     | Valuation allowance for deferred tax asset | $ 9,471                                          |  | $2,252                                                 |   | $                           |   | $20,142(6   | ) | $31,865                                    | 



|(1) |  | Represents allowance for doubtful accounts recorded on the
      books of EMCON at acquisition.                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                          
|(2) |  | Represents allowance for doubtful accounts recorded on the
      books of GTI at acquisition.                                                                                                                                                                                            
|    |  |                                                                                                                                                                                                                                                                                          
|(3) |  | Represents allowance for doubtful accounts at the date of
      acquisition for business acquired during the twelve months ended March
      27, 1988 totaling $18,020 less the allowance for doubtful accounts of
      $108 relating to the sale of IT's remediation services business.
|    |  |                                                                                                                                                                                                                                                                                          
|(4) |  | Represents valuation allowance adjustments relating to the
      OHM, GTI, EFM and EMCON acquisitions.                                                                                                                                                                                   
|    |  |                                                                                                                                                                                                                                                                                          
|(5) |  | Represents valuation allowance adjustments relating to the
      acquisitions of OHM and GTI.                                                                                                                                                                                            
|    |  |                                                                                                                                                                                                                                                                                          
|(6) |  | Represents valuation allowance adjustment relating to the
      acquisition of OHM.                                                                                                                                                                                                      
|    |  |                                                                                                                                                                                                                                                                                          





#### SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in
    Pittsburgh, Pennsylvania on the 30th day of March, 2000.

| | THE IT GROUP, INC.
| | ------------------
| |                   
| | By:               
| |                   
| |                   
| |                   

Pursuant to the requirements of the Securities Exchange Act of 1934, this
    report has been signed below by the following persons on behalf of the
    registrant and in the capacities and on the dates indicated.

|/s/  Daniel A. D'Aniello      |  | Chairman of the Board of          | March 30, 2000
|----------------------------- |  | --------------------------------- | --------------
|                              |  | Directors                         |               
|Daniel A D'Aniello            |  |                                   |               
|                              |  |                                   |               
|/s/  Anthony J. DeLuca        |  | Director, Chief Executive Officer | March 30, 2000
|                              |  | and President                     |               
|Anthony J. DeLuca             |  | (Principal Executive Officer)     |               
|                              |  |                                   |               
|/s/  Philip B. Dolan          |  | Director                          | March 30, 2000
|                              |  |                                   |               
|Philip B. Dolan               |  |                                   |               
|                              |  |                                   |               
|/s/  E. Martin Gibson         |  | Director                          | March 30, 2000
|                              |  |                                   |               
|E. Martin Gibson              |  |                                   |               
|                              |  |                                   |               
|/s/  Francis J. Harvey, Ph.D. |  | Director                          | March 30, 2000
|                              |  |                                   |               
|Francis J. Harvey, Ph.D.      |  |                                   |               
|                              |  |                                   |               
|/s/  James C. McGill          |  | Director                          | March 30, 2000
|                              |  |                                   |               
|James C. McGill               |  |                                   |               
|                              |  |                                   |               
|/s/  Richard W. Pogue         |  | Director                          | March 30, 2000
|                              |  |                                   |               
|Richard W. Pogue              |  |                                   |               
|                              |  |                                   |               
|/s/  Robert F. Pugliese       |  | Director                          | March 30, 2000
|                              |  |                                   |               
|Robert F. Pugliese            |  |                                   |               
|                              |  |                                   |               
|/s/  Charles W. Schmidt       |  | Director                          | March 30, 2000
|                              |  |                                   |               
|Charles W. Schmidt            |  |                                   |               
|                              |  |                                   |               
|/s/  James David Watkins      |  | Director                          | March 30, 2000
|                              |  |                                   |               
|James David Watkins           |  |                                   |               
|                              |  |                                   |               
|/s/  Harry J. Soose           |  | Senior Vice President and         | March 30, 2000
|                              |  | Chief Financial Officer           |               
|Harry J. Soose                |  | (Principal Financial Officer)     |               
|                              |  |                                   |               
|/s/  James J. Pierson         |  | Vice President, Finance           | March 30, 2000
|                              |  | (Principal Accounting Officer)    |               
|James J. Pierson              |  |                                   |