<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, 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 MARCH 27, 1998
                                       OR

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

FOR THE TRANSITION PERIOD FROM ________________ TO ___________________

                          COMMISSION FILE NUMBER 1-9037
                                                 ------

                      INTERNATIONAL TECHNOLOGY CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         Delaware                                              33-0001212
(STATE OR OTHER JURISDICTION OF                             (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                           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:
<TABLE>
<CAPTION>
                                                            NAME OF EACH EXCHANGE ON WHICH
          TITLE OF EACH CLASS                                         REGISTERED
          -------------------                                         ----------

<S>                                              <C>                 
 Common Stock, $.01 Par Value                    New York Stock Exchange; Pacific Stock Exchange
 Preferred Stock Depositary Shares               New York Stock Exchange; Pacific Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  None

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 ........

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. ___

THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING COMMON STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT AT JUNE 11, 1998, WAS APPROXIMATELY
$228,962,000 (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 JUNE 11, 1998 THE REGISTRANT HAD ISSUED AND OUTSTANDING AN AGGREGATE OF
22,637,774 SHARES OF ITS COMMON STOCK, INCLUDING 8,078 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 1998 ANNUAL MEETING
OF STOCKHOLDERS OF THE REGISTRANT IS INCORPORATED BY REFERENCE INTO PART III
HEREOF.


<PAGE>   2



                      INTERNATIONAL TECHNOLOGY CORPORATION
                           ANNUAL REPORT ON FORM 10-K
                    FOR THE FISCAL YEAR ENDED MARCH 27, 1998

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item                                                                                             Page
----                                                                                             ----
                                             PART I

<S>        <C>                                                                                     <C>
   1       Business.............................................................................     2
               General..........................................................................     2
               Background.......................................................................     3
               Operations.......................................................................     4
                    General.....................................................................     4
                    Engineering and Construction................................................     4
                    Consulting and Ventures.....................................................     4
                    Outsourcing.................................................................     5
                    International...............................................................     5
                    Customers...................................................................     5
                    Competition.................................................................     6
                    Technology Development......................................................     7
                    Regulations.................................................................     7
                    Environmental Contractor Risks..............................................     9
                    Insurance and Risk Management...............................................    10
                    Leverage....................................................................    11
                    Risk of Achievement of Synergies and Integration of Operations..............    11
                    History of Losses...........................................................    12
                    Control of Board of Directors...............................................    12
               Discontinued Operations..........................................................    12
               Employees........................................................................    13
   2       Properties...........................................................................    13
   3       Legal Proceedings....................................................................    13
   4       Submission of Matters to a Vote of Shareholders......................................    13

                                                    ----------

  4A       Executive Officers of the Company....................................................    14

                                             PART II

   5       Market for the Registrant's Common Stock and Related
               Shareholder Matters..............................................................    15
   6       Selected Financial Data..............................................................    16
   7       Management's Discussion and Analysis of Results of Operations
               and Financial Condition..........................................................    16
   8       Financial Statements and Supplementary Data..........................................    27
   9       Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure.........................................................    58

                                            PART III

  10       Directors and Executive Officers of the Registrant...................................    58
  11       Executive Compensation...............................................................    58
  12       Security Ownership of Certain Beneficial Owners and Management.......................    58
  13       Certain Relationships and Related Transactions.......................................    58

                                             PART IV

  14       Exhibits, Financial Statement Schedule and Reports on Form 8-K.......................    59
</TABLE>

                                       1

<PAGE>   3




                                     PART I

ITEM 1. BUSINESS.

GENERAL

     International Technology Corporation, a Delaware corporation (the Company
or IT) provides a full range of technology-driven, value-added consulting,
outsourcing, engineering and construction capabilities through a network of 67
offices in the United States and selected international locations. The Company
was incorporated in 1983; the earliest antecedent of the Company commenced
operations in California in 1926. On June 9, 1998, the Board of Directors of IT
approved a change in IT's fiscal year end from the last Friday in March of each
year to the last Friday in December of each year; as a result, the Company's
transition period will cover the nine month period ending December 25, 1998.

     The Company's services include construction and remediation, risk
assessment, air quality management, pollution prevention and waste minimization,
information management, land-use planning and restoration of impaired
properties, decontamination and decommissioning, design/build, wastewater
treatment, historical research and investigation, environmental consulting and
advocacy services, engineering services and facility operation and maintenance.
The Company's business strategy is to be a global provider of environmental
solutions to both the government and private industry clients. As part of this
strategy, the Company has diversified through several acquisitions of
specialized companies primarily serving targeted commercial markets.
Additionally, the Company acquired OHM Corporation (OHM) in a two-step
transaction, comprised of a tender offer for 13,933,000 shares of OHM common
stock, or 54% of the outstanding OHM stock, for $160,300,000 in cash, which was
consummated on February 25, 1998, and a merger (the "Merger") of an IT
subsidiary into OHM on June 11, 1998. In the Merger, the former OHM shareholders
received IT common stock representing approximately 57% of the outstanding IT
common stock and 45% of the voting power of IT, as well as cash in the aggregate
amount of $30,800,000.

     Following the tender offer, the Company launched an integration plan which
included having IT and OHM management coordinate their operations and implement
cost savings plans. OHM is a leading diversified services firm, providing a
broad range of outsourced services for governmental and private sector clients.
OHM has worked at 300 military bases on projects for the U.S. Army Corp of
Engineers, the U.S. Department of the Navy and Air Forces as well as projects
for the U.S. Environmental Protection Agency (EPA) and the Department of Energy
(DOE). Private sector clients include those in petroleum, chemical,
transportation and general manufacturing. Giving effect to the OHM acquisition,
IT has projected annual revenues of approximately $1.0 billion and backlog at
March 27, 1998 of $3.5 billion (see Management's Discussion and Analysis of
Results of Operations and Financial Condition - Results of Operations).

     Demand for the Company's services is heavily influenced by the level of
enforcement of environmental laws and regulations, funding levels for government
projects and spending patterns of commercial clients. The Company believes
commercial client spending has been and will continue to be influenced by the
implementation and enforcement activities of governmental regulatory agencies
and the existing uncertain regulatory climate. The operations of the Company are
performed subject to a comprehensive federal, state, and local environmental
regulatory structure. (See Business - Operations - Regulations.) This regulatory
framework is a primary driver of business opportunities for the Company. The
lapse of the Superfund (see Business - Operations - Regulations - Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and
uncertainty concerning the form of the future reauthorization of the Superfund
and potential changes in other regulations have dampened demand for the
Company's services.

     In recent years, the Company's revenues have been derived primarily from
its business with federal, state and local governmental clients. Revenues
attributable to contracts with governmental agencies accounted for 63%, 67% and
69% of total revenues in fiscal years 1998, 1997 and 1996, respectively. (See
Business - Operations - Customers Federal, State and Local Governmental
Clients.) The Company expects that revenues attributable to federal, state and
local governmental agency contracts, particularly those with the U.S. Department
of Defense (DOD) and DOE, will continue to represent a substantial percentage of
total revenues in the near term. Efforts to constrain the federal budget

                                        2

<PAGE>   4



deficit have reduced the level of spending on environmental restoration by the
DOD, the DOE and other federal governmental agencies. During the past two years,
the Company's commercial client revenue has increased modestly despite an
uncertain regulatory climate, primarily due to the acquisitions of specialized
consulting firms (see Business-Operations - Consulting and Ventures and
Management's Discussion and Analysis of Results of Operations and Financial
Condition - Revenues).

BACKGROUND

     Hazardous materials management and remediation, as well as air and water
pollution control, are widely acknowledged as significant national priorities.
As of March 1998, the USEPA had designated approximately 1,372 sites as
Superfund locations with significant concentrations of hazardous materials,
although only approximately 37% of these sites have been remediated. In
addition, there are a large number of small commercial and governmental sites
that will require cleanup. The assessment, decontamination and remediation of
hazardous sites are governed by complex environmental and occupational safety
and health regulations administered by numerous federal, state and local
agencies.

     Many of the Company's clients, both governmental and commercial, require a
full-service solution, in which a single supplier manages the entire process
from identification and assessment through remediation. Successful remediation
of hazardous sites requires a multidisciplinary approach, since such sites
typically involve a variety of waste which affects air, soil and/or water.
Depending on the circumstances, the required skills may include risk assessment,
computer modeling, ambient air monitoring, land-use planning, process and design
engineering, and construc tion/remediation. The application of these disciplines
to solve client problems requires substantial operational knowledge, and the
Company believes that it is well-positioned to solve client problems in a
practical, cost-effective manner because of the combination of its technical
capabilities and experience. Additionally, the Company's technical expertise and
operational experience are sought by other firms for project-specific teaming
and joint venture relationships, thereby allowing the Company access to an
increased number of large-scale governmental and commercial programs.

     Over the past several years, the environmental management and hazardous
waste remediation industry has been characterized by an increasing number of
well-capitalized competitors, reduced government enforcement of environmental
regulations and regulatory uncertainty. This has resulted in reduced commercial
spending on environmental cleanup and intense pricing competition for hazardous
waste cleanup projects. In recent years, lower demand in the private sector has
been offset to some extent by new major project opportunities in the public
sector, primarily comprehensive cleanup projects at DOD and DOE installations,
which require a broad range of project management and field execution skills,
limiting the number of potential bidders. As a result of the changes impacting
the industry, consolidation has occurred through downsizing and mergers. The
Company's strategy is to be a strong competitor for the major project
opportunities offered by the DOD and DOE, to continue to actively serve the
commercial market, to expand and diversify into economically-driven, value-added
services and to achieve economies of scale by continued participation in the
ongoing consolidation in the industry. (See Management's Discussion and Analysis
of Results of Operations and Financial Condition - Liquidity and Capital
Resources.)

     Since 1996, the Company has made a number of acquisitions to further grow
and diversify its business, including the acquisition of OHM. In March 1996, the
Company acquired Gradient Corporation, a prominent environmental risk assessment
firm. In November 1996, the Company acquired a 50.1% interest in a Taiwanese
wastewater treatment design/build firm (see Business - Operations -
International). In May 1997, the Company acquired PHR Environmental Consultants,
Inc. (PHR), a company that provides environmental historical research and
investigation, and in September 1997, the Company acquired Pacific Environmental
Group (PEG), a leading provider of a broad range of environmental consulting and
engineering services to major oil companies. In January 1998, the Company
acquired Jellinek, Schwartz & Connolly, Inc., (JSC) a Washington D.C. based firm
providing economically driven, science-based environmental consulting and
advocacy services to clients in the areas of chemical product registration,
environmental regulatory strategy, and risk management through the systematic
integration of science, policy, advocacy and management expertise. (See Business
- Operations - Consulting and Ventures.) In March 1998, the Company acquired
LandBank Inc., a real estate and restoration company focusing on environmentally
impaired properties. A subsidiary of OHM,

                                        3

<PAGE>   5



Beneco Enterprises, Inc., (Beneco), a leading provider of operations,
maintenance and construction outsourcing services, was acquired by OHM in June
1997. These recent acquisitions are illustrative of the Company's strategy of
directing its growth and diversification toward economically-driven, value-added
services which are complementary to IT's existing services and which are
synergistic when combined with IT's market position and infrastructure.

OPERATIONS

GENERAL

     The Company's operations have been managed through two divisions,
Engineering and Construction and Consulting and Ventures. Outsourcing, a third
division, is being formed to focus on service areas that are expected to
experience high growth. The Engineering and Construction division manages
projects of all sizes, while the Consulting and Ventures division provides
specialized consulting services and focuses on new value-added business
solutions. The Company provides these capabilities throughout the United States
as well as internationally through appropriate resources located in the
Company's 67 offices and through certain international affiliates (see Business
Operations - International). OHM's business is being integrated primarily into
the Engineering and Construction division, with the exception of Beneco, which
will serve as the platform for the Outsourcing division.

ENGINEERING AND CONSTRUCTION

     The major part of IT's business is the management of complex hazardous
waste remediation projects involving the assessment, planning and execution of
the decontamination and restoration of property, plant and equipment that have
been contaminated by hazardous substances. These projects include the cleanup of
land disposal sites where hazardous or toxic substances have been disposed and
pose a threat to the surrounding environment; rivers, streams and ground water
contaminated by chemical substances and buildings, production facilities and
storage sites contaminated with hazardous chemical and/or radioactive materials.
These projects require considerable strategic environmental management,
technical engineering and analytical effort to determine the substances
involved, the extent of the contamination, the appropriate alternatives for
containing or removing the contamination, and the selection of the technologies
for treatment to perform the cleanup of the site as well as strong project
management and construction and remediation skills to execute the ultimate
remediation projects in the field. The Company is involved in the assessment or
cleanup phases of site remedial action projects in all areas of the United
States.

     The Company provides full-service capabilities for these projects,
primarily in the areas of DOD and DOE delivery order program management,
engineering and design services, remedial construction, specialized equipment,
and decontamination/decommissioning capabilities. In the area of remedial
construction, IT offers diverse services, such as excavation and isolation,
installation of subsurface recovery systems, bioremediation approaches, chemical
treatment, soil washing, fixation or stabilization, facility or site closures,
solidification, landfill cell construction, and slurry wall and cap
installation. This full-service strategy supports the Company's marketing
efforts toward developing partnering arrangements with clients in which IT is
the primary supplier of all client environmental management services and assists
clients in innovatively reducing total environmental costs.

CONSULTING AND VENTURES

     The Company provides a wide range of consulting services including
environmental permitting, facility siting and design, strategic environmental
management, environmental compliance/auditing, risk assessment/management,
pollution prevention, waste minimization, environmental information systems, and
data management.

     The Company has expanded its air quality business in response to its
clients' needs. The Company provides services related to pollution prevention
engineering, control technology specification, permit preparation, emergency
release management, emission sampling and monitoring, leak detection in
industrial facilities and overall air quality management.


                                        4

<PAGE>   6



     Additionally, the Company performs a variety of consulting services for
clients to help them comply with environmental and/or health and safety
regulations. The Company also provides assistance to these clients in developing
corporate policies and procedures in areas such as pollution prevention and
waste minimization that integrate environmental regulations into their business
decisions.

     The Company has been strategically broadening its capability through
business initiatives which address the trend toward economically-driven,
value-added environmental solutions. As part of this strategy, the Company has
expanded its Consulting and Ventures division through the acquisitions of
Gradient Corporation, PHR Environmental Consultants, Pacific Environmental
Group, Inc., Jellinek, Schwartz & Connolly and LandBank, Inc.

OUTSOURCING

     Through Beneco, a company acquired as part of the OHM acquisition, IT has
full service capabilities for operations, maintenance and construction at
federal facilities. Beneco is a leading provider of project, program and
construction management services to the DOD, and state and local government
agencies. The addition of Beneco is an important step to leveraging the
Company's core competencies into new, high growth service areas, specifically
the outsourcing and privatization trend occurring across federal, state and
local levels of government. Through Beneco, the Company may offer a service
related business of a recurring nature that is not dependent on regulatory
enforcement.

INTERNATIONAL

     In November 1996, the Company made a 50.1% investment in Chi Mei
Scientech/Entech, a Taiwan-based wastewater treatment design/build firm, which
now does business as Chi Mei International Technology. The Company has in the
past, and may in the future, enter into joint venture agreements or investments
to pursue and perform international projects; however, no such joint ventures
are currently active. (See Management's Discussion and Analysis of Results of
Operations and Financial Condition - Results of Operations - Continuing
Operations - Revenues.)

CUSTOMERS

     The Company's services are provided to a broad range of federal, state and
local governmental and commercial clients in the U.S. market. During fiscal year
1998, the Company experienced a shift in revenues from the governmental sector
to commercial primarily due to the acquisition of specialized firms that
primarily service commercial clients. However, with the acquisition of OHM, the
Company's governmental sector revenue is expected to increase to at least the
levels experienced in fiscal year 1996; approximately 70% of the Company's
revenues.

     Federal, State and Local Governmental Clients

     Due to its technical expertise, project management experience and
full-service capabilities, the Company has successfully bid on and executed
contracts with federal and other governmental agencies for the performance of
various CERCLA and RCRA activities. (See Business - Operations - Regulations.)
The Company's governmental contracts are often multi-year, indefinite delivery
order programs (IDOs). These programs provide spending budget estimates for
which the client expects to define the scope by working closely with IT's
program management and technical staff. While initially not providing the
Company with any specific kind of work, as projects are defined, the work is
awarded to the Company on a sole source basis. Government contracts are
typically subject to annual funding limitations and public sector budgeting
constraints. Some of these contracts provide a maximum contractual amount of
services that may be performed by the Company with the specific services
authorized from time to time by the government agency through a series of task
orders under the master contract. The Company may be asked to perform services
for the full amount of an IDO or for amounts greater or less than the full
amount. IDOs generated approximately 40% of the Company's revenues in fiscal
year 1998. The programs with federal government agencies typically involve a
competitive bidding process pursuant to federal procurement policies involving
several bidders and result in a period of contract negotiation after a
successful bidder is selected. Although the Company generally serves as the
prime contractor on its contracts or as a part of a joint venture which is the
prime contractor, the Company serves as a subcontractor to other prime
contractors on some federal government programs. As has become typical in the

                                        5

<PAGE>   7



environmental industry, the Company has entered and may continue to enter into
joint venture or teaming arrangements with competitors when bidding on certain
of the largest, most complex contracts, to provide the breadth of technical
expertise and, at times, bonding capacity required for the project.

     The Company's revenues attributable to federal, state and local
governmental contracts as a percentage of the Company's consolidated revenues
for the last three years is outlined in the table below:

                                                          YEAR ENDED
                                                ------------------------------
                                                MARCH 27, MARCH 28,  MARCH 29,
     SOURCE                                       1998      1997       1996
     ------                                       ----      ----       ----

     Federal government:
          DOD..................................   47%         42%        51%
          DOE..................................    9          14         11
          Other federal agencies...............    2           3          3
                                                 ---         ---         --
                                                  58          59         65

     State and local governments ..............    5           8          4
                                                 ---          --         --

     Total.....................................   63%         67%        69%
                                                  ==          ==         ==

     Commercial Clients

     The Company serves numerous commercial clients including chemical,
petroleum and other manufacturing firms, utilities, real estate and
transportation service companies, and law firms. A substantial portion of the
Company's commercial work represents new contracts awarded by existing clients.
No single commercial client accounted for 10% or more of the Company's
consolidated revenues in fiscal years 1998, 1997 or 1996. There is a growing
trend in the Company's work for commercial clients toward strategic
environmental management services and economically-driven solutions to
environmental issues (see Business - Operations - Consulting and Ventures).

COMPETITION

     The environmental management industry is very competitive and requires
professional personnel with technical and project management skills. The Company
believes that the principal competitive factors in all areas of its business are
operational experience, technical proficiency, breadth of services offered,
local presence and, often most importantly, price. The Company faces competition
from a diverse array of small and large organizations including 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 hazardous waste generators which have developed in-house
capabilities.

     Increased competition, combined with changes in client procurement
procedures, has resulted in market trends over the past several years toward
lower contract margins, a client preference for fixed-price or unit-price
contracts and unfavorable changes in contract terms and conditions in areas such
as indemnification of the client by the Company of liabilities for damage or
injury to third parties and property and for environmental fines and penalties.
Additionally, certain of the Company's larger competitors may benefit from
economies of scale and have better access to bonding and insurance markets at a
lower cost. The entry of large systems contractors and international engineering
and construction firms into the environmental management industry has increased
the level of competition for major federal governmental contracts and programs,
which have been the primary source of the Company's revenue in recent years.
Over the past several years, there has been consolidation in the industry as
certain of the larger corporations have acquired smaller firms which, although
reducing the number of industry competitors to some degree, has increased the
number of stronger competitors. The Company has been, and expects to continue to
be, a participant in the industry consolidation.


                                        6

<PAGE>   8


TECHNOLOGY DEVELOPMENT

     IT's technology development program focuses on innovative applications of
new and existing technologies and methods, principally through client projects.
The IT technology development program is directed in three primary areas: 1)
continued improvements to technologies developed in-house through applications
on client projects, 2) the evaluation and implementation of technologies
developed outside the Company which present commercial opportunities for IT, and
3) improvements to third party technologies for enhanced client value.

     Through the Company's technology development program, IT has continued to
advance the development and implementation of its bioremediation programs. Clean
closure of numerous sites have been accomplished using naturally occurring
organisms in the patented BIOFAST(R) system.

     Under license from a third party, IT continues the application of the
"barrier wall and reactive gate technology." Contaminated groundwater at the
site collects against the down gradient barrier wall and is funneled to the
reactive gate where the contaminants decompose by reaction with the reactive
media in the gate.

     IT has entered into the third option year of the contract for operation of
the USEPA Test & Evaluation Facility in Cincinnati, Ohio. This RCRA Part B
permitted, USEPA facility is also available for private party sponsored
technology evaluations, provides treatability testing and process development
services on contaminated waste waters, sludges, and soils. Major efforts this
year focused on safe drinking water and water treatment processes including
filtration and disinfection technologies.

     This year the Company has also improved its position in the development and
commercialization of environmental information management technology. IT has
received extensive patent coverage for the ManageIT system which is used for the
management and tracking of hazardous waste at client sites. Through the use of
its proprietary IT Environment Management System (ITEMS) and related systems,
the Company has become a leading user of advanced data base management
technology to serve its clients' needs. The Company uses various information
management capabilities developed by many vendors, in addition to its
proprietary systems, in implementing environmental information management
systems for its clients.

PATENTS

     Through OHM, the Company currently owns two patents covering certain design
features of equipment employed in its on-site remediation business. The first
relates to a filtration system developed and used by the Company to remove
pollutants from flowing creeks and streams and the second, known as a Portable
Method for Decontaminating Earth, relates to a decontamination system used by
the Company to remove contaminants from the soil through a process, commonly
known as soil vapor extraction. The Company utilizes X*TRAX(R) and LT*X(R) per
perform thermal desorption serves. The X*TRAX(R) and LT*X(R) systems are waste
treatment processes that thermally separate organic contaminants from soils or
solids with subsequent treatment of the organic vapor stream.

REGULATIONS

     The Company and its clients are subject to extensive and evolving
environmental laws and regulations; the level of enforcement of which affects
the demand for many of the services offered by the Company (see Business -
Operations - Environmental Contractor Risks) and creates certain significant
risks and potential opportunities for the Company in providing its services.
Regulatory changes may also affect the Company's inactive disposal sites in
Northern California. (See Notes to Consolidated Financial Statements - 
Discontinued operations.)

     Within the past several years, a number of significant changes to existing
environmental legislation have been proposed. Most of the proposed changes have
been stalled in the Congress. The proposals would overhaul the government
regulatory process, require regulatory risk assessments and cost-benefit
analyses, and reduce requirements

                                        7

<PAGE>   9



for reporting to the government. Although the impact of these proposed changes
upon the Company's business cannot yet be fully predicted, the proposed changes
in regulations and reduced enforcement of current environmental laws appear to
have decreased the demand for certain of the Company's services, as customers
anticipate and adjust to the potential changes. Proposed changes could result in
increased or decreased demand for certain of the Company's services if
regulatory changes affect the cost of remediation projects or result in more
funds being spent for actual remediation. The ultimate impact of the proposed
changes will depend upon a number of factors, including the overall strength of
the U.S. economy and customers' views on the cost-effectiveness of remedies
available under the changed regulations.

     The principal environmental legislation affecting the Company and its
clients is described below:

     National Environmental Policy Act of 1969 (NEPA). Under NEPA, all federal
agencies must consider environmental factors in their decision making. Among
other matters, NEPA established guidelines and requirements for environmental
assessments and mitigation measures for a variety of projects involving
government approval or financing, including development and construction of
power plants and transmission lines, pipelines, highways, landfills, mines,
reservoirs and residential and commercial developments.

     Resource Conservation and Recovery Act of 1976 (RCRA). RCRA regulates the
treatment, storage and disposal of hazardous and solid wastes. The 1984
Hazardous and Solid Waste Amendments to RCRA (HSWA) expanded RCRA's scope by
providing for the regulation of additional wastes as hazardous and imposing
restrictions on land disposal of certain wastes, prescribing more stringent
management standards for hazardous waste disposal sites, setting standards for
underground storage tank (UST) management and providing for corrective action
procedures. Under RCRA, liability and stringent management standards are imposed
on generators or transporters of hazardous waste or owners or operators of waste
treatment, storage or disposal facilities.

     Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA). CERCLA addresses cleanup of sites at which there have been or may
be releases or threatened releases of hazardous substances into the environment.
CERCLA assigns liability for costs of cleanup and damage to natural resources to
any person who, currently or at the time of disposal of a hazardous substance,
owned or operated any facility at which hazardous substances were released; to
any person who arranged for disposal, treatment, or transportation of hazardous
substances by others; and to certain persons who accepted hazardous substances
for transport to facilities or sites from which there is a release or threatened
release of hazardous substances. CERCLA authorizes the federal government either
to clean up these sites itself or to order persons responsible for the situation
to do so. CERCLA created the Hazardous Substance Superfund (Superfund) to be
used by the federal government to pay for certain cleanup efforts. Where the
federal government expends Superfund money for remedial activities, it must seek
reimbursement from the potentially responsible parties (PRPs). CERCLA generally
imposes strict, joint and severe retroactive liability upon such parties. CERCLA
was amended in 1986 by the Superfund Amendments and Reauthorization Act (SARA),
which authorized increased federal expenditures and imposed more stringent
cleanup standards and accelerated timetables. SARA also contained provisions
which expanded the enforcement powers of the USEPA.

     Although CERCLA's Superfund taxing authority expired in December 1995 and
CERCLA's authority to expend funds originally expired in September 1994;
Congress has extended the USEPA's authority to tax and use funds on an interim
basis. Congress has to date, related reinstatement of Superfund's taxing and
spending authority to comprehensive reauthorization of the basic CERCLA statute.
The Congressional Budget Office estimates that the Superfund trust fund has
sufficient funds for the CERCLA program through the year 2000.

     The Company believes that failure of Congress to reauthorize CERCLA and
proposed substantial changes in and continuing uncertainty concerning the
details of the legislation, cleanup standards, and remedy selection, have
resulted in project delays and/or the failure of clients to initiate or proceed
with projects. A number of changes to CERCLA have been previously proposed as a
part of the reauthorizing legislation. Amendments to repeal CERCLA's retroactive
liability provisions have been introduced. Standards for acceptable cleanups
have also been the subject of proposals for change. Although several bills to
reauthorize CERCLA have been introduced in Congress, controversy over the

                                        8

<PAGE>   10



details of the legislation indicate that there is no clarity when CERCLA may be
reauthorized, what changes would be included in any reauthorization, or what
funding levels might be.

     In response to Congressional and private sector pressure and, in part, to
avoid more sweeping legislative changes, the USEPA has attempted to relax
regulatory requirements and enforcement. For example, the USEPA 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. While the Company believes such programs offer
additional opportunities, the ultimate impact of such programs cannot yet be
predicted.

     Clean Air Act and 1990 Amendments. The Clean Air Act requires compliance
with National Ambient Air Quality Standards for specific pollutants and empowers
the USEPA 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, they
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 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 USEPA recently promulgated regulations significantly
tightening standards for ozone and particulate emissions, which might eventually
increase demand for the Company's air quality services, the proposals have met
with substantial opposition (including court challenges) and their ultimate fate
and impact remains uncertain.

     Other Federal and State Environmental Laws. The Company's services are also
utilized by its clients in complying with, and the Company's operations are
subject to regulation under, among others, the following federal laws: the Toxic
Substances Control Act, the Clean Water Act, the Safe Drinking Water Act, the
Occupational Safety and Health Act and the Hazardous Materials Transportation
Act. The Food Quality Protection Act (FQPA) of 1996 has created an increased
demand for agricultural chemical registration and defense services in which JSC,
a recent acquisition by the Company, is a leading supplier. Moreover, 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
certain of the Company's services. Many states have also passed Superfund-type
legislation and other regulations and policies to cover more detailed aspects of
hazardous materials management. This legislation addresses such topics as air
pollution control, UST and aboveground storage tank (AST) management, water
quality, solid waste, hazardous waste, surface impoundments, site cleanup and
wastewater discharge. Many states are also reviewing and relaxing laws and
regulations because of their alleged adverse impact upon business and
competitiveness.

ENVIRONMENTAL CONTRACTOR RISKS

     Although the Company believes that it generally benefits from increased
environmental regulations affecting business, and from enforcement of those
regulations, increased regulation, enforcement and private litigation also
create significant risks for the Company. These risks include potentially large
civil and criminal liabilities from violations of environmental laws and
regulations and liabilities to customers and to third parties for damages
arising from performing services for clients. The Company's failure to observe
such laws and/or the terms and conditions of licenses and permits it holds could
adversely impact the Company's ability to carry on one or more of its businesses
as presently conducted.

     Liabilities Arising out of Environmental Laws and Regulations

     All facets of the Company's business are conducted in the context of an
extensive and rapidly changing statutory and regulatory framework. The Company's
operations and services are affected by and subject to regulation by a number of
federal and other agencies. There have also been efforts by litigants to expand
the reach of CERCLA and RCRA to make contractor firms responsible for cleanup
costs through claims that environmental contractors are owners or operators of
hazardous waste facilities or that they arranged for treatment, transportation
or disposal of hazardous

                                        9

<PAGE>   11



substances. While a few decided CERCLA cases have shielded cleanup contractors
from strict liability, no clear direction has emerged from the cases decided
to-date.

     Potential Liabilities Involving Customers and Third Parties

     In performing services for its customers, the Company could potentially be
liable for breach of contract, personal injury, property damage, negligence and
other causes of action. The damages available to a customer, should it prevail
in its claims, are potentially large and could include consequential damages.

     Many of those contracting for environmental management services,
particularly those involving large scale remediations, seek to shift to
contractors the risk of completing the project in the event the contamination is
either more extensive or difficult to resolve than originally anticipated. In
the competitive market in which environmental management services are offered,
customer pressure has increased significantly for contractors to accept greater
risk of performance, liability for damage or injury to third parties or
property, and liability for fines and penalties. The Company has from time to
time been involved in claims and litigation involving disputes over such issues.
(See Notes to Consolidated Financial Statements -Commitments and Contingencies -
Contingencies.)

     Environmental management contractors, in connection with work performed for
customers, also potentially face liabilities to third parties from various
claims including claims for property damage or personal injury stemming from a
release of toxic substances or otherwise which could arise long after completion
of the project.

     Over the past several years, the USEPA 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. While future Congressional action to broaden the availability of
indemnification is possible, there is no assurance that Congress will change
federal government indemnification policies.

     Government Contracting Risk

     As a major provider of services to governmental agencies, the Company also
faces the risks associated with government contracting, which could include
substantial civil and criminal fines and penalties. Government contracting
requirements are complex, highly technical and subject to varying
interpretations. As a result of its government contracting business, the Company
has been, is, and expects in the future to be, the subject of audits and
investigations by governmental agencies. (See Notes to Consolidated Financial
Statements - Commitments and contingencies - Helen Kramer.) In addition to the
potential damage to the Company's business reputation, the failure to comply
with the terms of one or more of its government contracts could also result in
the Company's suspension or debarment from future government contract projects
for a significant period of time, which could result in a material adverse
effect on the consolidated financial condition, liquidity, and results of
operations of the Company.

INSURANCE AND RISK MANAGEMENT

     The Company has adopted a range of insurance and risk management programs
designed to control or reduce potential liabilities, including financing risk
through insurance and self-insurance programs, negotiation of contractual
indemnification with suppliers and clients, other contract administration
procedures, and employee health, safety, training, and environmental monitoring
programs. Due to the significant percentage of the Company's revenues derived
from work for governmental agencies, the Company has developed a company-wide
government contracts compliance program. The Company cannot assure the adequacy
of the program and compliance failure could have a material adverse effect on
the Company's business.

     The Company maintains liability insurance programs that are structured to
provide coverage for major and catastrophic losses while essentially
self-insuring losses that may occur in the ordinary course of business.
Effective April 1, 1998, the Company contracted with primary and excess
liability carriers for $75,000,000 limits with a $500,000 deductible. The
Company's insurance program also includes pollution liability coverage with
limits of $35,000,000 and a $1,000,000 deductible.

                                       10

<PAGE>   12



     In preceding years, the Company's insurance program included a $5,000,000
retention for general liability, automobile liability and contractor's pollution
liability coverages. With respect to the $5,000,000 retention level for each of
such coverages, the Company is obligated to indemnify the Company's insurance
carriers against liabilities and costs of defense, subject to certain
limitations. Letters of credit support the indemnity commitment.

     Although the Company believes its insurance program to be appropriate for
the management of its risks, its insurance policies may not fully cover risks
arising from the Company's 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 such insurance.

LEVERAGE

     The Company has in the past and may in the future have a significant amount
of indebtedness. Concurrent with the Merger, IT amended and restated its tender
offer credit facility to consist of a $228,000,000 eight year term loan and a
$150,000,000 six year revolving credit facility. In conjunction with the Merger,
the Company borrowed $228,000,000 under the term loan and approximately
$85,000,000 under the revolving credit facility to refinance the tender offer
credit facilities and OHM's existing revolving line of credit. The facility is
also available for working capital purposes.

     The Company's leverage could also limit its ability to obtain necessary
project and other financing and any necessary bonding and to withstand
competitive pressure and adverse economic conditions (including a downturn in
business or increased inflation or interest rates) or to take advantage of
significant business opportunities that may arise, including strategic
acquisitions (see generally Management Discussion and Analysis of Results of
Operations and Financial Condition - Liquidity and Capital Resources).

RISKS OF ACHIEVEMENT OF SYNERGIES AND INTEGRATION OF OPERATIONS

     The Company's management believes that it will be able to achieve certain
after-tax cost savings and other synergistic benefits as a result of combining
IT and OHM in the Merger. However, there can be no assurance that such benefits
will be realized. Regardless of the level of savings actually realized, the
level of savings in 1998 will be affected by transaction costs, presently
expected to aggregate approximately $30,500,000 for IT and OHM, consisting of
Tender Offer Credit Facilities and Merger Credit Facilities, debt issuance costs
of approximately $3,700,000 and $5,400,000, respectively, debt breakage costs of
approximately $7.8 million and asset acquisition and stock issuance costs of
approximately $8,600,000 and $5,000,000, respectively. Additionally, the future
success of the Company will depend in part upon its ability to integrate and
operate OHM and other acquired businesses successfully with its business. The
business integration includes management reviewing OHM contract claim
receivables to understand fully the facts and claim recovery assumptions. The
integration process will require the dedication of management resources, which
may temporarily distract attention from the day-to-day business of the Company.
The future success of the Company will also depend in part on its ability to
retain and assimilate qualified employees of OHM and other acquired businesses.
There can be no assurance that the Company will be able to efficiently integrate
acquired businesses with its business or retain or assimilate qualified
employees of acquired businesses. A failure to do so could have material adverse
effect on the Company's financial condition, liquidity and results of
operations. Furthermore, the Company's business strategy calls for continued
growth through acquisitions. Identifying and pursuing future acquisition
opportunities will require a significant amount of management time and skill.
There can be no assurance that the Company will be able to identify suitable
acquisition candidates, consummate any acquisition on acceptable terms or
successfully integrate acquired business operations (including by realization of
anticipated cost savings and synergies). Future acquisitions may entail the
payment of consideration in excess of book value, may result in the issuance of
additional shares of IT Common Stock, IT Preferred Stock, or the incurrence of
additional indebtedness and could have a dilutive effect on the Company's net
income per share.

                                       11

<PAGE>   13




HISTORY OF LOSSES

     IT incurred losses applicable to common stock from continuing operations in
each of the five fiscal years 1994 through 1998 in the amounts of $3,200,000,
$7,900,000, $3,700,000, $13,700,000 and $12,500,000, respectively. Excluding
special charges, net income or loss applicable to common stock from continuing
operations is $1,800,000 net income in fiscal year 1998, $5,300,000 net loss in
fiscal year 1997 and a $4,600,000 net income in fiscal year 1996. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition - "Special Charges", "Quanterra" and "Extraordinary Item". No
assurance can be given that IT will not continue to incur losses from continuing
operations.


CONTROL OF BOARD OF DIRECTORS

     In November 1996, certain entities affiliated with the Carlyle Group
(Carlyle), a Washington D.C. based merchant banking firm, or with respect to
which Carlyle affiliates act as investment manager (all such entities are also
referred to herein as the "Parent Stockholders") acquired 45,000 shares of
Convertible Preferred Stock and warrants (the "Carlyle Warrants") to purchase
1,250,000 shares of IT Common Stock. As a result of a paid-in-kind dividend paid
on February 20, 1998, the Parent Stockholders as of that date held 45,271 shares
of Convertible Preferred Stock. The Parent Stockholders hold approximately 38%
of the voting power of IT prior to the consummation of the Merger (approximately
43% assuming exercise of the Carlyle Warrants) and approximately 21%
(approximately 24% assuming exercise of the Carlyle Warrants) of the voting
power thereafter. 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 IT Board of Directors, provided that such
holders continue to hold at least 20% of the voting power of IT. As a result,
the Parent Stockholders are in a position to control the strategic direction of
IT, to elect and dismiss IT's officers and to approve and disapprove significant
transactions. (See "Notes to Consolidated Financial Statements - Preferred Stock
- Carlyle Investment".)

DISCONTINUED OPERATIONS

     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. These operations included the handling and
transportation of clients' wastes and their treatment and/or disposal at Company
or third party-owned facilities. In June 1989, the Company completed the sale of
IT's active treatment and disposal operations in Imperial Valley and at
Bakersfield, California, as well as its transportation business. The Company's
four inactive treatment, storage and disposal facilities located in Northern
California were not included in this transaction. Closure plans for the other
three were previously approved and two of these facilities are closed with the
other in the process of closure. In March 1998, the Company announced approval
by the California Department of Toxic Substances Control (DTSC) of the final
closure and post closure plan for one of the four inactive treatment, storage
and disposal facilities. The approved plans allow the Company to proceed with
the completion of final closure construction and provides for future submittal
of technical studies that will be utilized to determine final aspects and costs
of closure construction and monitoring programs for the former Panoche disposal
site. Primarily as a result of the recent approval of the Panoche final closure
plan, the Company increased its previous cost estimates by $8,000,000 in the
quarter ending March 27, 1998.

     There are substantial financial implications related to the discontinued
operations (see Notes to Consolidated Financial Statements - Discontinued
Operations and Management's Discussion and Analysis of Results of Operations and
Financial Condition - Liquidity and Capital Resources).






                                       12

<PAGE>   14



EMPLOYEES

     At March 27, 1998, the Company employed 4,595 regular employees. At March
27, 1998, none of the Company's employees were represented by labor unions under
collective bargaining agreements. The Company employs union labor from time to
time on a project-specific basis. The Company considers its relations with its
employees to be good.

ITEM 2.  PROPERTIES.

     IT owns or leases property in 28 states, the District of Columbia and the
United Kingdom. Excluding its discontinued operations, the Company owns
approximately 76 acres and leases approximately 1,115,000 square feet of
property for various uses, including regional and project offices, technology
and process development laboratories, field remediation support service
facilities and corporate offices. Management considers the facilities adequate
for the present and anticipated activities of the Company.

     Additionally, the Company owns approximately 2,821 acres related to its
discontinued operations, principally in Northern California, of which
approximately 500 acres have been used for hazardous waste disposal facilities
and approximately 2,200 are adjacent to those facilities, but were never used
for waste disposal.

ITEM 3.  LEGAL PROCEEDINGS.

CONTINUING OPERATIONS LEGAL PROCEEDINGS

     See Notes to Consolidated Financial Statements - Commitments and
Contingencies - Contingencies for information regarding the legal proceedings
related to the continuing operations of the Company.

DISCONTINUED OPERATIONS LEGAL PROCEEDINGS

     See Notes to Consolidated Financial Statements - Discontinued operations
for information regarding the legal proceedings that related to the
transportation, treatment and disposal discontinued operations of the Company.

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

     There were no matters submitted to a vote of the Company's common
shareholders during the fourth quarter of fiscal year 1998.



                                       13

<PAGE>   15



ITEM 4A.      EXECUTIVE OFFICERS OF THE COMPANY.

         The following table provides information as of June 12, 1998 regarding
the Company's executive officers and the positions they hold with the Company.
The officers are appointed annually by the Board of Directors to serve at the
discretion of the Board.

<TABLE>
<CAPTION>
                                                                                                  First
                                                                                               elected as
                                                                                               officer of
              Name                 Age             Position                                    the Company
              ----                 ---             --------                                    -----------

<S>                                <C>      <C>                                                  <C> 
     Anthony J. DeLuca             51       Chief Executive Officer                              1990
                                              and President
     James G. Kirk                 59       Vice President, General Counsel                      1996
                                              and Secretary
     James R. Mahoney              59       Senior Vice President,                               1991
                                              Consulting and Ventures
     Raymond J. Pompe              64       Senior Vice President,                               1988
                                              Engineering and Construction
     Philip O. Strawbridge         43       Senior Vice President,                               1998
                                              Chief Administrative Officer
</TABLE>

-------------

     Mr. DeLuca was named Chief Executive Officer and President and a director
of the Company as of July 1, 1996. Prior thereto, Mr. DeLuca had been Senior
Vice President and Chief Financial Officer of the Company since March 1990.
Before joining the Company Mr. DeLuca had been a senior partner at the public
accounting firm Ernst & Young LLP.

     Mr. Kirk, who joined the Company as General Counsel, Eastern Operations, in
1991, was named Vice President, General Counsel and Secretary in September 1996.
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.

     Mr. Mahoney, who joined the Company in January 1991 as Senior Vice
President and Director of Technology was named Senior Vice President, Corporate
Development and Sales in April 1992; Senior Vice President, Technical Operations
and Corporate Development in March 1995; and Senior Vice President, Consulting
and Ventures in July 1996. Prior to joining the Company, Mr. Mahoney was
Director of the National Acid Precipitation Assessment Program, a U.S.
government research and assessment program, from 1988 to 1991. From 1984 to
1987, Mr. Mahoney served in various environmental managerial capacities with
Bechtel Group, Incorporated, a major engineering and construction firm.

     Mr. Pompe joined the Company in 1988 as Vice President, Construction and
Remediation, was named Senior Vice President, Project Operations, in March 1995,
and Senior Vice President, Engineering and Construction in July 1996. Prior to
joining the Company, Mr. Pompe was employed by Dravo Corporation, a major
construction firm, from 1956 to 1988 in various executive capacities, most
recently as Senior Vice President responsible for construction projects.

     Mr. Strawbridge joined the Company through the merger with OHM in May, 1998
as Senior Vice President and Chief Administrative Officer. Mr. Strawbridge
joined OHM Corporation in February 1996 as Senior Vice President, Chief
Financial and Administrative Officer and was given the additional responsibility
of President of OHM's wholly owned subsidiary OHM Energy Services in October,
1996. Prior to joining OHM, Mr. Strawbridge was employed by Fluor Corporation
from 1988 to 1996 in various managerial capacities including Senior Director of
Contracts and Finance and acting Vice President of Fluor Daniel Fernald. From
1976 to 1988, Mr. Strawbridge was employed by the U.S. Government in various
management and executive capacities.



                                       14

<PAGE>   16



                                     PART II


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


     The Company's common stock is listed on the New York Stock Exchange (NYSE)
and Pacific Stock Exchange under the symbol ITX. The following table sets forth
the high and low sale prices of the common stock, as reported by the NYSE for
the periods indicated, all after adjustment for a one-for-four reverse stock
split effective November 21, 1996.

                           QUARTER ENDED                 HIGH         LOW
                           -------------                 ----         ---

     June 28, 1996................................... $ 14          $  9
     September 27, 1996..............................   12             7   1/2
     December 27, 1996...............................   11   1/2       8   3/8
     March 28, 1997..................................    8   7/8       6   3/4
     June 27, 1997...................................    8   1/4       6   3/8
     September 26, 1997..............................    9   1/4       6 13/16
     December 26, 1997...............................    9  9/16       7
     March 27, 1998..................................   10   5/8       7   3/8


     On June 11, 1998, the closing sale price of the common stock on the NYSE as
reported by The Wall Street Journal was $10.1875 per share. On that date there 
            -----------------------
were 2,118 stockholders of record.

     The Company has not paid a cash dividend on its common stock for the three
years ended March 27, 1998. The Company has no present intention to pay cash
dividends on its common stock for the foreseeable future in order to retain all
earnings for investment in the Company's business. IT's credit agreements
prohibit cash dividends on common stock.


                                       15

<PAGE>   17



ITEM 6.  SELECTED FINANCIAL DATA.

     The following table sets forth income statement information for the
Company's continuing operations and other financial information for each of the
five years in the period ended March 28, 1997. Share and per share data have
been restated to reflect the one-for-four reverse stock split effective November
21, 1996.

<TABLE>
<CAPTION>
                                                                        Year ended
                                                 -----------------------------------------------------------
                                                                                               March 31,
                                                 March 27,    March 28,    March 29,       -----------------
                                                    1998        1997         1996          1995         1994
                                                    ----        ----         ----          ----         ----
                                                             (In thousands, except per share data)
<S>                                              <C>          <C>          <C>          <C>          <C>  
INCOME STATEMENT INFORMATION
Revenues                                         $ 442,216    $ 362,131    $ 400,042    $ 423,972    $ 392,803

Loss from continuing operations
  (net of preferred stock dividends)               (12,527)     (13,693)      (3,654)      (7,880)      (3,241)

Loss per share
  from continuing operations                         (1.28)       (1.48)        (.41)        (.89)        (.37)

Weighted average shares outstanding                  9,737        9,227        8,982        8,889        8,691

OTHER FINANCIAL INFORMATION
Working capital                                 $   74,924    $ 110,705    $  89,174    $  73,838    $  63,522

Total assets                                       709,217      342,531      315,314      362,152      359,203

Long-term debt                                     284,697       65,874       65,611       80,189       68,625

Long-term accrued liabilities                       27,528       15,184       30,223       45,207       38,993

Stockholders' equity                               148,150      168,853      140,865      145,921      160,548
</TABLE>

Above per share amounts are computed based upon the new Financial Accounting
Standards Board Opinion No. 128, which had no effect as a result of the losses
incurred.

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

CONTINUING OPERATIONS

OVERVIEW

     The Company provides a full range of technology-driven, value-added
consulting, engineering and construction capabilities through a network of 67
offices in the United States and selected international locations. The Company's
services include construction and remediation, risk assessment, air quality
management, pollution prevention and waste minimization, information management,
land-use planning and restoration services of impaired properties,
decontamination and decommissioning, design/build, wastewater treatment,
historical research and investigation, environmental consulting and advocacy
services, engineering services and facility outsourcing for operation,
maintenance and construction. The Company's business strategy is to be a global
provider of environmental and infrastructure solutions to both the government
and private industry clients. As part of this strategy, the Company entered into
a definitive agreement to acquire OHM Corporation on January 15, 1998 and the
first step of the Merger Agreement was completed through a tender offer on
February 25, 1998 at which time the Company owned

                                       16

<PAGE>   18


                      INTERNATIONAL TECHNOLOGY CORPORATION
                        RESULTS OF OPERATIONS (CONTINUED)


approximately 54% of the outstanding shares of OHM. The second step of the
acquisition was successfully completed on June 11, 1998 and created a company
with projected annual revenues of approximately $1.0 billion and backlog at
March 27, 1998 of approximately $3.5 billion. The Company has also diversified
through several acquisitions of specialized companies primarily serving targeted
commercial markets.

REVENUES

     Revenues for fiscal year 1998 were $442,216,000, up 22 percent or
$80,085,000 from the $362,131,000 revenues reported in the prior fiscal year.
Fiscal year 1998 includes the results of OHM Corporation ("OHM") since February
25, 1998, the date on which IT acquired a 54% controlling interest. Revenues
related to OHM in the fourth quarter were $42,106,000. A significant portion of
the increase in revenues (approximately $57,500,000) is due to revenues
generated from acquired businesses including OHM. Revenue from the Company's
federal government contracts increased approximately 19 percent in fiscal year
1998 when compared to fiscal year 1997. Revenues from federal government
contracts excluding OHM, increased 6 percent during these same comparative
periods.

     Although revenue growth (excluding acquisitions) in the Company's
construction and remediation business is expected to be modest in the near
future due to difficult industry-wide conditions, the Company has aggressively
targeted revenue growth and diversification through business acquisitions as
evidenced by the businesses acquired during fiscal year 1998. In addition to the
OHM acquisition, the Company purchased four other companies during fiscal year
1998. These acquisitions include; (1) PHR, a consulting firm which assists
business entities to more economically confront potential or existing
environmental liabilities through an interdisciplinary investigation approach of
science, history and information, (2) PEG, a company providing a broad range of
environmental consulting and engineering services to major oil companies, mainly
in the western United States, (3) JSC, a company providing economically driven,
science-based environmental consulting and advocacy services, and (4) LandBank
Inc., a real estate and restoration company focusing on environmentally impaired
properties.

     A substantial percentage of the Company's revenues during the three years
ended March 27, 1998 was earned through executing governmental contracts for
various federal, state and local agencies. Revenues from governmental contracts
accounted for 63% of the Company's revenues in fiscal year 1998 compared to 67%
and 69% in fiscal years 1997 and 1996, respectively. See the table in Business -
Operations - Customers - Federal, State and Local Governmental Clients for an
analysis of the Company's revenues attributable to federal, state and local
governmental contracts. Federal governmental revenues are derived principally
from work performed for the DOD and, to a lesser extent, the DOE. In the near
term, the Company expects that the percentage of total revenues from the
execution of federal, state and local governmental contracts will continue to be
substantial and increase due to the acquisition of OHM.

     During fiscal year 1998, the DOD revenues of $206,180,000 exceeded fiscal
year 1997 revenues of $153,464,000 by $52,716,000. Of this improvement in DOD
revenues, about one half resulted from the OHM acquisition and the balance from
increased funding of the Company's DOD indefinite delivery order programs and an
increase in the number of DOD contracts being executed. The Company expects to
continue to derive a substantial portion of its revenues from the DOD indefinite
delivery order contracts which are primarily related to remedial action work.
Overall, revenue levels from the Company's federal government contracts
(excluding OHM) have gradually improved during these comparative periods as
strong improvement in DOD activity was partially offset by the completion of
contracts funded by other government agencies including the DOE.

     DOE revenues declined by 18% from $49,591,000 in fiscal year 1997 to
$40,496,000 in fiscal year 1998. OHM's DOE revenues were not significant for the
five week period ending March 27, 1998; however, the Company has received recent
DOE awards. Management expects to increase its revenues from the DOE in the
future due to an expected transition by the DOE over the next several years to
emphasize remediation over studies combined with the Company's favorable
experience in winning and executing similar work for the DOD and the Company's
experience

                                       17

<PAGE>   19


                      INTERNATIONAL TECHNOLOGY CORPORATION
                        RESULTS OF OPERATIONS (CONTINUED)


with DOE related to its past performance of DOE studies. Evidence of the
Company's efforts to benefit from this transition is the award in October 1997
of a $122 ,000,000 project to perform the excavation, pretreatment and drying of
an estimated one million tons of contaminated materials for the DOE's Fernald
Environmental Management Project and the recent award, to provide architect,
engineering, construction and construction management services at the DOE's
Rocky Flats Environmental Technology Site near Denver, Colorado.

     The Company reported an increase in revenue from the commercial sector of
$42,760,000 or 36% for fiscal year 1998, when compared to fiscal year 1997. Of
this $42,760,000 revenue increase, 38% was attributable to targeted commercial
business opportunities and 62% resulted from business acquisitions including
OHM. Revenue growth from the commercial sector (excluding recent acquisitions)
could be restricted in the near term partly due to increased emphasis on
competitively bid lower cost solutions and partly due to delaying certain work
until final Congressional action is taken on the reauthorization of CERCLA. As
for CERCLA, it is uncertain when reauthorization will occur or what the details
of the legislation, including retroactive liability, cleanup standards, and
remedy selection, may include. Uncertainty regarding possible rollbacks of
environmental regulation and/or reduced enforcement have led some commercial
clients to delay projects as well. Contemplated changes in regulations could
further decrease the demand for certain of the Company's services, as customers
anticipate and adjust to the new regulations. However, legislative or regulatory
changes could also result in increased demand for certain of the Company's
services if such changes decrease the cost of remediation projects or result in
more funds being spent for actual remediation. The ultimate impact of any such
changes will depend upon a number of factors, including the overall strength of
the U.S. economy and customers' views on the cost effectiveness of the remedies
available.

     Revenues for fiscal year 1997 of $362,131,000 were 9.4% below the
$400,042,000 revenue level of fiscal year 1996. This decline in revenues
generally reflected the weak demand in both governmental and commercial markets
served by the Company, as well as a change in the Company's approach to the
market in de-emphasizing smaller lower-value projects in fiscal year 1997. In
addition, revenues declined in fiscal year 1997 due to delays in the
authorization of the federal budget that reduced funding of governmental
projects.

     Revenues derived from large, complex thermal remediation contracts
utilizing the Company's HTTS thermal treatment technology were approximately 3%,
10% and 11% of revenues in fiscal years 1998, 1997 and 1996, respectively.
Incineration as a remedy under CERCLA has come under legislative and regulatory
pressures. Because of this issue, and the relatively higher cost of incineration
and the lack of regulatory approved potential project opportunities in the
United States; the Company has been forced to seek alternative uses for its HTTS
equipment. Until recently, the Company had been actively pursuing foreign and
domestic potential opportunities which utilize the HTTS equipment. The two
foreign thermal HTTS installations IT had been pursuing through joint ventures
have been slowed by circumstances outside of IT's control. At March 27, 1998,
the net book value of IT's HTTS equipment, related spare parts inventory and
related foreign joint ventures ownership interests was approximately
$12,900,000. IT's HTTS equipment is currently idle. On May 27, 1998, IT's Board
of Directors approved plans to exit the HTTS incineration business. As a result
of this action, the Company plans to sell the HTTS equipment and anticipates 
incurring a $12,000,000 charge to operations, net of cash proceeds in the
quarter ending June 26, 1998. (See Notes to Consolidated Financial Statements -
Subsequent Events.)

     The Company's total funded and unfunded backlog at March 27, 1998 was
approximately $3,451,000,000 ($1,198,000,000 at March 28, 1997) including
approximately $405,000,000 of contracted backlog scheduled to be completed
during the nine month period ended December 1998 and between $180,000,000 and
$210,000,000 of additional project work expected to be defined and performed in
the nine month period ended December 1998 under existing governmental IDO
contracts. Backlog revenues are expected to be earned 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 amounts at March 27, 1998 and March 28,
1997 include $2,688,000,000 and $785,000,000, respectively, of future work the
Company estimates it will receive (based on historical experience) under
existing IDO programs. In accordance with industry practices, substantially all
of the Company's contracts are subject to cancellation, delay or modification by
the customer.

                                       18

<PAGE>   20


                      INTERNATIONAL TECHNOLOGY CORPORATION
                        RESULTS OF OPERATIONS (CONTINUED)


     The Company's backlog at any given time is subject to changes in scope of
services required by the contracts leading to increases or decreases in backlog
amounts. These contracts subject to such 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 - Summary of
significant accounting policies - Contract accounting and accounts receivable.)

GROSS MARGIN

        Gross margins were 11.6%, 10.5% and 14.5% of revenues in fiscal years
1998, 1997 and 1996, respectively. Gross margins improved to 11.6% in fiscal
year 1998 as management continues to carefully monitor overhead costs and as a
result of spreading fixed overhead costs over higher revenue levels. In the near
term, the Company expects to maintain the improved gross margin levels achieved
due to the organizational streamlining initiated in the second quarter of fiscal
year 1997 and through expected cost savings resulting from the recent OHM
acquisition. The Company's ability to maintain or improve its gross margins is
heavily dependent on increasing utilization of professional staff, properly
executing projects, and successfully bidding new contracts at adequate margin
levels. In fiscal year 1997, gross margins declined compared to fiscal year 1996
as a result of lower pricing due to competitive industry conditions and by the
continued shift in revenue mix toward larger projects and programs which involve
more subcontracting and carry a lower margin on revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses were 7.2%, 9.2% and 9.5% of
revenues in fiscal years 1998, 1997 and 1996, respectively. Selling, general and
administrative expenses of $31,774,000 in fiscal year 1998 were $1,657,000 or
5.0% lower than the fiscal year 1997 level primarily due to the full year impact
of the corporate restructuring (see Special Charges) initiated at the end of the
second fiscal quarter of 1997 and the relocation of the Company's corporate
headquarters in the first quarter of fiscal year 1998 which resulted in reduced
lease expense and labor cost as the Company integrated and consolidated
management and corporate functions into the Company's largest facility (see
Special Charges). In the near term, the Company expects selling, general and
administrative expenses to decrease as a percentage of revenue primarily due to
the OHM acquisition. Fiscal year 1997 selling, general and administrative
expenses of $33,431,000 represented a decrease of $4,694,000 or 12.3% from the
prior year level, due to the above mentioned corporate restructuring initiated
in the second fiscal quarter of 1997.

SPECIAL CHARGES

     Special charges of $14,248,000 were recorded in fiscal year 1998. These
special items include a $5,694,000 charge for integration costs associated with
the acquisition of OHM, a $3,943,000 non-cash charge related to the Helen Kramer
project claim settlement, a $2,811,000 charge associated with the relocation of
the Company's corporate headquarters, and a $1,800,000 loss from the sale of a
small remediation services business.

     As a result of the acquisition of OHM, the Company approved an integration
plan to reduce overall facility cost by consolidating various IT and OHM
facilities, subleasing excess space and terminating certain employees. The
$5,694,000 charge recorded in the fourth quarter of fiscal year 1998 for these
integration costs included $2,197,000 of costs for severance pay to IT employees
and $3,497,000 of costs and other related items for closing and consolidating IT
offices with OHM offices. As of March 27, 1998, $4,526,000 of the integration
charge remained to be paid. By December 25, 1998, approximately 50% of this
charge is expected to be paid as the integration process between IT and OHM will
be substantially complete. The remaining costs relate to the facility closures
and office consolidations and will be paid over the future terms of the facility
leases. Most of these facility leases will be paid off within the next four
years, however, one lease requires payments over the next seven years.
Subleasing efforts commenced in February 1998 primarily through a relationship
established with a national real estate firm.


                                       19

<PAGE>   21


                      INTERNATIONAL TECHNOLOGY CORPORATION
                        RESULTS OF OPERATIONS (CONTINUED)


     In December 1997, the Company 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 the joint venture of IT and Davy
International at the Helen Kramer Superfund project. On December 26, 1997, the
joint venture received a $14,500,000 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 $4,300,000 to the
Government to resolve related civil claims by the Government. IT's share of the
joint venture results is 60%, accordingly, IT received net cash of $6,000,000,
its proportionate share of the settlement. In December 1997, the Company
recorded a non-cash pre-tax charge of $3,943,000 as the cash received was less
than the combined unbilled and billed receivables related to this project which
totaled approximately $9,900,000.

     The special charges that occurred in the first quarter of fiscal 1998
resulted from the relocation of the Company's corporate headquarters from
Torrance, California to Monroeville (Pittsburgh), Pennsylvania and the sale of
its California based small project remediation services business. The
headquarters relocation consolidated the corporate overhead functions with the
Company's largest operations office and closer to its lenders and largest
shareholders which are located in the Eastern United States. As a result of this
relocation, the Company incurred a pre-tax charge of $2,811,000. In May 1997,
the Company incurred a non-cash pre-tax charge of $1,800,000 to sell its
California remediation services business pursuant to a change in the Company's
approach to the market.

     In conjunction with the corporate restructuring which was initiated in the
second quarter of fiscal year 1997, the Company incurred a pre-tax restructuring
charge of $8,403,000. The restructuring charge included $3,400,000 of costs for
severance, $4,100,000 of costs for closing and reducing the size of a number of
the Company's offices, and $903,000 of costs for other related items. As part of
the plan of termination, the Company laid-off 133 employees and paid
approximately $2,460,000 in termination benefits. In addition, the Company
approved a plan to close five leased facilities and reduce the size of eleven
other leased facilities by either sublease or abandonment. Most of the remaining
costs to be paid relate to the facility closures and office space reductions
which will be paid out over the terms of the lease. One of these facility
closures has a remaining lease obligation of approximately 7 years. At March 27,
1998, $1,187,000 of the charge remained to be paid.

QUANTERRA

     Since December 29, 1995, the Company has retained a 19% ownership interest
in Quanterra, Inc., an environmental laboratory business, and accounted for this
investment under the cost method. (See Liquidity and Capital Resources and Notes
to Consolidated Financial Statements - Quanterra.) As a result, the Company has
not recognized income or loss from Quanterra in fiscal years 1998 or 1997. Prior
to December 29, 1995, the Company's investment in Quanterra was 50% and
accounted for under the equity method. In the nine month period ending December
29, 1995, the Company reported equity in net loss of Quanterra of $1,821,000 and
a pre-tax charge of $24,595,000 to reflect the impairment in the value of IT's
investment in Quanterra. The impairment occurred as a result of the
recapitalization transaction in which IT and Corning completed an agreement to
recapitalize Quanterra and change IT's ownership interest in Quanterra from 50%
to 19%. The events that led to the impairment of the Company's investment in
Quanterra occurred in December 1995 when it became evident that Quanterra's net
loss would increase significantly in comparison to the September 1995 quarterly
results and it became apparent that Quanterra would require additional capital
from its owners to meet its liquidity needs for 1996. These two events led to
the recapitalization transaction and the Company's loss recognition. On May 27,
1998, IT's Board of Directors considered and approved the divestiture of certain
non-core assets. The non-core assets include the Company's 19% common stock
ownership interest in Quanterra, which is currently recorded at $16,300,000.
The Company expects to sell its investment in Quanterra for approximately
$6,000,000, and as a result, the Company anticipates recording a non-cash charge
of approximately $10,000,000 in the quarter ending June 26, 1998. (See Notes to
Consolidated Financial Statements - Subsequent Events.)



                                       20

<PAGE>   22


                      INTERNATIONAL TECHNOLOGY CORPORATION
                        RESULTS OF OPERATIONS (CONTINUED)


OTHER INCOME

     In fiscal year 1998, other income represents minority interest in OHM (see
Notes to the Consolidated Financial Statements - Business Acquisitions - OHM
Acquisition), Chi Mei and miscellaneous asset sales.

     In fiscal year 1996, the Company reported in other income a pre-tax gain of
$1,090,000, related to the settlement of certain litigation concerning a HTTS
incineration project.

INTEREST, NET

     Net interest expense was 1.8%, 1.5% and 1.6% of revenues in fiscal years
1998, 1997 and 1996, respectively. The following table shows net interest
expense for the three fiscal years ended March 27, 1998.

<TABLE>
<CAPTION>
                                                      Year ended
                                       --------------------------------------------
                                       March 27,         March 28,        March 29,
                                         1998              1997             1996
                                         ----              ----             ----
                                                      (In thousands)
<S>                                     <C>               <C>               <C>    
Interest incurred..................     $ 10,730          $ 7,168           $ 7,014
Capitalized interest...............          (10)               -                 -
Interest income....................       (2,751)          (1,908)             (569)
                                         -------          -------           -------
  Interest, net....................      $ 7,969          $ 5,260           $ 6,445
                                          ======           ======            ======
</TABLE>

     The increase in fiscal year 1998 net interest expense compared to fiscal
year 1997 of $2,709,000 is directly related to the tender credit facilities
arranged by the Company to acquire OHM. Loan origination costs and fees and
interest expense incurred for the period February 25, 1998 to March 27, 1998
related to the acquisition of OHM stock was approximately $3,400,000.

     During fiscal year 1997, the level of debt outstanding was relatively
unchanged from the prior year end level as the Company's refinancing completed
in October 1995 provided that initial principal payments were not due until 2001
on the Company's outstanding $65,000,000 senior secured notes. Accordingly,
interest incurred in fiscal year 1997 was $154,000 or 2.2% higher than the
corresponding amount for fiscal year 1996. Interest income of $1,908,000 was
$1,339,000 higher than the $569,000 in fiscal year 1996 due to the full-year
investment in cash equivalents of the excess proceeds of the October 1995
refinancing and an increased level of investment in cash equivalents beginning
in November 1996 from the proceeds of the Carlyle Investment (see Notes to
Consolidated Financial Statements Preferred stock - Carlyle Investment).

INCOME TAXES

     For the fiscal year 1998, the Company reported a loss from continuing
operations before income taxes and an extraordinary item of $2,185,000 and
recorded an income tax charge of $4,175,000 after adjusting for the special
charge and a $2,252,000 deferred tax asset valuation adjustment prior to the
acquisition of OHM. The Company also recognized a tax benefit of $3,497,000 on
an extraordinary charge for the early extinguishment of debt and a $3,040,000
benefit for a loss from disposition of a discontinued operation. The total net
tax benefit is $2,362,000. The Company's 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 - Income taxes).

     For fiscal year 1997, in which the Company reported a loss from continuing
operations before income taxes of $8,956,000, the Company recorded an income tax
benefit of $179,000 which included a $4,602,000 tax charge resulting from the
adjustment of IT's deferred tax asset valuation allowance based on the Company's
assessment of the

                                       21

<PAGE>   23


                      INTERNATIONAL TECHNOLOGY CORPORATION
                        RESULTS OF OPERATIONS (CONTINUED)


uncertainty as to when it will generate a sufficient level of future earnings to
realize the deferred tax asset created by the Special Charges (see Special
Charges).

     For fiscal year 1996, in which the Company reported a loss from continuing
operations before income taxes of $11,744,000, the Company recorded an income
tax benefit of $12,290,000 which included a $7,781,000 tax benefit resulting
from the adjustment of IT's deferred tax asset valuation allowance based on the
Company's reassessment of its ability to generate a sufficient level of future
earnings to realize a substantial portion of IT's related deferred tax asset.

     Based upon a net deferred tax asset of $86,495,000 (net of a valuation
allowance of $31,865,000) at March 27, 1998, and assuming a net 38% federal and
state tax rate, the level of future earnings necessary to fully realize the
deferred tax asset would be approximately $228,000,000. The Company evaluates
the adequacy of the valuation allowance and the realizability of the deferred
tax asset on an ongoing basis. Because of the Company's position in the
industry, recent acquisitions and restructuring and existing backlog, management
expects that its future taxable income will more likely than not allow the
Company to fully realize its deferred tax asset of $86,495,000.

EXTRAORDINARY ITEM

     In fiscal year 1998, the Company recorded a $5,706,000 charge, net of
income tax benefit of $3,497,000, related to the early extinguishment of IT's
$65,000,000 senior debt which was refinanced in connection with the merger with
OHM. The Company incurred a $5,563,000 payment for the make whole interest
provision as a result of retiring its $65,000,000 senior debt, in accordance
with the loan agreement. In addition, the Company also expensed approximately
$3,600,000 related to the unamortized loan origination expenses associated with
issuing the $65,000,000 senior debt.

DIVIDENDS

     The reported dividends for fiscal years 1998, 1997 and 1996 were
$6,167,000, $4,916,000 and $4,200,000, respectively. The reported dividends
include imputed dividends on the 6% Cumulative Convertible Participating
Preferred Stock of $2,105,000 and $866,000 for fiscal years 1998 and 1997,
respectively, which are not payable in cash or stock. Commencing with November
21, 1997, the 6% Preferred Stock outstanding accrues a 3% inkind stock dividend
for one year during which the statement of operations also includes an imputed
dividend at a rate of approximately 3% per annum. This additional imputed
dividend of $467,000 in fiscal 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. After November 21, 1998, the
outstanding 6% Preferred Stock is entitled to a 6% cumulative cash dividend
payable quarterly. The Company reported cash dividends on its outstanding
depositary shares (each representing 1/100 of a share of the Company's 7%
Cumulative Convertible Exchangeable Preferred Stock) of $3,595,000, $4,050,000
and $4,200,000 in fiscal years 1998, 1997 and 1996, respectively. The decrease
in cash dividends in fiscal 1998 of $455,000 compared to fiscal 1997 is due to
the conversion to common stock by some holders of the Company's 7% Cumulative
Convertible Exchangeable Preferred Stock during the third quarter of fiscal year
1997. The Company's dividends are summarized below:


                                       22

<PAGE>   24


                      INTERNATIONAL TECHNOLOGY CORPORATION
                        RESULTS OF OPERATIONS (CONTINUED)


<TABLE>
<CAPTION>
                                                              March 27,        March 28,         March 29,
                                                                1998             1997              1996
                                                                ----             ----              ----

<S>                                                         <C>              <C>               <C>        
Dividend Summary on Preferred Stock
-----------------------------------
7% Cumulative convertible exchangeable
     cash dividend                                          $ 3,595,000      $ 4,050,000       $ 4,200,000

6% Cumulative convertible participating
     Imputed non-cash dividend                                2,105,000          866,000                 -
     In kind 3% stock dividend (including
     cash paid of $7,000 for fractional shares)                 467,000                -                 -
                                                            -----------      -----------       -----------
                Total                                       $ 6,167,000      $ 4,916,000       $ 4,200,000
                                                            ===========      ===========       ===========
</TABLE>

DISCONTINUED OPERATIONS

     In fiscal year 1998, the Company increased its provision for loss on
disposition of its discontinued transportation, treatment and disposal business
by $4,960,000 (net of income tax benefit of $3,040,000). This increased
provision primarily related to an additional accrual for closure costs related
to the former Panoche disposal site. In March 1998, the Company announced
approval by the California Department of Toxic Substances Control (DTSC) of the
final closure and post closure plan for one of the four inactive treatment,
storage and disposal facilities. The approved plans allow the Company to proceed
with the completion of final closure construction and provides for future
submittal of technical studies that will be utilized to determine final aspects
and costs of closure construction and monitoring programs for the former Panoche
disposal site.

     For further information regarding the Company's discontinued operations,
see Notes to Consolidated Financial Statements - Discontinued Operations.

                                       23

<PAGE>   25


                      INTERNATIONAL TECHNOLOGY CORPORATION

LIQUIDITY AND CAPITAL RESOURCES


     Working capital decreased by $35,781,000 or 32.3% to $74,924,000 at March
27, 1998 from $110,705,000 at March 28, 1997. The current ratio at March 27,
1998 was 1.38:1 which compares to 2.21:1 at March 28, 1997.

     Cash used by operating activities for fiscal year 1998 totaled $19,540,000,
a change of $44,335,000 from the $24,795,000 of cash provided by operating
activities in the prior fiscal year principally due to a reduction in
receivables collected in fiscal year 1998 compared to fiscal year 1997.
Additionally, billing in excess of revenues earned decreased $4,634,000 compared
to an increase of $5,183,000 last year as a large remediation project was
completed in the current fiscal year. Furthermore, during fiscal year 1997, cash
flow from operating activities was positive primarily due to strong accounts
receivable management that improved cash flow by $25,422,000. This improved
receivable management was maintained during the current fiscal year as
receivables decreased slightly, $386,000, despite an increase in revenue. Of the
$19,540,000 net cash used for operating activities during fiscal year 1998,
$14,914,000 is related to the Company's discontinued operations. For further
information on these activities, see Notes to Consolidated Financial Statements
- Discontinued operations. Capital expenditures were $4,766,000, $3,361,000 and
$4,696,000 for fiscal years 1998, 1997 and 1996, respectively. Capital
expenditures for fiscal year 1998 were $1,405,000 higher than fiscal year 1997
due primarily to computer hardware requirements to integrate acquisitions.
However, capital expenditures for fiscal year 1998 were approximately the same
as fiscal year 1996. The Company expects an increase in capital expenditures for
the period ending December 1998 directly related to the OHM acquisition. Cash
used for the acquisition of businesses, net of cash acquired was $163,189,000
for fiscal year 1998. On February 25, 1998, IT purchased 13,933,000 shares of
OHM Corporation common stock for $160,229,500 which is included in the Statement
of Cash Flows net of the $12,000,000 of cash acquired. The Company also acquired
speciality consulting firms PHR, PEG, JSC and LandBank for cash during fiscal
year 1998. These acquisition agreements, along with the acquisition of Beneco by
OHM, include potential future earnout payments. The total potential future
contingent payments range from a low of zero to a maximum of approximately
$19,900,000 of which $13,700,000 can be payable in the Company's common stock at
the Company's option. The Company does not expect to pay significant cash income
taxes over the next several years due to its net operating loss carryforwards.
(See Notes to Consolidated Financial Statements - Income taxes and Management's
Discussion and Analysis of Results of Operations and Financial Condition
Continuing Operations - Income taxes.)

     To finance the acquisition of OHM, IT entered into a $240,000,000 credit
facility ("Tender Offer Credit Facilities"). The Tender Offer Credit Facilities
were used to complete the Tender Offer, to refinance IT's $65,000,000 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. The Tender Offer Credit Facilities provided up to
$240,000,000, consisting of an eighteen-month $80,000,000 tender note and an
$160,000,000 revolving credit facility. The loans made under the Tender Offer
Credit Facilities did not amortize and were repaid in full with proceeds made
under the Merger Credit Facilities (as defined herein). Loans made under the
Tender Offer Credit Facilities bore interest at a rate equal to LIBOR plus 2.50%
per annum (or Citibank's base rate plus 1.50% per annum) through June 10, 1998,
at the Company's option. To complete the Merger, IT effected a $378,000,000
refinancing ("Merger Credit Facilities") on June 11, 1998 and initially borrowed
$228,000,000 under the term loan provisions and approximately $85,000,000
through the revolving credit facility. The proceeds of the loans made under the
Merger Credit Facilities were used to finance the cash consideration paid in the
Merger, to pay related expenses and costs, to refinance loans outstanding under
the Tender Offer Credit Facilities and OHM's loans outstanding under its
existing credit facility. The Merger Credit Facilities consist of an eight-year
amortizing term loan of $228,000,000 and a six-year revolving credit facility of
$150,000,000. The $150,000,000 revolving facility provides working capital for
IT and its subsidiaries (including OHM and its subsidiaries) and for general
corporate purposes. The Merger Credit Facilities are secured by a security
interest in substantially all of the assets of IT and its subsidiaries
(including the assets of OHM and its subsidiaries).

     The term loans made under the Merger Credit Facilities bear interest at a
rate equal to LIBOR plus 2.50% per annum (or Citibank's base rate plus 1.50% per
annum), and revolving loans made under the Merger Credit Facilities

                                       24

<PAGE>   26


                      INTERNATIONAL TECHNOLOGY CORPORATION
                   LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

bear interest at a rate equal to LIBOR plus 2.00% per annum (or Citibank's base
rate plus 1.00% per annum), through the date that is six months after completion
of the Merger, with adjustments thereafter based on the ratio of IT's
consolidated total debt to consolidated earnings before interest and taxes and
depreciation and amortization, "EBITDA" as defined by the Merger Credit
Facilities loan agreement.

     The Merger Credit Facilities amortize on a semi annual basis in aggregate
annual installments of $4,500,000 for the first six years after the Merger, with
the remainder payable in eight equal quarterly installments in the seventh and
eighth years after the Merger. IT is required to prepay the loans under the
Merger Credit Facilities with the net proceeds of asset sales and certain debt
and equity financing, and with a portion of IT's consolidated excess cash flow.
In addition, OHM is required by the terms of its 8% Convertible Subordinated
Debentures to make annual redemptions (or sinking fund payments) in an amount
equal to approximately $4,300,000. These Debentures are guaranteed by the
Company and are convertible into a combination of IT common stock (based on a
conversion price, subject to adjustment, of $22.50 per share) and cash (based on
a conversion price of $24.00 per share).

     The Credit Facilities include certain representations, warranties and
covenants customary for facilities of this type, including: various financial
covenants and limitations (subject to certain exceptions) on indebtedness, lease
obligations, mergers and acquisitions, and other fundamental changes. The Credit
Facilities also include customary events of default as well as upon a change of
control of IT including, among other things, on or after the funding of the
Merger Credit Facilities on June 11, 1998, the disposition of the 6% Cumulative
Convertible Participating Preferred Stock or the Carlyle Warrants to a person
other than the Preferred Stock Group (any person or group of persons other than
the Convertible Preferred Stock or the Carlyle Warrants to a person other than
the Parent Stockholders or certain persons affiliated with the Parent
Stockholders).

     Long-term debt (including the 8% convertible subordinated debentures) of
$284,697,000 at March 27, 1998 increased from the $65,874,000 at March 28, 1997
primarily due to the acquisition of OHM. (See Notes to Consolidated Financial
Statements - Long-term debt.) The Company's ratio of debt (including current
portion) to equity increased to 2.03:1 at March 27, 1998 from 0.42:1 at March
28, 1997 and 0.47:1 at March 29, 1996, respectively.

     With regard to the transportation, treatment and disposal discontinued
operations, a number of items could potentially affect the liquidity and capital
resources of the Company, including changes in closure and post-closure costs,
realization of excess and residual land values, demonstration of financial
assurance and resolution of other regulatory and legal contingencies. (See Notes
to Consolidated Financial Statements - Discontinued operations.)

     The Company's shareholder agreements relating to Quanterra (an
environmental analytical services business 81% owned by an affiliate of Corning
Incorporated and 19% owned by IT) contain certain provisions which have affected
and, in the future, could affect liquidity. IT was required by these agreements
to contribute $2,500,000 to Quanterra in October 1995 and an additional
$2,500,000 to Quanterra in January 1996. In connection with a recapitalization
of Quanterra in January 1996, the Company committed an additional $2,500,000 to
Quanterra, of which $475,000 was paid in each of March, April and July 1996 and
$1,075,000 was paid in December 1996, completing the commitment. Additionally,
in fiscal year 1997, the Company made a one-time $1,300,000 contribution to
Quanterra in the form of work performed related to the decommissioning/closure
of a Quanterra laboratory facility. On May 27, 1998, IT's Board of Directors
considered and approved the divestiture of certain non-core assets. The non-core
assets include the Company's 19% common stock ownership interest in Quanterra.
As a result of this action, the Company anticipates recording a non-cash charge
of approximately $10,000,000 in the quarter ending June 26, 1998. (See Notes to
Consolidated Financial Statements - Subsequent Events.) (See Notes to
Consolidated Financial Statements - Quanterra.)


                                       25

<PAGE>   27


                      INTERNATIONAL TECHNOLOGY CORPORATION
                   LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

     The Company's bond surety programs provide for $300,000,000 of contract
capacity. The evaluation of capacity is based upon bonded projects estimated
cost to complete. Approximately thirty-three percent of the capacity is being
utilized currently. A portion of the Company's bonding lines is collateralized
in the form of letters of credit.

     At June 11, 1998, giving effect to borrowings made in connection with the
consummation of the Merger, the Company had $38,000,000 of availability under
its revolving credit facility and $2,800,000 in cash and short-term investments.
The Company continues to have significant cash requirements, including
expenditures for the closure of its inactive disposal sites and PRP matters (see
Notes to Consolidated Financial Statements - Discontinued operations), interest,
required term loan and subordinated debenture principal payments, preferred
dividend obligations, operating lease payments, contingent liabilities and
potential future acquisitions. The Company's liquidity position with the
availability of the Merger Credit Facilities and cash generated from operations
is expected to be sufficient to meet the foreseeable requirements, as well as to
in part fund expansion and diversification of the Company's business through
both internal growth and acquisitions but will require careful management,
particularly during periods of integration of major acquisitions. In connection
with the Company's plans for continued growth through acquisition, additional
capital sources will be required.

YEAR 2000

     The Company's core financial and administrative software system is
certified as Year 2000 compliant by the vendor. During fiscal year 1998, the
Company established an integration test plan to test this software and verify
Year 2000 compliance. In February 1998, these integration tests were
successfully completed. The Company's core hardware was also tested and fully
compliant with the year 2000 limitations. The Company also is communicating with
customers, suppliers, financial institutions and others with which it does
business to coordinate year 2000 conversion. The total cost of compliance and
its effect on the Company's future results of operations is being determined as
part of the detailed conversion plan and is not expected to be material.

FORWARD LOOKING STATEMENTS

     Statements of the Company's or management's intentions, beliefs,
expectations or predictions for the future, denoted by the words "anticipate",
"believe", "estimate", "expect", "project", "imply", "intend", and similar
expressions are forward-looking statements that reflect the current views of the
Company and its management about future events and are subject to certain risks,
uncertainties and assumptions. Such risks, uncertainties and assumptions include
those identified in "Business - Operations" - "Regulations", - "Environmental
Contractor Risks", - "Insurance and Risk Management", - "Risk of Achievement of
Synergies and Integration of Operations", - "Leverage", - "History of Losses",
and "Legal Proceedings", and other general economic and business conditions, the
business opportunities (or lack thereof) that may be presented to and pursued by
the Company, changes in laws or regulations affecting the Company's operations
and other factors, many of which are beyond the control of the Company as well
as competitive factors and pricing pressures, funding of backlog, matters
affecting contracting and engineering businesses generally, such as the
seasonality of work, weather and clients' timing of projects, and the ultimate
costs and results of closure and divestiture of the Company's discontinued
operations, the effects of the integration of OHM and any other major
acquisitions and achievement of expected synergies therefrom, and industry-wide
market factors. The Company's actual results could differ materially from those
projected in such forward-looking statements as a result of such factors.

                                       26

<PAGE>   28
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


       INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
         SCHEDULE FOR THE THREE YEARS IN THE PERIOD ENDED MARCH 28, 1997


<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS.                                                                   PAGE
                                                                                                     ----
<S>                                                                                                    <C>
     Report of  Ernst & Young LLP, Independent Auditors..............................................  28
     Consolidated Balance Sheets ----- March 27, 1998 and March 28, 1997.............................  29
     Consolidated Statements of Operations ----- Three Years Ended
       March 27, 1998................................................................................  30
     Consolidated Statements of Stockholders' Equity ----- Three
       Years Ended March 27, 1998....................................................................  31
     Consolidated Statements of Cash Flows ----- Three Years Ended
       March 27, 1998................................................................................  32
     Notes to Consolidated Financial Statements......................................................  33

FINANCIAL STATEMENT SCHEDULE.

     II.      Valuation and qualifying accounts......................................................  65
</TABLE>

     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.




                                       27

<PAGE>   29



                REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS



The Board of Directors
International Technology Corporation

We have audited the accompanying consolidated balance sheets of International
Technology Corporation as of March 27, 1998 and March 28, 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period 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 generally accepted auditing
standards. 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
International Technology Corporation at March 27, 1998 and March 28, 1997 and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended March 27, 1998 in conformity with generally
accepted accounting principles. 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, Pennsylvania
May 15, 1998 except the subsequent
   event disclosures related to: (i) HTTS
   and Quanterra; and, (ii) the completion
   of the OHM merger, as to which the
   dates are May 27, 1998 and June 11, 1998,
   respectively.


                                       28

<PAGE>   30



                      INTERNATIONAL TECHNOLOGY CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                MARCH 27,        MARCH 28,
                                                                                  1998             1997
                                                                                ---------        --------
                                         ASSETS                                       (IN THOUSANDS)
<S>                                                                             <C>             <C>       
Current assets:
     Cash and cash equivalents.............................................     $ 24,765        $   78,897
     Accounts receivable, less allowance for doubtful
         accounts of $19,026,000 in 1998 and $2,055,000 in 1997............      210,630           108,207
     Prepaid expenses and other current assets.............................       25,523             4,077
     Deferred income taxes.................................................       12,750            11,324
                                                                                --------          --------
         Total current assets..............................................      273,668           202,505
Property, plant and equipment, at cost:
     Land and land improvements............................................          846             1,330
     Buildings and leasehold improvements..................................       18,222             9,232
     Machinery and equipment...............................................      159,433           140,630
                                                                                 -------           -------
                                                                                 178,501           151,192
         Less accumulated depreciation and amortization....................      102,480           106,891
                                                                                 -------           -------
              Net property, plant and equipment............................       76,021            44,301

Cost in excess of net assets of acquired businesses........................      211,878             9,363
Investment in Quanterra....................................................       16,300            16,300
Other assets  .............................................................       17,557             9,222
Deferred income taxes......................................................       73,745            20,792
Long-term assets of discontinued operations................................       40,048            40,048
                                                                                --------          --------
     Total assets..........................................................     $709,217          $342,531
                                                                                ========          ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable......................................................     $ 82,597          $ 29,571
     Accrued wages and related liabilities.................................       38,395            18,852
     Billings in excess of revenues........................................        3,723             7,227
     Other accrued liabilities.............................................       42,091            13,788
     Short-term debt, including current portion of long-term debt..........       16,738             5,343
     Net current liabilities of discontinued operations....................       15,200            17,019
                                                                                --------          --------
         Total current liabilities.........................................      198,744            91,800

Long-term debt.............................................................      240,147            65,874
8% convertible subordinated debentures.....................................       44,550                 -
Long-term accrued liabilities of discontinued operations, net..............        3,773             9,280
Other long-term accrued liabilities........................................       23,755             5,904
Minority interest..........................................................       50,098               820
Commitments and contingencies
Stockholders' equity:
     Preferred stock, $100 par value; 180,000 shares authorized:
         7% cumulative convertible exchangeable, 20,556
              issued and outstanding.......................................        2,056             2,056
         6% cumulative convertible participating, 45,271 and 45,000 shares
              issued and outstanding, respectively.........................        4,451             4,204
     Common stock, $.01 par value; 50,000,000 shares authorized; 9,729,511
         and 9,744,583 shares issued and outstanding, respectively.........           97                97
     Treasury stock at cost, 8,078 shares .................................          (74)              (74)
     Additional paid-in capital............................................      246,681           244,287
     Deficit  .............................................................     (105,061)          (81,717)
                                                                                --------          --------
         Total stockholders' equity........................................      148,150           168,853
                                                                                --------          --------
     Total liabilities and stockholders' equity............................     $709,217          $342,531
                                                                                ========          ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       29

<PAGE>   31



                      INTERNATIONAL TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                   YEAR ENDED
                                                                    ----------------------------------------------
                                                                     MARCH 27,        MARCH 28,          MARCH 29,
                                                                       1998             1997               1996
                                                                       ----             ----               ----

<S>                                                                  <C>               <C>               <C>      
Revenues ..................................................        $ 442,216         $ 362,131         $ 400,042
Cost and expenses:
   Cost of revenues .......................................          391,126           323,993           341,890
   Selling, general and administrative expenses ...........           31,774            33,431            38,125
   Special charges ........................................           14,248             8,403                --
                                                                   ---------         ---------         ---------
Operating income (loss) ...................................            5,068            (3,696)           20,027
Quanterra related losses ..................................               --                --           (26,416)
Other income, net .........................................              716                --             1,090
Interest, net .............................................           (7,969)           (5,260)           (6,445)
                                                                   ---------         ---------         ---------
Loss from continuing operations before income taxes .......           (2,185)           (8,956)          (11,744)
Benefit (provision) for income taxes ......................           (4,175)              179            12,290
                                                                   ---------         ---------         ---------
Income (loss) from continuing operations ..................           (6,360)           (8,777)              546
Discontinued operations (net of $3,040 income tax benefit):
   Loss from disposition ..................................           (4,960)               --                --
                                                                   ---------         ---------         ---------
Income (loss) before extraordinary item ...................          (11,320)           (8,777)              546
Extraordinary item: (net of $3,497 income tax benefit)
   early extinguishment of debt ...........................           (5,706)               --                --
                                                                   ---------         ---------         ---------
Net income (loss) .........................................          (17,026)           (8,777)              546
Less preferred stock dividends ............................           (6,167)           (4,916)           (4,200)
                                                                   ---------         ---------         ---------
Net loss applicable to common stock .......................        $ (23,193)        $ (13,693)        $  (3,654)
                                                                   =========         =========         =========

Net loss per share basic and diluted:
   Continuing operations (net of preferred stock dividends)        $   (1.28)        $   (1.48)        $    (.41)
   Discontinued operations:
     Loss from disposition ................................             (.51)               --                --
   Extraordinary item: early extinguishment of debt .......             (.59)               --                --
                                                                   ---------         ---------         ---------
                                                                   $   (2.38)        $   (1.48)        $    (.41)
                                                                   =========         =========         =========
</TABLE>


See accompanying notes to consolidated financial statements.





                                       30

<PAGE>   32



                      INTERNATIONAL TECHNOLOGY CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    FOR THE THREE YEARS ENDED MARCH 27, 1998
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                               7%            6%
                                           CUMULATIVE    CUMULATIVE
                                           CONVERTIBLE   CONVERTIBLE
                                          EXCHANGEABLE  PARTICIPATING                    ADDITIONAL
                                            PREFERRED     PREFERRED  COMMON  TREASURY     PAID-IN
                                              STOCK         STOCK    STOCK    STOCK       CAPITAL         DEFICIT         TOTALS
                                              -----         -----    -----    -----       -------         -------         ------


<S>                                          <C>          <C>        <C>       <C>        <C>            <C>            <C>      
Balance at March 31, 1995 ..............     $ 2,400      $   --     $ 89      $  --      $ 207,785      $ (64,353)     $ 145,921
   Repurchase of common stock ..........          --          --       --       (740)            --             --           (740)
   Restricted stock awards, net ........          --          --        2        656            238             --            896
   Retirement of warrant and common
     stock resulting from the
     recapitalization of Quanterra .....          --          --       (1)        --         (2,399)            --         (2,400)
   Issuances of common stock ...........          --          --        1         --            841             --            842
   Dividends paid on preferred stock ...          --          --       --         --             --         (4,200)        (4,200)
   Net income ..........................          --          --       --         --             --            546            546
                                             -------      ------     ----      -----      ---------      ---------      ---------
Balance at March 29, 1996 ..............       2,400          --       91        (84)       206,465        (68,007)       140,865
   Net proceeds from preferred stock and
       warrants issued to Carlyle ......          --       4,117       --         --         36,492             --         40,609
   Conversion of preferred stock .......        (344)         --        7         --            337             --             --
   Restricted stock awards, net ........          --          --       (1)        10            214             --            223
   Dividends on preferred stock ........          --          87       --         --            779         (4,916)        (4,050)
   Cumulative translation adjustment ...          --          --       --         --             --            (17)           (17)
   Net loss ............................          --          --       --         --             --         (8,777)        (8,777)
                                             -------      ------     ----      -----      ---------      ---------      ---------
 Balance at March 28, 1997 .............       2,056       4,204       97        (74)       244,287        (81,717)       168,853
   Restricted stock ....................          --          --       --         --            223             --            223
   Dividends on preferred stock ........          --         247       --         --          2,232         (6,167)        (3,688)
   Cumulative translation adjustment ...          --          --       --         --             --           (151)          (151)
   Stock options exercised .............          --          --       --         --            (61)            --            (61)
   Net loss ............................          --          --       --         --             --        (17,026)       (17,026)
                                             -------      ------     ----      -----      ---------      ---------      ---------
 Balance at March 27, 1998 .............     $ 2,056      $4,451     $ 97      $ (74)     $ 246,681      $(105,061)     $ 148,150
                                             =======      ======     ====      =====      =========      =========      =========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       31

<PAGE>   33



                      INTERNATIONAL TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                  YEAR ENDED
                                                                 ----------------------------------------------
                                                                   MARCH 27,         MARCH 28,        MARCH 29,
                                                                     1998              1997             1996
                                                                     ----              ----             ----
<S>                                                                 <C>              <C>              <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)........................................        $(17,026)        $ (8,777)        $     546
   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 .....................          13,158           14,363            14,502
         Loss on disposition of business ...................           1,800               --                --
         Loss on Helen Kramer claim ........................           3,943               --                --
         Deferred income taxes .............................             678              370           (13,734)
         Quanterra related losses ..........................              --               --            26,416
         Gain from settlement of lawsuits ..................              --               --            (9,090)
         Writedown of equipment ............................              --               --             8,000
         Other .............................................            (980)             (45)              (10)
   Changes in assets and liabilities, net of effects 
     from acquisitions and dispositions of businesses:
         Decrease in receivables ...........................             386           25,422            12,904
         (Increase) decrease in prepaid expenses and
           other current assets ............................            (717)             601             1,416
         (Decrease) increase in accounts payable ...........          (7,687)             905            (2,204)
         (Decrease) increase in accrued wages
           and related liabilities .........................          (4,471)           2,473            (3,987)
         (Decrease) increase in billings in
           excess of revenues ..............................          (4,634)           5,183            (1,986)
         Increase (decrease) in other
           accrued liabilities .............................           1,591           (2,111)           (6,613)
         Increase (decrease) in other long-term
           accrued liabilities .............................             733              452              (275)
         Decrease in liabilities of discontinued
           operations ......................................         (14,914)         (14,041)          (11,704)
                                                                    --------         --------         ---------
     Net cash (used for) provided by operating activities...         (19,540)          24,795            14,181
CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from thermal HTTS project settlement ...........              --               --            41,100
   Capital expenditures ....................................          (4,766)          (3,361)           (4,696)
   Investment in Quanterra .................................              --           (3,325)           (5,475)
   Proceeds from disposition of business ...................           2,800               --                --
   Acquisition of businesses, net of cash acquired .........        (163,189)          (1,455)           (2,223)
   Other, net ..............................................          (4,896)             700             4,247
                                                                    --------         --------         ---------
   Net cash (used for) provided by investing activities ....        (170,051)          (7,441)           32,953
CASH FLOWS FROM FINANCING ACTIVITIES:
   Financing costs .........................................          (4,113)              --            (4,902)
   Repayments of long-term borrowings ......................         (68,666)            (438)         (110,751)
   Long-term borrowings ....................................         210,940              962            89,598
   Net proceeds from issuance of preferred stock ...........              --           40,609                --
   Dividends paid on preferred stock .......................          (2,702)          (4,050)           (4,200)
   Issuances of common stock, net ..........................              --              (33)            1,807
   Repurchase of common stock ..............................              --               --              (740)
                                                                    --------         --------         ---------
   Net cash provided by (used for) financing activities ....         135,459           37,050           (29,188)
                                                                    --------         --------         ---------
Net (decrease) increase in cash and cash equivalents .......         (54,132)          54,404            17,946
Cash and cash equivalents at beginning of year .............          78,897           24,493             6,547
                                                                    --------         --------         ---------
Cash and cash equivalents at end of year....................        $ 24,765         $ 78,897         $  24,493
                                                                    ========         ========         =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       32

<PAGE>   34



                      INTERNATIONAL TECHNOLOGY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Basis of presentation and principles of consolidation

     The consolidated financial statements include International Technology
Corporation (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. Certain reclassifications have been
made to prior years' consolidated financial statements in order to conform to
the current year presentation.

     The Company's fiscal year consists of four thirteen-week fiscal quarters
with the fourth quarter ending on the last Friday of March. On June 9, 1998, the
Board of Directors of IT approved a change in IT's 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 will be IT's Annual Report on Form 10-K
for the nine month period ending December 25, 1998.

     Business Acquisitions:

     OHM Acquisition

     In January 1998, the Company entered into a merger agreement to acquire OHM
Corporation (OHM), an environmental and hazardous waste remediation services
company servicing primarily industrial, federal government and local government
agencies located primarily in the United States and Canada. The transaction was
effected through a two-step process consisting of (a) the acquisition of 54% of
the total outstanding shares through a cash tender offer, which was consummated
on February 25, 1998, at $11.50 per share for 13,933,000 shares of OHM common
stock, for a total consideration of approximately $160,200,000 plus,
approximately $4,600,000 in asset acquisition costs and (b) the acquisition on
June 11, 1998 of the remaining 46% of the total outstanding shares through the
exchange of approximately 12,900,000 shares of Company common stock and payment
of approximately $30,800,000.

     This transaction was accounted for as a step acquisition purchase and
therefore the effects of the second step of the merger have not been included in
the March 27, 1998 financial statements because the issuance of additional
Company shares was subject to shareholder approval which was received subsequent
to year end. As a result of the Company acquiring less than 100% of OHM
outstanding stock in the first step of the Merger, the valuation of assets
acquired and liabilities assumed has been based upon the prorata ownership
allocation of the fair values of the assets acquired and liabilities assumed
(54%). The excess of the purchase price over the prorata ownership allocation of
the fair value of assets acquired and liabilities assumed in the first step of
the merger of approximately $194,000,000 is classified as cost in excess of net
assets of acquired businesses and is being amortized over forty years. The
remaining 46% of OHM's assets and liabilities are included in the Company's
financial statements at historical cost with an amount designated as minority
interest. Results of operations include OHM for the period from February 24,
1998 through March 27, 1998.











                                       33

<PAGE>   35



                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The estimated fair value of the assets acquired and liabilities assumed at
the date of the first step of acquisition of OHM are as follows:

     Description                                                Amount
     -----------                                                ------
                                                           (In thousands)
     Current assets                                            $ 153,509
     Property and equipment                                       36,478
     Cost in excess of net assets of acquired businesses         194,318
     Other long term assets                                       43,920
     Current liabilities                                         119,234
     Long term liabilities, primarily debt                        96,716

     As a result of the Merger, the Company has plans to close specific
overlapping properties and reduce consolidated employment. The acquired balance
sheet includes an estimated accrual of approximately $7,200,000 for 54% of the
estimated OHM severance, office closure costs and lease termination costs of
which $650,000 was paid prior to March 27, 1998. The OHM integration plan will
be finalized, approved and communicated prior to December 31, 1998.

     The purchase price allocation is preliminary and based upon information
currently available. Management is continuing to gather and evaluate information
regarding the valuation of assets and liabilities at the dates of both the first
and second steps of the acquisition. This assessment involves gathering
additional information to complete the allocation. Management does not
anticipate material changes to the preliminary allocation.

     The following unaudited pro forma condensed statements of operations give
effect to the first step of the OHM merger as if the transaction occurred at the
beginning of each period presented.

                                                     52 weeks ended
                                          -------------------------------------
                                          (In thousands, except per share data)

                                           March 27, 1998      March 28, 1997
                                              Pro Forma          Pro Forma
                                              ---------          ---------

Revenues                                  $   955,381             $  984,945
Loss from continuing operations
     before extraordinary item                (14,133)               (12,280)
Net loss                                      (24,779)               (12,280)
Net loss applicable to common stock           (30,946)               (17,196)
Loss per share:
     Basic and diluted                          (3.18)                 (1.86)

     The above amounts are based upon certain assumptions and estimates which
the Company believes are reasonable. The pro forma results do not reflect
anticipated cost savings and do not necessarily represent results which would
have occurred if the merger had taken place at the date and on the basis assumed
above.

     Other Acquisitions

     The Company acquired certain other businesses during 1998 and 1997 for
aggregate consideration of $12,300,000 and $1,500,000, respectively. These
acquisition agreements include potential future earnout payments. Potential
future contingent payments relating to these acquisitions range from a low of
zero to a maximum of approximately $9,900,000, of which approximately $3,700,000
is payable in the Company's common stock at the Company's option. In accordance
with Accounting Principles Board Opinion No. 16 - Business Combinations, these
acquisitions were accounted for using the purchase method and in the aggregate
were not material enough to require disclosure of pro forma financial 
information.


                                       34

<PAGE>   36



                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In addition, in connection with the acquisition of OHM, the Company assumed
the potential future earnout payments relating to Beneco, a company acquired by
OHM in June 1997, which range from a low of zero to a maximum of $10,000,000,
which at the option of the Company, may be paid in any combination of cash or
Company common stock determined by the Company.

     Recent Accounting Pronouncements

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statements No. 130, "Reporting Comprehensive Income," and Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." Statement
No. 130 which does not materially impact the Company and is effective for fiscal
years beginning after December 15, 1997, requires separate reporting of certain
items affecting shareholders' equity outside of those included in arriving at
net earnings. Statement No. 131, effective for the period ending December 25,
1998, establishes requirements for reporting information about operating
segments in annual and interim statements. This statement may require a change
in the Company's financial reporting, however, the extent of this change, if
any, has not been determined.

     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.

     Cash equivalents

     Cash equivalents include highly liquid investments with an original
maturity of three months or less.

     Contract accounting and accounts receivable

     The Company primarily derives its revenues from providing environmental
management services in the United States, principally to federal, state and
local governmental entities, large industrial companies, utilities and waste
generators. Services are performed under time-and-material, cost-reimbursement,
fixed-price and unit-bid contracts.

     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 in the ordinary course of business, leading to some
estimates of claim amounts being included in revenues. When such amounts are
finalized, any changes from the estimates are reflected in earnings.

     Unbilled receivables typically represent amounts earned under the Company's
contracts but not billable according to the contract terms, which usually
consider the passage of time, achievement of certain milestones or completion of
the project. Generally, unbilled receivables are expected to be billed and
collected in the subsequent fiscal year. Included in unbilled receivables at
March 27, 1998 is $23,000,000 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 and
should be settled within one year. This $23,000,000 excludes contract claims in
litigation (see Notes to Consolidated Financial Statements - 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. Included in unbilled receivables at March
28, 1997 was $9,200,000 of claims related to the Helen Kramer project which was
subject to a governmental investigation. The Company settled this claim in
December 1997. (See Commitments and contingencies-Helen Kramer contract.)


                                       35

<PAGE>   37


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Included in accounts receivable at March 27, 1998 are billed receivables,
unbilled receivables and retention in the amounts of $191,773,000, $26,996,000
and $10,887,000, respectively. Billed receivables, unbilled receivables and
retention from the U.S. Government as of March 27, 1998 were $97,482,000,
$9,908,000 and $2,201,000, respectively. At March 28, 1997, billed receivables,
unbilled receivables and retention were $89,975,000, $12,305,000 and $7,982,000,
respectively. Billed receivables, unbilled receivables and retention from the
U.S. Government as of March 28, 1997 were $42,501,000, $9,162,000 and
$4,105,000, respectively. Billings in excess of revenues represent amounts
billed in accordance with contract terms, which are in excess of the amounts
includable in revenue.

     The Company performs periodic evaluations of its customers' financial
condition and generally does not require collateral. At March 27, 1998, 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.

     The allowance for doubtful accounts was $19,026,000 at March 27, 1998
compared to $2,055,000 at March 28, 1997. This increase was due to the OHM
acquisition which includes allowances for specifically identified receivables
that are currently in litigation.

     Property, plant and equipment

     The cost of property, plant and equipment is depreciated using primarily
the straight-line method over the following useful lives of the individual
assets: buildings-20 to 30 years, land improvements-3 to 20 years, and machinery
and equipment-5 to 10 years including salvage value. The Hybrid Thermal
Treatment System(R) (HTTS(R)) transportable incineration units are depreciated
over the shorter of in-production operating days or on an 8-year straight-line
basis (idle basis) to salvage value. The HTTS units are currently idle and
subsequent to fiscal year end 1998, on May 27, 1998, the Company announced a
plan to exit the HTTS thermal business. (See Notes to Consolidated Financial
Statements Subsequent Events.) Amortization of leasehold improvements is
provided using the straight-line method over the term of the respective lease.

     In March 1995, the FASB issued Statement of Accounting Standards No. 121
(SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying value. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company has adopted SFAS No. 121 in fiscal year 1997 which did not result in any
material impact on the results of operations or financial position of the
Company. Long-term assets of discontinued operations (see Discontinued
operations) are accounted for under APB Opinion No. 30, "Reporting the Results
of Operations" and are not subject to SFAS No. 121.

     Interest

     Interest incurred on qualified capital expenditures is capitalized and
included in the cost of such constructed assets. Interest incurred was
$10,730,000, $7,168,000 and $7,014,000 for fiscal years 1998, 1997 and 1996,
respectively. Interest capitalized was $10,000 in fiscal year 1998. No interest
was capitalized in fiscal years 1997 or 1996.

     Interest income is principally earned on the Company's investments in cash
equivalents and was $2,751,000, $1,908,000 and $569,000 in fiscal years 1998,
1997 and 1996, 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 March 27, 1998 and March 28, 1997,
accumulated amortization is $9,576,000 and $8,143,000, respectively. The

                                       36

<PAGE>   38


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Company periodically evaluates the recoverability of intangibles resulting from
business acquisitions and measures the amount of impairment, if any, by
assessing current and future levels of income and cash flows as well as other
factors, such as business trends and prospects and market and economic
conditions. Other intangibles arising principally from acquisitions, are
amortized on a straight-line basis over periods not exceeding 20 years.

     Stock-based compensation

     The Company grants stock options for a fixed number of shares to employees
and members of the Board of Directors with an exercise price equal to the fair
value of the shares at the date of grant. The Company accounts for stock
compensation arrangements in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB No. 25") and accordingly, recognizes no
compensation expense for the stock compensation arrangements. The pro forma
information regarding net income and earnings per share as required by Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") is disclosed in the note Stock incentive plans:
Compensation cost.

     Risks and uncertainties

     The Company provides a broad range of environmental and hazardous waste
remediation services to its clients located primarily in the United States. The
assessment, remediation, analysis, handling and management of hazardous
substances necessarily involve significant risks, including the possibility of
damages or injuries caused by the escape of hazardous materials into the
environment, and the possibility of fines, penalties or other regulatory action.
These risks include potentially large civil and criminal liabilities for
violations of environmental laws and regulations, and liability to customers and
to third parties for damages arising from performing services for clients, which
could have a material adverse effect on the Company. Although the Company
believes that it generally benefits from increased environmental regulations and
from enforcement of those regulations, increased regulation and enforcement also
create significant risks for the Company.

     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 governmental agencies accounted for 63%, 67% and
69% of revenue for fiscal years 1998, 1997 and 1996, 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 Company's business. 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 Summary of significant accounting policies - Business
Acquisitions and Commitments and contingencies.)





                                       37

<PAGE>   39


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Per share information

     Per share information is based on the weighted average number of
outstanding common shares and common share equivalents during each period which
aggregated 9,737,130 in 1998, 9,226,596 in 1997 and 8,981,827 in 1996.

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which was required to be adopted on December 31,
1997. The Company has changed the method used to compute earnings per share and
restated all prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options is excluded. For all
periods presented, shares of common stock issuable upon conversion of the
Company's convertible preferred stock, common stock warrants, contingently
issuable shares and common stock options are antidilutive, and therefore
excluded from the diluted earnings per share calculation.

     Fair value of financial instruments

     The following methods and assumptions were used by the Company in
estimating the fair value of its 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 8% convertible subordinated
debentures was based on a quoted market price at March 27, 1998. For fiscal year
1997, a reasonable estimate of the fair value for the 9.42% senior secured notes
was based upon a discounted cash flow analysis. 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:

<TABLE>
<CAPTION>
                                                      March 27, 1998                      March 28, 1997
                                                 -------------------------          -------------------------
                                                 Carrying        Estimated          Carrying        Estimated
                                                  amount        fair value           amount        fair value
                                                  ------        ----------           ------        ----------
                                                                         (In thousands)
<S>                                              <C>             <C>                 <C>             <C>    
Cash and cash equivalents                        $ 24,765        $ 24,765            $78,897         $78,897

Long and short-term debt:
     9.42% senior secured notes                        --              --             65,000          63,329
     Credit agreement debt:
         Revolver borrowings outstanding-
              Bank of America                      33,200          33,200                 --              --
         Revolver borrowings outstanding-
              Citibank                            126,293         126,293                 --              --
         Term Loan - Citibank                      80,000          80,000                 --              --
     8% Convertible Subordinated Debentures-
         Due October 1, 2006                       46,753          45,643                 --              --
     Other                                         15,189          15,189              6,217           6,217
</TABLE>



                                       38

<PAGE>   40


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES:

   Supplemental cash flow information is:
                                                      Year ended
                                       ----------------------------------------
                                         March 27,      March 28,     March 29,
                                           1998           1997          1996
                                       ------------   ------------   ----------
                                                     (In thousands)
   Interest paid, net of amounts
     capitalized                          $ 11,060       $ 6,713        $ 7,184
   Interest received                         2,652         1,730            293
   Income taxes paid                           770           287          1,860
   Income tax refunds received                   3         1,178              2
   Acquisition liabilities assumed         218,440         6,346          1,155

SPECIAL CHARGES:

     Special charges of $14,248,000 were recorded in fiscal year 1998. These
special items include $5,694,000 for integration costs associated with the
acquisition of OHM, $3,943,000 non-cash charge related to the Helen Kramer
project claim settlement, $2,811,000 charge associated with the relocation of
the Company's corporate headquarters, and $1,800,000 loss from the sale of a
small remediation services business.

     In the fourth quarter of fiscal year 1998, the Company recorded a
$5,694,000 special charge for integration costs associated with the acquisition
of OHM. The integration charge included $2,197,000 of costs for severance and
$3,497,000 of costs and other related items for closing and consolidating IT
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 an integration plan to close three leased facilities, reduce the size
of three facilities and subleased a portion of eight IT facilities by moving
into OHM facilities to consolidate offices located in the same area. As of March
27, 1998, $4,526,000 of the integration charge remained to be paid. By December
25, 1998, approximately 50% of this amount is expected to be paid as the
integration process between IT and OHM becomes substantially complete. 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 four years. One lease requires payments
over the next seven years. Subleasing efforts commenced in February 1998
primarily through a relationship established with a national real estate firm.

     In December 1997, the Company 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 the joint venture of IT and Davy
International at the Helen Kramer Superfund project. On December 26, 1997, the
joint venture received a $14,500,000 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 $4,300,000 to the
Government to resolve related civil claims by the Government. IT's share of the
joint venture results is 60%, accordingly, IT received net cash of $6,000,000,
its proportionate share of the settlement. In December 1997, the Company
recorded a non-cash pre-tax charge of $3,943,000 as the cash received was less
than the unbilled and billed receivables related to this project which totaled
approximately $9,200,000 and $700,000, respectively.

     The special charges that occurred in the first quarter of fiscal 1998
resulted from the relocation of the Company's corporate headquarters from
Torrance, California to Monroeville (Pittsburgh), Pennsylvania and the sale of
its California based small project remediation services business. The
headquarters relocation consolidated the corporate overhead functions with the
Company's largest operations office and closer to its lenders and largest
shareholders which are located in the Eastern United States. As a result of this
relocation, the Company incurred a pre-tax charge of $2,811,000. The relocation
charge included $790,000 of costs for severance, $953,000 of costs for the
relocation of IT employees, $710,000 of costs related to the closure of the
offices in Torrance, California and $358,000 of other related costs. As part of
this relocation, 32 employees were laid off, primarily corporate management and
administrative support personnel. As

                                       39

<PAGE>   41


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


of March 27, 1998, $312,000 remained to be paid, primarily relating to employee
relocation and office closure. In May 1997, the Company incurred a non-cash
pre-tax charge of $1,800,000 to sell its California based small projects
remediation services business.

     In conjunction with the corporate restructuring which was initiated in the
second quarter of fiscal year 1997, the Company incurred a pre-tax restructuring
charge of $8,403,000. The restructuring charge included $3,400,000 of costs for
severance, $4,100,000 of costs for closing and reducing the size of a number of
the Company's offices, and $903,000 of costs for other related items. As part of
the plan of termination, the Company laid-off 133 employees and paid over
$2,460,000 in termination benefits. In addition, the Company approved a plan to
close five leased facilities and reduce the size of eleven other leased
facilities by either sublease or abandonment. Most of the remaining costs to be
paid relate to the facility closures and office space reductions which will be
paid out over the terms of the lease. One of these facility closures has a
remaining lease obligation of approximately seven years. At March 27, 1998,
$1,187,000 of the charge remained to be paid.

QUANTERRA:

     In January 1996, the Company and Corning completed an agreement to
recapitalize Quanterra which resulted in a change in Quanterra's ownership to
19% by IT and 81% by Corning. IT decided it would be in the best interest of the
Company to negotiate a structure for its Quanterra investment that would sustain
Quanterra's future potential but limit future IT capital requirements. This
approach allowed IT to invest its available resources in its core business. The
recapitalization included a $25,000,000 infusion of new equity in Quanterra, of
which $2,500,000 was contributed by IT. In addition, IT sold a common stock
interest in Quanterra to Corning in consideration of the exchange of 83,250
shares of IT stock and warrants to purchase 500,000 shares of IT common stock,
previously issued to Corning in connection with the formation of Quanterra.
These shares and warrants were subsequently retired by IT. IT also received a
put option allowing it to sell its shares to Quanterra at market value in the
year 2003. The Company reported a pre-tax charge of $24,595,000 to reflect the
impairment in the value of IT's investment resulting from and subsequent to the
recapitalization transaction. The events that led to the other than temporary
decline in the value of the Company's investment in Quanterra occurred in
December 1995 when it became evident that Quanterra's net loss would increase
significantly in comparison to the September 1995 quarterly results and it
became apparent that Quanterra would require additional capital from its owners
to meet its liquidity needs in 1996. These two events led to the
recapitalization transaction and the Company's loss recognition. As a result of
the recapitalization, IT's investment in Quanterra, which was previously
accounted for under the equity method, is currently accounted for on the cost
basis. 

     On May 27, 1998, IT's Board of Directors considered and approved the
divestiture of certain non-core assets. The non-core assets include the
Company's 19% common stock ownership interest in Quanterra, Inc., an
environmental laboratory business, which is currently recorded at $16,300,000.
The Company expects to sell its investment in Quanterra for approximately
$6,000,000, and as a result, the Company anticipates recording a non-cash charge
of approximately $10,000,000 in the quarter ended June 26, 1998. (See Notes to
Consolidated Financial Statements - Subsequent Events).





                                       40

<PAGE>   42


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


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 $8,000,000 or
$4,960,000, net of income tax benefit of $3,040,000, primarily for additional
closure costs related to the approval of the closure plan by the DTSC for the
Panoche disposal site. Prior to fiscal year 1998, the Company cumulatively
recorded a provision for loss on disposition of transportation, treatment and
disposal discontinued operations (including the initial provision and three
subsequent adjustments) in the amount of $160,192,000, net of income tax benefit
of $32,879,000. The adjustments principally related to a writeoff of the
contingent purchase price from the earlier sale of certain assets, increased
closure costs principally due to delays in the regulatory approval process, and
costs related to certain waste disposal sites where IT has been named a
potentially responsible party (PRP). The Company has funded previously accrued
costs of $14,914,000 in 1998, $15,698,000 in 1997 and $11,704,000 in 1996
relating to the closure plans and construction and PRP matters. The Company
expects to incur costs over the next several years; however, the nature of the
costs will change from closure to monitoring. At March 27, 1998, the Company's
consolidated balance sheet included accrued liabilities of approximately
$19,000,000 to complete the closure and post-closure of its disposal facilities
and the PRP matters, net of certain trust fund and annuity investments,
restricted to closure and post-closure use.

     The $19,000,000 in accrued liabilities includes reserves of $42,200,000 for
the closure, clean up and post closure care of the Company's Northern California
Sites and $2,400,000 for the settlement of alleged liabilities with regard to
the OII, GBF and other third party site clean up matters, offset against
$25,600,000 of related assets predominantly consisting of trust funds primarily
invested in high quality common stock and AAA rated corporate and government
bonds, which are recognized at fair market value and annuity investments noted
above.

     The annuities and trust fund assets are held in a legally binding trust
agreement by a third party trustee naming the California EPA, Department of
Toxic Substances control (DTSC) as the beneficiary of the trust. The trust
agreement was entered into pursuant to a 1989 consent agreement between the
Company and DTSC. As closure and post closure obligations are met by the
Company, DTSC is obligated to release funds from the trusts to reimburse the
Company to pay for work completed.

     The provision for loss on disposition of transportation, treatment and
disposal discontinued operations is based on various assumptions and estimates,
including those discussed below. The adequacy of the provision for loss has been
currently 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. 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.

     Northern California Facilities

     As a part of the Company's discontinued transportation, treatment, and
disposal operations, the Company operated a series of treatment, storage and
disposal facilities in California, including four (4) major disposal facilities.
Closure plans for all four of these facilities have now been approved by all
applicable regulatory agencies. Closure construction has been completed at two
of these facilities (Montezuma Hills and Benson Ridge) and is substantially
completed at a third (Vine Hill), with final completion expected during the 
spring of 1999.


                                       41

<PAGE>   43


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     On March 18, 1998, the DTSC certified the Environmental Impact Report and
approved the Closure Plan for the Panoche facility. The approved plans are
generally consistent with IT's proposed plans for most of the site, with some
modifications to the Company's plans for the landfill cap and additional
relocation of certain wastes in a peripheral area of the site. The approved
plans also provide for future submittal of technical studies that will be
utilized to determine final aspects, details and costs of closure construction
and monitoring programs. While IT believes that the approved closure plans
substantially reduce future cost uncertainties to complete the closure of the
Panoche facility, the ultimate costs will depend upon the results of the
technical studies called for in the approved plans. Closure construction for the
plan is scheduled to be completed within three years of approval of the plan. As
a part of the closure process, the Company will excavate drums buried in a
portion of the facility. The drums are the alleged source of low levels of
contaminants which have migrated through groundwater underneath a portion of
municipally-owned land adjacent to the facility.

     Closure and post-closure costs are incurred over a significant number of
years and are subject to a number of variables including, among others,
negotiations regarding the details of site closure and post-closure, with DTSC,
USEPA, the California State Water Resources Control Board, the California Air
Resources Board, Regional Water Quality Control Boards (RWQCBs), Air Quality
Management Districts, various other state authorities and certain applicable
local regulatory agencies. Operation of the facilities in the closure and
post-closure periods is also subject to regulation by the same agencies. Closure
costs are comprised principally of engineering, design and construction costs
and of caretaker and monitoring costs during closure. Upon completion of closure
construction, the Company is required to perform post-closure monitoring and
maintenance of its disposal facilities for at least 30 years. The Company has
estimated the impact of closure and post-closure costs in the provision for loss
on disposition of transportation, treatment and disposal discontinued
operations; however, 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 regulatory permit
conditions.

     Regulations of the DTSC and the United States Environmental Protection
Agency (USEPA) require that owners and operators of hazardous waste treatment,
storage and disposal facilities provide financial assurance for closure and
post-closure costs of those facilities. The Company has provided such financial
assurance equal to its estimate for closure and post closure costs at March 1,
1998, which could be subject to increase at a later time as a result of
regulatory requirements, in the form of a corporate guarantee of approximately
$18,000,000, and approximately $25,600,000 in trust funds and purchased
annuities which will ultimately mature over the next 30 years to pay for its
estimates of post-closure costs. Additionally, the Company will be required to
notify the DTSC with respect to the impact, if any of the Merger with OHM and
any other related transactions on the Company's requirement to provide financial
assurance for the closure and post closure of its Northern California facilities
and may be required to provide additional or alternate financial assurance.

     The carrying value of the long-term assets of transportation, treatment and
disposal discontinued operations of $40,048,000 at March 27, 1998 is principally
comprised of residual land at the inactive disposal facilities (a substantial
component of which is adjacent to those facilities and was never used for waste
disposal) and assumes that sales will occur at market prices estimated by the
Company based on certain assumptions (entitlements, development agreements,
etc.), taking into account market value information provided by independent real
estate appraisers. A portion of the residual land is the subject of a local
community review of growth strategy. This review has recommended strategies for
limiting growth in the area applicable to certain of the Company's property,
which have been incorporated in a draft general plan and environmental impact
report which were released for public comment in the spring of 1998. Ultimately,
if development plans are materially restricted or acceptable entitlements are
unobtainable, the carrying value of this property could be significantly
impaired. The Company is also pursuing favorable planning changes with respect
to certain other nearby property. None of these strategies or changes have been
finalized. There is no assurance as to the timing of development or sales of any
of the Company's residual land, or the Company's ability to ultimately liquidate
the land for the sale prices assumed. 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.


                                       42

<PAGE>   44


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     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 $32,000,000 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. Subsequently, USEPA alleged that
the Company had generated approximately 2% by volume of the manifested hazardous
wastes disposed of at the site, and the Company was also served with lawsuits
brought by members of a group of PRPs (the Steering Committee).

     Between October 1995 and April 1996, the Company, the USEPA and the
Steering Committee agreed to settlements of the Company's alleged liability for
response costs incurred by the USEPA pursuant to the first three partial consent
decrees entered into in connection with the OII site pursuant to which the
Company paid $5,400,000 to the USEPA and $250,000 to the Steering Committee.
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. In September 1996, the USEPA released a final record of decision
selecting the final remedy for the site. Response costs for the final remedy are
estimated by USEPA to be approximately $161,800,000. The Company believes that
this estimate does not take into account the benefits of certain work to be
performed under the previous consent decrees and therefore substantially
overstates the remaining cost. The USEPA has requested, and the Steering
Committee and the Company have submitted, proposals to work cooperatively with
interested parties respect to the final remedy.

     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 (whether because of differences in the protections obtained
by the Steering Committee and the Company under the various consent decrees to
which Steering Committee members and the Company are subject, failure of other
PRPs to pay their proportionate shares, or otherwise), the cost to the Company
of concluding this matter could materially increase.

     GBF Pittsburg Site

     In September 1987, the Company and 17 other companies were served with a
Remedial Action Order (RAO) issued by the DTSC, concerning the GBF Pittsburg
landfill site near Antioch, California, a site which had been proposed by the
USEPA to be added to the National Priorities List under CERCLA. (Additional
PRPs, consisting primarily of known waste generators, were subsequently served
with amended RAOs by the DTSC.) 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. The activity ceased in 1974, and the Company's
predecessor's facility was closed pursuant to a closure plan approved by the
appropriate RWQCB. Both of the parcels were then operated by other parties as a
municipal and industrial waste site (overlying the former liquid hazardous waste
site) and, until 1992, continued to accept municipal waste. Water quality
samples from monitoring wells in the vicinity of the site were analyzed by the
property owner in August 1986 and indicated the presence of volatile organics
and heavy metals along the periphery of the site.

     In June 1997, the DTSC completed and released a final Remedial Action Plan
(RAP) selecting DTSC's preferred alternative of actively pumping and treating
groundwater from both the alleged source points of contamination and the edge of
the allegedly contaminated groundwater plume emanating from the site, which DTSC
estimated to cost between $18,000,000 and $33,000,000, depending upon whether
certain options for discharge of produced waters are available. 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 $4,000,000. (The DTSC also seeks approximately $1,000,000 in
oversight costs from all PRPs.) The PRP group continues to believe that its
preferred alternative of continued limited site monitoring, which was estimated
to cost approximately $4,000,000, is appropriate in part because the studies
conducted by the PRP group indicate that groundwater quality impact is not
affecting drinking water supplies and has filed an application with the
appropriate RWQCB for designation of the site as a containment zone which, if
approved, would facilitate the PRP group's preferred remedial alternative.

                                       43

<PAGE>   45


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



     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 Agency Contra Costa County, California Superior Court
Case No. C97-02936) challenging the final RAP, and the PRP group and the DTSC
have agreed to stay this litigation and implementation of major RAP elements
pending the RWQCB's review of the containment zone application.

     In the final RAP the DTSC assigned the Company and the other members of the
PRP group collective responsibility for 50% of the site's response costs.
Although the DTSC's allocation of responsibility is not binding except in very
limited circumstances, 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 because, among other things, the ground
water quality impact is not attributable solely to the portion of the site
previously operated by it's predecessor, 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 of the site have denied responsibility and have not cooperated
with the PRP group in its efforts to study and characterize the site, except for
limited cooperation which was offered shortly after the September 1987 RAO and,
currently, with respect to DTSC's attempts to cause the selection of its
preferred remedial alternative. The owner/operators are vigorously defending the
PRP group's litigation, and the outcome of the litigation cannot be determined
at this time.

     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.

     Environmental Protection Corporation Site

     In March 1995, IT was notified by the DTSC that it was among 13 companies
identified as potentially responsible for costs associated with investigation
and cleanup of the Environmental Protection Corporation (EPC) site known as the
Eastside Facility near Bakersfield, California. IT transported various waste
streams both generated by IT and on behalf of its customers to the Eastside
Facility at various times during that facility's operation and it was a minority
shareholder in EPC for a period of its operations. Because of the early stage of
the matter, the potential costs associated with the remediation of the Eastside
facility cannot be reasonably estimated.

     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 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.



                                       44

<PAGE>   46


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


LONG-TERM DEBT:

     Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                          March 27,        March 28,
                                                            1998             1997
                                                            ----             ----
                                                                (In thousands)

<S>                                                          <C>           <C>       
8% Convertible Subordinated Debentures-
        Due October 1, 2006 .......................        $ 46,753        $    --

Senior secured notes, due 2001 - 2003 .............              --         65,000
Credit Agreement Debt:
    Revolver borrowings outstanding-Bank of America          33,200             --
    Revolver borrowings outstanding-Citibank ......         126,293             --
    Term Loan-Citibank ............................          80,000             --

Other .............................................          15,189          6,217
                                                           --------        -------
                                                            301,435         71,217
Less current portion ..............................          16,738          5,343
                                                           --------        -------
                                                           $284,697        $65,874
                                                           ========        =======
</TABLE>

     Aggregate maturity of long-term debt, including annual mandatory sinking
fund payments for the convertible subordinated debentures, for the five fiscal
years following March 27, 1998 is: 1999, $16,738,000; 2000, $11,387,000; 2001,
$9,143,000; 2002, $8,813,000; 2003 and thereafter $255,354,000.

     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% of the principal amount which commenced in 1996,
and continue through October 1, 2005.

     On May 31, 1995, OHM entered into a $150,000,000 revolving credit agreement
with a group of banks (the "Bank Group") to provide letters of credit and cash
borrowings. The agreement has a five year term to expire on May 30, 2000. Under
the terms of the agreement the entire credit facility could be used for either
cash borrowings or letters of credit subject to certain covenants. Cash
borrowings bore interest at either the prime rate (8.5% at March 27, 1998) plus
a percentage up to 0.625% or, at the Company's option, the Eurodollar market
rate (6.11% at March 27, 1998) plus a percentage ranging from 0.325% to 1.625%.
This facility was repaid in full, and canceled with the closing and funding of
the Merger Credit Facility on June 11, 1998.

     IT executed the OHM Tender Offer with a $240,000,000 credit facility (the
"Tender Offer Credit Facilities"). The Tender Offer Credit Facilities were used
to complete the Tender Offer, to refinance IT's $65,000,000 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. The Tender Offer Credit Facilities provided amounts up to
$240,000,000, consisting of an $80,000,000 tender note for eighteen-months, and
a $160,000,000 revolving credit facility, including a sublimit of $25,000,000
for letter of credit issuance. Loans made under the Tender Offer Credit
Facilities bore interest at a rate equal to LIBOR plus 2.50% per annum (or
Citibank's base rate plus 1.50% per annum) through June 10, 1998, at the
Company's option. The Company recorded an extraordinary charge of $9,203,000,
reduced by $3,497,000 of deferred tax benefit, as the result of the early
extinguishment of existing Company debt, to obtain the Tender Offer Credit
Facilities. On June 11, 1998, upon consummation of the second step of the OHM
acquisition (see Business Acquisitions above), the Company's Tender Offer Credit
Facilities were replaced by the Merger Credit Facilities. As such, the Company
classified applicable portions of the Tender Offer Credit Facilities outstanding
as of March 27, 1998 as long-term debt in accordance with the provisions of the
Merger Credit Facilities.

     The Merger Credit Facilities consist of an eight-year amortizing term loan
(term loans) of $228,000,000 and a six-year revolving credit facility (revolving
loans) of $150,000,000 that contains a sublimit of $50,000,000 for letter of
credit

                                       45

<PAGE>   47


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


issuance. The term loans made under the Merger Credit Facilities bear interest
at a rate equal to LIBOR plus 2.50% per annum (or Citibank's base rate plus
1.50% per annum)and amortize on a semi annual basis in aggregate annual
installments of $4,500,000 for the first six years after the Merger, with the
remainder payable in eight equal quarterly installments in the seventh and
eighth years after the Merger. The revolving loans made under the Merger Credit
Facilities bear interest at a rate equal to LIBOR plus 2.00% per annum (or
Citibank's base rate plus 1.00% per annum). Six months after completion of the
merger, adjustments to the interest rates will be made based on the ratio of
IT's consolidated total debt to consolidated earnings before interest, taxes,
depreciation and amortization. The Merger Credit Facilities are secured by a
security interest in substantially all of the assets of the Company and its
subsidiaries. In addition, the facilities also contain certain restrictive
covenants that, among other things, prohibit the payment of cash dividends on
common stock, limit capital expenditures, and require the Company to meet
certain financial targets. Letters of credit outstanding at March 27, 1998 were
$26,600,000 for the consolidated company.

     The Company also has various miscellaneous outstanding notes payable and
capital lease obligations totaling $15,189,000. These notes payable mature at
various dates between June 1998 and November 2000, at interest rates ranging
from to 6.909% to 9.50%.



                                       46

<PAGE>   48


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


INCOME TAXES:

     The benefit for income taxes, net of changes in the deferred tax valuation
allowance, consists of the following:

                                           Year ended
                        --------------------------------------------------
                        March 27,           March 28,            March 29,
                          1998                1997                 1996
                          ----                ----                 ----
                                        (In thousands)
Current:
  Federal                $    54             $   (764)            $  1,098
  State                      559                  215                  346
                         -------             --------             --------
                             613                 (549)               1,444
                         -------             --------             --------
Deferred:
  Federal                 (2,801)                 336              (11,942)
  State                     (174)                  57               (1,792)
  Foreign                     --                  (23)                  --
                         -------             --------             --------
                          (2,975)                 370              (13,734)
                         -------             --------             --------
Total benefit            $(2,362)            $   (179)            $(12,290)
                         =======             ========             ========


The benefit for income taxes is included in the statements of operations as
follows:

<TABLE>
<CAPTION>
                                                                               Year ended
                                                           --------------------------------------------------
                                                           March 27,           March 28,            March 29,
                                                             1998                1997                 1996
                                                             ----                ----                 ----
                                                                           (In thousands)

<S>                                                         <C>                 <C>                  <C>      
Continuing operations before extraordinary items            $ 4,175             $   (179)            $(12,290)
Extraordinary item: early extinguishment of debt             (3,497)                  --                   --
                                                            -------             --------             --------
                                                                678                 (179)             (12,290)
Discontinued operations                                      (3,040)                  --                   --
                                                            -------             --------             --------
Total benefit                                               $(2,362)            $   (179)            $(12,290)
                                                            =======             ========             ========
</TABLE>

     A reconciliation of the provision (benefit) for income taxes on the total
benefit computed by applying the federal statutory rate of 34% to the loss from
continuing operations before income taxes and the reported provision (benefit)
for income taxes of the total benefit is as follows:
<TABLE>
<CAPTION>
                                                                               Year ended
                                                           --------------------------------------------------
                                                           March 27,           March 28,            March 29,
                                                             1998                1997                 1996
                                                             ----                ----                 ----
                                                                           (In thousands)

<S>                                                         <C>                 <C>                  <C>      
Income tax benefit computed at
  statutory federal income tax rate                        $  (743)            $(3,045)            $ (3,993)
State income taxes, net of federal tax
  benefit, if any                                              504                 179                 (954)
Equity in income (loss) of foreign subsidiaries                121                  --                   --
Amortization of cost in excess of net assets
  of acquired businesses                                       287                 100                  199
Equity in net loss of Quanterra                                 --                  --               (2,366)
Extraordinary item: early extinguishment
  of debt                                                   (3,129)                 --                   --
Discontinued operations                                     (2,720)                 --                   --
Federal deferred tax asset valuation
  allowance adjustment                                       1,906               2,597               (5,539)
Other                                                        1,412                 (10)                 363
                                                           -------             -------             --------
Total provision (benefit)                                  $(2,362)            $  (179)            $(12,290)
                                                           =======             =======             ========
</TABLE>

                                       47

<PAGE>   49


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



     At March 27, 1998 and March 28, 1997, the Company had deferred tax assets
and liabilities as follows:

<TABLE>
<CAPTION>
                                                                March 27,            March 28,
                                                                  1998                  1997
                                                                  ----                  ----
                                                                        (In thousands)
<S>                                                             <C>                   <C>     
Deferred tax assets:
    Closure accruals - discontinued operations                  $  15,771             $ 18,468
    NOL carryforwards                                              72,319               20,481
    Tax basis in excess of book basis in Quanterra                 11,145               11,145
    Alternative minimum tax credit carryforwards                    3,458                2,240
    Investment and other tax credit carryforwards                  10,474                2,601
    Other accrued liabilities                                      17,050               11,193
    Asset basis difference - OHM                                   25,987                   --
    Other, net                                                      7,933                3,053
                                                                ---------             --------
        Gross deferred tax asset                                  164,137               69,181
    Valuation allowance for deferred tax asset                    (31,865)              (9,471)
                                                                ---------             --------
        Total deferred tax asset                                  132,272               59,710

Deferred tax liabilities:
    Tax depreciation in excess of book depreciation               (19,465)              (9,235)
    Asset basis difference - discontinued operations              (13,012)             (13,012)
    Other, net                                                    (13,300)              (5,347)
                                                                ---------             --------
        Total deferred tax liabilities                            (45,777)             (27,594)
                                                                ---------             --------

        Net deferred tax asset                                  $  86,495             $ 32,116
                                                                =========             ========

Net current asset                                               $  12,750             $ 11,324
Net noncurrent asset                                               73,745               20,792
                                                                ---------             --------
        Net deferred tax asset                                  $  86,495             $ 32,116
                                                                =========             ========
</TABLE>

Approximately $7,100,000 of the valuation allowance relates to the OHM
acquisition. Tax benefits subsequently recognized that are related to these
amounts will reduce cost in excess of net assets of acquired businesses. 

     At March 27, 1998, the Company had net operating losses (NOL's) and tax
credit carryforwards with expiration dates as follows:

<TABLE>
<CAPTION>
                                                                      Research
                                                     Net                 and
                                                  Operating          Development         Other
Expiration Dates                                    Losses           Tax Credits        Credits
----------------                                    ------           -----------        -------
                                                                    (In thousands)
<S>                                            <C>                 <C>               <C>        
     1998 - 2003                               $      516          $     1,140       $     2,381
     2004 - 2008                                   13,831                3,393               107
     2009 - 2013                                  166,944                3,452                 -
     Indefinite                                         -                    -             3,458
                                               ----------          -----------       -----------
      Total                                    $  181,291          $     7,985       $     5,946
                                               ==========          ===========       ===========
</TABLE>

     During the year ended March 27, 1998, the Company increased its deferred
tax asset valuation allowance from $9,471,000 to $31,865,000. 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 fourth
quarter, the Company acquired

                                       48

<PAGE>   50


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


OHM (see OHM Acquisition) which substantially increased projected taxable
income. 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
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 year ended March 28, 1997, the Company increased its deferred
tax asset valuation allowance from $4,869,000 to $9,471,000. This change was
principally due to the Company's assessment of the uncertainty as to when it
will generate a sufficient level of future earnings to realize the deferred tax
asset created by the special charges (see Special Charges).

     During the year ended March 29, 1996, the Company decreased its deferred
tax asset valuation from $12,650,000 to $4,869,000. The cumulative impact of the
resolution in fiscal year 1996 of a number of uncertainties led to a
reassessment of the Company's ability to generate a sufficient level of future
earnings to realize a greater portion of its related deferred tax asset,
resulting in a release of valuation allowance.

                                       49

<PAGE>   51


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED
                                                                    --------------------------------------------------
                                                                    MARCH 27,            MARCH 28,           MARCH 29,
                                                                      1998                 1997                1996
                                                                      ----                 ----                ----
                                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                 <C>                  <C>                  <C>    
Numerator:
     Income (loss) from continuing operations
      and before extraordinary items                                $ (6,360)            $ (8,777)            $   546
     Preferred stock dividends                                        (6,167)              (4,916)             (4,200)
                                                                    --------             --------             -------
     Numerator for basic and dilutive earnings
      per share-income available to common
      stockholders                                                   (12,527)             (13,693)             (3,654)
     Discontinued operations (net of income tax benefit)
      loss from disposition                                           (4,960)                  --                  --
                                                                    --------             --------             -------
                                                                     (17,487)             (13,693)             (3,654)
     Extraordinary charge for early retirement of debt
      (net of income tax benefit)                                     (5,706)                  --                  --
                                                                    --------             --------             -------
Net income (loss) applicable to common stock                        $(23,193)            $(13,693)            $(3,654)
                                                                    ========             ========             =======

Denominator:
     Weighted-average number of common shares
         outstanding for basic and dilutive
         earnings per share                                            9,737                9,227               8,982
                                                                    ========             ========             =======

Net loss per share:
     Earnings from continuing operations
         (net of preferred stock dividends)                         $  (1.28)            $  (1.48)            $  (.41)
     Earnings from discontinued operations                              (.51)                  --                  --
     Extraordinary item - early extinguishment of debt                  (.59)                  --                  --
                                                                    --------             --------             -------

Net loss per share                                                  $  (2.38)            $  (1.48)            $  (.41)
                                                                    ========             ========             =======
</TABLE>


----------

In June 1998, approximately 12,900,000 shares were issued in connection with the
second step of the OHM Merger. (See Business Acquisitions.)

COMMITMENTS AND CONTINGENCIES:

     LEASE COMMITMENTS

     The Company's operating lease obligations including OHM 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 March 27, 1998, future minimum rental commitments under
noncancelable operating leases with terms longer than one year aggregate
$116,938,000 and require payments in the five succeeding years and thereafter of
$27,618,000,

                                       50

<PAGE>   52


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


$28,995,000, $24,804,000, $16,728,000, $6,943,000, and $11,850,000,
respectively. A significant portion of these leased assets represent duplicative
facilities and equipment resulting from the OHM acquisition. The Company is
currently and actively involved in subleasing these assets.

     Rental expense related to continuing operations was $12,931,000 (including
$1,175,000 of the special charges), $12,564,000 (including $2,184,000 of the
special charges) and $11,037,000 for fiscal years 1998, 1997 and 1996,
respectively.

     CONTINGENCIES

     Helen Kramer

     The governmental investigation and related contract claims were settled in
December 1997. (See Special Charges.)

     Central Garden

     The Company has determined that the previously disclosed settlements of the
three remaining personal injury cases do not require court approval as a class
action settlement. While there is some potential for additional personal injury
claims to be asserted, the Company believes that this matter can be concluded
within the amounts previously reserved by the Company and the coverage of its
insurance policies.

     Coakley Landfill Action

     On March 9, 1998, the Coakley Landfill PRP Steering Committee terminated,
allegedly for cause, IT'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) The Company disputes that the Steering
Committee is entitled to terminate the agreement for cause and believes the
termination action arose from the Company's pending change order request of
approximately $6,300,000. The Company 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 no trial date has been set and the ultimate outcome of this matter cannot
yet be predicted.

     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 March 27, 1998 include a claim receivable of $8,653,000 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 $8,806,000 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 $9,200,000 (inclusive of
$8,653,000 of claim receivable) for damages arising from Occidental's breach of
contract, misrepresentation and failure to pay outstanding contract amounts. OHM
has established additional reserves for a portion of the receivables related to
this matter. Management believes that it has established adequate reserves
should the resolution of the above matter be lower than the amounts recorded.
Due to the early stage of this matter, its ultimate outcome cannot be predicted.



                                       51

<PAGE>   53


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



     GM - Hughes Massena Litigation

     OHM is in litigation with General Motors Corporation ("GM") in the U.S.
District Court for the Northern District of New York. GM filed suit in January
1996 (General Motors Corporation v. OHM Remediation Services Corporation,
U.S.D.C., N.D.N.Y., Case No. 7:96-CV-1214TJMDS) alleging that OHM breached a
contract between Hughes Environmental Systems, Inc. (HESI), a GM subsidiary, for
work in 1994 for the remediation of 22,000 cubic yards of PCB contaminated
sediment in the St. Lawrence River in Massena. GM seeks damages for $3,800,000.
OHM in turn filed suit against HESI and ERM Northeast, Inc. in U.S. District
Court in Northern New York seeking $3,600,000 in damages for breach of contract.
(OHM Remediation Services Corporation v. Hughes Environmental Systems, Inc. And
ERM Northeast, Inc., U.S.D.C., N.D.N.Y., Case No. 7:96-CV-0110TJMDS) The GM suit
was later consolidated with OHM's suit against HESI and ERM. GM alleges that OHM
abandoned the contract through inability to perform while OHM claims that
performance was impacted by conditions at the site that were not as represented.
Due to the early stage of this matter, 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 future
results of operations or financial condition.

     The Company maintains a liability insurance program which includes
commercial general liability, product liability, automotive liability,
employer's liability, workers' compensation, all risk property coverage,
consultants' environmental liability (including errors and omissions),
employment practices liability and directors' and officers' liability insurance
coverage. A portion of the Company's commercial general liability, product
liability, automotive liability and workers' compensation insurance is provided
through arrangements which require the Company to indemnify the insurance
carriers for all losses and expenses under the policies and to support the
indemnity commitments with letters of credit and is, in effect, a self-insurance
layer.

     Environmental Impairment Liability coverage for IT's inactive treatment,
storage and disposal facilities located in Northern California is provided
through the Company's captive insurance subsidiary, which has issued a
$32,000,000 policy which meets the current requirements of both federal and
state law. See Discontinued operations for information regarding certain legal
and governmental proceedings affecting the Company's treatment, storage and
disposal facilities.

GOVERNMENTAL REGULATION:

     The Company is subject to extensive regulation by applicable federal, state
and local agencies. All facets of the Company's business are conducted in the
context of a complex statutory, regulatory and governmental enforcement
framework and a highly visible political environment. The Company's operations
must satisfy stringent laws and regulations applicable to performance. Future
changes in regulations may have an adverse effect on the Company's business.






                                       52

<PAGE>   54


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


PREFERRED STOCK:

     Carlyle Investment

     At the November 20, 1996 Annual Meeting of Stockholders, IT's shareholders
voted to approve a $45,000,000 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 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 $4,391,000) from the Carlyle Investment were $40,609,000.

     Carlyle held approximately 38% of the voting power of IT prior to the
consummation of the Merger (approximately 43% assuming exercise of the Carlyle
Warrants) and approximately 21% (approximately 24% assuming exercise of the
Carlyle Warrants) of the voting power thereafter. Until November 20, 2001, the
holders of the Convertible Preferred Stock have the right to elect a majority of
the IT Board of Directors, provided that such holders continue to hold at least
20% of the voting power of IT. As a result, the Parent Stockholders are in a
position to control the strategic direction of IT, to elect and dismiss IT's
officers and to approve and disapprove significant transactions. The terms of
the Convertible Preferred Stock provide that, to 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 are payable quarterly in kind for the second year at the rate of 3%
per annum and, as of March 27, 1998, Carlyle has been paid dividends of an
additional 271 shares of Convertible Preferred Stock. Thereafter, dividends will
be paid 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 warrants may at any time, at the option
of Carlyle, be converted into IT common shares. At March 27, 1998, 5,964,454 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 are paid at a rate of 0% and 3%,
respectively, dividends will be imputed during this period at a rate of
approximately 6% per annum. Imputed dividends were $2,105,000 and $866,000 in
fiscal years 1998 and 1997, 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.

                                       53

<PAGE>   55




                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     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 March 27, 1998, 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.

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. At March 27, 1998, the maximum number of shares of the
Company's common stock that may be issued pursuant to awards granted under the
1996 Plan is 140,846. At April 1 of each 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. During fiscal year 1998, 132,921
stock options were granted under the 1996 Plan, which expires in fiscal year
2002.

     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. No shares are available for grant under these plans as such authority to
grant as to the 1991 Plan expired in March 1996 and as to the 1983 Plan expired
in September 1993. Options granted under the plans and outstanding at March 27,
1998 will expire at various dates through January 20, 2008.

     Changes in the number of shares represented by outstanding options under
the 1996 Plan, the 1991 Plan and the 1983 Plan during the fiscal years ended
March 27, 1998, March 28, 1997 and March 29, 1996 are summarized as follows:


                                       54

<PAGE>   56


                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


<TABLE>
<CAPTION>
                                                                           Year ended
                                                      ----------------------------------------------------
                                                      March 27,             March 28,            March 29,
                                                        1998                  1997                  1996
                                                        ----                  ----                  ----
<S>                                                    <C>                   <C>                   <C>    
     Outstanding at beginning
       of year                                         747,679               744,847               784,895

     Options granted
       (1998, $7.00 - $8.50 per share;
       1997, $8.63 per share;
       1996, $10.50 - $13.00 per share)                132,921               171,000                39,750

     Options exercised
       (1997 and 1996, $11.50 per share)                     -                (3,629)                 (575)

     Options expired and forfeited                    (110,143)             (164,539)              (79,223)
                                                    ----------            ----------            ----------

     Outstanding at end of year
       ($7.00 - $32.50 per share)                      770,457               747,679               744,847
                                                    ==========            ==========            ==========

     Vested options                                    486,520               473,257               462,793
                                                    ==========            ==========            ==========

     Common stock reserved for future issuance         911,298
</TABLE>


     The weighted-average grant date fair values of options granted to employees
in fiscal years 1998, 1997 and 1996 were $6.32, $8.63 and $11.96, respectively.
The weighted-average exercise price for all options outstanding at the end of
fiscal years 1998, 1997 and 1996 were $13.99, $15.96 and $17.55, respectively.
The weighted-average exercise price of options currently exercisable at the end
of fiscal years 1998, 1997 and 1996 was $16.95, $19.04 and $20.64, respectively.
The weighted-average exercise price of options exercised in fiscal years 1997
and 1996 was $11.50 for each year, no options were exercised in 1998, and the
weighted-average exercise price for expired and forfeited options in fiscal
years 1998, 1997 and 1996 was $19.69, $18.53 and $24.78, respectively. The
weighted-average remaining contractual life of options outstanding at the end of
fiscal years 1998, 1997 and 1996 was 6.7 years, 6.8 years and 6.0 years,
respectively.

As of March 27, 1998, approximately 188,000 OHM stock options remained
outstanding and converted into approximately 262,000 IT stock options on June
11, 1998.

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 FASB
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 in fiscal years 1998 and 1997,
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: risk-free interest rate

                                       55

<PAGE>   57




                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

based upon zero-coupon U.S. Treasury Notes of 6.38% and 6.0% in fiscal years
1997 and 1998, respectively; no dividend yield; volatility factor of the
expected market price of the Company's common stock of 0.395; and a weighted
average expected life of each option of 6.7 years.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferrable. 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 FAS123, the Company's
net loss applicable to common stock and net loss per common share would have
been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                               Year ended
                                                -----------------------------------------
                                                March 27, 1998             March 28, 1997
                                                --------------             --------------
                                                  (In thousands, except per share data)
<S>                                              <C>                        <C>          
Net loss applicable to common stock
       As reported                               $    (23,193)              $    (13,693)
                                                 =============              =============
       Pro forma                                 $    (24,024)              $    (13,735)
                                                 =============              =============

Net loss per common share
       As reported                               $      (2.38)              $      (1.48)
                                                 =============              =============
       Pro forma                                 $      (2.47)              $      (1.49)
                                                 =============              =============
</TABLE>

       Additionally, under the 1991 Plan, the Company awarded shares of
nonvested restricted stock to officers and key employees which amounted to
266,019 in fiscal year 1996. Vesting of awards is 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 March 27, 1998, the total number
of shares of restricted stock outstanding was 169,908. The cost of restricted
stock awards is generally expensed over the vesting period, which ranges from
two to five years, and amounted to $477,000, $575,000 and $568,000 in fiscal
years 1998, 1997 and 1996, respectively.

MAJOR CUSTOMERS:

       A total of 63%, 67% and 69% of the Company's revenues during fiscal years
1998, 1997 and 1996, respectively, were from federal governmental agencies,
primarily the U.S. Department of Defense (DOD) and the U.S. Department of Energy
(DOE). In fiscal years 1998, 1997 and 1996, the DOD provided 47%, 42% and 51%,
respectively, of the Company's revenues. The DOE provided 9%, 14% and 11% of the
Company's revenues during fiscal years 1998, 1997 and 1996, respectively.

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 funds current costs as accrued, and there are no unfunded
vested benefits. Through June 30, 1995, the Plan required a minimum annual
contribution of 4% of participants' eligible compensation; thereafter, the
required minimum annual contribution is 3% of participants' eligible
compensation. Additionally, beginning July 1, 1995, the Company contributes 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 $160,000 annually.


                                       56

<PAGE>   58




                      INTERNATIONAL TECHNOLOGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

       Pension and profit sharing expense was $3,583,000, $3,614,000 and
$3,601,000 for fiscal years 1998, 1997 and 1996, respectively.

QUARTERLY RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED):

<TABLE>
<CAPTION>
                                                                First            Second             Third             Fourth
                                                               quarter           quarter           quarter            quarter
                                                               -------           -------           -------            -------
<S>                                                            <C>              <C>               <C>               <C>      
1998:
     Revenues .........................................        $ 98,181         $ 102,840         $ 105,157         $ 136,038
     Gross margin .....................................          11,424            11,412            11,770            17,200
     Income (loss) from continuing operations
       before extraordinary item ......................          (2,914)            1,922            (1,840)           (3,528)
     Discontinued operations: transportation, treatment
       and disposal business ..........................              --                --                --             4,960
     Extraordinary item-early extinguishment of debt ..              --                --                --             5,706
     Net income (loss) applicable to common stock .....          (4,447)              385            (3,379)          (15,752)
     Net income (loss) per share:
       Earnings from continuing operations
       (net of preferred stock dividends) .............            (.46)              .04              (.35)             (.52)
       Discontinued operations ........................              --                --                --              (.51)
       Extraordinary item-early extinguishment of debt               --                --                --              (.59)
                                                               --------         ---------         ---------         ---------
                                                               $   (.46)        $     .04         $    (.35)        $   (1.62)
                                                               ========         =========         =========         =========

1997:
     Revenues .........................................        $ 81,416         $  92,490         $  92,513         $  95,712
     Gross margin .....................................           7,779             9,139             9,723            11,497
     Income (loss) from continuing operations .........          (1,541)           (8,890)              371             1,283
     Net income (loss) applicable to common stock .....          (2,591)           (9,940)             (924)             (238)
     Net income (loss) per share ......................        $   (.28)        $   (1.09)        $    (.10)        $    (.02)
                                                               ========         =========         =========         =========
</TABLE>

     From February 25, 1998 through the end of the fourth quarter of fiscal year
1998 results of operations includes the Company's 54% ownership of OHM and the
related 46% minority interest.

     In fiscal year 1998, the Company recorded special charges of $14,248,000.
These special items include a fourth quarter charge of $5,694,000 for
integration costs associated with the acquisition of OHM, a third quarter
non-cash charge of $3,943,000 related to the Helen Kramer project claim
settlement, and first quarter charges including $2,811,000 associated with the
relocation of the Company's corporate headquarters, and $1,800,000 loss from the
sale of a small remediation services business.

     During the second quarter of fiscal year 1997, the Company recorded a
$8,403,000 ($.92 per share) pre-tax and after tax (see Income taxes)
restructuring charge in connection with an organizational realignment (see
Special charges).

SUBSEQUENT EVENTS:

     On May 27, 1998, IT's Board of Directors considered and approved the
divestiture of certain non-core assets. The non-core assets primarily include
the Company's 19% common stock ownership interest in Quanterra, Inc., an
environmental laboratory business, and the assets associated with IT's thermal
incineration business. As a result of these actions, the Company anticipates
recording a non-cash charge of approximately $25,000,000 in the quarter ending
June 26, 1998 and anticipates receiving future cash proceeds of approximately
$7,000,000.




                                       57

<PAGE>   59



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 the registrant's Definitive
Proxy Statement to be filed with the Securities and Exchange Commission for the
Annual Meeting of Stockholders scheduled for September 23, 1998 (the Proxy
Statement) is incorporated herein by reference. See also "Executive Officers of
the Company" in Part I of this report for certain information concerning the
Company's executive officers.


ITEM 11.    EXECUTIVE COMPENSATION.

     The section entitled "Executive Compensation" in the 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 the Proxy
Statement is incorporated herein by reference.


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Section entitled "Certain Transactions" in the Proxy Statement is
incorporated herein by reference.



                                       58

<PAGE>   60
                                     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.


Exhibit No.                        Description
-----------                        -----------

2                 Omitted - Inapplicable.

3(i)              Certificate of Incorporation of the Registrant as amended by
                  Amendment to Certificate of Incorporation filed September 17,
                  1987, with Delaware Secretary of State.(1) and by Certificate
                  of Amendment to Certificate of Incorporation filed June 19,
                  1998, with Delaware Secretary of State.

3(ii)             Amended and Restated Bylaws of the Registrant as amended
                  through June 12, 1998.

4(i)              1.  Certificate of Designations with respect to the
                      Registrant's 7% Cumulative Convertible Exchangeable
                      Preferred Stock, $100 par value.(2)

                  2.  Certificate of Designations, Preferences and Relative,
                      Participating, Optional and Other Special Rights and
                      Qualifications, Limitations and Restrictions Thereof of
                      Cumulative, Convertible Participating Preferred Stock of
                      International Technology Corporation, issued November 20,
                      1996.(3)

4(ii)             1.  Indenture for the Registrant's 7% Convertible Subordinated
                      Debentures Due 2008.(2)

                  2.  Indenture dated as of October 1, 1986 between OHM
                      Corporation and United States Trust Company of New York,
                      Trustee, relating to OHM Corporation's 8% Convertible
                      Subordinated Debentures due October 1, 2006.(4)

                  3.  Specimen Debenture Certificate.(5)

                  4.  First Supplemental Indenture dated as of May 20, 1994 by
                      and among OHM Corporation and United States Trust Company
                      of New York.(6) 

                  5.  Second Supplemental Indenture dated as of June 11, 1998
                      among OHM Corporation, International Technology
                      Corporation, a guarantor, and United States Trust Company
                      of New York

9                 Omitted - Inapplicable.

10(ii)            1.  Amended and Restated Credit Agreement, dated as of June
                      11, 1998, among the Registrant, IT Corporation, OHM 
                      Corporation, the institutions from time to time party
                      thereto as lenders, the institutions from time to time
                      party thereto as issuing banks, Citicorp USA Inc., in its
                      capacity as administrative agent, and BankBoston, M.A., in
                      its capacity as documentation agent.(7) 



                                       59
<PAGE>   61




Exhibit No.                         Description
-----------                         -----------

                  2.  Agreement and Plan of Merger, dated as of January 15,
                      1998, among OHM Corporation, Registrant and IT-Ohio,
                      Inc.(8)

                  3.  Parent Voting Agreement dated January 15, 1998 among OHM
                      Corporation, Registrant and the stockholders of Registrant
                      named therein.(8)

                  4.  Company Voting Agreement dated January 15, 1998 among OHM
                      Corporation, Registrant and the shareholders of OHM
                      Corporation named therein.(8)

                  5.  Option Termination Agreement dated January 15, 1998
                      between James L. Kirk and OHM Corporation.(8)

                  6.  Share Repurchase Agreement dated January 15, 1998 among
                      OHM Corporation, Registrant, Rust International, Inc. and
                      Waste Management, Inc.(8)

                  7.  Second Amended and Restated Share Repurchase Agreement,
                      dated as of February 17, 1998, among OHM Corporation, WMX,
                      Rust, Rust Remedial Services Holding Company Inc. and
                      Registrant.(9)

                  8.  Asset Transfer Agreement among MetPath Inc., the
                      Registrant and IT Corporation dated as of May 2, 1994.(10)

                  9.  Amended and Restated Shareholders' Agreement between
                      Corning Incorporated, the Registrant, IT Corporation and
                      Quanterra Incorporated, dated January 1, 1996.(11)

                  10. Amended and Restated Equity Investors' Undertaking, dated
                      January 19, 1996, from the Equity Investors in favor of
                      Quanterra Incorporated, Citibank, N.A., and Citicorp USA,
                      Inc.(11)

                  11. Agreement, dated January 19, 1996, related to the
                      ownership of IT Corporation, Corning Clinical Laboratories
                      Inc., and Corning Incorporated in Quanterra
                      Incorporated.(11)

                  12. Stock Purchase Agreement dated as of June 17, 1997 by and
                      among OHM Corporation, Beneco Enterprises, Inc., Bennie
                      Smith, Jr., Robert Newberry and Scott Doxey.(12)

                  13. Securities Purchase Agreement dated as of August 28, 1996
                      between the Registrant and certain Purchasers identified
                      therein affiliated with The Carlyle Group (3), including
                      agreement by and between The Carlyle Group and the
                      Registrant re financial advisory and investment banking
                      fees.(13)

                  14. Amendment No. 1, dated November 20, 1996, to Securities
                      Purchase Agreement dated August 28, 1996, by and among the
                      Registrant and certain Purchasers identified therein
                      affiliated with The Carlyle Group.(14)

                  15. Form of Warrant Agreement by and among the Registrant and
                      certain Warrant Holders defined herein affiliated with The
                      Carlyle Group, dated as of November 20, 1996.(3)

                  16. Form of Registration Rights Agreement by and among the
                      Registrant and certain Investors affiliated with The
                      Carlyle Group, dated November 20, 1996.(3)



                                       60


<PAGE>   62



Exhibit No.                           Description
-----------                           -----------

                  17. Master Loan and Security Agreement dated May 11, 1993,
                      between OHM Remediation Services Corp. and BOT Financial
                      Corporation (15) 

                  18. Amendment No. 1 to Master Loan and Security Agreement
                      dated as of January 19, 1995 between BOT Financial
                      Corporation and OHM Remediation Services Corp.(16)

                  19. Promissory Note dated December 23, 1993 executed by OHM
                      Remediation Services Corp. in favor of BOT Financial
                      Corporation.(17)

                  20. Promissory Note dated December 28, 1994 executed by OHM
                      Remediation Services Corp. in favor of BOT Financial
                      Corporation.(6)

                  21. Loan and Security Agreement dated as of August 1, 1994 by
                      and between OHM Remediation Services Corp. and
                      Internationale Nederlanden Lease Structured Finance B.V.
                      (18)

                  22. Promissory Note dated August 31, 1994 executed by OHM
                      Remediation Services Corp. in favor of Internationale
                      Nederlanden Lease Structured Finance B.V.(18)

                  23. Continuing Corporate Guaranty dated as of August 1, 1994
                      executed by OHM Corporation in favor of Internationale
                      Nederlanden Lease Structured Finance B.V.(18)

10(iii)           1.  Non-Employee Directors' Retirement Plan, as amended and
                      restated June 2, 1994 (19)(10), as amended by the Amended
                      and Restated Non-Employee Directors Retirement Plan,
                      Amendment No. 5, dated November 20, 1996.(19)(13)

                  2.  Description of the Special Turn-a-Round Plan (Fiscal Year
                      1995 Management Incentive Plan) of the Registrant.(19)(20)

                  3.  1983 Stock Incentive Plan, as amended.(19)(21)

                  4.  1991 Stock Incentive Plan (19)(22) as modified by waiver
                      dated November 20, 1996, by certain former Non-Employee
                      Directors, in favor of the Registrant.(13)(19)

                  5.  1996 Stock Incentive Plan, as amended and restated
                      effective June 11, 1998.(19)(23)

                  6.  OHM Corporation 1986 Stock Option Plan, as amended and
                      restated as of May 10, 1994.(19)(24)

                  7.  OHM Corporation Nonqualified Stock Option Plan for
                      Directors.(19)(25)

                  8.  OHM Corporation Directors' Deferred Fee Plan. (6)(19)

                  9. Amendment No. 1 to OHM Corporation Directors' Deferred Fee
                     Plan.(16)(19)

                  10. OHM Corporation Retirement Savings Plan, as amended and
                      restated as of January 1, 1994.(6)(19)

                  11. Amendment No. 1 to OHM Corporation Retirement Savings
                      Plan, as amended and restated as of January 1,
                      1994.(16)(19)




                                       61
<PAGE>   63



Exhibit No.                             Description
-----------                             -----------

                  12. Amendment No. 2 to OHM Corporation Retirement Savings
                      Plan, as amended and restated as of January 1, 1994.
                      (19)(26)

                  13. OHM Corporation Retirement Savings Plan Trust Agreement
                      between OHM Corporation and National City Bank, as
                      Trustee, as amended and restated effective July 1, 1994.
                      (6)(19)

                  14. Fiscal Year 1997 Management Incentive Plan.(13) (19)

                  15. Fiscal Year 1998 Management Incentive Plan.(13) (19)

                  16. Separation Agreement dated July 24, 1996 between Robert B.
                      Sheh and the Registrant.(19) (27)

                  17. Retirement Agreement dated March 3, 1994 between Murray H.
                      Hutchison and the Registrant.(6)(19) as amended by First
                      Amendment dated January 6, 1995 to the Retirement
                      Agreement dated March 3, 1994 between Murray H. Hutchison
                      and the Registrant.(19)(28)

                  18. Retirement Plan of IT, 1993 Restatement.(19)(20)

                  19. Amendment Number One to IT Corporation Retirement Plan,
                      dated as of July 1, 1995.(19)(29)

                  20. Amendment Number Two to IT Corporation Retirement Plan,
                      dated as of October 1, 1995.(19) (29)

                  21. Amendment Number Three to IT Corporation Retirement Plan,
                      dated as of July 15, 1996.(19) (30)

                  22. Amendment Number Four to IT Corporation Retirement Plan,
                      dated as of February 1, 1997.(13) (19)

                  23. Amendment Number Five to IT Corporation Retirement Plan,
                      dated as of May 13, 1997.(13) (19)

                  24. Amendment Number Six to IT Corporation Retirement Plan
                      dated as of May 27, 1998.(19)

                  25. Executive Stock Purchase Interest Reimbursement Plan,
                      approved September 6, 1995.(19) (22)

                  26. Executive/Directors Deferred Compensation Plan, effective
                      January 1, 1996.(19) (22)

                  27. Executive Restoration Plan, effective July 1, 1995 as
                      amended through May 13, 1997.(19) (22)

                  28. IT Corporation Deferred Compensation Plan (amended and
                      restated effective January 1, 1998).(19)

                  29. IT Corporation Restoration Plan amended and restated
                      effective January 1, 1998.(19)

                  30. 1997 International Technology Corporation Non-Employee
                      Directors Stock Plan - Director Fees, dated as of February
                      26, 1997.(19) (30)

                  31. Employment Agreement, dated as of November 20, 1996, by
                      and between the Registrant, IT Corporation, and Anthony J.
                      DeLuca.(13) (19)


                                       62

<PAGE>   64



Exhibit No.                                Description
-----------                                -----------

                  32. Separation Agreement, dated as of April 10, 1998, by and
                      between the Registrant, its subsidiaries and affiliates,
                      and Franklin E. Coffman.(19)

                  33. Employment Agreement, dated as of November 20, 1996, by
                      and between the Registrant, IT Corporation, and James R.
                      Mahoney.(13) (19)

                  34. Employment Agreement, dated as of November 20, 1996, by
                      and between the Registrant, IT Corporation, and Raymond J.
                      Pompe.(13) (19)

                  35. Employment Continuation, Non-competition and
                      Confidentiality Agreement dated the 17th day of June,
                      1997, by and between Beneco Enterprises, Inc., a Utah
                      corporation, OHM Corporation, an Ohio corporation, and
                      Scott Doxey.(19)

                  36. Employment Continuation, Non-competition and
                      Confidentiality Agreement dated the 17th day of June,
                      1997, by and between Beneco Enterprises, Inc., a Utah
                      corporation, OHM Corporation, an Ohio corporation, and
                      Robert Newberry.(19)

                  37. Employment Continuation, Non-competition and
                      Confidentiality Agreement dated the 17th day of June,
                      1997, by and between Beneco Enterprises, Inc., a Utah
                      corporation, OHM Corporation, an Ohio corporation, and
                      Bennie Smith, Jr.(19)

                  38. Form of Employment Agreement by and between OHM
                      Corporation, and each of Pamela K.M. Beall, Robert J.
                      Blackwell, Kris E. Hansel, Steven E. Harbour, James L.
                      Kirk, Philip V. Petrocelli, Philip O. Strawbridge, and
                      Michael A. Szomjassy, as amended by Amendment No. 1 in the
                      case of each of Ms. Beall and Messrs. Blackwell, Hansel,
                      Harbour, Strawbridge and Szomjassy, and as amended by
                      Amendment No. 2 in the case of each of Ms. Beall and 
                      Messrs. Blackwell, Hansel, and Harbour.(19)

                  39. International Technology Corporation Severance and
                      Retention Bonus Plan dated March 5, 1998.(19)

11                Omitted - Inapplicable.

12                Omitted - Inapplicable.

13                Omitted - Inapplicable.

16                Omitted - Inapplicable.

18                Omitted - Inapplicable.

20                Notice to All Holders of Depositary Shares each representing
                  1/100 of a share of 7% Cumulative Convertible Exchangeable
                  Preferred Stock dated November 25, 1996.(31)

21                List of the Registrant's subsidiaries.

22                Omitted - Inapplicable.

23                1.  Consent of Ernst & Young LLP, Independent Auditors.


                                       63

<PAGE>   65



Exhibit No.                          Description
-----------                          -----------

24                Omitted - Inapplicable.

27                Financial Data Schedule for the year ended March 27, 1998.

28                Omitted - Inapplicable.

99                Omitted - Inapplicable.

----------
(1)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Annual Report on Form 10-K
                  for the year ended March 31, 1988 (No. 1-9037) and
                  incorporated herein by reference.

(2)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Registration Statement on
                  Form S-3 (No. 33-65988) and incorporated herein by reference.

(3)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Form 8-K dated September 20,
                  1996 and incorporated herein by reference.

(4)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Annual Report on Form 10-K
                  for the year ended December 31, 1986 and incorporated herein
                  by reference.

(5)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Amendment No. 1 to
                  Registration Statement of Form S-1, No. 33-8296 and
                  incorporated by reference.

(6)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Annual Report on Form 10-K 
                  for the year ended December 31, 1994 and incorporated herein 
                  by reference.

(7)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to Registrant's Report on Form 8-K dated June
                  11, 1998 and incorporated herein by reference.

(8)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Report on Form 8-K dated
                  January 15, 1998.

(9)               Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Schedule 14D-1 (Amendment
                  No. 5) dated February 18, 1998 and incorporated herein by
                  reference.

(10)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Annual Report on Form 10-K
                  for the year ended March 31, 1995 and incorporated herein by
                  reference.

(11)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Quarterly Report on Form
                  10-Q for the quarter ended December 29, 1995.

(12)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Report on Form 8-K filed on
                  July 2, 1997 and incorporated herein by reference.

(13)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to Registrant's Report on Form 10-K for the year
                  ended March 28, 1997.




                                       64
<PAGE>   66



(14)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Quarterly Report on Form
                  10-Q for the quarter ended December 27, 1996 and incorporated
                  herein by reference.

(15)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Quarterly Report on Form
                  10-Q for the quarter ended June 30, 1993 and incorporated
                  herein by reference.

(16)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Quarterly Report on Form
                  10-Q for the quarter ended June 30, 1995 and incorporated
                  herein by reference.

(17)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Annual Report on Form 10-K
                  for the year ended December 31, 1993 and incorporated herein
                  by reference.

(18)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Quarterly Report on Form
                  10-Q for the quarter ended September 30, 1994 and incorporated
                  herein by reference.

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

(20)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Annual Report on Form 10-K
                  for the year ended March 31, 1994 and incorporated herein by
                  reference.

(21)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Annual Report on Form 10-K
                  for the year ended March 31, 1993 and incorporated herein by
                  reference.

(22)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Annual Report on Form 10-K
                  for the year ended March 29, 1996 and incorporated herein by
                  reference.

(23)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Proxy Statement dated May
                  11, 1998 and incorporated herein by reference.

(24)              Previously filed with the Securities and Exchange Commission
                  as an Appendix to OHM Corporation's Proxy Statement for its
                  Annual Meeting held May 10, 1994 and incorporated herein by
                  reference.

(25)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to OHM Corporation's Quarterly Report on Form
                  10-Q for the quarter ended September 30, 1992 and incorporated
                  herein by reference.

(26)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Annual Report on Form 10-K
                  for the year ended December 31, 1995 and incorporated herein
                  by reference.

(27)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's report on Form 10-K/A,
                  Amendment No. 1, dated July 29, 1996, to the Annual Report of
                  Form 10-K for the year ended March 29, 1996 and incorporated
                  herein by reference.



                                       65
<PAGE>   67


(28)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Quarterly Report on Form
                  10-Q for the quarter ended December 31, 1994 and incorporated
                  herein by reference.

(29)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Form S-8 (No. 333-00651) and
                  incorporated herein by reference.

(30)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Registration Statement on
                  Form S-8 (No. 333-26143) and incorporated herein by reference.

(31)              Previously filed with the Securities and Exchange Commission
                  as an Exhibit to the Registrant's Form 8-K, dated January 17,
                  1997 and incorporated herein by reference.


Reports on Form 8-K

1.    Current report on Form 8-K, dated January 15, 1998, reporting under Item 5
      relating to the announcement of the Agreement and Plan of Merger entered
      into among the Registrant, OHM Corporation, an Ohio corporation and
      IT-Ohio, Inc., an Ohio corporation and newly formed subsidiary of the
      Registrant.
2.    Current report on Form 8-K, dated February 25, 1998, reporting under Item
      2 relating to the cash tender offer by IT-Ohio, Inc., a wholly owned
      subsidiary of the Registrant, for 13,933,000 shares of OHM Corporation
      common stock and Item 7 the Financial Statements of Businesses Acquired
      and Pro Forma Financial Information.





                                       66

<PAGE>   68



                      INTERNATIONAL TECHNOLOGY CORPORATION
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                    PROVISION
                                    BALANCE AT      (BENEFIT)            ACCOUNTS                            BALANCE
                                     BEGINNING       CHARGED             WRITTEN                             AT END
                                     OF PERIOD      TO INCOME              OFF              OTHER           OF PERIOD
                                     ---------      ---------              ---              -----           ---------

<S>                                  <C>             <C>                 <C>              <C>                <C>    
YEAR ENDED MARCH 27, 1998:
     Allowance for doubtful
       accounts ............         $ 2,055         $   206             $(1,147)         $17,912(1)         $19,026
     Valuation allowance for
       deferred tax asset ..         $ 9,471         $ 2,252(4)          $    --          $20,142(5)         $31,865

YEAR ENDED MARCH 28, 1997:
     Allowance for doubtful
       accounts ............         $ 2,943         $   304             $(1,208)         $    16(2)         $ 2,055
     Valuation allowance for
       deferred tax asset ..         $ 4,869         $ 4,602             $    --          $    --            $ 9,471

YEAR ENDED MARCH 29, 1996:
     Allowance for doubtful
       accounts ............         $ 3,107         $   614             $  (842)         $    64(3)         $ 2,943
     Valuation allowance for
       deferred tax asset ..         $12,650         $(7,781)(4)         $    --          $    --            $ 4,869
</TABLE>




----------

(1)  Represents allowance for doubtful accounts at the date of acquisition for
     business acquired during fiscal year 1998 totaling $18,020 less the
     allowance for doubtful accounts of $108 relating to the sale of IT's
     remediation services business.

(2)  Represents allowance for doubtful accounts at November 1996 for receivables
     acquired in the purchase of Chi Mei.

(3)  Represents allowance for doubtful accounts at March 1, 1996 for receivables
     acquired in the purchase of Gradient Corporation.

(4)  Represents benefit for income taxes.

(5)  Represents valuation allowance adjustment principally relating to the
     acquisition of OHM Corporation.



                                       67

<PAGE>   69



                                   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 Monroeville,
Pennsylvania on the 25th day of June, 1998.


                                INTERNATIONAL TECHNOLOGY CORPORATION


                                By: ANTHONY J. DELUCA
                                    -------------------------------------
                                    Anthony J. DeLuca
                                    President and Chief Executive Officer

     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.


<TABLE>
<S>                                        <C>                                          <C>
DANIEL A. D'ANIELLO
---------------------------
Daniel A. D'Aniello                         Chairman of the Board of                    June 25, 1998
                                               Directors



ANTHONY J. DELUCA
---------------------------
Anthony J. DeLuca                           Director, President and                     June 25, 1998
                                               Chief Executive Officer and
                                               Duly Authorized Officer

PHILIP B. DOLAN
---------------------------
Philip B. Dolan                             Director                                    June 25, 1998

E. MARTIN GIBSON
---------------------------
E. Martin Gibson                            Director                                    June 25, 1998

JAMES C. MCGILL
---------------------------
James C. McGill                             Director                                    June 25, 1998

---------------------------
Richard W. Pogue                            Director                                    

ROBERT F. PUGLIESE
---------------------------
Robert F. Pugliese                          Director                                    June 25,  1998

CHARLES W. SCHMIDT
---------------------------
Charles W. Schmidt                          Director                                    June 25, 1998

JAMES DAVID WATKINS
---------------------------
James David Watkins                         Director                                    June 25, 1998

PHILIP O. STRAWBRIDGE
---------------------------
Philip O. Strawbridge                       Senior Vice President, Chief                June 25, 1998
                                              Administrative Officer and
                                              Principal Financial Officer

HARRY J. SOOSE
---------------------------
Harry J. Soose                              Vice President, Finance and Controller      June 25, 1998
                                               and Principal Accounting Officer
</TABLE>