ICF International, Inc. Annual Report 2016

FY2016 Annual Report · ICF International, Inc.

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2016 ANNUAL REPORT

Message from Chairman and CEO Sudhakar Kesavan

ICF continued its growth trajectory in 2016. Our revenue increased approximately 5 percent to $1.185 billion as
we continued to expand our presence in our key markets. We achieved record contract awards in 2016 of over
$1.5 billion, expanded our operating margins and delivered $2.40 in diluted earnings per share, up 20 percent
over 2015. We remain focused on delivering value for our clients, our shareholders, and our people in an
increasingly complex world.

Our performance in 2016 shows the benefit of our strategy to serve clients in multiple markets. Our longstanding
focus on commercial energy paid off as we achieved material growth through large, long-term Demand Side
Management/ Energy Efficiency contracts with multiple utilities. At the same time we extended the thought
leadership that has been the hallmark of our Energy Advisory practice, delivering value in the transformation of
the electric utility industry. We established growth in our commercial marketing services business by
demonstrating the enduring value of our combination of creativity and technology depth. In our Federal
businesses, we continued to support many of the nation’s most essential missions while growing organically.

In recognition of ICF’s opportunity to better communicate our value propositions to our customers, and in
conjunction with the 10th anniversary of our IPO, in September we kicked off an ongoing process to refresh and
reinvigorate our brand. Beyond our new visual identity, we are revamping and rearticulating the messages we
communicate to clients to make it easier for them to see the distinctive value we can bring to their businesses
and their missions. We invite you to visit us online at www.icf.com.

Near the end of 2016 the level of uncertainty in ICF’s markets increased. We had already seen the impact of
Britain’s vote in June to leave the European Union. In the U.S., the outcome of national elections and the
resulting change in administration have increased the uncertainty felt by all companies serving the U.S.
Government and those serving many regulated industries. The work we do falls in both of those categories.
Fortunately, ICF is well-positioned to succeed in today’s rapidly changing world. With our increasingly
balanced sources of revenue, agile professional workforce, and unique mix of domain expertise and functional
skills, ICF has the tools necessary to succeed in this time of heightened uncertainty. Whether it is combining
digital engagement skills with deep expertise in energy or delivering advanced analytics solutions to a key U.S.
Federal agency, ICF’s service offerings will continue to drive client and shareholder success in coming years.

Work that makes us proud

ICF is proud of the work we do. While the breadth of this work prevents me from describing every aspect of it
here, below I illustrate a few of the ways in which we make a difference for our clients and the world:.

 Supporting Exelon Corporation and its utilities Commonwealth Edison Company, PECO, and

Baltimore Gas and Electric Company by providing comprehensive implementation services to their
Commercial and Industrial (C&I) energy efficiency initiatives while also providing marketing support
to both C&I and Residential efforts. The contracts included in these efforts totaled over $110M, making
this the largest portfolio of energy contracts in our history.

 Providing support to Great Plains Energy for subsidiary Kansas City Power and Light Company’s

residential energy efficiency programs. ICF is fully engaging our powerful marketing, analytics and
operation platforms to inform marketing investments and customer engagement strategy, including our
mobile Power Rebate App to submit heating and cooling rebate applications in the field, and other
customized apps and tools.

 Supporting the U.S. Centers for Disease Control and Prevention (CDC) with advanced analytics
capabilities. ICF will support CDC’s National Health Care Surveys with survey design and
implementation, electronic data collection, processing of administrative data and electronic health
records, data storage and warehousing, and data integration. In parallel we will also serve as the Data
Coordinating Center for CDC’s HIV Surveillance Supplemental Reporting System providing high-
quality, timely data that are ready for analysis, dissemination and use for program and policy
improvement.

 Supporting the National Cancer Institute’s (NCI) Smokefree.gov campaign, designed to help Americans
quit smoking through personalized coaching and information. By integrating multiple websites, social
media programs, artificial intelligence, and innovative and engaging content, ICF has helped NCI
double the chance of success for citizens looking to quit smoking.

 Supporting the California Department of Transportation (Caltrans) in its ongoing efforts to build and
improve transportation infrastructure throughout the Golden State. ICF’s support to Caltrans includes
broad environmental and biological support services as well as agency coordination and preparation of
monitoring reports. We will provide the same level of excellence that Caltrans has come to expect from
ICF to help ensure the transportation agency remains compliant with the numerous, complex
environmental requirements presented by its projects.

 Winning the U.S. Department of Defense (DoD) Critical Infrastructure Protection Program, to

strengthen the resilience of DoD assets and assess the potential vulnerability of critical infrastructure at
installations around the world. ICF will perform risk assessments of physical and cyber infrastructure at
DoD installations worldwide, study resilience of DoD assets, and provide subject matter expertise to
identify potential risks and their consequences.

 Continuing service to Amtrak, Wyndham, Hyatt, and other Loyalty clients which contributed to ICF

Olson being named a Leader in The Forrester Wave™ 2016 Customer Loyalty Solutions for Large
Organizations (Q1 2016). ICF Olson, our marketing services agency, helps our clients create and
nurture genuine connections with their customers, getting to know and connect with them at both
traditional and unexpected moments so they stay loyal and profitable.

 Helping Bissell Homecare reach customers and raise funds for shelter pets. ICF Olson converted the
topic of appliances to a focus on why we need them in the first place – the messes our pets make – in
the #pethappens campaign. Combined with a live Super Bowl Sunday video where the more customers
engaged the more messes the puppies got to make, #pethappens helped Bissell drive dramatically
higher sales while raising over $100,000 for pets in need.

Beyond these few examples we continue to provide assistance to our wide range of customers from governments
and private sector companies around the world, and we are increasingly finding additional ways to support them
with our broadening value proposition.

Corporate citizenship

Our commitment to our communities and to the causes important to our employees remains strong. During 2016,
ICF’s corporate giving totaled $518,000 — a 9 percent increase over our 2015 donations. Our employees
engaged more than ever with our charity partners. Employees volunteered thousands of hours and donated
$49,000 through our philanthropic campaigns. Our employees’ generosity continues to provide inspiration for us
all.

ICF continued to take responsibility for our environmental footprint and employed a number of tactics to reduce
it, such as prioritizing leases in green buildings and improving the commuter transit benefit. Our employee
volunteer Green Team bolstered corporate efforts by leading a recycling campaign that engaged hundreds of our
people: Be mindful; act green. We took inventory of our carbon emissions, including those from facilities,
business travel and employee commuting, and we offset 100 percent of electricity used in the US by purchasing
Renewable Energy Certificates that are Green-e® certified and support renewable energy infrastructure. We
maintained our net zero carbon footprint by offsetting emissions with an investment in two projects: one that
converts landfill methane to energy and another that generates wind-based power. Finally, we advanced ICF’s
climate resiliency by conducting the first climate and extreme weather vulnerability assessment for a
professional services firm.

Our people

I am gratified and honored to lead the wide range of diverse professionals within ICF as we strive to Make Big
Things Possible. Every day they demonstrate their commitment to excellence on behalf of their customers, to
innovative solutions combining ICF’s diverse capabilities, and to ICF’s mission and values. We remain
committed to being a supportive and high-performance environment in which they can grow professionally and
make the world a better and more interesting place.

Sudhakar Kesavan

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016

Commission File Number: 001-33045

ICF INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

22-3661438
(IRS Employer Identification Number)

9300 Lee Highway
Fairfax, VA
(Address of principal executive offices)

22031
(Zip Code)

Registrant’s telephone number, including area code:
(703) 934-3000

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class
Common Stock, $0.001 par value

Name of Exchange on which Registered
The NASDAQ Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

Indicate by check mark 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. ☐

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

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of the last
business day of the Registrant’s most recently completed second fiscal quarter was approximately $751 million based upon the closing
price per share of $40.90, as quoted on the NASDAQ Global Select Market on June 30, 2016. Shares of the outstanding common stock
held by each executive officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other purposes.

As of February 24, 2017, 19,017,430 shares of the Registrant’s common stock, $0.001 par value, were outstanding.

Part III incorporates information by reference from the Proxy Statement for the 2017 Annual Meeting of Stockholders expected to

be held in June 2017.

DOCUMENTS INCORPORATED BY REFERENCE

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TABLE OF CONTENTS

PART I .............................................................................................................................................................................
ITEM 1.
Business .......................................................................................................................................................
ITEM 1A. Risk Factors .................................................................................................................................................
ITEM 1B. Unresolved Staff Comments ........................................................................................................................
Properties .....................................................................................................................................................
ITEM 2.
ITEM 3.
Legal Proceedings ........................................................................................................................................
ITEM 4. Mine Safety Disclosures ..............................................................................................................................

PART II .............................................................................................................................................................................
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities ..................................................................................................................................................
ITEM 6.
Selected Financial Data ................................................................................................................................
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .......................
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk ......................................................................
Financial Statements and Supplementary Data ............................................................................................
ITEM 8.
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ......................
ITEM 9A. Controls and Procedures ..............................................................................................................................
ITEM 9B. Other Information ........................................................................................................................................

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30
32
45
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47

PART III ...........................................................................................................................................................................
ITEM 10. Directors, Executive Officers, and Corporate Governance ..........................................................................
ITEM 11. Executive Compensation ..............................................................................................................................
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.....
ITEM 13. Certain Relationships and Related Transactions, and Director Independence .............................................
ITEM 14. Principal Accountant Fees and Services ......................................................................................................

48
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PART IV ...........................................................................................................................................................................
ITEM 15. Exhibits and Financial Statement Schedules ................................................................................................

49
49

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FORWARD-LOOKING STATEMENTS

Some of the statements in this Annual Report on Form 10-K constitute forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995, as amended. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be
materially different from any future results, levels of activity, performance, or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would,” or similar words.
You should read statements that contain these words carefully. The risk factors described in Item 1A of Part I of this Annual
Report on Form 10-K captioned “Risk Factors,” or otherwise described in our filings with the Securities and Exchange
Commission (“SEC”), as well as any cautionary language in this Annual Report on Form 10-K, provide examples of risks,
uncertainties, and events that may cause our actual results to differ materially from the expectations we describe in our
forward-looking statements, including, but not limited to:

•

our dependence on contracts with United States
international governments, agencies and departments for the majority of our revenue;

(“U.S.”)

federal,

state and

local, and

failure by Congress or other governmental bodies to approve budgets in a timely fashion and reductions in
government spending including, but not limited to, budgetary cuts resulting from automatic sequestration
under the Budget Control Act of 2011, See “Risk Factors—Risks Related to our Business— The new
Presidential Administration (“Administration”) may make substantial changes to fiscal and tax policies that
may adversely affect our business.”;

results of routine and non-routine government audits and investigations;

dependence of our commercial work on certain sectors of the global economy that are highly cyclical;

failure to receive the full amount of our backlog;

difficulties in integrating acquisitions generally;

risks resulting from expanding our service offerings and client base;

the lawsuit filed by the State of Louisiana seeking approximately $214.3 million in alleged overpayments
from the Road Home contract; and

additional risks as a result of having international operations.

Our forward-looking statements are based on the beliefs and assumptions of our management and the information
available to our management at the time these disclosures were prepared. Although we believe the expectations reflected in
these statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You
should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report
on Form 10-K. We undertake no obligation to update these forward-looking statements, even if our situation changes in the
future.

The terms “we,” “our,” “us,” and “the Company,” as used throughout this Annual Report on Form 10-K, refer to ICF
International, Inc. and its consolidated subsidiaries, unless otherwise indicated. The term “federal” or “federal government”
refers to the U.S. federal government, and “state and local” or “state and local government” refers to U.S. state and local
governments, unless otherwise indicated.

ITEM 1.

BUSINESS

COMPANY OVERVIEW

PART I

•

Energy, Environment, and Infrastructure,

Health, Education, and Social Programs,

Safety and Security, and

Consumer and Financial.

In September 2016, we celebrated our tenth anniversary as a publicly traded company. In conjunction with that event,
we launched a new brand, reflecting a new visual identity, logo and company website (www.icf.com). The new brand
reinforces ICF’s identity as a trusted services provider with expertise in these four markets.

We provide services across these four markets that deliver value throughout the entire life cycle of a policy, program,
project, or initiative from research and analysis and assessment and advice to design and implementation of programs and
technology-based solutions, and the provision of engagement services and programs. Our primary services include:

•

Research and Analytic Services. We research critical policy, industry, and stakeholder issues, trends, and
behavior. We collect and analyze wide varieties of data to understand critical issues and options for our clients.

Assessment and Advisory Services. We measure and evaluate results and their impact and, based on those
assessments, provide advice to our clients on how to navigate societal, market, business, communication, and
technology challenges.

Design and Management Services. We design, develop, and manage plans, frameworks, programs and tools
that are key to our clients’ mission or business performance. These programs often relate to the analytics and
advice we provide.

Solution Identification and Implementation Services. We identify, define, and implement technology-based
systems and business tools that make our clients’ organizations more effective and efficient. These solutions
are implemented through a wide range of standard and customized methodologies designed to match our
clients’ business context.

Engagement Services. We inform and engage our clients’ constituents, customers, and employees through
public relations, branding and marketing, multichannel and strategic communications, and enterprise training
and communications programs. Our engagement services frequently rely on our digital design and
implementation skills.

We perform work for both government and commercial clients. Our government clients include federal clients, state
and local clients, as well as governments outside the U.S. Our commercial clients include both U.S. and international clients.
Our clients utilize our services because we offer a combination of deep subject-matter expertise, technical solutions, and
institutional experience in their market areas. We believe that our domain expertise and the program knowledge developed
from both our research and analytics and assessment and advisory engagements (which we refer to hereafter as “research and
advisory services”) further position us to provide our full suite of services.

We generated revenue of $1,185.1 million, $1,132.2 million, and $1,050.1 million in 2016, 2015, and 2014,
respectively. Our total backlog was approximately $2,122.7 million, $1,817.4 million, and $1,868.3 million as of December
31, 2016, 2015, and 2014, respectively. See further discussion in “Contract Backlog.”

As of December 31, 2016, we had more than 5,000 employees around the globe, including many recognized as thought
leaders in their respective fields. We serve clients globally from our headquarters in the Washington, D.C. metropolitan area,
our more than 55 regional offices throughout the U.S., and more than 10 offices outside the U.S., including offices in the
United Kingdom (“UK”), Belgium, China, India and Canada.

We report operating results and financial data in one operating and reportable segment. See our revenue, net income
and total assets as presented in the consolidated financial statements and the related notes included elsewhere in Part IV of
this Annual Report.

OUR COMPANY INFORMATION

ICF International, Inc. began as a Delaware limited liability company formed in 1999 under the name ICF Consulting
Group Holdings, LLC. It was formed to purchase our principal operating subsidiary, which was founded in 1969, from a
larger services organization. A number of our current senior managers participated in this transaction, along with private
equity investors. We converted to a Delaware corporation in 2003 and changed our name to ICF International, Inc. in 2006.
We completed our initial public offering in October 2006.

Our principal executive office is located at 9300 Lee Highway, Fairfax, Virginia 22031, and our telephone number is
(703) 934-3000. We maintain an internet website at www.icf.com. We make available our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to such reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other information
related to us, free of charge, on this site as soon as reasonably practicable after we electronically file those documents with,
or otherwise furnish them to, the SEC. Our internet Web site and the information contained therein or connected thereto are
not intended to be incorporated into this Annual Report on Form 10-K.

MARKET OPPORTUNITY, SERVICES, AND SOLUTIONS

Complex, long-term market factors, as well as geopolitical, environmental and demographic trends, are changing the
way we live and the way government and industry operate and interact. Some of the most critical factors are centered on the
markets in which our clients operate, see “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Selected Key Metrics.”

In the energy, environment, and infrastructure market, these factors include: the changing mix of sources used to
generate electricity and the related policy and infrastructure issues resulting from those changes; the changing position of the
U.S. in the world’s energy markets overall; an increasing focus on renewables, energy efficiency, climate change, and
resilience; an aging transportation infrastructure; increasing drought and need to invest in water infrastructure and
conservation; and environmental degradation.

In the health, education, and social programs market, these factors include: the increasing level of healthcare
expenditures and efforts at healthcare reform; global public health and health security issues, including potential global
epidemics; aging populations across the globe; increasing military and veteran health demands; continued focus on disease
prevention; the perceived declining performance of the U.S. educational system compared to other countries; and the desire
to find more efficient means to deliver social and educational programs.

In the safety and security market, these factors include: the continuing spectrum of all-hazard threats, including

cybersecurity threats, terrorism, severe weather and climatological changes, as well as infrastructure protection.

In the consumer and financial market, these factors include increased use of interactive data technologies to link
organizations with consumers and other stakeholders in more varied and personalized ways, and less reliance on traditional
print and television marketing; changing industry structures in marketing and advertising services; the desire for greater
return on marketing investment; and the continued elevation of data analytics as a business management and marketing tool.

In addition to these market-based factors, trends across all of our markets are increasing the demand for research and
advisory services that drive our business. These trends include: increased government focus on efficiency and mission
performance management; generational changes; the emphasis on transparency and accountability; and an increased demand
for combining domain knowledge of client mission and programs with innovative technology-enabled solutions. We see
growth opportunities for technology-based solutions involving digital services and strategic communications across all of our
markets.

We believe that demand for our services will continue as government, industry, and other stakeholders seek to
understand and respond to these and other factors. We expect that our government clients will continue to utilize professional
services firms with relevant domain expertise to assist with designing new programs, enhancing existing ones, and offering
transformational solutions based on applicable experience evaluating and improving such programs, and to deploy innovative
information and communications technology. In addition, commercial organizations affected by these programs will need to
understand such changes, as well as their implications, in order for them to plan appropriately. More broadly, we believe our
commercial clients will demand innovative services and solutions that can help them connect with customers and stakeholders
in an increasingly connected and crowded marketplace. We believe that our institutional knowledge and subject-matter
expertise are distinct competitive advantages in providing all of our clients across all four key markets with practical,
innovative solutions, which are directly applicable to their mission or business, with a faster deployment of the right resources.
Moreover, we believe we will be able to leverage the domain expertise and program knowledge we have developed through
our research and advisory assignments and our experience with program management, technology-based solutions, and
engagement projects to win larger engagements, thereby increasing returns on business development investment and driving
higher employee utilization. Rapid changes in technology, including the omnipresent influence of mobile, social, and cloud
technologies, also demand new ways of communicating, evaluating and implementing programs, and we are focused on
leveraging our expertise in technology to capitalize on those changes.

Our future results will depend on the success of our strategy to capitalize on our competitive strengths, including our
success in maintaining our long-standing client relationships, to seek larger engagements across the program life cycle and
to complete and successfully integrate strategic acquisitions. We will continue to focus on building scale in vertical and
horizontal domain expertise; developing business with both our government and commercial clients; and replicating our
business model geographically in selected regions of the world. In doing so, we will continue to evaluate strategic acquisition
opportunities that enhance our subject matter knowledge, broaden our service offerings, and/or provide scale in specific
geographies.

Energy, Environment, and Infrastructure

For decades, we have advised on energy and environmental issues, including the impact of human activity on natural
resources, and have helped develop solutions for infrastructure-related challenges. In addition to addressing government
policy and regulation in these areas, our work focuses on industries that are affected by these policies and regulations,
particularly those industries most heavily involved in the use and delivery of energy. Significant factors affecting suppliers,
users, and regulators of energy are driving private and public sector demand for professional services firms, including:

•

Changing power markets, increasingly diverse sources of supply, and an increased demand for alternative
sources of energy;

Ongoing efforts to upgrade energy infrastructure to meet new power, transmission, environmental, and
cybersecurity requirements and to enable more distributed forms of generation; and

The need to manage energy demand and increase efficient energy use in an era of environmental concerns,
especially regarding carbon and other emissions.

We assist energy enterprises worldwide in their efforts to analyze, develop, and implement strategies related to their
business operations and the interrelationships of those operations with the environment and applicable government
regulations. We utilize our policy expertise, deep industry knowledge, and proprietary modeling tools to advise government
and commercial clients on key topics related to electric power, traditional fuels, and renewable sources of energy. Our areas
of expertise include power market analysis and modeling, transmissions analysis, electric system reliability standards, energy
asset valuation and due diligence, regulatory and litigation support, fuels market analysis, air regulatory strategy, and
renewable energy and green power.

We also assist commercial and government clients in designing, implementing, and evaluating energy efficiency
programs both for residential and for commercial and industrial sectors. Utility companies must balance the changing demand
for energy with a price-sensitive, environmentally conscious consumer base. We help utilities meet these needs, guiding them
through the entire life cycle of energy efficiency programs, including policy and planning, determining technical
requirements, and program implementation and improvement.

Carbon emissions have been an important focus of federal government regulation, international governments, many
state and local governments, and multinational corporations around the world. Reducing or offsetting greenhouse gas
(“GHG”) emissions continues to be the subject of both public and private sector interest, and the regulatory landscape in this
area is still evolving. The need to address carbon and other harmful emissions has significantly changed the way the world’s
governments and industries interact and continues to be one of the drivers of interest in energy efficiency. Moreover, how
government and business adapt to the effects of climate change is growing in importance. We support governments at the
federal and state and local level, including providing comprehensive support to NASA’s Global Change Research Program.
Additionally, we support ministries and agencies of the government of the UK and European Commission, as well as
commercial clients, on these and related issues.

We also have decades of experience in designing, evaluating, and implementing environmental policies and
transportation infrastructure projects. A number of key issues are driving increased demand for the services we provide in
these areas, including:

•

Increased focus on the proper stewardship of natural resources;

Aging water, energy, and transportation infrastructure, particularly in the U.S.;

The increasing exposure of infrastructure to damage and interference by severe weather events influenced by
a changing climate;

Under-investment historically in U.S. transportation infrastructure; and

Changing patterns of economic development that require transportation systems and energy infrastructure to
adapt to new patterns of demand.

By leveraging our interdisciplinary skills, which range from finance and economics to earth and life sciences,
information technology, and program management, we are able to provide a wide range of services that include complex
environmental impact assessments, environmental management information systems, air quality assessments, program
evaluation, transportation planning and operational improvement, strategic communications, and regulatory reinvention. We
help clients deal specifically with the interrelated environmental, business, and social implications of issues surrounding all
transportation modes and infrastructure. From the environmental management of complex infrastructure engagements to
strategic and operational concerns of airlines and airports, our solutions draw upon our expertise and institutional knowledge
in transportation, urban and land use planning, industry management practices, financial analysis, environmental sciences,
and economics.

Health, Education, and Social Programs

We also apply our expertise across our full suite of services in the areas of health, education, and social programs. We
believe that a confluence of factors will drive an increased need for public and private focus on these areas, including, among
others:

•

Expanded healthcare services to underserved segments of the population;

Rising healthcare expenditures, which require the evaluation of the effectiveness and efficiency of current and
new programs;

Growing awareness of the threats from the global spread of disease;

The emphasis on improving the effectiveness of the U.S. and other countries’ educational systems;

The need for greater transparency and accountability of public sector programs;

A continued high need for social support systems;

A changing regulatory environment; and

Military personnel returning home from active duty with health and social service needs.

We believe we are well positioned to provide our services to help our clients develop and manage effective programs
in the areas of health, education, and social programs at the international, national, regional, and local levels. Our subject-
matter expertise includes public health, mental health, international health and development, health communications and
associated interactive technologies, education, child and family welfare needs, housing and communities, and substance
abuse. Our combination of domain knowledge and our experience in information technology-based applications provides us
with strong capabilities in health and social programs informatics and analytics, which we believe will be of increasing
importance as the need to manage information grows. We partner with our clients in the government and commercial sectors
to increase their knowledge base, support program development, enhance program operations, evaluate program results, and
improve program effectiveness.

In the area of public health, we support many agencies and programs within the Department of Health and Human
Services (“HHS”), including the National Institutes of Health (“NIH”) and the Centers for Disease Control and Prevention
(“CDC”), conducting primary data collection and analyses, assisting in designing, delivering, and evaluating programs,
managing technical assistance centers, providing instructional systems, developing information technology applications, and
managing information clearinghouse operations. Increasingly, we provide multichannel communications and messaging for
public health programs using capabilities similar to our commercial marketing business. We also provide training and
technical assistance for early care and educational programs (such as Head Start), and health and demographic surveys in
developing countries for the Department of State (“DOS”). In the area of social programs, we provide extensive training,
technical assistance, and program analysis and support services for a number of the housing and disaster recovery programs
of the Department of Housing and Urban Development (“HUD”) and state and local governments. In addition, we provide
research, program design, evaluation, and training for educational initiatives at the federal and state level. We provide similar
services to a variety of UK ministries, as well as several Directorates-General of the European Commission.

Safety and Security

Safety and security programs continue to be a critical priority of the federal government, state and local governments,
international governments (especially in Europe), and in the commercial sector. We believe we are positioned to meet the
following key safety concerns:

•

Vulnerability of critical infrastructure to cyber and terrorist threats;

Increasing risks to enterprises’ reputations in the wake of a cyber-attack;

Broadened homeland security concerns that include areas such as health, food, energy, water, and
transportation;

Reassessment of the emergency management functions of homeland security in the face of natural disasters;

Safety issues around crime and at-risk behavior;

Increased dependence on private sector personnel and organizations in emergency response; and

The need to ensure that critical functions and sectors are resilient and able to recover quickly after attacks or
disasters.

These security concerns create demand for government programs that can identify, prevent, and mitigate key

cybersecurity and disaster impacts and the societal issues they cause.

In addition, the Department of Defense (“DoD”) is undergoing major transformations in its approach to strategies,

processes, organizational structures, and business practices due to several complex, long-term factors, including:

•

The changing nature of global security threats, including cybersecurity threats;

Family issues associated with globally-deployed armed forces; and

The increasing need for real-time information sharing and logistics modernization and network-centric
planning requirements, and the global nature of conflict arenas.

We provide key services to DoD, the Department of Homeland Security (“DHS”), Department of Justice (“DOJ”), and
analogous Directorates-General at the European Commission. We support DoD by providing high-end strategic planning,
analysis, and technology-based solutions in the areas of logistics management, operational support, command and control,
and cybersecurity. We also provide the defense sector with critical infrastructure protection, environmental management,
human capital assessment, military community research, and technology-enabled solutions. At DHS, we assist in shaping
and managing critical programs to ensure the safety of communities, developing critical infrastructure protection plans and
processes, establishing goals and capabilities for national preparedness at all levels of government in the U.S., and managing
the national program to test radiological emergency preparedness at the state and local government levels in communities
adjacent to nuclear power facilities. At DOJ, we provide technical and communications assistance to programs that help
victims of crime and at-risk youths. At the European Commission, we provide support and analytical services related to
justice and home affairs issues within the European context.

Consumer and Financial

In the area of consumer and financial, we combine our expertise in strategic communications, marketing and creative
services and public relations with our strengths in interactive and mobile technologies to help companies develop stronger
relationships and engage with their customers and stakeholders across all channels, whether via traditional or digital media,
to drive better business results. In an effort to enhance our positioning and build awareness outside of our traditional client
set, we have combined capabilities from our acquisitions to create a full-service, technology-rooted agency that guides brands
digitally through informed strategy, inspired creative design, and technical know-how. We have the capability to complete
projects big or small across all channels, such as web, social, mobile, intranets and emerging platforms, through end-to-end
technology-based implementations for local and global clients. Target customer areas include airlines, airports, electric and

gas utilities, oil companies, banks and other financial services companies, transportation, travel and hospitality firms, non-
profits/associations, law firms, manufacturing firms, retail chains, and distribution companies.

COMPETITIVE STRENGTHS

We possess the following key business strengths:

We have a highly-educated professional staff with deep subject-matter knowledge

We possess strong intellectual capital that provides us with a deep understanding of policies, processes, and programs
across our major markets. Our thought leadership is based on years of training, experience, and education. We are able to
apply our in-depth knowledge of our subject-matter experts and our experience developed over 40 years of providing research
and advisory services to address the problems and issues our clients are facing. As of December 31, 2016, approximately
32% of our benefits-eligible staff held post-graduate degrees in diverse fields such as the social sciences, business and
management, physical sciences, public policy, human capital, information technology, mathematics, engineering, planning,
economics, life sciences, and law. These qualifications, and the complementary nature of our markets, enable us to deploy
multi-disciplinary teams to identify, develop, and implement solutions that are creative, pragmatic, and tailored to our clients’
specific needs.

We believe our diverse range of markets, services, and projects provide a stimulating work environment for our
employees that enhances their professional development. The use of multi-disciplinary teams provides our staff the
opportunity to develop and refine common skills required in many types of engagements. Our approach to managing human
resources fosters collaboration and significant cross-utilization of the skills and experience of both industry experts and other
personnel who can develop creative solutions by drawing upon their different experiences. The types of services we provide,
and the manner in which we do so, enable us to attract and retain talented professionals from a variety of backgrounds while
maintaining a culture that fosters teamwork and excellence.

We have strong, long-standing relationships with clients across a diverse set of markets

The long-term relationships we maintain with many of our clients reflect our successful track record of fulfilling our
clients’ needs. We have advised both the Environmental Protection Agency (“EPA”) and HHS for more than 30 years, the
Department of Energy (“DOE”) for more than 25 years, DoD for more than 20 years, certain commercial clients in our energy
markets for more than 20 years, the European Commission for more than 10 years, and we have multi-year relationships with
many of our other clients in both our government and commercial client base. We have numerous contacts at various levels
within our clients’ organizations, ranging from key decision-makers to functional managers. The long-standing nature and
breadth of our client relationships adds greatly to our institutional knowledge, which, in turn, helps us carry out our client
engagements more effectively and maintain and expand such relationships. Our extensive experience and client contacts,
together with our prime-contractor position on a substantial majority of our contracts and onsite presence, gives us clearer
visibility into future opportunities and emerging requirements. We believe our balance between civilian and defense agencies,
our commercial presence, and the diversity of the markets we serve help mitigate the impact of policy or political shifts, as
well as annual shifts in our clients’ budgets and priorities.

Our research and advisory services position us to capture a full range of engagements

We believe our research and advisory approach, which is based on our subject-matter expertise combined with an
understanding of our clients’ requirements and objectives, is a significant competitive differentiator that helps us gain access
to key client decision-makers during the initial phases of a policy, program, project, or initiative. We use our expertise and
understanding to formulate customized recommendations for our clients. We believe this domain expertise and the program
knowledge developed from our research and advisory engagements further position us to provide a full suite of services
across the entire life cycle of a particular policy, program, project, or initiative. As a result, we are able to understand our
clients’ requirements and objectives as they evolve over time. We then use this knowledge to provide continuous
improvement across our entire range of services, which maintains the relevance of our recommendations.

Our technology-enabled solutions are driven by our subject-matter expertise and creativity

Government and commercial decision-makers have become increasingly aware that, to be effective, technology-based
solutions need to be seamlessly integrated with people and processes. We possess strong knowledge in information
technology and a thorough understanding of organizational behavior and human decision processes. This combination of
skills, along with our domain knowledge, allows us to deliver technology-enabled solutions tailored to our clients’ business
8

and organizational needs with less start-up time required to understand client issues. In addition, many of our clients seek to
deploy cutting-edge solutions to communicate and transact with citizens, stakeholders, and customers in a multichannel
environment, and doing so takes both our constantly-refreshed technical know-how and world-class creativity.

Our proprietary tools, analytics and methods allow us to deliver superior solutions to our clients

We believe our innovative, and often proprietary, analytics and methods are key competitive differentiators because
they enhance our ability to deliver customized solutions to our clients, and enable us to deliver services in a more cost-
effective manner than our competitors. For example, we have developed industry-standard energy and environmental models
that are used by governments and commercial entities around the world for energy planning and air quality analyses, and
have also developed a suite of proprietary climate change tools to help the private sector develop strategies for complying
with GHG emission reduction requirements. Our loyalty marketing services are often provided via our proprietary Tally
software. We maintain proprietary databases that we continually refine and that are available to be incorporated quickly into
our analyses on client engagements. In addition, we also have proprietary program management methodologies and services
that we believe can help governments improve performance measurement, support chief information officer and science and
engineering program activities, and reduce security risks.

We are led by an experienced management team

Our management team, consisting of approximately 288 officers with the title of vice president or higher, possesses
extensive industry experience and had an average tenure of 13 years with us as of December 31, 2016 (including prior service
with companies we have acquired). This low turnover allows us to retain institutional knowledge. Our managers are
experienced both in marketing efforts and in successfully managing and executing our key services. Our management team
also has experience in acquiring other businesses and integrating those operations with our own. A number of our managers
are industry-recognized thought leaders. We believe that our management’s successful past performance and deep
understanding of our clients’ needs have been differentiating factors in competitive situations.

We have a broad global presence

We serve our clients with a global network of more than 55 regional offices throughout the U.S., and more than 10
offices in key markets outside the U.S., including offices in the UK, Belgium, China, India and Canada. Our global presence
also gives us access to many of the leading experts on a variety of issues around the world, allowing us to expand our
knowledge base and areas of functional expertise. Over the past year, we worked in dozens of countries, helping government
and commercial clients with energy, environment, infrastructure, healthcare, marketing, interactive technology/e-commerce,
and air transport matters.

STRATEGY

Our strategy to increase our revenue and shareholder value involves the following key elements:

Expand our commercial businesses

We plan to continue to pursue higher-margin commercial projects. We believe we have strong, global client
relationships in both the commercial energy and air transport markets, where our margins have historically been higher than
those in our government market. We continue to see growth opportunities in our current commercial business in the utility
sector, as well as significant potential for us to expand our business in other commercial areas, such as aviation and digital
marketing and strategic communications services, both domestically and internationally.

We view the energy industry as a particularly attractive market for us over the next decade due to concerns over
controlling energy costs and limiting climate and environmental impacts, increased state and federal regulation, the need for
cleaner and more diverse sources of energy, and the concomitant need for infrastructure to transport and/or convert those
new energy sources. We also believe that the combination of our vertical domain expertise with our digital marketing
expertise makes us a provider of choice for high value-added assignments in that arena. Although we believe the utility
industry will continue to be a strong market for research and advisory services, particularly in light of the changing focus on
regulatory actions and alternative energy sources, we intend to leverage our existing relationships and institutional expertise
to pursue and capture additional, typically higher-margin opportunities. For example, we believe we can continue to expand
our program and technology-based services in areas such as assisting with the implementation of energy efficiency programs,
information technology applications, and environmental management services for larger utilities. In addition, the growth of
interest in sustainability and energy efficiency issues has created opportunities to offer these types of services to new clients
9

beyond our traditional sectors. We believe these factors, coupled with our expansive national and global footprint, will result
in a greater number of engagements that will also be larger in size and scope.

We expect other sectors, such as information service providers and travel and tourism, to continue to expand their
interest in these services as these industries better understand their energy consumption options and the positive benefits of
demonstrating environmental stewardship. Our broad range of services to the aviation industry makes us well positioned to
capitalize on significant industry changes, including substantial airline equipment upgrades to newer, more efficient aircraft
models in a cost-constrained environment; renovations of older airports to adapt to newer aircraft; and changes to airport
business models and strategy as they place increasing importance on passenger experience.

Our engagement services, including marketing, interactive technology, and strategic communications offerings, are
well-positioned to support the continuing growth of multichannel engagement and e-commerce. We broadened our client
offerings, particularly in the areas of content management, marketing and digital services. We can now offer complete end-
to-end solutions for chief marketing officers, chief communications officers, and chief technology officers as they invest in
digital marketing platforms and solutions. We deliver cutting-edge digital strategy support, as well as the creative services
that help brands, products and services succeed in a crowded marketplace.

Replicate our business model across government and industry in selected geographies

We believe the services we provide to our energy, environment, and infrastructure market have strong growth potential
in selected geographies. Our domain expertise is well suited to meet Europe's need for cutting-edge climate change, energy
and environmental solutions and to increasing, in particular, our offerings to the UK government and European Commission.
We have also focused our geographic footprint by selectively closing or reducing the size of offices which appear to be
unlikely to generate profitable growth in the near to medium term, generally in nations or regions undergoing either economic
or political challenges.

Strengthen our technology-based offerings

We strengthened our services in the fields of content and customer relationship management, loyalty marketing, and
end-to-end e-commerce. We are positioned to increase these services by expanding the technological underpinnings of our
business, while bringing these marketing and e-commerce solutions, as well as expanded data management and analytics
offerings to allow our clients to better link themselves with consumers and other stakeholders.

Leverage research and advisory work into full life cycle solutions

We plan to continue to leverage our research and advisory services and strong client relationships to increase our
revenue from longer running engagements. These engagements could include: information services and technology-based
solutions, project and program management, business process solutions, marketing and communications delivery, strategic
communications, and technical assistance and training. Our research and advisory services provide us with insight and
understanding of our clients’ missions and goals. We believe the domain expertise and program knowledge we develop from
these assignments position us to capture a greater portion of larger engagements. However, we will need to undertake such
expansion carefully to avoid actual, potential, and perceived conflicts of interest. See “Risk Factors—Risks Related to our
Business—The diversity of the services we provide, and the clients we serve, may create actual, potential, and perceived
conflicts of interest and conflicts of business that limit our growth and lead to potential liabilities for us.”

Defend, expand, and deepen our presence in core federal and state and local government markets

Changing political priorities at the federal and state and local government levels have created challenging market
conditions for all competitors in the government services sector. We will focus not only on defending our current market
footprint, but also on innovating to continue expanding across key growth markets, such as federal government health-related
and cybersecurity initiatives, digital services, and disaster recovery work to state and local governments. We will continue to
provide innovative solutions that help our public sector clients “do more with less.” We will specifically target deeper
penetration of those agencies that currently procure services only from one or two of our service areas. We believe we can
leverage many of our long-term client relationships by introducing these existing clients, where appropriate, to our other
services. For example, we plan to introduce many of our research and advisory clients to our capabilities to provide associated
information technology, cybersecurity, large-scale program management, and strategic communications and digital services.
Given the increasing focus on deficit reduction and transparency, we can also offer clients our extensive performance
measurement, program evaluation, and performance management services. Finally, having more than 55 offices across the

U.S allows us to focus more of our business development efforts on addressing the needs of federal and state and local
government agencies with operations outside of the Washington, D.C. metropolitan area.

Pursue larger prime contract opportunities

We believe that continuing to expand our client engagements into services we offer as part of our end-to-end client
solutions enables us to pursue larger prime contract opportunities, which should provide a greater return on our business
development efforts and allow for increased employee utilization. We plan to continue to target larger and longer-term
opportunities through greater emphasis on early identification of opportunities, strategic capture and positioning, and
enhanced brand recognition. We believe that the resulting increase in the scale, scope, and duration of our contracts will help
us continue to grow our business.

Pursue strategic acquisitions

We plan to augment our organic growth, where appropriate, with strategic acquisitions. Since the beginning of 2014,
we have added a number of companies including: Mostra S.A. ("Mostra"
) in February 2014; CityTech, Inc. ("CityTech" )
in March 2014; OCO Holdings, Inc. and its various subsidiaries, including Olson + Co., Inc. ("Olson" ) in November 2014;
and Trade NTE, LLC. ("Trade NTE") in November 2016. Our more recent acquisitions are discussed further in
"Management's Discussion and Analysis of Financial Condition and Results of Operations-Acquisitions and Business
Combinations." We plan to continue a disciplined acquisition strategy to obtain new clients, increase our size and market
presence, and obtain capabilities that complement our existing portfolio of services, while focusing on cultural compatibility
and positive financial impact.

CLIENT AND CONTRACT MIX

Government clients (including federal, state and local, and international governments) and commercial clients
(including U.S. and international) accounted for approximately 65% and 35%, respectively, of our 2016 revenue,
approximately 65%, and 35%, respectively, of our 2015 revenue, and approximately 70% and 30%, respectively, of our 2014
revenue. Our clients span a broad range of civilian and defense agencies and commercial enterprises. Commercial clients
include non-profit organizations and universities, while government clients include the World Bank and the United Nations.
In general, a client is considered government if the primary funding of that client is from a government agency or institution.
If we are a subcontractor, then the client is not considered to be the prime contractor but rather the ultimate client receiving
the services from the prime contractor team.

In the fiscal years 2016, 2015, and 2014, our three largest clients were HHS, DOS, and DoD. The following table

summarizes the percentage of our total revenue for each of these.

Year ended December 31,
2015

2014

2016

Department of Health and Human Services ......................................
Department of State ...........................................................................
Department of Defense......................................................................
Total ..................................................................................................

19%
6%
5%
30%

18 %
8 %
5 %
31 %

17 %
8 %
6 %
31 %

Most of our revenue is derived from prime contracts, which accounted for approximately 89%, 85%, and 86% of our
revenue for 2016, 2015, and 2014, respectively. Unless the context otherwise requires, we use the term “contracts” to refer
to contracts and any task orders or delivery orders issued under a contract.

Our contract periods typically extend from one month to five years, including option periods. Many of our government
contracts provide for option periods that may be exercised by the client. In 2016, 2015, and 2014, no single contract accounted
for more than 4% of our revenue. Our 10 largest contracts by revenue collectively accounted for approximately 14%, 15%,
and 14% of our revenue in 2016, 2015, and 2014, respectively.

Our international operations pose special risks, as discussed below in “Risk Factors—Risks Related to Our Business—
Our international operations pose additional risks to our profitability and operating results.” The table below details
information on our domestic and international revenues for each of the three years presented. Revenue is attributed to location
based on the geographic areas to which a contract is awarded. International revenues have decreased for the year ended
December 31, 2016 compared to the year ended December 31, 2015 due to decreases in the foreign currency exchange rates.
In addition, we have focused our geographic footprint by selectively closing or reducing the size of offices which appear to
be unlikely to generate profitable growth in the near to medium term, generally in nations or regions undergoing either
economic or political challenges. Certain immaterial revenue amounts in the prior year have been reclassified to conform to
current year presentation.

2016

Year ended December 31,
2015
(In thousands)

2014

U.S. .................................................................................................... $
International .......................................................................................
Total ................................................................................................... $

1,070,336 $
114,761
1,185,097 $

1,011,877 $
120,355
1,132,232 $

919,098
131,036
1,050,134

CONTRACT BACKLOG

We define total backlog as the future revenue we expect to receive from our contracts and other engagements. We
generally include in our total backlog the estimated revenue represented by contract options that have been priced, but not
exercised. We do not include any estimate of revenue relating to potential future delivery orders that might be awarded under
our General Services Administration Multiple Award Schedule (“GSA Schedule”) contracts, other Indefinite
Delivery/Indefinite Quantity (“IDIQ”) contracts, Master Service Agreements (“MSAs”), or other contract vehicles that are
also held by a large number of firms and under which potential future delivery orders or task orders might be issued by any
of a large number of different agencies, and are likely to be subject to a competitive bidding process. We do, however, include
potential future work expected to be awarded under IDIQ contracts that are available to be utilized by a limited number of
potential clients and are held either by us alone or by a limited number of firms.

We include expected revenue in funded backlog when we have been authorized by the client to proceed under a contract
up to the dollar amount specified by our client, and this amount will be owed to us under the contract after we provide the
services pursuant to the authorization. If we do not provide services authorized by a client prior to the expiration of the
authorization, we remove amounts corresponding to the expired authorization from funded backlog. We do include expected
revenue under an engagement in funded backlog when we do not have a signed contract, but only in situations when we have
received client authorization to begin or continue working and we expect to sign a contract for the engagement. In this case,
the amount of funded backlog is limited to the amount authorized. Our funded backlog does not represent the full revenue
potential of our contracts because many government clients, and sometimes other clients, authorize work under a particular
contract on a yearly or more frequent basis, even though the contract may extend over several years. Most of the services we

provide to commercial clients are provided under contracts or task orders under MSAs with relatively short durations. As a
consequence, our backlog attributable to these clients is typically reflected in funded backlog and not in unfunded backlog.

We define unfunded backlog as the difference between total backlog and funded backlog. Our estimate of unfunded
backlog for a particular contract is based, to a large extent, on the amount of revenue we have recently recognized on that
contract, our experience in utilizing contract capacity on similar types of contracts, and our professional judgment.
Accordingly, our estimate of total backlog for a contract included in unfunded backlog is sometimes lower than the revenue
that would result from our client utilizing all remaining contract capacity.

Although we expect our total backlog to result in revenue, the timing of revenue associated with both funded and
unfunded backlog will vary based on a number of factors, and we may not recognize revenue associated with a particular
component of backlog when anticipated, or at all. Our government clients generally have the right to cancel any contract, or
ongoing or planned work under any contract, at any time. In addition, there can be no assurance that revenue from funded or
unfunded backlog will have similar profitability to previous work or will be profitable at all. Generally speaking, we believe
the risk that a particular component of backlog will not result in future revenue is higher for unfunded backlog than for funded
backlog. See “Risk Factors—Risks Related to Our Business—We may not receive revenue corresponding to the full amount
of our backlog, or may receive it later than we expect, which could adversely affect our revenue and operating results.”

Our funded and estimates of unfunded and total backlog were as follows at December 31:

Funded ................................................................................................ $
Unfunded ............................................................................................
Total backlog ...................................................................................... $

1,020.3 $
1,102.4
2,122.7 $

791.9 $
1,025.5
1,817.4 $

849.9
1,018.4
1,868.3

2016

2015
(In millions)

2014

There were no awards included in our 2016, 2015 or 2014 backlog amounts that were under protest.

BUSINESS DEVELOPMENT

Our business development efforts are critical to our organic growth. Our business development processes and systems
are designed to enable agility and speed-to-market over the business development life cycle, especially given the distinctions
between commercial and public sectors. Business development efforts in priority market areas, which include some of our
largest federal agency accounts (HHS, DOS, DOE, Department of Transportation and EPA), are executed through account
teams, each of which is headed by a corporate account executive and supported by dedicated corporate business development
professionals and senior staff from the relevant operational area. Each account executive has significant authority and
accountability to set priorities and bring to bear the appropriate resources, focusing on larger and strategically important
pursuits. Each team participates in regular executive reviews. Our non-federal government clients are served by account
leaders from operating units and coordinated by senior executives within industry sectors (e.g. energy) where such
coordination is deemed appropriate to enhance our business development opportunities. This account-based approach allows
deep insight into the needs of our clients. It also helps us anticipate our clients’ evolving requirements over the coming 12 to
18 months and position ourselves to meet those requirements. Each of our operational areas is responsible for maximizing
sales in our existing accounts and finding opportunities in closely-related accounts.

The corporate business development function also includes a market research and competitive intelligence group, a
proposal group, a marketing group, a communications group, and a strategic capture unit. The marketing group engages in
brand marketing and strategic marketing program development and execution to raise awareness of our services and solutions
across our markets, and to generate leads for further pursuit by sales personnel. Our contracts and administration function
leads our pricing decisions in partnership with the business development account teams and operational areas.

COMPETITION

We operate in a highly competitive and fragmented marketplace and compete against a number of firms in each of our
key markets. Some of our principal competitors include: Abt Associates Inc.; AECOM Technology Corporation; Alliance
Data Systems Corporation; Booz Allen Hamilton Holding Corporation; CACI International Inc.; Cambridge Systematics,
Inc.; CRA International, Inc.; CSRA Inc.; Deloitte LLP; Eastern Research Group, Inc.; Cardno ENTRIX, Inc.; L-3
Communications Corporation; Leidos Holdings, Inc.; Lockheed Martin Corporation; ManTech International Corporation;
Navigant Consulting, Inc.; Northrop Grumman Corporation; Omnicom Group Inc.; PA Consulting Group;
PricewaterhouseCoopers (PwC); Publicis Group; Science Applications International Corp; Research Triangle Institute; Tetra
Tech Inc.; Westat, Inc., and WPP Plc. In addition, within each of our key markets, we have numerous smaller competitors,
many of which have narrower service offerings and serve niche markets. Some of our competitors are significantly larger
than we are and have greater access to resources and stronger brand recognition than we do.

We consider the principal competitive factors in our market to be client relationships, reputation and past performance
of the firm, client references, technical knowledge and industry expertise of employees, quality of services and solutions,
scope of service offerings, and pricing.

INTELLECTUAL PROPERTY

We own a number of trademarks and copyrights that help maintain our business and competitive position. Sales and
licenses of our intellectual property do not currently comprise a substantial portion of our revenue or profit. We rely on the
technology and models, proprietary processes, and other intellectual property we own or have rights to use in our analyses
and other work we perform for our clients. We use these innovative, and often proprietary, software, analytical models and
tools throughout our service offerings. Our staff regularly maintains, updates, and improves these software, models, and tools
based on our corporate experience. In addition, we sometimes retain limited rights in software applications we develop for
clients. We use a variety of means to protect our intellectual property, but there can be no assurance that it will be adequately
protected.

EMPLOYEES

As of December 31, 2016, we had more than 5,000 benefits-eligible (full-time and regular part-time) employees,
approximately 32% of whom held post-graduate degrees in diverse fields such as social sciences, business and management,
physical sciences, public policy, human capital, information technology and mathematics, engineering, planning, economics,
life sciences, and law. Approximately 67% of these employees held a bachelor’s degree or equivalent or higher. Our
professional environment encourages advanced training to acquire industry-recognized certifications, rewards strong job
performance with advancement opportunities, and fosters ethical and honest conduct. Our salary structure, incentive
compensation, and benefit packages are competitive within our industry.

ITEM 1A.

RISK FACTORS

The following discussion of “risk factors” sets forth some of the most significant factors that may adversely affect our
business, operations, financial position or future financial performance, reputation and/or value of our stock. This information
should be read in conjunction with Management’s Discussion and Analysis and the consolidated financial statements and
related notes incorporated by reference into this Annual Report on Form 10-K. Because of the following factors, as well as
other factors, whether known or unknown, affecting our business, operations, financial position or future financial
performance, reputation and/or value of our stock, past financial performance should not be considered to be a reliable
indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

RISKS RELATED TO OUR INDUSTRY

The failure of Congress to approve appropriations bills in a timely manner for the federal government agencies and
departments we support, or the failure of the President and Congress to reach an agreement on fiscal issues, could
delay and reduce spending, cause us to lose revenue and profit, and affect our cash flow.

On an annual basis, Congress is required to approve appropriations bills that govern spending by each of the federal
government agencies and departments we support. When Congress is unable to agree on budget priorities, and thus is unable
to pass annual appropriations bills on a timely basis, it typically enacts a continuing resolution. Continuing resolutions
generally allow federal government agencies and departments to operate at spending levels based on the previous fiscal year.
When agencies and departments operate on the basis of a continuing resolution, funding we expect to receive from clients
for work we are already performing and for new initiatives may be delayed or cancelled. Thus, the failure by Congress to
approve appropriations bills in a timely manner can result in the loss of revenue and profit when federal government agencies
and departments are required to cancel or change existing or new initiatives or the deferral of revenue and profit to later
periods due to delays in implementing existing or new initiatives. There is also the possibility that Congress will not enact
appropriations bills or a continuing resolution in a timely manner. Furthermore, the federal government may not be able to
fund its operations due to a failure by Congress to raise the U.S. debt ceiling. In such events, many parts of the federal
government, including agencies, departments, programs, and projects we support, may “shut down,” which could have a
substantial negative affect on our revenue, profit, and cash flows. The budgets of many of our state and local government
clients are also subject to similar processes, and thus subject us to similar risks and uncertainties.

In addition, in an effort to control the federal government deficit, Congress passed the Budget Control Act of 2011 (the
“Budget Act”), which mandated the reduction of discretionary spending by the federal government by $1.2 trillion over 10
years. While some of these reductions have been rescinded, the spending caps through 2021 remain in place and, unless they
are also rescinded, could continue to constrain federal discretionary spending for the services we provide. Because we derive
a significant portion of our revenue from contracts with federal government clients, a decline in federal government
expenditures and/or a shift of expenditures away from programs we support, whether as a result of the Budget Act or
otherwise, would likely have a negative impact on our business and results.

Government spending priorities may change in a manner adverse to our business.

We derived approximately 48%, 48%, and 51% of our revenue in 2016, 2015, and 2014, respectively, from contracts
with federal government clients, and approximately 17%, 17%, and 19% of our revenue from contracts with state and local
governments and international governments in 2016, 2015, and 2014, respectively. Expenditures by our federal government
clients may be restricted or reduced by presidential or congressional action, by action of the Office of Management and
Budget, by action of individual agencies or departments, or by other actions. In addition, many state and local governments
are not permitted to operate with budget deficits and nearly all state and local governments face considerable challenges in
balancing their budgets. Accordingly, we expect that some of our government clients may delay payments due to us, may
eventually fail to pay what they owe us, and/or may delay certain programs and projects. For some government clients, we
may face a difficult choice: turn down (or stop) work with the risk of damaging a valuable client relationship, or perform
work with the risk of not getting paid in a timely fashion or perhaps at all. Federal and/or state and local government elections
could also affect spending priorities and budgets at all levels of government. For example, the new administration has
articulated new spending priorities, including in the areas of health care, transportation and homeland security, which, if
adopted, could significantly change the size and mix of contracts being offered by our federal government clients. In addition,
increased deficits and debt at all levels of government, both domestic and international, may lead to reduced spending by
agencies and departments on projects or programs we support.

The results of the November 2016 Presidential election in the U.S. resulted in a different political party controlling the
executive branch. In any such change the potential exists for numerous policy alterations to be promulgated which could
adversely affect our business, financial condition, and results of operations. Such alterations could include changes to one or
several of the policy areas in which ICF is active, including but not limited to energy, environment, public health, climate
change, housing, biomedical research, cybersecurity, and education.

Our failure to comply with complex laws, rules, and regulations could cause us to lose business and subject us to a
variety of penalties and sanctions.

We must comply with laws, rules, and regulations that affect how we do business with our government clients and
impose added costs on our business. Each government client has its own laws, rules, and regulations that affect its contracts.

Some of the more significant laws and regulations affecting the formation, administration, and performance of government
contracts include:

•

The U.S. Federal Acquisition Regulation, and agency and department regulations analogous or supplemental
to it;

The Foreign Corrupt Practices Act;

The Truth in Negotiations Act;

The Procurement Integrity Act;

The Civil False Claims Act;

The Cost Accounting Standards; and

Laws, rules and regulations restricting (i) the use and dissemination of information classified for national
security purposes, (ii) the exportation of specified products, technologies, and technical data, and (iii) the use
and dissemination of sensitive but unclassified data.

Any failure to comply with applicable federal, and/or state and local government laws, rules and regulations could
subject us to civil and criminal penalties and administrative sanctions, including termination of contracts, repayment of
amounts already received under contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment
from doing business with federal and/or state and local government agencies and departments, any of which could adversely
affect our reputation, our revenue, our operating results, and/or the value of our stock.

In addition, the federal government and other governments with which we do business may change their procurement
practices or adopt new contracting laws, rules, or regulations that could be costly to satisfy or that could impair our ability to
obtain new contracts and reduce our revenue and profit, for example, by curtailing the use of services firms or increasing the
use of firms with a “preferred status,” such as small businesses.

In addition to our U.S. operations, we also have a significant presence in key markets outside the U.S., including offices
in the United Kingdom, Belgium, China, India and Canada. Failure to abide by laws, rules and regulations applicable to our
work outside the U.S. could have similar effects to those described above.

We are subject to various routine and non-routine governmental and other reviews, audits and investigations, and
unfavorable audit results could force us to adjust previously reported operating results, could affect future operating
results, and could subject us to a variety of penalties and sanctions.

Federal government departments and agencies and many state government clients audit and review our contract
performance, pricing practices, cost structure, financial capability, and compliance with applicable laws, rules, and
regulations. Audits could raise issues that have significant adverse effects, including, but not limited to, substantial
adjustments to our previously reported operating results and substantial effects on future operating results. If a government
audit, review, or investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and
administrative sanctions, including termination of contracts, repayment of amounts already received under contracts,
forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with federal and state
and local government agencies and departments, any of which could adversely affect our reputation, our revenue, our
operating results, and/or the value of our stock. We may also lose business if we are found not to be sufficiently able to meet
ongoing cash flows and financial obligations on a timely basis. In addition, we could suffer serious harm to our reputation
and our stock price could decline if allegations of impropriety are made against us, whether true or not. Federal government
audits have been completed on our incurred contract costs only through 2007; audits for costs incurred on work performed
since then have not yet been completed. In addition, non-audit reviews by federal and state and local governments may still
be conducted on all our government contracts, even for periods before 2007.

Our contracts may contain provisions that are unfavorable to us and permit our clients to, among other things,
terminate our contracts partially or completely at any time prior to completion.

Our contracts may contain provisions that allow our clients to terminate or modify these contracts at their convenience
upon short notice. If a client terminates one of our contracts for convenience, we may only bill the client for work completed
prior to the termination, plus any commitments and settlement expenses the client agrees to pay, but not for any work not yet
performed. In addition, many of our government contracts and task and delivery orders are incrementally funded as

appropriated funds become available. The reduction or elimination of such funding can result in contract options not being
exercised and further work on existing contracts and orders being curtailed. In any such event, we would have no right to
seek lost fees or other damages. In addition, certain contracts with international government clients may have more severe
and/or different contract clauses than what we are accustomed to with federal and state and local government clients, such as
penalties for any delay in performance. If a client were to terminate, decline to exercise options under, or curtail further
performance under one or more of our major contracts, our revenue and operating results could be adversely affected.

Our commercial work depends on certain sectors of the global economy that are highly cyclical, which can lead to
substantial variations in our revenue and profit from period to period.

In recent years, we have expanded our work with commercial clients. Our commercial clients, which include clients
outside the U.S., generated approximately 35%, 35%, and 30% of our revenue in 2016, 2015, and 2014, respectively. This
increased reliance on commercial clients presents new risks and challenges. For example, our commercial work is heavily
concentrated in cyclical industries such as energy, air transportation, environmental, health, retail and financial services.
Demand for our services from our commercial clients has historically declined when their industries have experienced
downturns, and we expect a decline in demand for our services when these industries experience downturns in the future.

RISKS RELATED TO OUR BUSINESS

The new Presidential Administration (“Administration”) may make substantial changes to fiscal and tax policies that
may adversely affect our business.

The new Administration has called for substantial changes to fiscal and tax policies, which may include comprehensive
tax reform. We cannot predict the impact, if any, of these changes to our business; however, it is possible that these changes
could adversely affect our business. It is likely that some policies adopted by the new Administration will benefit us and
others may negatively impact us. Of course, legislative changes would have to be enacted by the U.S. Congress before being
signed into law by the President. Until we know what changes are enacted, we will not know whether in total we will benefit
from, or are negatively affected by such changes.

Maintaining our client relationships and professional reputation are critical to our ability to successfully win new
contracts and renew expired contracts.

Our client relationships and professional reputation are key factors in maintaining and growing our business, revenue
and profit levels under contracts with our clients. We continually bid for and execute new contracts, and our existing contracts
continually become subject to re-competition and expiration. If we are not able to replace the revenue from these contracts,
either through follow-on contracts or new contracts for those requirements or for other requirements, our revenue and
operating results may be adversely affected. Upon the expiration of a contract, we typically seek a new contract or
subcontractor role relating to that client to replace the revenue generated by the expired contract. There can be no assurance
that those expiring contracts we are servicing will continue after their expiration, that the client will re-procure those
requirements, that any such re-procurement will not be restricted in a way that would eliminate us from the competition (e.g.,
set asides for small businesses), or that we will be successful in any such re-procurements or in obtaining subcontractor roles.
Any factor that diminishes our reputation or client relationships with federal, state and local and international government
clients, as well as commercial clients, could make it substantially more difficult for us to compete successfully for new
engagements and qualified employees. To the extent our reputation and/or client relationships deteriorate, our revenue and
operating results could be adversely affected.

Our reliance on GSA Schedule and other IDIQ contracts creates the risk of volatility in our revenue and profit levels.

We believe that one of the elements of our success is our position as a prime contractor under GSA Schedule contracts
and other IDIQ contracts. As these types of contracts have increased in importance over the last several years, we believe our
position as a prime contractor has become increasingly important to our ability to sell our services to federal government
clients. However, these contracts require us to compete for each delivery order and task order, rather than having a more
predictable stream of activity during the term of a contract. In addition, we may spend considerable cost and managerial time
and effort to prepare bids and proposals for contracts that we may not win. There can be no assurance that we will continue
to obtain revenue from such contracts at current levels, or in any amount, in the future. To the extent that federal government
agencies and departments choose to employ GSA Schedule contracts and other IDIQ contracts encompassing activities for
which we are not able to compete or provide services, we could lose business, which would negatively affect our revenue
and profitability.

We may not receive revenue corresponding to the full amount of our backlog, or may receive it later than we expect,
which could adversely affect our revenue and operating results.

The calculation of backlog is highly subjective and conditioned on numerous uncertainties and estimates, and there can
be no assurance that we will in fact receive the amounts we have included in our backlog. Our assessment of a contract's
potential value is based on factors such as the amount of revenue we have recently recognized on that contract, our experience
in utilizing contract capacity on similar types of contracts, and our professional judgment. In the case of contracts that may
be renewed at the option of the client, we generally calculate backlog by assuming that the client will exercise all of its
renewal options; however, the client may elect not to do so. In addition, federal government contracts rely on congressional
appropriation of funding, which is typically provided only partially at any point during the term of federal government
contracts, and all or some of the work to be performed under a contract may require future appropriations by Congress and
the subsequent allocation of funding by the procuring agency or department to the contract. Protests of contracts continue to
be common in our industry, and successful protests of contracts awarded to us could also adversely affect our backlog and
our potential associated revenue. Our estimate of the portion of backlog that we expect to recognize as revenue in any future
period may differ from actual results because the receipt and timing of this revenue often depends on subsequent appropriation
and allocation of funding and is subject to various contingencies, such as timing of task orders and delivery orders, many of
which are beyond our control. In addition, we may never receive revenue from some of the engagements that are included in
our backlog, and this risk is greater with respect to unfunded backlog. Although we adjust our backlog to reflect modifications
to, or renewals of, existing contracts, awards of new contracts, or approvals of expenditures, if we fail to realize revenue
corresponding to our backlog, our revenue and operating results could be adversely affected.

Failure to identify, hire, train and retain talented employees who are committed to our mission and vision could have
a negative effect on our reputation and our business.

Our business, which provides professional services and technology-based solutions to government and commercial
clients, largely depends on our ability to attract and retain qualified employees. Additionally, as our business continues to
evolve, as we acquire new businesses, and as we provide a wider range of services, we become increasingly dependent upon
the capabilities of our employees. If we are unable to recruit and retain a sufficient number of qualified employees that are
committed to our mission and vision, we may incur higher costs related to an increase in subcontractors, hiring, training and
retention. Additionally, the loss of key personnel could impair our ability to effectively serve our clients and maintain and
grow our business, and our future revenue and operating results could be adversely affected.

Because much of our work is performed under task orders and delivery orders, and sometimes under short-term
assignments, we are exposed to the risk of not having sufficient work for our staff, which can affect revenue and profit.

We perform some of our work under short-term contracts. Even under many of our longer-term contracts, we perform
much of our work under individual task orders and delivery orders, many of which are awarded on a competitive basis. If we
cannot obtain new work in a timely fashion, whether through new contracts, task orders, or delivery orders, modifications to
existing contracts, or otherwise, we may not be able to keep our staff profitably utilized, which may result in challenges
related to retaining talented members of our staff and also adversely impact our financial results. There can be no assurance
that we can profitably manage the utilization of, or retain, our staff.

If we are unable to accurately estimate and control our contract costs, then we may incur losses on our contracts,
which could decrease our operating margins and reduce our profits. In particular, our fixed-price contracts could
increase the unpredictability of our earnings.

It is important for us to accurately estimate and control our contract costs so that we can maintain positive operating
margins and profitability. As described elsewhere in this Form 10-K, we generally enter into three principal types of contracts
with our clients: fixed-price, time-and-materials and cost-plus.

We derived 39% of our revenue from fixed-price contracts in 2016, as compared to 38% in 2015 and 34% in 2014.
Under fixed-price contracts, we receive a fixed price irrespective of the actual costs we incur and, consequently, we are
exposed to a number of risks. We realize a profit on fixed-price contracts only if we can control our costs and prevent cost
overruns on our contracts. Fixed-price contracts require cost and scheduling estimates that are based on a number of
assumptions, including those about future economic conditions, costs, and availability of labor, equipment and materials, and
other exigencies. We could experience cost overruns if these estimates are inaccurate as a result of errors or ambiguities in
the contract specifications, or become inaccurate as a result of a change in circumstances following the submission of the
estimate due to, among other things, unanticipated technical problems, difficulties in obtaining permits or approvals, changes
in local laws or labor conditions, weather delays, or the inability of our vendors or subcontractors to perform. If cost overruns
occur, we could experience reduced profits or, in some cases, a loss for that project. If a project is significant, or if there are
one or more common issues that impact multiple projects, costs overruns could increase the unpredictability of our earnings,
as well as have an adverse impact on our business and earnings.

In our consumer and financial market, we provide digital marketing services in a highly competitive and constantly
evolving market. Our success in this market depends upon our ability to develop and integrate new technologies into
our business and enhance our existing products and services, as well as our ability to respond to rapid changes in
technology in order to remain competitive.

In our consumer and financial market, which expanded due to certain acquisitions, including the acquisition of Olson,
we provide digital marketing services in highly competitive markets. We compete principally with large systems consulting
and implementation firms, traditional and digital advertising and marketing agencies, offshore consulting and outsourcing
companies, and clients’ internal information systems departments. To a lesser extent, other competitors include boutique
consulting firms that maintain specialized skills and/or are geographically focused. We expect these competitors to devote
significant effort to maintaining and growing their respective market shares. If we cannot respond effectively to advances by
our competitors in this market, or grow our own business efficiently, our overall business and operating results could be
adversely affected.

Our success in this competitive market depends in part on our ability to adapt to rapid technological advances and
evolving standards in computer hardware and software development and media infrastructure, changing and increasingly
sophisticated customer needs, newly-developed digital marketing services and platform introductions and enhancements. If,
within this market, we are unable to develop new or sufficiently differentiated products and services, to enhance and improve
our products and support services in a timely manner or to position and/or price our products and services to meet demand,
our overall business and operating results could be adversely affected.

Litigation, claims, disputes, audits, reviews, and investigations in connection with the completed Road Home contract
expose us to many different types of liability, may divert management attention, and could increase our costs.

In June 2006, our subsidiary, ICF Emergency Management Services, LLC (“ICF Emergency”), was awarded the Road
Home contract by the State of Louisiana, Office of Community Development (the “OCD”), to manage a program designed
primarily to help homeowners and landlords of small rental properties affected by Hurricanes Rita and Katrina by providing
them compensation for the uninsured, uncompensated damages they suffered from the hurricanes (the “Program”). With an
aggregate value of $912 million, the Road Home contract was our largest contract throughout its three-year duration, which
ended on June 11, 2009.

The Road Home contract provided us with significant opportunities, but also created substantial risks. A number of
these risks continued beyond the term of the contract. We still have lawsuits pending, and other claims have been made
against us in connection with this contract. New lawsuits may be filed and new claims may be made against us in the future
including, but not limited to, claims by subcontractors and others who are dissatisfied with the amount of money they have
received from, or their treatment under, the Program. We have defended such lawsuits and claims vigorously and plan to
continue to do so, but we have not prevailed in every case and may not prevail in future cases. Although the contract provides
that, with several exceptions, we are allowed to charge, as an expense under the contract, reasonable costs and fees incurred
in defending and paying claims brought by third parties arising out of our performance, there can be no assurance that our
costs and fees will be reimbursed. The State of Louisiana has not reimbursed us for the majority of such costs or fees and has
not reimbursed any such costs or fees since 2008. The outstanding contract receivables related to defending and paying claims
were fully reserved as of December 31, 2016.

In addition and as discussed in “Note 16—Commitments and Contingencies – Road Home Contract” in our financial
statements, on June 10, 2016, the OCD filed a written administrative demand (the “Administrative Demand”) with the
Louisiana Commissioner of Administration against ICF Emergency in connection with the administration of the Program. In
its administrative demand, the OCD sought approximately $200.8 million in alleged overpayments to Program grant
recipients. The OCD separately supplemented the amount of recovery it is seeking in total approximately $214.3 million.
The State of Louisiana, through the Division of Administration, also filed suit (the “Proceeding”) in Louisiana state court on
June 10, 2016 broadly alleging and seeking recoupment for the same claim made in the Administrative Demand. On
September 21, 2016, the Commissioner of the Division of Administration notified the OCD and the Company of his decision
to defer jurisdiction of the Administrative Demand. In so doing, the Commissioner declined to reach a decision on the merits,
stated that his deferral would not be deemed to grant or deny any portion of the OCD’s claim, and authorized the parties to
proceed on the matter in the Proceeding. The Company continues to believe that neither the Administrative Demand nor the
Proceeding has any merit, intends to vigorously defend its position, and has therefore not recorded a liability as of December
31, 2016.

As discussed above, the Road Home contract has been, and we expect it to continue to be, audited, investigated,
reviewed, and monitored frequently by federal and state government authorities and their representatives. These activities
may consume significant management time and effort; further, the contract provides that we are subject to audits for a period
after the date of the last payment made under the contract. Findings from any audit, investigation, review, monitoring, or
similar activity could subject us to civil and criminal penalties and administrative sanctions from federal and state government
authorities, which could substantially adversely affect our reputation, our revenue, our operating results, and the value of our
stock.

We derive significant revenue and profit from contracts awarded through a competitive bidding process, which can
impose substantial costs on us, and we will lose revenue and profit if we fail to compete effectively.

We derive significant revenue and profit from contracts that are awarded through a competitive bidding process.

Competitive bidding imposes substantial costs and presents a number of risks, including:

•

the substantial cost and managerial time and effort that we spend to prepare bids and proposals;

the need to estimate accurately the resources and costs that will be required to service any contracts we are
awarded, sometimes in advance of the final determination of their full scope;

the expense and delay that may arise if our competitors protest or challenge awards made to us pursuant to
competitive bidding, as discussed in the risk factor below; and

the opportunity cost of not bidding on and winning other contracts we may have otherwise pursued.

To the extent we engage in competitive bidding and are unable to win particular contracts, we not only incur substantial
costs in the bidding process that negatively affect our operating results, but we may lose the opportunity to operate in the
market for the services provided under those contracts for a number of years. Even if we win a particular contract through
competitive bidding, our profit margins may be depressed or we may even suffer losses as a result of the costs incurred
through the bidding process and the need to lower our prices to overcome competition.

Our business could be adversely affected by delays caused by our competitors protesting contract awards received by
us, which could stop our work. Likewise, we may protest the contracts awarded to some of our competitors, a process
that takes the time and energy of our management and incurs outside costs.

Due in part to the competitive bidding process under which government contracts are awarded, we are at risk of
incurring expenses and delays if one or more of our competitors protest contracts awarded to us. Contract protests remain
common in our industry and may result in a requirement to resubmit offers for the protested contract or in the termination,
reduction, or modification of the awarded contract. It can take many months to resolve contract protests and, in the interim,
the contracting government agency or department may suspend our performance under the contract pending the outcome of
the protest. Even if we prevail in defending the contract award, the resulting delay in the startup and funding of the work
under these contracts may adversely affect our operating results.

Moreover, in order to protect our competitive position, we may protest the contract awards of our competitors. This
process takes the time and energy of our executives and employees, is likely to divert management’s attention from other
important matters, and could cause us to incur outside expenses.

Our international operations pose additional risks to our profitability and operating results.

We have offices in the UK, Belgium, China, India and Canada, among others, and expect to continue to have
international operations and offices, some of which are in underdeveloped countries that do not have a well-established
business infrastructure. We also perform work in some countries where we do not have a physical office. Some of the
countries in which we work have a history of political instability or may expose our employees and subcontractors to physical
danger. Expansion into selective new geographic regions requires considerable management and financial resources, the
expenditure of which may negatively impact our results, and we may never see any return on our investment.

Geopolitical events in the European Union ("EU") may also adversely impact our business. Following a referendum on
June 23, 2016 in which voters in the UK approved an exit from the EU and the January 29, 2017 Parliamentary approval, it
is expected that the UK government will initiate a process to leave the EU (often referred to as “Brexit”), including negotiating
the terms of the UK’s future relationship with the EU. Such an exit from the EU is unprecedented, and it is unclear how the
UK’s access to the EU Single Market, and the wider commercial, legal and regulatory environment in which we, our
customers and our counterparties operate, will be impacted. Our UK and Belgian operations service most of our European
clients, including the EU, and these operations could be disrupted by Brexit, particularly if there is a change in the UK’s
relationship to the EU Single Market. Even prior to any change to the UK’s relationship with the EU, the uncertainty
surrounding the terms of the UK’s exit and its consequences could adversely impact customer and investor confidence, result
in additional market volatility and adversely affect our businesses and results of operations.

Other member states may conduct similar referenda leading to an exit from the EU, resulting in a reduction in funding
for the European Commission that could lead to a decrease in the funding and scope of our work for that client. In addition,
security and sovereignty issues resulting from geopolitical events, or the EU negotiations driven by those events, could change
the current balance of responsibility established between the European Commission and member nations, which could also
reduce the funding and scope of our work for that client.

Our international operations are subject to risks associated with operating in, and selling to and in, countries other than
the U.S., that could, directly or indirectly, adversely affect our international and domestic operations and our overall revenue,
profit, and operating results including, but not limited to:

•

compliance with the laws, rules, regulations, policies, legal standards, and enforcement mechanisms of the
U.S. and the other countries in which we operate, including bribery and anti-corruption laws, economic
sanctions, trade restrictions, local tax and income laws, and local labor and employment laws, which are
sometimes inconsistent;

restrictions on the ability to repatriate profits to the U.S. or otherwise move funds;

potential personal injury to personnel who may be exposed to military conflicts and other hostile situations in
foreign countries;

expropriation and nationalization of our assets or those of our subcontractors, and other inabilities to protect
our property rights; and/or

difficulties in managing and staffing such operations, including obtaining work permits or visas, identifying
qualified local employees, operating according to different local labor laws and regulations, dealing with
different local business cultures and practices, and collecting contract receivables.

In addition, because of our work with international clients, certain of our revenues and costs are denominated in other
currencies, then translated to U.S. dollars for financial reporting purposes. Our revenues and profits may decrease as a result
of currency fluctuations and devaluations and limitations on the conversion of foreign currencies into U.S. dollars. We
currently have forward contract agreements (“hedges”) related to our operations in the EU. We recognize changes in the fair-
value of the hedges in our results of operations. We may increase the number, size and scope of our hedges as we analyze
options for mitigating our foreign exchange risk. We cannot be sure that our hedges will be successful in reducing the risks
to us of our exposure to foreign currency fluctuations and, in fact, the hedges may adversely affect our operating results.

As we develop new services, clients and practices, enter new lines of business, and focus more of our business on
providing a full range of client solutions, our operating risks increase.

As part of our corporate strategy, we are attempting to leverage our research and advisory services to sell our full suite
of services across the life cycle of a policy, program, project, or initiative, and we are regularly searching for ways to provide
new services to clients. In addition, we plan to extend our services to new clients, into new lines of business, and into new
selected geographic locations. As we focus more on our delivery of a full range of consulting services from advisory through
implementation and attempt to develop new services, clients, practice areas and lines of business these efforts could be
unsuccessful and adversely affect our results of operations.

Such growth efforts place substantial additional demands on our management and staff, as well as on our information,
financial, administrative and operational systems. We may not be able to manage these demands successfully. Growth may
require increased recruiting efforts, increased business development, selling, marketing and other actions that are expensive
and entail increased risk. We may need to invest more in our people and systems, controls, compliance efforts, policies and
procedures than we anticipate. Therefore, even if we do grow, the demands on our people and systems, controls, compliance
efforts, policies and procedures may be sufficiently great that the quality of our work, our operating margins, and our
operating results suffer, at least in the short-term, and perhaps in the long-term.

Efforts involving a different focus, new services, new clients, new practice areas, and new lines of business, entail
inherent risks associated with our inexperience and competition from mature participants in those areas. Our expansion of
services we deliver to clients may result in costly decisions that could harm our profit and operating results. In particular,
implementation and improvement services often relate to the development, implementation and improvement of critical
infrastructure or operating systems that our clients may view as “mission critical,” and if we fail to satisfy the needs of our
clients in providing these services, our clients could incur significant costs and losses for which they could seek compensation
from us.

The diversity of the services we provide, and the clients we serve, may create actual, potential, and perceived conflicts
of interest and conflicts of business that limit our growth and could lead to potential liabilities for us.

Because we provide services to a wide array of both government and commercial clients, occasions arise where, due to
actual, potential, or perceived conflicts of interest or business conflicts, we cannot perform work for which we are qualified.
A number of our contracts contain limitations on the work we can perform for others, such as, for example, when we are
assisting a government agency or department in developing regulations or enforcement strategies. Actual, potential, and
perceived conflicts limit the work we can do and, consequently, can limit our growth and adversely affect our operating
results. In addition, if we fail to address actual or potential conflicts properly, or even if we simply fail to recognize a perceived
conflict, we may be in violation of our existing contracts, may otherwise incur liability, may lose future business for not
preventing the conflict from arising, and our reputation may suffer. Particularly as we continue to grow our commercial
business, we anticipate that conflicts of interest and business conflicts will pose a greater risk.

Our relationships with other contractors are important to our business and, if disrupted, could cause us damage.

We derive a portion of our revenue from contracts under which we act as a subcontractor or from “teaming”
arrangements in which we and other contractors jointly bid on particular contracts, projects, or programs. As a subcontractor
or team member, we often lack control over fulfillment of a contract, and poor performance on the contract, whether resulting
from our performance or the performance of another contractor, could tarnish our reputation, result in a reduction of the
amount of our work under, or termination of, that contract or other contracts, and cause us not to obtain future work, even
when we perform as required. Moreover, our revenue, profit and operating results could be adversely affected if any prime
contractor or teammate does not pay our invoices in a timely fashion, chooses to offer products or services of the type that
we provide, teams with other companies to provide such products or services, or otherwise reduces its reliance upon us for
such products or services.

We depend on our intellectual property and our failure to protect it could harm our competitive position.

Our success depends in part upon our internally-developed technology and models, proprietary processes, and other
intellectual property that we incorporate in our products and utilize to provide our services. If we fail to protect our intellectual
property, our competitors could market services or products similar to our services and products, which could reduce demand
for our offerings. Government clients typically retain a perpetual, worldwide, royalty-free right to use the intellectual property
we develop for them in a manner defined within government regulations, including providing it to other government agencies
or departments, as well as to our competitors in connection with their performance of government contracts. When necessary,
we seek authorization to use intellectual property developed for the government or to secure export authorization.
Government clients may grant us the right to commercialize software developed with government funding, but they are not
required to do so. If we improperly use intellectual property that was even partially funded by government clients, these
clients could seek damages and royalties from us, sanction us, and prevent us from working on future government contracts.
Actions could also be taken against us if we improperly use intellectual property belonging to others besides our government
clients. In addition, there can be substantial costs associated with protecting our intellectual property, which can also have an
adverse effect on our results of operations.

We may be harmed by intellectual property infringement claims.

We have been subject to claims, and are likely to be subject to future claims, that the intellectual property we use in
delivering services and business solutions to our clients infringes upon the intellectual property rights of others. Our
employees develop much of the intellectual property that we use to provide our services and business solutions to our clients,
but we also acquire or obtain rights to use intellectual property through mergers or acquisitions of other companies, engage
third parties to assist us in the development of intellectual property and license technology from other vendors. If our vendors,
our employees or third parties assert claims that we or our clients are infringing on their intellectual property, we could incur
substantial costs to defend those claims, even if we prevail. In addition, if any of these infringement claims are ultimately
successful, we could be required to:

•

pay substantial damages;

cease selling and using products and services that incorporate the challenged intellectual property;

obtain a license or additional licenses from our vendors or other third parties, which may not be available on
commercially reasonable terms or at all; and

re-design our products and services that rely on the challenged intellectual property, which may be very
expensive or commercially impractical.

Any of these outcomes could further adversely affect our operating results.

Systems and/or service failures could interrupt our operations, leading to reduced revenue and profit.

Any interruption in our operations or any systems’ failures, including, but not limited to: (i) the inability of our staff to
perform their work in a timely fashion, whether caused by limited access to and/or closure of our and/or our clients’ offices
or otherwise; (ii) the failure of network, software and/or hardware systems; and (iii) other interruptions and failures, whether
caused by us, a third-party service provider, unauthorized intruders and/or hackers, computer viruses, natural disasters, power
shortages, terrorist attacks or otherwise, could cause loss of data and interruptions or delays in our business or that of our
clients, or both. In addition, the failure or disruption of mail, communications and/or utilities could cause an interruption or
suspension of our operations or otherwise harm our reputation or business. Our property and business interruption insurance
may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption
and, as a result, revenue, profits and operating results could be adversely affected.

Improper disclosure of confidential and personal data could result in liability and harm our reputation.

We store and process increasingly large amounts of confidential information concerning our employees, customers and
vendors, as well as confidential information on behalf of our customers (such as information regarding applicants in programs
on which we perform services through our contractual relationships with customers). Therefore, we must ensure that we are
at all times compliant with the various privacy laws, rules, and regulations in all of the countries within which we are
operating. These laws, rules, and regulations can vary significantly from country to country, with many being more onerous
than those in the U.S. Moreover, we must ensure that all of our vendors who have access to such information also have the
appropriate privacy policies, procedures and protections in place.

Although we take appropriate measures to protect such information, the continued occurrence of high-profile data
breaches of other companies provides evidence of an external environment increasingly hostile to information security.
Cybersecurity attacks in particular are evolving, and we face the constant risk of cybersecurity threats, including computer
viruses, attacks by computer hackers and other electronic security breaches that could lead to disruptions in critical systems,
unauthorized release of confidential or otherwise protected information and/or corruption of data. In particular, as a federal
government contractor, we face a heightened risk of a security breach or disruption with respect to personally identifiable,
sensitive but unclassified, classified, or otherwise protected data resulting from an attack by computer hackers, foreign
governments and/or cyber terrorists. Improper disclosure of this information could harm our reputation, lead to legal exposure
to customers, or subject us to liability under laws, rules and regulations that protect personal or other confidential data,
resulting in increased costs or loss of revenue.

RISKS RELATED TO ACQUISITIONS

When we undertake acquisitions, they may present integration challenges, fail to perform as expected, increase our
liabilities, and/or reduce our earnings.

One of our growth strategies is to make strategic acquisitions. When we complete acquisitions, it may be challenging
and costly to integrate the acquired businesses due to operating and integrating new accounting systems, differences in the
locations of personnel and facilities, differences in corporate cultures, disparate business models, or other reasons. If we are
unable to successfully integrate acquired companies, our revenue and operating results could suffer. In addition, we may not
successfully achieve the anticipated cost efficiencies and synergies from these acquisitions. Also, our costs for managerial,
operational, financial, and administrative systems may increase and be higher than anticipated. During and following the
integration of an acquired business, we may experience attrition, including losing key employees and/or clients of the acquired
business, which could adversely affect our future revenue and operating results and prevent us from achieving the anticipated
benefits of the acquisition.

Businesses we acquire may have liabilities or adverse operating issues, or both, that we either fail to discover through
due diligence or underestimate prior to the consummation of the acquisition. These liabilities and/or issues may include the
acquired business’ failure to comply with, or other violations of, applicable laws, rules, or regulations or contractual or other
obligations or liabilities. As the successor owner, we may be financially responsible for, and may suffer harm to our reputation
or otherwise be adversely affected by, such liabilities and/or issues. An acquired business also may have problems with
internal controls over financial reporting, which could in turn cause us to have significant deficiencies or material weaknesses
in our own internal controls over financial reporting. These and any other costs, liabilities, issues, and/or disruptions
associated with any past or future acquisitions, and the related integration, could harm our operating results.

As a result of our acquisitions, we have substantial amounts of goodwill and intangible assets, and changes in business
conditions could cause these assets to become impaired, requiring write-downs that would adversely affect our
operating results.

All of our acquisitions have been accounted for as purchases and involved purchase prices well in excess of tangible
asset values, resulting in the creation of a significant amount of goodwill and other intangible assets. As of December 31,
2016, goodwill and purchased intangibles accounted for approximately 63% and 4%, respectively, of our total assets. Under
U.S. generally accepted accounting principles (“GAAP”), we do not amortize goodwill and intangible assets acquired in a
purchase business combination that are determined to have indefinite useful lives. Instead, we review them for impairment
annually (or more frequently if impairment indicators arise). Although we have to date determined that such assets have not
been impaired, future events or changes in circumstances that result in an impairment of goodwill or other intangible assets
would have a negative impact on our profitability and operating results.

RISKS RELATED TO OUR CORPORATE AND CAPITAL STRUCTURE

Provisions of our charter documents and Delaware law may prevent or deter potential acquisition bids to acquire us
and other actions that stockholders may consider favorable, and the market price of our common stock may be lower
as a result.

Our charter documents contain the following provisions that could have an anti-takeover effect:

•

our board of directors is divided into three classes, making it more difficult for stockholders to change the
composition of the board;

directors may be removed only for cause;

our stockholders are not permitted to call a special meeting of the stockholders;

all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting
or by a written consent signed by all of our stockholders;

our stockholders are required to comply with advance notice procedures to nominate candidates for election
to our board of directors or to place stockholders’ proposals on the agenda for consideration at stockholder
meetings; and

the approval of the holders of capital stock representing at least two-thirds of our voting power is required to
amend our indemnification obligations, director classifications, stockholder proposal requirements, and
director candidate nomination requirements set forth in our amended and restated certificate of incorporation
and amended and restated bylaws.

In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. These provisions could discourage potential acquisition proposals; delay or prevent
a change-in-control transaction; discourage others from making tender offers for our common stock; and/or prevent changes
in our management.

There are risks associated with our outstanding and future indebtedness which could reduce our profitability, limit
our ability to pursue certain business opportunities and reduce the value of our stock.

As of December 31, 2016, we had an aggregate of $259.4 million of outstanding indebtedness under a credit facility
that will mature in May 2019. Subject to the limits contained in the agreements governing our outstanding debt, we may incur
additional debt in the future. Our ability to pay interest and repay the principal for our indebtedness, as well as meet our debt
and operations covenant requirements, is dependent upon our ability to, among other things, manage our business operations,
and generate sufficient cash flows to service such debt. If we are unable to comply with the terms of our financing agreements
or obtain additional required financing, this could ultimately result in a significant adverse effect on our financial results and
the value of our stock. Among other things, our debt could:

•

make it difficult to obtain additional financing for working capital, capital expenditures, acquisitions, or other
general corporate purposes;

result in a substantial portion of our cash flows from operations being dedicated to the
payment of the principal and interest on our debt, as well as used to make debt service
payments;

limit our flexibility in planning for, and reacting to, changes in our business and the marketplace;

place us at a competitive disadvantage relative to other less leveraged firms; and

increase our vulnerability to economic downturns and rises in interest rates.

Should any of these or other unforeseen consequences arise, they could have an adverse effect on our business, financial

condition, results of operations, future business opportunities and/or ability to satisfy our obligations under our debt.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We lease our offices and do not own any real estate. As of December 31, 2016, we leased approximately 330,000 square
feet of office space at our corporate headquarters at 9300/9302 Lee Highway, Fairfax, Virginia (in the Washington, D.C.
metropolitan area) through December 2022 (the “Fairfax Offices”). The Fairfax Offices house a portion of our operations
and almost all of our corporate functions, including most of our staff within executive management, treasury, accounting,
legal, human resources, business and corporate development, facilities management, information services, and contracts.

As of December 31, 2016, we had leases in place for approximately 1.3 million square feet of office space in more than
65 office locations throughout the U.S. and around the world, with various lease terms expiring over the next 11 years. As of
December 31, 2016, approximately 6,000 square feet of the space we leased was subleased to other parties. We believe that
our current office space, as well as other office space we expect to be able to lease, will meet our needs for the next several
years. Lastly, a portion of our operations staff is housed at client-provided facilities, pursuant to the terms of a number of our
client contracts. See “Note 16—Commitments and Contingencies” in our financial statements for additional information
regarding our operating leases.

ITEM 3.

LEGAL PROCEEDINGS

We are involved in various legal matters and proceedings arising in the ordinary course of business. While these matters
and proceedings cause us to incur costs, including, but not limited to, attorneys’ fees, we currently believe that any ultimate
liability arising out of these matters and proceedings will not have a material adverse effect on our financial position, results
of operations, or cash flows.

An update on litigation related to our Road Home contract is discussed in “Note 16— Commitments and Contingencies

— Road Home Contract” in our financial statements.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the NASDAQ Global Select Market under the symbol “ICFI.” The high and low sales

prices of our common stock for each quarter for the two years 2016 and 2015 are as follows:

2016 Fourth Quarter ......................................................................................... $
2016 Third Quarter .......................................................................................... $
2016 Second Quarter ........................................................................................ $
2016 First Quarter ............................................................................................ $
2015 Fourth Quarter ......................................................................................... $
2015 Third Quarter .......................................................................................... $
2015 Second Quarter ........................................................................................ $
2015 First Quarter ............................................................................................ $

Holders

Sales Price Per Share
(in dollars)

High

Low

59.55 $
45.44 $
42.80 $
35.75 $
37.25 $
37.21 $
42.43 $
43.73 $

43.66
38.64
34.16
31.26
29.19
30.11
34.09
37.00

As of February 24, 2017, there were 36 registered holders of record of our common stock. This number is not
representative of the number of beneficial holders because many of the shares are held by depositories, brokers, or nominees.

Dividends

We have neither declared nor paid any cash dividends on our common stock and presently intend to retain our future

earnings, if any, to fund the development and growth of our business.

Stock Performance Graph

The following graph compares the cumulative total stockholder return on our common stock from December 31, 2011
through December 31, 2016, with the cumulative total return on (i) the NASDAQ Composite, (ii) the Russell 2000 stock
index, and (iii) our 2016 peer group composed of other governmental and commercial service providers: The Advisory Board
Company; Booz Allen Hamilton Holding Corporation; CACI International Inc.; CBIZ, Inc.; CDI Corporation; Convergys
Corporation; The CEB Company; CRA International, Inc.; Exponent Inc.; FTI Consulting, Inc.; Gartner Inc.; GP Strategies
Corporation; Huron Consulting Group Inc.; Leidos Holdings, Inc.; ManTech International Corporation; Maximus, Inc.;
Navigant Consulting, Inc.; NCI, Inc.; Resources Connection, Inc.; Science Applications International Corporation; Tetra
Tech, Inc.; Unisys Corporation; and VSE Corporation (the “2016 Peer Group”). As part of the annual process of reviewing
our peer group, management ensures that the selected companies remain aligned with our evolving business strategy. With
respect to our 2016 Peer Group, there were no changes from our 2015 peer group except IHS, Inc. (“IHS”) was removed as
it was acquired in July 2016 by Markit Ltd. In addition, the Corporate Executive Board Company changed its legal name in
May 2015 to “CEB, Inc.,” and appears under such name in the 2016 Peer Group listed above. The comparison below assumes
that all dividends are reinvested and all returns are market-cap weighted. The historical information set forth below is not
necessarily indicative of future performance.

ICF International, Inc. .......................................... $
NASDAQ Composite ...........................................
Russell 2000 Index ...............................................
2015 Peer Group ..................................................
2016 Peer Group .................................................

Recent Sales of Unregistered Securities

2012

94.59 $
116.41
116.35
113.88
113.88

Year Ended December 31,
2014

2015

2013

140.07 $
165.47
161.52
166.98
166.98

165.38 $
188.69
169.43
184.16
184.16

143.50 $
200.32
161.95
190.17
190.17

2016

222.76
216.54
196.45
227.63
227.63

During the three months ended December 31, 2016, we issued the following securities that were not registered under
the Securities Act of 1933, as amended (the “Securities Act”). No underwriters were involved in the following issuances of
securities.

(a) Issuances of Common Stock:

For the three months ended December 31, 2016, a total of 4,217 shares of unregistered common stock, valued at an
aggregate of $189,892 were issued to six of our directors on October 3, 2016 for director-related compensation.

Each of these issuances was made in reliance upon the exemption from registration provisions of the Securities Act, set
forth in Section 4(2) thereof relative to sales by an issuer not involving any public offering and the rules and regulations
thereunder. The recipients of securities in each case acquired the securities for investment only and not with a view to the
distribution thereof. Each of the recipients of securities in these transactions was an accredited or sophisticated person and
had adequate access, through employment, business, or other relationships, to information about us.

Purchases of Equity Securities by Issuer

The following table summarizes the share repurchase activity for the three months ended December 31, 2016 for our
share repurchase plan that expires on November 4, 2017 and shares purchased in satisfaction of employee tax withholding
obligations.

Period
October 1 – October 31 ............................................
November 1 – November 30 ....................................
December 1 – December 31 .....................................
Total ...............................................................

Total
Number of
Shares
Purchased (a)

Average
Price Paid
per Share (a)
44.72
49.81
—
47.05

11,903 $
10,043 $
— $
21,946 $

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

Approximate
Dollar
Value of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs (b)

11,903 $
— $
— $
11,903

35,440,703
37,084,043
37,701,373

(a) The total number of shares purchased of 21,946 includes shares repurchased pursuant to our share repurchase
program described further in footnote (b) below, as well as shares purchased from employees to pay required
withholding taxes related to the settlement of restricted stock units in accordance with our applicable long-term
incentive plan. During the three months ended December 31, 2016, we repurchased 10,043 shares of common stock
from employees in satisfaction of tax withholding obligations at an average price of $49.81 per share.

(b) In the third quarter of 2015, our Board of Directors approved a new share repurchase plan, effective November 5,
2015, and expiring on November 4, 2017 that authorizes share repurchases in the aggregate up to $75.0 million, not
to exceed the amount allowed under our revolving line of credit. Our Credit Facility, which we entered into on May
16, 2014, further limits our share repurchases to $75.0 million during the duration of the Credit Facility, net of new
issuances as defined in the Credit Facility. During the three months ended December 31, 2016, we had new issuances
of $2.6 million. During the three months ended December 31, 2016, we repurchased 11,903 shares under this
program at an average price of $44.72 per share or $0.5 million.

ITEM 6.

SELECTED FINANCIAL DATA

The following table presents selected historical financial data derived from our audited consolidated financial
statements and other information for each of the five years presented. This information should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial
statements and the related notes included elsewhere in this Annual Report. The financial information below reflects the results
or impact of our acquisitions since the date the entities were purchased.

2016

Year Ended December 31,
2014
(in thousands, except per share amounts)

2015

2013

2012

Statement of Earnings Data:
Revenue .............................................................. $ 1,185,097 $ 1,132,232 $ 1,050,134 $
Direct costs .........................................................
654,946
Operating costs and expenses:

694,436

745,137

949,303 $
591,516

937,133
583,195

Indirect and selling expenses ......................
Depreciation and amortization ....................
Amortization of intangible assets ................
Total operating costs and expenses ......
Operating Income ...............................................
Interest expense ...........................................
Other income (expense) .............................
Income before income taxes ...............................
Provision for income taxes .................................
Net income ......................................................... $

328,048
16,638
12,481
357,167
82,793
(9,470)
1,184
74,507
27,923
46,584 $

329,159
16,222
17,184
362,565
75,231
(10,072)
(1,559)
63,600
24,231
39,369 $

302,020
13,369
10,437
325,826
69,362
(4,254)
(958)
64,150
24,120
40,030 $

272,387
11,238
9,477
293,102
64,685
(2,447)
(12)
62,226
22,896
39,330 $

263,878
9,789
14,089
287,756
66,182
(3,946)
(325)
61,911
23,836
38,075

Earnings per share (“EPS”)(1):

Basic ............................................................ $
Diluted ........................................................ $

2.45 $
2.40 $

2.04 $
2.00 $

1.99 $
1.95 $

1.94
1.91

Weighted-average shares:

Basic ............................................................
Diluted ........................................................

18,989
19,416

19,335
19,663

19,608
19,997

19,755
20,186

19,663
19,957

Other Non-GAAP Operating Data

(Unaudited):

Service revenue(2) ............................................... $ 864,765 $ 849,122 $
EBITDA(3) ..........................................................
108,637
Adjusted EBITDA(3) ...........................................
110,740
Non-GAAP EPS(4) ..............................................
2.64

111,912
113,891
2.87

774,394 $
93,168
98,626
2.51

709,774 $
85,400
86,303
2.28

705,295
90,060
90,736
2.36

2016

2015

As of December 31,
2014
(in thousands)

Consolidated balance sheet data:
12,122 $
Cash and cash equivalents .................................... $
Net working capital(5) ...........................................
92,498
Total assets(5) ........................................................ 1,085,571 1,080,290 1,110,340
350,052
Long-term debt .....................................................
500,689
Total stockholders’ equity ....................................

6,042 $
102,411

311,532
523,276

259,389
566,004

7,747 $
91,760

2013

2012

8,953 $
82,268
700,914
40,000
474,091

14,725
97,461
709,721
105,000
428,750

(1) No cash dividends were paid in the years ended December 31, 2016, 2015, 2014, 2013, and 2012.

(2) Service revenue represents revenue less subcontractor and other direct costs, such as third-party materials and travel
expenses. Service revenue is not a recognized term under U.S. GAAP and does not purport to be an alternative to revenue
as a measure of operating performance. Because not all companies use identical calculations, this presentation of Service
revenue may not be comparable to other similarly-titled measures used by other companies. Service revenue is a measure
used by us to evaluate our margins for services performed and, therefore, we believe it is useful to investors. A
reconciliation of revenue to service revenue follows:

2016

2015

Year ended December 31,
2014
(In thousands)

2013

2012

Revenue ........................................................ $ 1,185,097 $ 1,132,232 $ 1,050,134 $
(275,740)
Subcontractor and other direct costs .............
774,394 $
Service revenue ............................................ $

(283,110)
849,122 $

(320,332)
864,765 $

949,303 $
(239,529)
709,774 $

937,133
(231,838)
705,295

(3) EBITDA, earnings before interest and other income and/or expense, tax, and depreciation and amortization, is a measure
we use to evaluate performance. We believe EBITDA is useful to investors because similar measures are frequently used
by securities analysts, investors, and other interested parties in evaluating companies in our industry. Adjusted EBITDA
is EBITDA further adjusted to eliminate the impact of certain items that we do not consider to be indicative of the
performance of our ongoing operations. We evaluate these adjustments on an individual basis based on both the
quantitative and qualitative aspects of the item, including its size and nature and whether or not we expect it to occur as
part of our normal business on a regular basis. We believe that the adjustments applied in calculating adjusted EBITDA
are reasonable and appropriate to provide additional information to investors.

EBITDA and adjusted EBITDA are not recognized terms under U.S. GAAP and do not purport to be an alternative to
net income as a measure of operating performance, or to cash flows from operating activities as a measure of liquidity.
Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be
comparable to other similarly-titled measures used by other companies. EBITDA and adjusted EBITDA are not intended
to be a measure of free cash flow for management’s discretionary use, as they do not consider certain cash requirements
such as interest payments, tax payments, capital expenditures, and debt service. We have a revolving line of credit that
includes covenants based on EBITDA, subject to certain adjustments. A reconciliation of net income to EBITDA and
adjusted EBITDA follows:

2016

2015

Year ended December 31,
2014
(In thousands)

2013

Net income ................................................ $
Other (income) expense ............................
Interest expense .........................................
Provision for income taxes ........................
Depreciation and amortization ..................
EBITDA ....................................................
Acquisition-related expenses ....................
Special charges related to severance for

staff realignment .....................................
Special charges related to office closures..
Adjusted EBITDA..................................... $

46,584 $
(1,184)
9,470
27,923
29,119
111,912
20

39,369 $
1,559
10,072
24,231
33,406
108,637
189

1,701
258
113,891 $

1,118
796
110,740 $

40,030 $
958
4,254
24,120
23,806
93,168
2,243

1,931
1,284
98,626 $

39,330 $
12
2,447
22,896
20,715
85,400
903

—
—
86,303 $

2012

38,075
325
3,946
23,836
23,878
90,060
676

—
—
90,736

(4) Non-GAAP EPS represents diluted EPS excluding the impact of certain items such as special charges and acquisition-
related expenses that we do not consider to be indicative of the performance of our ongoing operations and are excluded
from adjusted EBITDA as described above and adjusted to eliminate the impact of amortization of intangible assets
related to our acquisitions. Non-GAAP EPS is not a recognized term under U.S. GAAP and does not purport to be an
alternative to basic or diluted EPS. Because not all companies use identical calculations, the presentation of non-GAAP
EPS may not be comparable to other similarly titled measures used by other companies. We believe that the supplemental
adjustments applied in calculating non-GAAP EPS are reasonable and appropriate to provide additional information to
investors. A reconciliation of diluted EPS to non-GAAP EPS for the years ended December 31, 2016, 2015, 2014, 2013
and 2012, including income tax effects calculated using an effective U.S. GAAP tax rate of 37.5%, 38.1%, 37.6%, 36.8%,
and 38.5%, respectively, follows:

Diluted EPS ............................................... $
Acquisition-related expenses ....................
Special charges related to severance for

staff realignment .....................................
Special charges related to office closures..
Amortization of intangibles .......................
Income tax effects .....................................
Non-GAAP EPS ........................................ $

2016

2.40 $
—

0.09
0.02
0.64
(0.28)
2.87 $

Year ended December 31,
2014

2013

2015

2.00 $
0.01

0.06
0.09
0.87
(0.39)
2.64 $

2.00 $
0.11

0.10
0.09
0.52
(0.31)
2.51 $

1.95 $
0.04

—
—
0.47
(0.18)
2.28 $

2012

1.91
0.03

—
—
0.71
(0.29)
2.36

(5) The prior years’ balances have been adjusted for the Company’s adoption of ASU 2015-17, Balance Sheet Classification

of Deferred Taxes (Topic 740) on a retrospective basis.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Financial Data” and the
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion
and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions, such as statements of
our plans, objectives, expectations, and intentions. The cautionary statements made in this Annual Report on Form 10-K
should be read as applying to all related forward-looking statements wherever they appear in this Annual Report on Form
10-K. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could
cause or contribute to our actual results differing materially from those anticipated include those discussed in “Risk Factors”
and elsewhere in this Annual Report on Form 10-K.

OVERVIEW AND OUTLOOK

We provide professional services and technology-based solutions to government and commercial clients, including
management, technology, and policy consulting and implementation services. We help our clients conceive, develop,
implement, and improve solutions that address complex natural resource, social, and public safety issues. Our clients operate
in four key markets: energy, environment, and infrastructure; health, education, and social programs; safety and security; and
consumer and financial. We provide services that deliver value throughout the entire life cycle of a policy, program, project,
or initiative, from research and analysis and assessment and advice to design and implementation of programs and
technology-based solutions, and the provision of engagement services and programs.

Our clients utilize our services because we combine diverse institutional knowledge and experience with the deep
subject-matter expertise of our highly educated staff which we deploy in multi-disciplinary teams. We categorize our clients
into two classifications: government and commercial. Within the government classification, we present three client sub-
classifications: federal government, state and local government, and international government.

Our major clients are federal government departments and agencies. Our federal government clients have included
every cabinet-level department, most significantly HHS, DOS, and DoD. Federal government clients generated
approximately 48%, 48%, and 51% of our revenue in 2016, 2015, and 2014, respectively. State and local government clients
generated approximately 11%, 10%, and 10% of our revenue in 2016, 2015, and 2014, respectively. International government
clients generated approximately 6%, 7%, and 9% of our revenue in 2016, 2015, and 2014, respectively.

We also serve a variety of commercial clients worldwide, including airlines, airports, electric and gas utilities, oil
companies, hospitals, health insurers and other health-related companies, banks and other financial services companies,
transportation, travel and hospitality firms, non-profits/associations, law firms, manufacturing firms, retail chains, and
distribution companies. Our commercial clients, which include clients outside the U.S., generated approximately 35%, 35%,
and 30% of our revenue in 2016, 2015, and 2014, respectively. We have successfully worked with many of our clients for
decades, with the result that we have a unique and knowledgeable perspective on their needs.

We report operating results and financial data as a single segment based on the consolidated information used by our
chief operating decision-maker in evaluating the financial performance of our business and allocating resources. Our single
segment represents our core business—professional services for government and commercial clients.

Although we describe our multiple service offerings to clients that operate in four markets to provide a better
understanding of our business, we do not manage our business or allocate our resources based on those service offerings or
markets.

In 2016, we saw growth in federal government revenue, state and local government revenue, and commercial client
revenue which was partially offset by lower international government revenue. Revenue increased to $1,185.1 million,
representing growth of $52.9 million, or 4.7%, for the year ended December 31, 2016 compared to the prior year. Operating
income increased $7.6 million, or 10.1%, to $82.8 million for the year ended December 31, 2016 compared to the prior year.
Net income increased $7.2 million, or 18.3%, to $46.6 million, largely driven by a $4.7 million decrease in amortization for
intangible assets, a net increase in Other income (expense) of $2.7 million, and additional net gross margin from increases in
revenue of $2.2 million.

We believe that demand for our services will continue to grow as government, industry, and other stakeholders seek to
address critical long-term societal and natural resource issues due to heightened concerns about clean energy and energy
efficiency; health promotion, treatment, and cost control; and ongoing homeland security threats. We also see significant
opportunity to leverage further our digital and client engagement capabilities across our commercial and government client
base. Our future results will depend on the success of our strategy to enhance our client relationships and seek larger
engagements across the program life cycle, and to complete and successfully integrate additional strategic acquisitions. We
will continue to focus on building scale in vertical and horizontal domain expertise; developing business with both our
government and commercial clients; and replicating our business model in selective geographies. In doing so, we will
continue to evaluate strategic acquisition opportunities that enhance our subject matter knowledge, broaden our service
offerings, and/or provide scale in specific geographies.

Federal government revenue was 48% of our total revenue for the year ended December 31, 2016. While we continue
to see favorable long-term market opportunities, there are certain near-term challenges facing all government service
providers, including top-line legislative constraints on federal government discretionary spending that limit expenditure
growth through 2021. Actions by Congress could result in a delay or reduction to our revenue, profit, and cash flows and
could have a negative impact on our business and results of operations; however, we believe we are well positioned in markets
that have been, and will continue to be, priorities to the federal government. See also, “Risk Factors—Risks Related to Our
Industry – Government spending priorities may change in a manner adverse to our business.”

We believe that the combination of internally-generated funds, available bank borrowings, and cash and cash
equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations, potential
acquisitions, customary capital expenditures, and other current working capital requirements.

Our results of operations and cash flows may vary significantly from quarter to quarter depending on a number of

factors, including, but not limited to:

•

progress of contract performance;

extraordinary economic events and natural disasters;

number of billable days in a quarter;

timing of client orders;

timing of award fee notices;

changes in the scope of contracts;

variations in purchasing patterns under our contracts;

federal and state and local governments’ and other clients’ spending levels;

•

timing of billings to, and payments by, clients;

timing of receipt of invoices from, and payments to, employees and vendors;

commencement, completion, and termination of contracts;

strategic decisions we make, such as acquisitions, consolidations, divestments, spin-offs, joint ventures,
strategic investments, and changes in business strategy;

timing of significant costs and investments (such as bid and proposal costs and the costs involved in planning
or making acquisitions);

timing of events related to discrete tax items;

our contract mix and use of subcontractors;

additions to, and departures of, staff;

changes in staff utilization;

paid time off taken by our employees;

level and cost of our debt;

changes in accounting principles and policies; and/or

general market and economic conditions.

Because a significant portion of our expenses, such as personnel, facilities, and related costs, are fixed in the short term,
contract performance and variation in the volume of activity, as well as in the number and volume of contracts commenced
or completed during any quarter, may cause significant variations in operating results from quarter to quarter.

We generally have been able to price our contracts in a manner that accommodates the rates of inflation experienced in

recent years, although we cannot ensure that we will be able to do so in the future.

CRITICAL ACCOUNTING POLICIES

The preparation of our financial statements in accordance with GAAP requires that we make estimates and judgments
that affect the reported amount of assets, liabilities, revenue, and expenses, as well as the disclosure of contingent liabilities.
If any of these estimates or judgments prove to be incorrect, our reported results could be materially affected. Actual results
may differ significantly from our estimates under different assumptions or conditions. We believe that the estimates,
assumptions, and judgments involved in the accounting practices described below have the greatest potential impact on our
financial statements and therefore consider them to be critical accounting policies. Our significant accounting policies,
including the critical accounting policies listed below, are more fully described and discussed in “Note 2—Summary of
Significant Accounting Policies” in the “Notes to Consolidated Financial Statements.”

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, services have been rendered, the contract
price is fixed or determinable, and collectability is reasonably assured. We enter into three types of contracts: time-and-
materials, cost-based and fixed-price.

•

Time-and-Materials Contracts. Revenue for time-and-materials contracts is recorded on the basis of
allowable labor hours worked multiplied by the contract-defined billing rates, plus the costs of other items
used in the performance of the contract. Profits and losses on time-and-materials contracts result from the
difference between the cost of services performed and the contract-defined billing rates for these services.

•

Cost-Based Contracts. Revenue under cost-based contracts is recognized as costs are incurred. Applicable
estimated profit, if any, is included in earnings in the proportion that incurred costs bear to total estimated
costs. Incentives, award fees, or penalties related to performance are also considered in estimating revenue
and profit rates based on actual and anticipated awards, taking into consideration factors such as our prior
award experience and communications with the customer regarding performance.

Fixed-Price Contracts. Revenue for fixed-price contracts is recognized when earned, generally as work is
performed. Services performed vary from contract to contract and are not always uniformly performed over
the term of the arrangement. Fixed-price contracts may contain multiple elements that must be evaluated to
determine if they represent separate units of accounting that have stand-alone value. If the assessment is made
that there is more than one unit of accounting, the contract value is then allocated to each unit based upon
management’s best estimate of selling price and the appropriate revenue recognition method is applied to each
unit. We recognize revenue in a number of different ways on fixed-price contracts based upon the nature of
the services to be provided and an assessment of what best mirrors the pattern of performance for the
deliverable/contract, including:

•

Proportional Performance: Revenue on certain fixed-price contracts is recognized based on
proportional performance when the provision of services extends beyond an accounting period with
more than one discrete performance act, and progress towards completion can be measured based on a
reliable output or input. Under this method, revenue is recorded each period based upon certain contract
performance input measures incurred (labor hours, labor costs, or total costs) or output measures
completed, expressed as a proportion of a total project estimate. Progress on a contract is monitored
regularly to ensure that revenue recognized reflects project status. When hours or costs incurred are
used as the basis for revenue recognition, the hours or costs incurred represent a reasonable surrogate
for output measures of contract performance, including the presentation of deliverables to the client.
Clients are obligated to pay as services are performed, and in the event that a client cancels the contract,
payment for services performed through the date of cancellation is typically negotiated with the client.

Specific Performance: When the services to be performed consist of a single act, revenue is recognized
at the time the act is performed or at the completion of the single service.

Straight-Line: When services are performed or are expected to be performed consistently throughout
an arrangement, or when we are compensated on a retainer or fixed-fee basis, revenue is recognized
ratably over the period benefited.

Completed Contract: Revenue and costs on certain fixed-price contracts are recognized at completion
if the final act is so significant to the arrangement that value is deemed to be transferred only at
completion.

Revenue recognition requires us to use judgment relative to assessing risks, estimating contract revenue and costs or
other variables, and making assumptions for scheduling and technical issues. Due to the size and nature of many of our
contracts, the estimation of revenue and estimates at completion can be complicated and are subject to many variables.
Contract costs include labor, subcontractor costs, and other direct costs, as well as an allocation of indirect costs. At times,
we must also make assumptions regarding the length of time to complete the contract because costs include expected increases
in wages, prices for subcontractors, and other direct costs. From time to time, facts develop that require us to revise our
estimated total costs or hours and thus the associated revenue on a contract. To the extent that a revised estimate affects
contract profit or revenue previously recognized, we record the cumulative effect of the revision in the period in which the
facts requiring the revision become known. A provision for the full amount of an anticipated loss on any type of contract is
recognized in the period in which it becomes probable and can be reasonably estimated. As a result, operating results could
be affected by revisions to prior accounting estimates.

Our contractual arrangements are evaluated to assess whether revenue should be recognized on a gross versus net basis.
Management’s assessment when determining gross versus net revenue recognition is based on several factors such as whether
we serve as the primary service provider, have autonomy in selecting subcontractors, or have credit risk, all of which are
primary indicators that we serve as the principal to the transaction. In such cases, revenue is recognized on a gross basis.
When such indicators are not present and we are primarily functioning as an agent under an arrangement, revenue is
recognized on a net basis.

We generate invoices to clients in accordance with the terms of the applicable contract, which may not be directly
related to the performance of services. Unbilled receivables are invoiced based upon the achievement of specific events as
defined by each contract, including deliverables, timetables, and incurrence of certain costs. Unbilled receivables are
classified as a current asset. Advanced billings to clients in excess of revenue earned are recorded as deferred revenue until
the revenue recognition criteria are met. Reimbursements of out-of-pocket expenses are included in revenue with
corresponding costs incurred by us included in the cost of revenue. We record revenue net of taxes collected from customers
to be remitted to governmental authorities.

We may proceed with work based upon client direction prior to the completion and signing of formal contract
documents. We have a review process for approving any such work. Revenue associated with such work is recognized only
when it can be reliably estimated and realization is probable. We base our estimates on a variety of factors, including previous
experiences with the client, communications with the client regarding funding status, and our knowledge of available funding
for the contract.

Goodwill and Other Intangible Assets

The purchase price of an acquired business is allocated to the tangible assets and separately identifiable intangible assets
acquired, less liabilities assumed, based upon their respective fair values, with the excess recorded as goodwill. Goodwill
represents the excess of costs over the fair value of net assets of businesses acquired. Goodwill and intangible assets acquired
in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead reviewed
annually for impairment, or more frequently if impairment indicators arise. Intangible assets with estimable useful lives are
amortized over such lives and reviewed for impairment if impairment indicators arise. As of December 31, 2016, goodwill
and intangibles assets were $683.7 million and $46.1 million, respectively.

We perform our annual goodwill impairment review as of September 30 of each year. For the purposes of performing
this review, we have one reporting unit. For the annual impairment review as of September 30, 2016, we opted to perform a
qualitative assessment of whether it is more likely than not that our reporting unit's fair value is less than its carrying amount.
If, after completing the qualitative assessment, we determine that it is more likely than not that the estimated fair value of the
reporting unit exceeded the carrying amount, we may conclude that no impairment exists. If we conclude otherwise, a two-
step goodwill impairment test must be performed, which includes a comparison of the fair value of the reporting unit to the
carrying value.

Our qualitative analysis as of September 30, 2016 included macroeconomic and industry and market-specific
considerations, financial performance indicators and measurements, and other factors. Based on our qualitative assessment,
we determined that it is more likely than not that the fair value of our one reporting unit exceeded the carrying amount, and
thus the two-step impairment test was not required to be performed for 2016. Therefore, based upon management’s review,
no goodwill impairment charge was required as of September 30, 2016. Historically, we have recorded no goodwill
impairment charges.

We are required to review long-lived assets and certain identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported
at the lower of the carrying amount or fair value, less cost to sell.

Stock-based Compensation

The ICF International, Inc. 2010 Omnibus Incentive Plan (as amended, the “Omnibus Plan”) provides for the granting
of options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units,
cash-based awards, and other stock-based awards to all officers, key employees, and non-employee directors. As of December
31, 2016, there were approximately 2.2 million shares available for grant under the Omnibus Plan.

We utilize cash-settled RSUs (“CSRSUs”), which are settled only in cash payments. The cash payment is based on the
fair value of our stock price at the vesting date, calculated by multiplying the number of CSRSUs vested by our closing stock
price on the vesting date, subject to a maximum payment cap and a minimum payment floor. CSRSUs have no impact on the
shares available for grant under the Omnibus Plan, and have no impact on the calculated shares used in earnings per share
(“EPS”) calculations.

We also grant awards of unregistered shares to our non-employee directors under our Annual Equity Election program.
The awards are issued from our treasury stock and have no impact on the shares available for grant under the Omnibus Plan.

We recognized total compensation expense relating to stock-based compensation of $15.9 million, $14.7 million, and
$13.4 million for the years ended December 31, 2016, 2015, and 2014, respectively. We recognize stock-based compensation
expense for stock options, restricted stock awards, RSUs and CSRSUs on a straight-line basis over the requisite service
period, which is generally the vesting period. We recognize expense for performance-based share awards (“PSAs”), which
are subject to a performance condition and a market condition, on a straight-line basis over the performance period. Non-
employee director awards do not include vesting conditions and are expensed when issued.

Stock-based compensation expense is based on the estimated fair value of these instruments and the estimated number
of shares we ultimately expect will vest. The calculation of the fair value of our awards requires certain inputs that are
subjective and changes to the estimates used will cause the fair value of our stock awards and related stock-based
compensation expense to vary. The fair value of stock options, restricted stock awards, RSUs, PSAs and non-employee
director awards is estimated based on the fair value of a share of common stock at the grant date. We have elected to use the
Black-Scholes-Merton option pricing model to determine the fair value of stock options. The fair value of a stock option
award is affected by our stock price on the date of grant, as well as other assumptions used as inputs in the valuation model,
including the estimated volatility of our stock price over the term of the awards, the estimated period of time that we expect
employees to hold their stock options and the risk-free interest rate assumption. The fair value of PSAs is estimated using a
Monte Carlo simulation model. We treat CSRSUs as liability-classified awards, and account for them at fair value estimated
based on the closing price of our stock at the reporting date.

We are required to adjust stock-based compensation expense for the effects of estimated forfeitures of awards over the
expense recognition period. Although we estimate the rate of future forfeitures based on factors such as historical experience
and employee class, actual forfeitures may differ from our current estimates. In addition, the estimation of PSAs that will
ultimately vest requires judgment based on performance conditions. To the extent actual results or updated estimates differ
from our current estimates, such amounts will be recorded as a cumulative adjustment in the period such estimates are revised.
See “Note 13—Accounting for Stock-based Compensation” in the “Notes to Consolidated Financial Statements” for further
discussion.

Recent Accounting Pronouncements

New accounting standards are discussed in “Note 2—Summary of Significant Accounting Policies” in the “Notes to

Consolidated Financial Statements.”

SELECTED KEY METRICS

The following table shows revenue generated from client markets as a percent of total revenue for the periods indicated.
For each client, we have attributed all revenue from that client to the market we consider to be the client's primary market,
even if a portion of that revenue relates to a different market. Certain revenue amounts in the prior years have been reclassified
due to adjustments and reclassification of revenues within key market categories.

Year ended December 31,
2015

2014

2016

Energy, environment, and infrastructure ...........................................
Health, education, and social programs .............................................
Safety and security ............................................................................
Consumer and financial .....................................................................
Total ..................................................................................................

39%
43%
8%
10%
100%

37 %
45 %
8 %
10 %
100 %

38 %
46 %
10 %
6 %
100 %

The fluctuation in the percentages of revenue by market for the year ended December 31, 2015, compared to the year

ended December 31, 2014, was primarily driven by the acquisition of Olson.

Our primary clients are the agencies and departments of the federal government and commercial clients. Most of our
revenue is from contracts on which we are the prime contractor, which we believe provides us strong client relationships. In
2016, 2015, and 2014, approximately 89%, 85%, and 86% of our revenue, respectively, was from prime contracts. The
following table shows our revenue by type of client as a percentage of total revenue for the periods indicated. Certain
immaterial revenue amounts in the prior years have been reclassified due to minor adjustments.

Year ended December 31,
2015

2014

2016

U.S. federal government ............................................................
U.S. state and local government ................................................
International government ...........................................................
Government .....................................................................................
Commercial ......................................................................................
Total ..................................................................................................

48%
11%
6%
65%
35%
100%

48 %
10 %
7 %
65 %
35 %
100 %

51 %
10 %
9 %
70 %
30 %
100 %

The fluctuation in the percentages of revenue by market for the year ended December 31, 2015, compared to the year

ended December 31, 2014, was primarily driven by the acquisition of Olson.

Contract mix

Our contract mix varies from year to year due to numerous factors, including our business strategies and the
procurement activities of our clients. Unless the context requires otherwise, we use the term “contracts” to refer to contracts
and any task orders or delivery orders issued under a contract. We have three main types of contracts, time-and-materials
contracts, fixed-price contracts, and cost-based contracts, described further below.

Time-and-materials contracts. Under time-and-materials contracts, we are paid for labor at fixed hourly rates and
generally reimbursed separately for allowable materials, other direct costs, and out-of-pocket expenses. Our actual labor costs
may vary from the expected costs that formed the basis for our negotiated hourly rates if we utilize different employees than
anticipated, need to hire additional employees at higher wages, increase the compensation paid to existing employees, or are
able to hire employees at lower-than-expected rates. Our non-labor costs, such as fringe benefits, overhead, and general and
administrative costs, also may be higher or lower than we anticipated. To the extent that our actual labor and non-labor costs
under a time-and-materials contract vary significantly from our expected costs or the negotiated hourly rates, we can generate
more or less than the targeted amount of profit or, perhaps, incur a loss.

Fixed-price contracts. Under fixed-price contracts, we perform specific tasks for a pre-determined price. Compared to
time-and-materials and cost-based contracts, fixed-price contracts involve greater financial risk because we bear the full
impact of labor and non-labor costs that exceed our estimates (in terms of costs per hour, number of hours, and all other costs
of performance) in return for the full benefit of any cost savings. We therefore may generate more or less than the targeted
amount of profit or, perhaps, incur a loss.

Cost-based contracts. Under cost-based contracts, (which include cost-based fixed fee, cost-based award fee, and cost-
based incentive fee contracts, as well as grants and cooperative agreements), we are paid based on the allowable costs we
incur, and usually receive a fee. All of our cost-based contracts reimburse us for our direct labor and fringe-benefit costs that
are allowable under the contract; however, certain contracts limit the amount of overhead and general and administrative
costs we can recover which may be less than our actual overhead and general and administrative costs. In addition, our fees
are constrained by fee ceilings and, in certain cases such as with grants and cooperative agreements, we may receive no fee.
Because of these limitations, our cost-based contracts, on average, are our least profitable type of contract, and we may
generate less than the expected profit, or perhaps, incur a loss. Cost-based fixed-fee contracts specify the fee to be paid. Cost-
based incentive-fee and cost-based award-fee contracts provide for increases or decreases in the contract fee, within specified
limits, based upon actual results as compared to contractual targets for factors such as cost, quality, schedule, and
performance.

The following table shows the approximate percentage of our revenue for each of these types of contracts for the periods

indicated.

Year ended December 31,
2015

2014

2016

Time-and-materials ...........................................................................
Fixed-price ........................................................................................
Cost-based .........................................................................................
Total ..................................................................................................

43%
39%
18%
100%

43 %
38 %
19 %
100 %

47 %
34 %
19 %
100 %

The increase in fixed-price contracts revenue as a percent of total revenue and the decrease in time-and-materials
contracts revenue as a percent of total revenue, for the year ended December 31, 2015, compared to the year ended December
31, 2014, is primarily due to the increase in fixed-price contracts from the acquisition of Olson.

Payments to the Company on cost-based contracts with the federal government are provisional payments subject to
adjustment upon audit by the government. Such audits have been finalized through December 31, 2007, and any adjustments
have been immaterial. Contract revenue for subsequent periods has been recorded in amounts that are expected to be realized
upon final audit and settlement of costs in those years.

ACQUISITIONS AND BUSINESS COMBINATIONS

A key element of our growth strategy is to pursue acquisitions. In 2016, we added Trade NTE and in 2014, we added

Mostra, CityTech and Olson.

Trade NTE. In November 2016, the Company acquired certain contracts of Trade NTE, a Georgia-based company
specializing in strategic marketing and branding services. The acquisition enhanced the Company’s branding services through
existing engagements and relationships with its clients and customers. The acquisition was immaterial to the Company’s
financial statements taken as a whole.

Olson. In November 2014, we completed the acquisition of Olson, a leading provider of marketing technology and
digital services based in Minneapolis, Minnesota. As a result of the acquisition, Olson became our wholly owned subsidiary.
The aggregate purchase price of approximately $298.2 million in cash was funded by our Credit Facility (as defined below).
The acquisition expanded our existing digital technology and strategic communications work and strengthened our ability to
bring more integrated solutions to an expanded client base, including multi-channel marketing initiatives across web, mobile,
email, social, print, broadcast and off-premise platforms.

CityTech. In March 2014, we acquired CityTech, a Chicago-based digital interactive consultancy specializing in
enterprise applications development, web experience management, mobile application development, cloud enablement,
managed services, and customer experience management solutions. The acquisition added expertise to our content
management capabilities and complemented our digital and interactive business.

Mostra. In February 2014, we completed the acquisition of Mostra, a strategic communications consulting company
based in Brussels, Belgium. Mostra offered end-to-end, multichannel communications solutions to assist government and
commercial clients, in particular the European Commission. The acquisition extended our strategic communications
capabilities globally to complement our policy work and enhanced our strategy of providing a full suite of services that
leverage our research and advisory services.

RESULTS OF OPERATIONS

The following table sets forth certain items from our consolidated statements of comprehensive income, expresses these

items as a percentage of revenue for the periods indicated and the period-over-period rate of change in each of them.

Years Ended December 31, 2016, 2015, and 2014
(dollars in thousands)

2016

Year Ended December 31,
2016

2014

2015
Dollars

2015
Percentages

2014

2015 to 2016
Dollars Percent

2014 to 2015
Dollars Percent

Year to Year Change

Revenue .................. $ 1,185,097 $ 1,132,232 $ 1,050,134 100.0% 100.0% 100.0% $ 52,865
654,946 62.9% 61.4% 62.4% 50,701
Direct Costs ............
Operating Costs
and Expenses
Indirect and selling

745,137

694,436

4.7% $ 82,098
7.3% 39,490

7.8 %
6.0 %

expenses ................

328,048

329,159

302,020 27.7% 29.1% 28.7%

(1,111)

(0.3)% 27,139

9.0 %

Depreciation and

amortization ..........

16,638

16,222

13,369

1.4%

1.3%

416

2.6%

2,853

21.3 %

Amortization of

intangible assets ....

12,481

17,184

10,437

1.0%

1.5%

1.0%

(4,703)

(27.4)%

6,747

64.6 %

Total Operating

Costs and
Expenses ..............

357,167

362,565

325,826 30.1% 32.0% 31.0%

(5,398)

(1.5)% 36,739

11.3 %

Operating Income ..

82,793

75,231

69,362

7.0%

6.6%

7,562

10.1%

5,869

8.5 %

Interest expense .......
Other income

(expense) ...............

Income Before

(9,470)

(10,072)

(4,254)

(0.8%)

(0.9)%

(0.4)%

602

(6.0)%

(5,818)

136.8 %

1,184

(1,559)

(958)

0.1%

(0.1)%

2,743

(175.9%)

(601)

62.7 %

Income Taxes ......

74,507

63,600

64,150

6.3%

5.6%

6.1% 10,907

17.1%

(550)

(0.9 )%

Provision for

Income Taxes ......

27,923

24,231

24,120

2.4%

2.1%

2.3%

3,692

15.2%

111

0.5 %

Net Income ............. $

46,584 $

39,369 $

40,030

3.9%

3.5%

3.8% $ 7,215

18.3% $

(661)

(1.7 )%

Year ended December 31, 2016, compared to year ended December 31, 2015

Revenue. Revenue for the year ended December 31, 2016, was $1,185.1 million, compared to $1,132.2 million for the
year ended December 31, 2015, representing an increase of $52.9 million or 4.7%. The increase in revenue was attributable
to increases in governmental revenue of $33.9 million and in commercial revenue of $19.0 million for the year ended
December 31, 2016 compared to the year ended December 31, 2015. The growth in governmental revenue included a $22.4
million increase in federal government revenue and a $20.8 million increase in state and local government revenue for the
year ended December 31, 2016 compared to the year ended December 31, 2015. The increase in federal government revenue
was primarily from health, education, and social programs. The increase in state and local government revenue was primarily
from the energy, environment, and infrastructure markets. Increases in federal government revenue and state and local
government revenue were partially offset by a $9.3 million decrease in international government revenue, primarily due to
declines in health, education, and social programs. The increase in commercial revenue was primarily in commercial energy
markets. The governmental and commercial revenues remained relatively consistent as a percent of revenue at 65% and 35%
for both years ended December 31, 2016 and 2015, respectively.

Direct costs. Direct costs for the year ended December 31, 2016, were $745.1 million compared to $694.4 million for
the year ended December 31, 2015, an increase of $50.7 million or 7.3%. The increase in direct costs was attributable to
increases in both subcontractor and other direct costs and direct labor and related fringe costs. Direct costs as a percent of
revenue increased to 62.9% for the year ended December 31, 2016, compared to 61.4% for the year ended December 31,
2015 due to a larger increase in subcontractor and other direct costs over the increase in direct labor and related fringe costs.
We generally expect the ratio of direct costs as a percentage of revenue to increase when our own labor costs decreases
relative to subcontracted labor costs.

Changes in the mix of services and other direct costs provided under our contracts can result in variability in our direct
costs as a percentage of revenue. For example, when we perform work in the area of implementation, we expect that more of
our services will be performed in client-provided facilities and/or with dedicated staff. Such work generally has a higher
proportion of direct costs than much of our current research and advisory work, and we anticipate that higher utilization of
such staff will decrease indirect expenses. In addition, to the extent we are successful in winning larger contracts, our own
labor services component could decrease because larger contracts typically are broader in scope and require more diverse
capabilities, potentially resulting in more subcontracted labor, more other direct costs, and lower margins. Although these
factors could lead to a higher ratio of direct costs as a percentage of revenue, the economics of these larger jobs are nonetheless
generally favorable because they increase income, broaden our revenue base, and have a favorable return on invested capital.

Indirect and selling expenses. Indirect and selling expenses for the year ended December 31, 2016, were $328.0 million
compared to $329.2 million for the year ended December 31, 2015, a decrease of $1.1 million or 0.3%. Indirect and selling
expenses include our management, facilities, and infrastructure costs for all employees and the salaries and wages related to
indirect activities, including stock-based compensation provided to employees whose compensation and other benefit costs
are included in indirect and selling expenses, plus associated fringe benefits not directly related to client engagements. Indirect
and selling expenses as a percent of revenue decreased to 27.7% for the year ended December 31, 2016, compared to 29.1%
for the year ended December 31, 2015.

Depreciation and amortization. Depreciation and amortization was $16.6 million for the year ended December 31,
2016, compared to $16.2 million for the year ended December 31, 2015, an increase of $0.4 million or 2.6%. Depreciation
and amortization includes depreciation of property and equipment and the amortization of the costs of software we use
internally.

Amortization of intangible assets. Amortization of intangible assets for the year ended December 31, 2016 was $12.5
million compared to $17.2 million for the year ended December 31, 2015. The $4.7 million decrease was primarily due to
reduced levels of intangible asset amortization associated with prior acquisitions.

Operating income. For the year ended December 31, 2016, operating income was $82.8 million compared to $75.2
million for the year ended December 31, 2015, an increase of $7.6 million or 10.1%. Operating income as a percent of revenue
was 7.0% for the year ended December 31, 2016 compared to 6.6% for the year ended December 31, 2015 largely due to
lower amortization of intangible assets.

Interest expense. For the year ended December 31, 2016, interest expense was $9.5 million, compared to $10.1 million

for the year ended December 31, 2015 due to lower average debt balances outstanding.

Other income (expense). For the year ended December 31, 2016, other income was $1.2 million compared to other
expense of $1.6 million for the year ended December 31, 2015. Other income for the year ended December 31, 2016 primarily
represents the net gain on a corporate owned insurance policy. Other expense for the year ended December 31, 2015 primarily
represents the reclassification of foreign currency translation losses from accumulated other comprehensive loss into earnings
as a result of closing certain international offices as part of actions taken to improve our cost structure and operations.

Provision for income taxes. The effective income tax rate for the year ended December 31, 2016 and December 31,
2015, was 37.5% and 38.1%, respectively. The decrease in the rate was related to favorable adjustments for the adoption of
new accounting guidance related to tax benefits for stock-based compensation, permanently non-taxable income, and the
release of a valuation allowance on certain foreign deferred tax assets. Our effective tax rate, including state and foreign taxes
net of federal benefit, for the year ended December 31, 2016 was lower than the statutory tax rate for the year primarily due
to favorable adjustments for the adoption of new accounting guidance related to tax benefits for stock-based compensation,
permanently non-taxable income, the true-up of our 2015 tax provision, state tax credits and the release of a valuation
allowance on certain foreign deferred tax assets, partially offset by unrecognized tax benefits, permanent differences related
to compensation costs and other expenses not deductible for tax purposes. We account for the expected impact of discrete
tax items once we determine that they are both reasonably quantified and when we are confident they will be realized due to
the associated event occurring, such as the filing of an amended tax return, enactment of tax legislation, or the closure of an
audit examination.

Year ended December 31, 2015, compared to year ended December 31, 2014

Revenue. Revenue for the year ended December 31, 2015, was $1,132.2 million, compared to $1,050.1 million for the
year ended December 31, 2014, representing an increase of $82.1 million, or 7.8%. The increase in revenue was primarily
attributable to the 25.0% increase in revenue from commercial clients, which was the result of higher revenue from digital
services, driven largely by the Olson acquisition. Total government revenue was relatively flat for the year ended December
31, 2015 compared to the year ended December 31, 2014. Increases in federal government revenue and state and local
government revenue of 1.5% and 5.0%, respectively, were mostly offset by lower international government revenue, which
was driven by the weakening of certain foreign currencies relative to the U.S. dollar, primarily the Euro, British Pound and
Canadian dollar.

Direct costs. Direct costs for the year ended December 31, 2015, were $694.4 million compared to $654.9 million for
the year ended December 31, 2014, an increase of $39.5 million, or 6.0%. The increase in direct costs was primarily
attributable to direct costs resulting from the acquisition of Olson, partially offset by a reduction in our use of subcontracted
labor. Direct costs as a percent of revenue decreased to 61.4% for the year ended December 31, 2015, compared to 62.4%
for the year ended December 31, 2014.

Indirect and selling expenses. Indirect and selling expenses for the year ended December 31, 2015, were $329.2 million
compared to $302.0 million for the year ended December 31, 2014, an increase of $27.1 million, or 9.0%. The increase in
indirect and selling expenses was primarily attributable to the Olson acquisition. In addition, the year ended December 31,
2014 included a $2.8 million reduction to indirect and selling expenses related to a fair value adjustment for contingent
consideration recorded as a result of the ECA acquisition. Indirect and selling expenses as a percent of revenue increased to
29.1% for the year ended December 31, 2015, compared to 28.7% for the year ended December 31, 2014.

Depreciation and amortization. Depreciation and amortization was $16.2 million for the year ended December 31,
2015, compared to $13.4 million for the year ended December 31, 2014. The increase in depreciation and amortization of
21.3% was primarily due to the acquisition of Olson.

Amortization of intangible assets. Amortization of intangible assets for the year ended December 31, 2015, was $17.2
million compared to $10.4 million for the year ended December 31, 2014. The $6.7 million increase was primarily due to the
addition of $64.9 million of intangible assets as a result of the Olson acquisition, partly offset by reduced amortization related
to intangible assets from acquisitions in prior years that were fully amortized.

Operating income. For the year ended December 31, 2015, operating income was $75.2 million compared to $69.4
million for the year ended December 31, 2014, an increase of $5.9 million or 8.5%. Operating income as a percent of revenue
was 6.6% for the years ended December 31, 2015 and 2014. We incurred lower expenses related to acquisitions, severance
and international office closures during the year ended December 31, 2015, compared to the year ended December 31, 2014;
however the positive margin impact of this reduction was mostly offset by the fair value adjustment of $2.8 million related
to contingent consideration for the acquisition of ECA that reduced indirect and selling expenses during the year ended
December 31, 2014.

Interest expense. For the year ended December 31, 2015, interest expense was $10.1 million, compared to $4.3 million
for the year ended December 31, 2014. The $5.8 million increase was driven by a higher average debt balance during the
year ended December 31, 2015 as a result of borrowings to fund the acquisition of Olson, and an increase in the applicable
interest rates under our Credit Facility (as defined below) due to the increased level of debt outstanding.

Other expense. Other expense was $1.6 million for the year ended December 31, 2015, compared to $1.0 million for
the year ended December 31, 2014. Other expense for both periods primarily represented the reclassification of foreign
currency translation losses from accumulated other comprehensive loss into earnings as a result of closing certain
international offices as part of actions taken to improve our cost structure and operations.

Provision for income taxes. The effective income tax rate for the year ended December 31, 2015 and December 31,
2014, was 38.1% and 37.6%, respectively. The rate increase was primarily related to unfavorable adjustments for
compensation costs and other expenses permanently not deductible for tax purposes. Our effective tax rate, including state
and foreign taxes net of federal benefit, for the year ended December 31, 2015 was lower than the statutory tax rate for the
year primarily due to the true-up of our 2014 tax provision, tax benefit of foreign tax rate differential and state tax credits,
partially offset by permanent differences related to compensation costs and other expenses not deductible for tax purposes.
We account for the expected impact of discrete tax items once we determine that they are both reasonably quantified and

when we are confident they will be realized due to the associated event occurring, such as the filing of an amended tax return,
enactment of tax legislation, or the closure of an audit examination.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Borrowing Capacity. Our business generally requires minimal infrastructure investment because we are
primarily a service provider for which facilities requirements are provided for under operating leases or on client premises.
Short-term liquidity requirements are created by our use of funds for working capital, capital expenditures, and the need to
provide any debt service. We expect to meet these requirements through a combination of cash flows from operations and
borrowings under our Credit Facility. We entered into a Fourth Amended and Restated Business Loan and Security
Agreement (the “Credit Facility”) with a syndication of 11 commercial banks on May 16, 2014, which was further modified
on November 5, 2014. The Credit Facility matures on May 16, 2019 and allows for borrowings of up to $500.0 million
without a borrowing base requirement, taking into account financial, performance-based limitations, and provides for an
“accordion,” which permits additional revolving credit commitments of up to $100.0 million, subject to lenders’ approval.
The Credit Facility provides for stand-by letters of credit aggregating up to $30.0 million that reduce the funds available
under the Credit Facility when issued. The Credit Facility is collateralized by substantially all of our assets and requires that
we remain in compliance with certain financial and non-financial covenants. The financial covenants, as defined in the Credit
Facility, require, among other things, that we maintain, on a consolidated basis for each quarter, a fixed charge coverage ratio
of not less than 1.25 to 1.00 and a leverage ratio of not more than 3.75 to 1.00. As of December 31, 2016, we were in
compliance with our covenants under the Credit Facility.

As of December 31, 2016, we had $259.4 million borrowed under the Credit Facility and outstanding letters of credit
of $3.4 million, resulting in unused borrowing capacity of $237.2 million under our Credit Facility (excluding the accordion),
which is available for our working capital needs and for other purposes. Taking into account certain financial, performance-
based limitations, available borrowing capacity (excluding the accordion) was $195.0 million.

We have the ability to borrow funds under our Credit Facility at interest rates based on both LIBOR and prime rates, at
our discretion, plus their applicable margins. The weighted average interest rate on outstanding borrowings at December 31,
2016 and 2015 was 2.46% and 2.23%, respectively.

We anticipate that our long-term liquidity requirements, including any future acquisitions, will be funded through a
combination of cash flows from operations, borrowings under our Credit Facility, additional secured or unsecured debt, or
the issuance of common or preferred stock, each of which may be initially funded through borrowings under our Credit
Facility.

We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents
on hand will provide the required liquidity and capital resources necessary to fund on-going operations, customary capital
expenditures, and other current working capital requirements. We are continuously analyzing our capital structure to ensure
we have sufficient capital to fund future acquisitions and internal growth. We monitor the state of the financial markets on a
regular basis to assess the availability and cost of additional capital resources both from debt and equity sources. We believe
that we will be able to access these markets at commercially reasonable terms and conditions if we need additional borrowings
or capital.

Financial Condition. There were several changes in our balance sheet during the year ended December 31, 2016. Cash
and cash equivalents decreased to $6.0 million on December 31, 2016, from $7.7 million on December 31, 2015 (see further
discussion in “Cash Flows” that follows). Contract receivables, net, increased to $281.4 million on December 31, 2016
compared to $257.0 million on December 31, 2015, and days-sales-outstanding increased to 78 days on December 31, 2016,
as compared to 73 days on December 31, 2015, primarily due to timing differences of certain contracts. Accounts payable
and accrued salaries and benefits increased to $70.6 million and $44.0 million, respectively, on December 31, 2016 from
$63.7 million and $43.1 million on December 31, 2015, respectively. The long-term debt decreased to $259.4 million on
December 31, 2016, from $311.5 million on December 31, 2015, due to net payments on our Credit Facility of $52.1 million.
Treasury stock increased to $88.7 million on December 31, 2016 from $74.7 million on December 31, 2015 primarily due to
share buybacks under our share repurchase plan. The $2.1 million increase in accumulated other comprehensive loss was
driven by the devaluation of certain foreign currencies relative to the U.S. dollar, primarily the Euro, British Pound and
Canadian dollar, partially offset by the change in the fair value of an interest rate hedging agreement as described further
below.

On September 30, 2016, we entered into a floating-to-fixed interest rate hedging agreement for an aggregate notional
amount of $100.0 million to hedge a portion of our floating rate indebtedness (the “Transaction”). We entered into the
Transaction to help manage the risk related to interest rate volatility and designated the swap as a cash flow hedge. On
December 1, 2016 we sold the interest rate hedge for $3.6 million. The fair value of the interest rate hedge on the date of the
sale was recorded in accumulated other comprehensive income and will be recognized as earnings when the hedged items,
interest payments commencing January 31, 2018 to January 31, 2023, are recognized in earnings.

We have explored various options of mitigating the risk associated with potential fluctuations in the foreign currencies
in which we conduct transactions. We currently have hedges in an amount proportionate to work anticipated to be performed
under certain contracts in Europe. We recognize changes in the fair-value of the hedges in our results of operations. We may
increase the number, size and scope of our hedges as we analyze options for mitigating our foreign exchange and interest rate
risk. The current impact of the hedges to the consolidated financial statements is immaterial.

Cash Flows. We consider cash on deposit and all highly liquid investments with original maturities of three months or
less when purchased to be cash and cash equivalents. The following table sets forth our sources and uses of cash for the
following years.

(In thousands)
Net cash provided by operating activities .......................................... $
Net cash used in investing activities ...................................................
Net cash (used in) provided by financing activities ...........................
Effect of exchange rate changes on cash ............................................
(Decrease) increase in cash and cash equivalents .............................. $

Year ended December 31,
2015

2016

2014

79,563 $
(13,891)
(66,974)
(403)
(1,705) $

76,319 $
(14,500 )
(64,448 )
(1,746 )
(4,375 ) $

79,160
(358,506 )
283,519
(1,004 )
3,169

Our operating cash flows is primarily affected by the overall profitability of our contracts, our ability to invoice and
collect from our clients in a timely manner, and our ability to manage our vendor payments. We bill most of our clients
monthly after services are rendered. Cash flows from operating activities for 2016 were positively impacted by net income,
accrued expenses, and accounts payable, partially offset by contract receivables and prepaid expenses and other assets. Cash
flows from operating activities for 2015 were positively impacted by net income, income tax receivable and payable, and
deferred revenue, partially offset by accrued salaries and benefits, accrued expenses, contract receivables, and accounts
payable. Cash flows from operating activities for 2014 were positively impacted by net income, accounts payable and accrued
salaries and benefits, partially offset by income tax receivable and payable, contract receivables and deferred revenue.

Our cash flows used in investing activities consists primarily of capital expenditures and acquisitions. During the year
ended 2016, we purchased capital assets totaling $13.8 million. During the year ended 2015, we purchased capital assets
totaling $12.7 million and paid approximately $1.8 million related to a holdback adjustment for our 2014 acquisition of
Olson. During the year ended 2014, we paid approximately $347.9 million for business acquisitions, net of cash acquired,
and purchased capital assets totaling $10.6 million.

Our cash flows used in and provided by financing activities consists primarily of debt and equity transactions. For the
year ended 2016, cash flows used in financing activities was primarily due to net payments on our Credit Facility of $52.1
million, and share repurchases under our share repurchase plan of $11.9 million. For the year ended 2015, cash flows used
in financing activities was primarily due to net payments on our Credit Facility of $38.5 million, and share repurchases under
our share repurchase plan of $22.3 million. For the year ended 2014, cash flows provided by financing activities was primarily
due to net advances on our Credit Facility of $310.1 million, primarily as a result of our acquisitions, partially offset by share
repurchases under our share repurchase plan of $24.4 million.

OFF-BALANCE SHEET ARRANGEMENTS

Contractual Obligations

We use off-balance sheet arrangements to finance the lease of facilities. We have financed the use of all of our office
and storage facilities through operating leases. Operating leases are also used from time to time to finance the use of
computers, servers, copiers, telephone systems, and to a lesser extent, other fixed assets, such as furnishings, and we also
obtain operating leases in connection with business acquisitions. We generally assume the lease rights and obligations of
businesses acquired in business combinations and continue financing facilities and equipment under operating leases until
the end of the lease term following the acquisition date.

As of December 31, 2016, we had nine outstanding letters of credit provided for under our Credit Facility with a total

value of $3.4 million primarily related to deposits to support our facility leases.

The following table summarizes our contractual obligations as of December 31, 2016 that require us to make future
cash payments. Our summary of contractual obligations includes payments that we have an unconditional obligation to make.

Payments due by Period

(In thousands)
Long-term debt obligation (1) ................................ $
Rent of facilities ...................................................
Operating lease obligations ..................................
Capital expenditure obligations ............................
Total ..................................................................... $

Total
275,543 $
216,984
1,768
7,530
501,825 $

Less than
1 year

6,815 $
36,463
845
4,826
48,949 $

1 to 3
years
268,728 $
67,960
909
2,704
340,301 $

3 to 5
years

More than
5 years

— $
60,277
14
—
60,291 $

—
52,284
—
—
52,284

(1) Represents the obligation for principal and variable interest payments related to the Credit Facility assuming the principal
amount outstanding and interest rates at December 31, 2016 remain fixed through maturity. These assumptions are subject
to change in future periods.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain financial market risks, the most predominant being fluctuations in interest rates for

borrowings under the Credit Facility and foreign exchange rate risk.

Interest rate fluctuations are monitored by our management as an integral part of our overall risk management program,
which recognizes the unpredictability of financial markets and seeks to reduce potentially adverse effects on our results of
operations. As part of this strategy, we may use interest rate swap arrangements to manage or hedge our interest rate risk. We
do not use derivative financial instruments for speculative or trading purposes.

Our exposure to market risk includes changes in interest rates for borrowings under the Credit Facility. These
borrowings accrue interest at variable rates. Based upon our borrowings under this facility in 2016, a 1% increase in interest
rates would have increased interest expense by approximately $3.2 million and would have decreased our annual pre-tax
income and cash flows by a comparable amount.

As a result of conducting business in currencies other than the U.S. dollar and our international operations where
transactions are in currencies other than the U.S. dollar, we are subject to market risk with respect to adverse fluctuations in
currency exchange rates. In general, our currency risk is mitigated largely by matching costs with revenues in a given
currency; however, our exposure to fluctuations in other currencies against the U.S. dollar increases as revenue in currencies
other than the U.S. dollar increase. In addition, we currently have hedges in place to mitigate our foreign exchange risk related
to our operations in Europe; however, there is some risk that revenue and profits will be affected by foreign currency exchange
fluctuations. We do not use derivative instruments for trading or speculative purposes.

We use a sensitivity analysis to assess the impact of movement in foreign currency exchange rates on revenue. During
the year ended December 31, 2016, approximately 10% of our revenue was generated from our international operations based
on the location to which a contract was awarded. As a result, a 10% increase or decrease in the value of the U.S. dollar against
all currencies would have an estimated impact on revenue of approximately 1%, or $11.5 million. Actual gains and losses in
the future could differ materially from this analysis based on the timing and amount of both foreign currency exchange rate
movements and our actual exposure. As of December 31, 2016, we held approximately $5.4 million in cash in foreign bank
accounts to be utilized on behalf of our foreign subsidiaries, thereby partially mitigating foreign currency conversion risks.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of ICF International, Inc. and subsidiaries are provided in Part IV in this Annual

Report on Form 10-K.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Based on an evaluation under the supervision and with the
participation of the Company’s management, the Company’s principal executive officer and principal financial officer have
concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act were effective as of December 31, 2016 to provide reasonable assurance that information required to be
disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized
and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the
Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting. The Company’s management is
responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rules 13a-15(f) and 15d-15(f). Management conducted an assessment of the effectiveness of the Company’s
internal control over financial reporting based on the criteria set forth in the 2013 Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment,
management has concluded that its internal control over financial reporting was effective as of December 31, 2016. The
Company’s independent registered public accounting firm, Grant Thornton LLP, has issued an audit report on the Company’s
internal control over financial reporting, which appears on page F-2 of this Form 10-K.

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting, and the preparation of financial statements for external purposes in accordance with GAAP.
The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, (iii) that the Company’s receipts and expenditures are being made only in
accordance with authorizations of the Company’s management and directors; and (iv) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial
reporting during 2016, which were identified in connection with management’s evaluation required by paragraph (d) of Rules
13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.

Inherent Limitations Over Internal Controls. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to
their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any
control system, misstatements due to error or fraud may occur and may not be detected. Also, any evaluation of the
effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because
of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

ITEM 9B.

OTHER INFORMATION

Not applicable.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item will be included in our Proxy Statement for the 2017 Annual Meeting of

Stockholders (the “2017 Proxy Statement”) and is incorporated herein by reference.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by

reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by

reference.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by

reference.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by

reference.

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) Financial Statements

PART IV

Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015, and 2014
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015, and 2014
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015, and 2014
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data (unaudited)

Page
F-1
F-3
F-4
F-5
F-6
F-7
F-30

(2) Financial Statement Schedules

None.

(3) Exhibits

The following exhibits are included with this report or incorporated herein by reference:

Exhibit
Number

Exhibit

2.1

3.1

3.2

4.1

4.2

10.1

10.2

10.3

10.4

Agreement and Plan of Merger by and among OCO Holdings, Inc., ICF International, Inc., ICF 2014 Merger Corp.
and OCO Rep Services LLC, dated as of October 21, 2014 (Incorporated by reference to Exhibit 2.2 to the
Company’s Form 10-K, filed February 27, 2015). (1)

Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 4.1 to the Company’s
Form S-8 (File No. 333-137975), filed October 13, 2006).

Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K, filed April
22, 2009).

Specimen common stock certificate (Incorporated by reference to Exhibit 4.1 to the Company’s Form S-1/A (File
No. 333-134018), filed September 12, 2006).

See Exhibits 3.1 and 3.2, above, for provisions of the Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of the Company defining the rights of holders of common stock of the Company.

2006 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Form S-1 (File
No. 333-134018), filed May 11, 2006).

ICF International, Inc. Nonqualified Deferred Compensation Plan, as amended and restated as of January 1, 2012
(Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K, filed March 1, 2013).

ICF International, Inc. 2010 Omnibus Incentive Plan, as amended (Incorporated by reference to Exhibit A to the
Company’s Definitive Proxy Statement for the 2015 Annual Meeting of Stockholders, filed April 24, 2015).

Form of Restricted Stock Unit Award under the 2010 Omnibus Incentive Plan, as amended. (Incorporated by
reference to Exhibit 10.3 to the Company’s Form 10-Q, filed July 31, 2015).

10.5

Form of Stock Option Award under the 2010 Omnibus Incentive Plan, as amended (Incorporated by reference to

Exhibit 10.5 to the Company’s Form 10-K, filed March 4, 2011).

10.6

Form of CEO Performance Share Award Agreement (Incorporated by reference to Exhibit 10.2 to the Company’s

Form 8-K, filed March 11, 2015).

10.7

Form of COO Performance Share Award Agreement (Incorporated by reference to Exhibit 10.3 to the Company’s

Form 8-K, filed March 11, 2015).

10.8

Form of General Performance Share Award Agreement under the 2010 Omnibus Incentive Plan, as amended.

(Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed July 31, 2015).

10.9

Form of Cash-Settled Restricted Stock Unit Award under the 2010 Omnibus Incentive Plan, as amended.

(Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q, filed July 31, 2015).

10.10 Restated Employment Agreement by and between the Company and Sudhakar Kesavan, dated December 29, 2008

(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed December 30, 2008).

10.11 Restated Severance Protection Agreement by and between the Company and Sudhakar Kesavan, dated
December 29, 2008 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed December 30,
2008).

10.12 Restated Severance Protection Agreement by and between the Company and John Wasson, dated December 12,
2008 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed December 18, 2008).

10.13 Amended Severance Letter Agreement by and between the Company and John Wasson, dated December 12, 2008

(Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K, filed December 18, 2008).

10.14 Employment Terms by and between the Company and James C. Morgan, dated June 8, 2012 (Incorporated by

reference to Exhibit 10.1 to the Company’s Form 10-Q, filed August 6, 2012).

10.15 Severance Benefit/Protection Agreement by and between the Company and James C. Morgan, dated June 8, 2012

(Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed August 6, 2012).

10.16 Severance Letter Agreement by and between the Company and Isabel S. Reiff, dated February 21, 2012

(Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, filed May 4, 2012).

10.17 Severance Letter Agreement by and between the Company and Ellen Glover, dated February 21, 2012

(Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed May 4, 2012).

10.18 Severance Letter Agreement by and between the Company and Sergio J. Ostria, dated March 6, 2012. (Incorporated

by reference to Exhibit 10.18 to the Company’s Form 10-K, filed on March 8, 2016).

10.19 Fourth Amended and Restated Business Loan and Security Agreement by and among ICF International, Inc., ICF
Consulting Group, Inc., and various other subsidiaries of ICF International, Inc. as Borrowers, and a group of
Lenders for which Citizens Bank of Pennsylvania acted as Administrative Agent, and RBS Citizens, N.A. and PNC
Capital Markets, LLC, acted in the capacity of joint lead arrangers and joint book running managers, dated May
16, 2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed May 21, 2014).

10.20 First Modification to Fourth Amended and Restated Business Loan and Security Agreement and Other Loan
Documents, dated as of November 5, 2014 (Incorporated by reference to Exhibit 10.15 to the Company’s Form
10-K, filed February 27, 2015).

10.21 Deed of Lease by and between Hunters Branch Leasing, LLC and ICF Consulting Group, Inc., effective April 1,
2010 (Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-K, filed March 11, 2010).

21.0 Subsidiaries of the Registrant.*

23.1 Consent of Grant Thornton LLP.*

31.1 Certificate of the Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).*

31.2 Certificate of the Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).*

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.*

32.2

101

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.*

The following materials from the ICF International, Inc. Annual Report on Form 10-K for the year ended December
31, 2016 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii)
Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv)
Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements. *

(1) Certain confidential information contained in this exhibit was omitted by means of redacting a portion of the text and
replacing it with an asterisk. This exhibit has been filed separately with the Secretary of the Securities and Exchange
Commission without the redaction pursuant to a confidential treatment request under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.

* Submitted electronically herewith.

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.

February 28, 2017

ICF INTERNATIONAL, INC.

By:

/s/ SUDHAKAR KESAVAN
Sudhakar Kesavan
Chairman 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.

Signature

Title

Date

/s/ SUDHAKAR KESAVAN
Sudhakar Kesavan

Chairman, Chief Executive Officer and Director
(Principal Executive Officer)

February 28, 2017

/s/ JAMES MORGAN
James Morgan

/s/ PHILLIP ECK
Phillip Eck

Chief Financial Officer (Principal Financial Officer)

February 28, 2017

Principal Accounting Officer

February 28, 2017

/s/ EILEEN O’SHEA AUEN
Eileen O’Shea Auen

Director

/s/ Dr. EDWARD H. BERSOFF
Dr. Edward H. Bersoff

Director

/s/ Dr. SRIKANT M. DATAR
Dr. Srikant M. Datar

Director

/s/ CHERYL GRISÉ
Cheryl Grisé

/s/ SANJAY GUPTA
Sanjay Gupta

/s/ LESLYE KATZ
Leslye Katz

/s/ PETER SCHULTE
Peter Schulte

Director

February 28, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
ICF International, Inc.

We have audited the accompanying consolidated balance sheets of ICF International, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive
income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of ICF International, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles
generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated February 28, 2017 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Arlington, Virginia
February 28, 2017

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
ICF International, Inc.

We have audited the internal control over financial reporting of ICF International, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2016, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2016, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements of the Company as of and for the year ended December 31, 2016, and our report dated
February 28, 2017 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Arlington, Virginia
February 28, 2017

F-2

ICF International, Inc., and Subsidiaries

Consolidated Balance Sheets
(in thousands, except share and per share amounts)

2016

2015

December 31,
Assets
Current Assets

Cash and cash equivalents ......................................................................................... $
Contract receivables, net ...........................................................................................
Prepaid expenses and other .......................................................................................
Total current assets ........................................................................................................

6,042 $
281,365
11,724
299,131

7,747
256,965
10,032
274,744

Total property and equipment, net ...............................................................................

40,484

45,425

Other assets:

Goodwill ...................................................................................................................
Other intangible assets, net .......................................................................................
Restricted cash ..........................................................................................................
Other assets ...............................................................................................................
Total Assets ..................................................................................................................... $

683,683
46,129
1,843
14,301
1,085,571 $

687,404
58,899
1,362
12,456
1,080,290

Liabilities and Stockholders’ Equity
Current Liabilities

Accounts payable ...................................................................................................... $
Accrued salaries and benefits ....................................................................................
Accrued expenses and other current liabilities ..........................................................
Deferred revenue .......................................................................................................
Income tax payable ...................................................................................................
Total Current Liabilities ................................................................................................

Long-term Liabilities:

Long-term debt ..........................................................................................................
Deferred rent .............................................................................................................
Deferred income taxes ..............................................................................................
Other .........................................................................................................................
Total Liabilities ...............................................................................................................

70,586 $
44,003
52,631
29,394
106
196,720

259,389
15,600
39,114
8,744
519,567

63,738
43,118
43,001
30,523
2,604
182,984

311,532
15,785
33,326
13,387
557,014

Commitments and Contingencies (Note 16)

Stockholders’ Equity

Preferred stock, par value $.001 per share; 5,000,000 shares authorized; none

issued .....................................................................................................................

—

Common stock, $.001 par value; 70,000,000 shares authorized; 21,663,432 and

21,313,472 shares issued; and 19,021,262 and 19,032,054 shares outstanding as
of December 31, 2016, and December 31, 2015, respectively ..............................
Additional paid-in capital ..........................................................................................
Retained earnings ......................................................................................................
Treasury stock ...........................................................................................................
Accumulated other comprehensive loss ....................................................................
Total Stockholders’ Equity ............................................................................................

22
292,427
371,890
(88,695 )
(9,640 )
566,004

21
280,113
325,306
(74,673)
(7,491)
523,276

Total Liabilities and Stockholders’ Equity .................................................................. $

1,085,571 $

1,080,290

The accompanying notes are an integral part of these statements.

F-3

ICF International, Inc., and Subsidiaries

Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)

Years ended December 31,
Revenue ............................................................................................. $
Direct Costs .......................................................................................
Operating costs and expenses

2016
1,185,097 $
745,137

2015
1,132,232 $
694,436

2014
1,050,134
654,946

Indirect and selling expenses ......................................................
Depreciation and amortization ....................................................
Amortization of intangible assets ................................................

328,048
16,638
12,481

329,159
16,222
17,184

302,020
13,369
10,437

Total operating costs and expenses ......................................

357,167

362,565

325,826

Operating Income .............................................................................
Interest expense ...........................................................................
Other income (expense) .............................................................

Income Before Income Taxes ..........................................................
Provision for Income Taxes .............................................................

82,793
(9,470)
1,184

74,507
27,923

75,231
(10,072 )
(1,559 )

63,600
24,231

69,362
(4,254 )
(958 )

64,150
24,120

Net Income ........................................................................................ $

46,584 $

39,369 $

40,030

Earnings per Share:

Basic .................................................................................... $
Diluted ................................................................................. $

Weighted-average Common Shares Outstanding:

Basic ....................................................................................
Diluted .................................................................................

Other comprehensive (loss) income:

Foreign currency translation adjustments, net of tax...................
Gain on sale of interest rate hedge agreement, net of tax ............
Total other comprehensive loss, net of tax ...........................
Comprehensive income, net of tax .................................................. $

2.45 $
2.40 $

18,989
19,416

(4,324)
2,175
(2,149)
44,435 $

2.04 $
2.00 $

19,335
19,663

(5,010 )
—
(5,010 )
34,359 $

2.04
2.00

19,608
19,997

(1,491 )
—
(1,491 )
38,539

The accompanying notes are an integral part of these statements.

F-4

ICF International, Inc., and Subsidiaries

Consolidated Statements of Stockholders’ Equity
(in thousands)

Years ended
December 31, 2016,
2015, and 2014
January 1, 2014 ............... 19,765 $

Additional
Common Stock
Paid-in
Shares Amount Capital

Retained Treasury Stock
Earnings Shares Amount

21 $ 250,698 $ 245,907

853 $ (21,545) $

Accumulated
Other

Comprehensive

Loss

Total
(990) $ 474,091

Net income ....................
Other comprehensive

loss .............................
Equity compensation .....
Exercise of stock

options ........................

Issuance of shares

pursuant to vesting of
restricted stock units ...

Net payments for stock

issuances and
buybacks .....................

Tax impact of stock

option exercises and
award vesting..............

—

40,030

—

— 40,030

—
—

—
10,680

—
—

—
328

(1,491)

(1,491)
— 11,008

—

1,831

—

1,831

333

—

(753)

—

454

—

753 (28,777)

— (28,323)

—

3,543

—

3,543

December 31, 2014 .......... 19,430

267,206 285,937

1,606 (49,994)

(2,481) 500,689

Net income ....................
Other comprehensive

loss .............................
Equity compensation .....
Exercise of stock

options ........................

Issuance of shares

pursuant to vesting of
restricted stock units ...

Net payments for stock

issuances and
buybacks .....................

Tax impact of stock

option exercises and
award vesting..............

—

39,369

—

— 39,369

—
—

—
10,392

—
—

—
458

(5,010)

(5,010)
— 10,850

—

932

—

932

234

—

(676)

—

276

—

676 (25,137)

— (24,861)

—

1,307

—

1,307

December 31, 2015 .......... 19,032

280,113 325,306

2,282 (74,673)

(7,491) 523,276

Net income ....................
Other comprehensive

loss .............................
Equity compensation .....
Exercise of stock

—

46,584

—

— 46,584

—
—

—
8,734

—
—

—
348

(2,149)
—

(2,149)
9,082

options ........................

128

3,033

—

3,034

Issuance of shares

pursuant to vesting of
restricted stock units ...

Net payments for stock

221

—

issuances and
buybacks .....................

(360)
December 31, 2016 .......... 19,021 $

—
—
547
22 $ 292,427 $ 371,890

360 (14,370)
2,642 $ (88,695) $

— (13,823)
(9,640) $ 566,004

The accompanying notes are an integral part of these statements.

F-5

ICF International, Inc., and Subsidiaries

Consolidated Statements of Cash Flows
(in thousands)

Years ended December 31,
Cash Flows from Operating Activities

Net income ............................................................................................. $
Adjustments to reconcile net income to net cash provided by

operating activities:

Bad debt expense ...........................................................................
Deferred income taxes ....................................................................
Non-cash equity compensation ......................................................
Depreciation and amortization .......................................................
Deferred rent ..................................................................................
Proceeds from hedge sale ...............................................................
Other adjustments, net ....................................................................
Changes in operating assets and liabilities, net of the effect of

acquisitions:

Contract receivables ...............................................................
Prepaid expenses and other assets ..........................................
Accounts payable ...................................................................
Accrued salaries and benefits .................................................
Accrued expenses ...................................................................
Deferred revenue ....................................................................
Income tax receivable and payable .........................................
Restricted cash .......................................................................
Other liabilities .......................................................................

Net Cash Provided by Operating Activities ...............................................
Cash Flows from Investing Activities

Capital expenditures for property and equipment and capitalized

software ...............................................................................................
Payments for business acquisitions, net of cash received .......................

Net Cash Used in Investing Activities .........................................................
Cash Flows from Financing Activities

Advances from working capital facilities ...............................................
Payments on working capital facilities ...................................................
Payments on capital expenditure obligations .........................................
Debt issue costs ......................................................................................
Proceeds from exercise of options..........................................................
Tax benefits of stock option exercises and award vesting ......................
Net payments for stockholder issuances and buybacks ..........................

2016

2015

2014

46,584 $

39,369 $

40,030

1,089
6,535
9,082
29,119
(43)
3,600
(637)

(29,020)
(2,792)
8,941
1,140
10,252
(707)
(2,447)
(494)
(639)

268
2,106
10,850
33,406
1,002
—
1,786

(2,713 )
(170 )
(2,374 )
(13,208 )
(4,522 )
2,367
8,356
116
(320 )

272
4,071
11,008
23,806
2,685
—
(3,015 )

(2,464 )
(1,743 )
9,424
4,286
683
(2,099 )
(6,453 )
387
(1,718 )

79,563

76,319

79,160

(13,791)
(100)

(12,682 )
(1,818 )

(10,635 )
(347,871 )

(13,891)

(14,500 )

(358,506 )

478,584
(530,728)
(4,041)
—
3,034
—
(13,823)

381,745
(420,265 )
(3,289 )
(17 )
932
1,307
(24,861 )

Net Cash (Used in) Provided by Financing Activities ...............................
Effect of Exchange Rate Changes on Cash ................................................

(66,974)
(403)

(64,448 )
(1,746 )

(Decrease) Increase in Cash and Cash Equivalents ..................................
Cash and cash equivalents, beginning of period ........................................
Cash and cash equivalents, end of period .................................................. $

(1,705)
7,747
6,042 $

(4,375 )
12,122
7,747 $

733,032
(422,980 )
(2,339 )
(1,245 )
1,831
3,543
(28,323 )

283,519
(1,004 )

3,169
8,953
12,122

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest ........................................................................................... $
Income taxes .................................................................................. $

8,937 $
21,094 $

9,845 $
16,315 $

2,728
24,335

Non-cash investing and financing transactions:

Capital expenditure obligations ...................................................... $

— $

12,870 $

—

The accompanying notes are an integral part of these statements.

F-6

ICF International, Inc., and Subsidiaries

Notes to Consolidated Financial Statements
(dollar amounts in tables in thousands, except share and per share data)

NOTE 1—BASIS OF PRESENTATION AND NATURE OF OPERATIONS

Basis of Presentation and Nature of Operations

The accompanying consolidated financial statements include the accounts of ICF International, Inc. (“ICFI”), and its
subsidiary, ICF Consulting Group, Inc. (“Consulting,” and together with ICFI, “the Company”), and have been prepared in
accordance with U.S. generally accepted accounting principles. Consulting is a wholly owned subsidiary of ICFI. ICFI is a
holding company with no operations or assets other than its investment in the common stock of Consulting. All other
subsidiaries of the Company are wholly owned by Consulting. All significant intercompany transactions and balances have
been eliminated.

Nature of Operations

The Company provides professional services and technology-based solutions to government and commercial clients,
including management, technology, and policy consulting and implementation services, in the areas of energy, environment,
and infrastructure; health, education, and social programs; safety and security; and consumer and financial. The Company
offers a full range of services to these clients throughout the entire life cycle of a policy, program, project, or initiative, from
research and analysis and assessment and advice to design and implementation of programs and technology-based solutions,
and the provision of engagement services and programs.

The Company’s major clients are United States (“U.S.”) federal government departments and agencies, most
significantly the Department of Health and Human Services, the Department of State and the Department of Defense. The
Company also serves U.S. state and local government departments and agencies; international governments; and commercial
clients worldwide, such as airlines, airports, electric and gas utilities, oil companies, banks and other financial services
companies, transportation, travel and hospitality firms, non-profits/associations, law firms, manufacturing firms, retail chains,
and distribution companies. The term “federal” or “federal government” refers to the U.S. federal government, and “state and
local” or “state and local government” refers to U.S. state and local governments, unless otherwise indicated.

The Company, incorporated in Delaware, is headquartered in Fairfax, Virginia. It maintains offices throughout the
world, including over 55 offices in the U.S. and more than 10 offices in key markets outside the U.S., including offices in the
United Kingdom, Belgium, China, India and Canada.

Reclassifications

Certain immaterial amounts in the 2015 and 2014 consolidated financial statements have been reclassified to conform

to the current year presentation.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered,
the contract price is fixed or determinable, and collectability is reasonably assured. The Company enters into three types of
contracts: time-and-materials, cost-based, and fixed-price.

•

F-7

costs. Incentives, award fees, or penalties related to performance are also considered in estimating revenue
and profit rates based on actual and anticipated awards, taking into consideration factors such as the
Company’s prior award experience and communications with the customer regarding performance.

•

Fixed-Price Contracts. Revenue for fixed-price contracts is recognized when earned, generally as work is
performed. Services performed vary from contract to contract and are not always uniformly performed over
the term of the arrangement. Fixed-price contracts may contain multiple elements that must be evaluated to
determine if they represent separate units of accounting that have stand-alone value. If the assessment is made
that there is more than one unit of accounting, the contract value is then allocated to each unit based upon
management’s best estimate of selling price and the appropriate revenue recognition method is applied to each
unit. The Company recognizes revenue in a number of different ways on fixed-price contracts based upon the
nature of the services to be provided and an assessment of what best mirrors the pattern of performance for
the deliverable/contract, including:

•

Specific Performance: When the services to be performed consist of a single act, revenue is recognized
at the time the act is performed or at the completion of the single service.

Straight-Line: When services are performed or are expected to be performed consistently throughout
an arrangement, or when the Company is compensated on a retainer or fixed-fee basis, revenue is
recognized ratably over the period benefited.

Revenue recognition requires the Company to use judgment relative to assessing risks, estimating contract revenue and
costs or other variables, and making assumptions for scheduling and technical issues. Due to the size and nature of many of
the Company’s contracts, the estimation of revenue and estimates at completion can be complicated and are subject to many
variables. Contract costs include labor, subcontractor costs, and other direct costs, as well as an allocation of indirect costs.
At times, the Company must also make assumptions regarding the length of time to complete the contract because costs
include expected increases in wages, prices for subcontractors, and other direct costs. From time to time, facts develop that
require the Company to revise its estimated total costs or hours and thus the associated revenue on a contract. To the extent
that a revised estimate affects contract profit or revenue previously recognized, the Company records the cumulative effect
of the revision in the period in which the facts requiring the revision become known. A provision for the full amount of an
anticipated loss on any type of contract is recognized in the period in which it becomes probable and can be reasonably
estimated. As a result, operating results could be affected by revisions to prior accounting estimates.

Contractual arrangements are evaluated to assess whether revenue should be recognized on a gross versus net basis.
Management’s assessment when determining gross versus net revenue recognition is based on several factors, such as
whether the Company serves as the primary service provider, has autonomy in selecting subcontractors, or has credit risk, all
of which are primary indicators that the Company serves as the principal to the transaction. In such cases, revenue is
recognized on a gross basis. When such indicators are not present and the Company is primarily functioning as an agent
under an arrangement, revenue is recognized on a net basis.

F-8

have been immaterial. Contract revenue for subsequent periods has been recorded in amounts that are expected to be realized
upon final audit and settlement of costs in those years.

The Company generates invoices to clients in accordance with the terms of the applicable contract, which may not be
directly related to the performance of services. Unbilled receivables are invoiced based upon the achievement of specific
events as defined by each contract, including deliverables, timetables, and incurrence of certain costs. Unbilled receivables
are classified as a current asset. Advanced billings to clients in excess of revenue earned are recorded as deferred revenue
until the revenue recognition criteria are met. Reimbursements of out-of-pocket expenses are included in revenue with
corresponding costs incurred by the Company included in the cost of revenue. The Company records revenue net of taxes
collected from customers to be remitted to governmental authorities.

The Company may proceed with work based upon client direction prior to the completion and signing of formal contract
documents. It has a review process for approving any such work. Revenue associated with such work is recognized only
when it can be reliably estimated and realization is probable. The Company bases its estimates on a variety of factors,
including previous experiences with the client, communications with the client regarding funding status, and its knowledge
of available funding for the contract.

Cash and Cash Equivalents

The Company considers cash on deposit and all highly liquid investments with original maturities of three months or

less when purchased to be cash and cash equivalents.

Restricted Cash

The Company has restricted cash representing amounts held in escrow accounts and/or not readily available due to

contractual restrictions.

Allowance for Doubtful Accounts

The Company considers a number of factors in its estimate of allowance for doubtful accounts, including the customer’s
financial condition, historical collection experience, and other factors that may bear on collectability of the receivables. The
Company writes off contract receivables when such amounts are determined to be uncollectible. Losses have historically
been within management’s expectations.

Property and Equipment

Property and equipment are carried at cost and are depreciated using the straight-line method over their estimated useful
lives, which range from two to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter
of the economic life of the improvement or the related lease term. Assets acquired in acquisitions are recorded at fair value.

Goodwill and Other Intangible Assets

The purchase price of an acquired business is allocated to the tangible assets and separately identifiable intangible assets
acquired, less liabilities assumed, based upon their respective fair values, with the excess recorded as goodwill. Goodwill
represents the excess of costs over the fair value of net assets of businesses acquired. Goodwill and intangible assets acquired
in a business combination and determined to have an indefinite useful life are not amortized, but instead are reviewed for
impairment annually, or more frequently if impairment indicators arise. Intangible assets with estimable useful lives are
amortized over such lives and reviewed for impairment if impairment indicators arise.

Impairment

The Company performs its annual goodwill impairment review as of September 30 of each year. For the purposes of
performing this review, the Company has one reporting unit. For the annual impairment review as of September 30, 2016,
the Company opted to perform a qualitative assessment of whether it is more likely than not that its reporting unit's fair value
is less than its carrying amount. If, after completing its qualitative assessment, the Company determines that it is more likely
than not that the estimated fair value of the reporting unit exceeded its carrying amount, it may conclude that no impairment
exists. If the Company concludes otherwise, a two-step goodwill impairment test must be performed, which includes a
comparison of the fair value of the reporting unit to the carrying value.

F-9

The Company’s qualitative analysis as of September 30, 2016, included macroeconomic and industry and market
specific considerations, financial performance indicators and measurements, and other factors. Based on the Company’s
qualitative assessment, it determined that it is more likely than not that the fair value of its one reporting unit exceeded its
carrying amount, and thus the two-step impairment test was not required to be performed for 2016. Therefore, based upon
management’s review, no goodwill impairment charge was required as of September 30, 2016. Historically, the Company
has recorded no goodwill impairment charges.

The Company is required to review long-lived assets and certain identifiable intangibles for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported
at the lower of the carrying amount or fair value, less cost to sell.

Capitalized Software

The Company capitalizes eligible costs to develop enhancements and upgrades to internal-use software that are incurred
subsequent to the preliminary project stage. Amortization expense is recorded on a straight-line basis over the expected
economic life, typically three to five years. During the years ended December 31, 2016, 2015, and 2014, the costs capitalized
for the development of internal-use software were not material to the Company’s consolidated financial statements.

Deferred Rent

The Company recognizes rent expense on a straight-line basis over the non-cancellable term of each lease, including
renewal option periods when renewal is reasonably assured or executed. Lease incentives or abatements received at or near
the inception of leases are accrued and amortized ratably over the life of the lease.

Stock-based Compensation

The Company recognizes stock-based compensation expense related to share-based payments to employees, including
grants of employee stock options, restricted stock awards, restricted stock units (“RSUs”), and cash-settled restricted stock
units (“CSRSUs”) on a straight-line basis over the requisite service period, which is generally the vesting period. The
Company recognizes expense for performance-based share awards (“PSAs”), which have a performance condition and a
market condition, on a straight-line basis over the performance period. Non-employee director awards do not include vesting
conditions and therefore are expensed when issued.

Stock-based compensation expense is based on the estimated fair value of these instruments and the estimated number
of shares the Company ultimately expects will vest. The Company estimates the rate of future forfeitures based on factors
such as historical experience and employee class. In addition, the estimation of PSAs that will ultimately vest requires
judgment based on performance conditions. Changes to these estimates are recorded as a cumulative adjustment in the period
estimates are revised.

The fair value of stock options, restricted stock awards, RSUs, PSAs, and non-employee director awards is estimated
based on the fair value of a share of common stock at the grant date. The Company has elected to use the Black-Scholes-
Merton option pricing model to determine the fair value of stock options. The fair value of PSAs is estimated using a Monte
Carlo simulation model.

CSRSUs are settled only in cash payments. The cash payment is based on the fair value of the Company’s stock price
at the vesting date, calculated by multiplying the number of CSRSUs vested by the Company’s closing stock price on the
vesting date, subject to a maximum payment cap and a minimum payment floor. The Company treats these awards as liability-
classified awards, and therefore accounts for them at fair value estimated based on the closing price of the Company’s stock
at the reporting date.

Other Comprehensive (Loss) Income

Other comprehensive (loss) income represents foreign currency translation adjustments arising from the use of differing
exchange rates from period to period and the gain on the sale of an interest rate hedge agreement. The financial positions and
results of operations of the Company’s foreign subsidiaries are based on the local currency as the functional currency and are
translated to U.S. dollars for financial reporting purposes. Assets and liabilities of the subsidiaries are translated at the
F-10

exchange rate in effect at each period-end. Income statement accounts are translated at the average rate of exchange prevailing
during the period. Translation adjustments are included in accumulated other comprehensive (loss) income in stockholders’
equity in the Company’s consolidated balance sheets. The activity included in other comprehensive (loss) income in the
Company’s consolidated statements of comprehensive income for each period reported is summarized below.

Foreign currency translation adjustments, net of tax(1) .......... $
Foreign currency realized (loss) gain reclassified into

earnings, net of tax (2) ...........................................................
Gain on sale of interest rate hedging agreement, net of tax(3)
Other comprehensive loss, net of tax (4) ................................. $

2016

Year ended December 31,
2015

2014

(4,321) $

(5,676 ) $

(3)
2,175
(2,149) $

666
—
(5,010 ) $

(2,017)

526
—
(1.491)

(1) In the third quarter of 2015, the Company recorded an adjustment to its foreign currency translation totaling
approximately $4 million, primarily related to goodwill, intangible assets, and fixed assets for certain acquired
international subsidiaries.

(2) Represents the reclassification of foreign currency translation adjustment from accumulated other comprehensive loss
into earnings as a result of closing international offices. Amounts are included in the other expense line item in the
Consolidated Statements of Comprehensive Income.

(3) On December 1, 2016, the Company sold the interest rate hedge agreement. The fair value of the interest rate hedge was
recorded in other comprehensive (loss) income and reclassified to earnings when earnings are impacted by the cash
flows of the hedged items, the interest payments on the Credit Facility or its replacement from January 31, 2018 to
January 31, 2023.

(4) Net of tax of $2.2 million, $1.0 million and $0.4 million for the years ended December 31, 2016, 2015, and 2014,

respectively.

Fair Value of Financial Instruments

The Company's financial instruments, including cash and cash equivalents, contract receivables, and accounts payable
are carried at cost, which the Company believes approximates their fair values at December 31, 2016 and 2015, due to their
short maturities. The Company believes the carrying value of other long-term liabilities related to capital expenditure
obligations approximates their fair value at December 31, 2016 and 2015 based on the current rates offered to the Company
for similar instruments with comparable maturities. The Company believes the carrying value of its lines of credit payable at
December 31, 2016 and 2015 approximate the estimated fair value for debt with similar terms, interest rates, and remaining
maturities currently available to companies with similar credit ratings.

The Company applies the provisions of ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) to its assets
and liabilities that are required to be measured at fair value pursuant to other accounting standards, including assets and
liabilities resulting from the Company’s nonqualified deferred compensation plan and foreign currency forward contract
agreements not eligible for hedge accounting. The fair value of assets and liabilities resulting from the Company’s
nonqualified deferred compensation plan and foreign currency forward contract agreements at December 31, 2016 and 2015
and the changes in fair value for the years ended December 31, 2016, 2015, and 2014 were immaterial.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The Company evaluates its ability to benefit from all deferred tax assets
and establishes valuation allowances for amounts it believes are not more likely than not to be realizable. For uncertain tax
positions, the Company uses a more-likely-than-not recognition threshold based on the technical merits of the income tax
position taken. Income tax positions that meet the more-likely-than-not recognition threshold are measured in order to
determine the tax benefit recognized in the financial statements. Penalties, if probable and reasonably estimable, and interest
expense related to uncertain tax positions are not recognized as a component of income tax expense but recorded separately
in indirect expenses.

F-11

Derivative Instruments

Derivative instruments designated as cash flow hedges are recorded on the consolidated balance sheet at fair value, at
the reporting date, and the effective portion of the hedge is recorded in other comprehensive (loss) income on the consolidated
statement of comprehensive income and reclassified to earnings in the period that the hedged instruments affect earnings.
Management reviews the effectiveness of the hedges on a quarterly basis, and any ineffective portion is immediately
reclassified to earnings.

Treasury Shares

Treasury shares are accounted for under the cost method.

Segment, Customer and Geographic Information

The Company operates in one segment based upon the consolidated information used by its chief operating decision
maker in evaluating the financial performance of its business and allocating resources. This single segment represents the
Company’s core business, which is professional services for government and commercial clients. Although the Company
describes its four key market areas to provide a better understanding of the Company’s business operations, the Company
does not manage its business or allocate resources based upon those service offerings or markets.

Approximately $563 million, $540 million, and $532 million of the Company’s revenue for the years 2016, 2015, and
2014, respectively, was derived under prime contracts and subcontracts with agencies and departments of the federal
government representing 48%, 48%, and 51% of total revenue, respectively. No other customer accounted for 10% or more
of the Company’s revenue during the years ended December 31, 2016, 2015, and 2014.

The Company’s international operations offer services to both commercial and non-U.S. government customers.
Revenue is attributed to location based on the geographic areas to which a contract is awarded. The Company’s revenue
generated from international clients as a percentage of total revenue was approximately 10%, 11%, and 12% for the years
2016, 2015, and 2014.

At December 31, 2016 and 2015, long-lived assets from international offices were not material as compared to the

Company’s total long-lived assets.

Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash
and cash equivalents and contract receivables. The majority of the Company’s cash transactions are processed through one
U.S. commercial bank. Cash held domestically in excess of daily requirements is used to reduce any amounts outstanding
under the Company’s Credit Facility. As of December 31, 2016 and 2015, the Company held approximately $5.4 million and
$6.7 million, respectively, of cash in foreign bank accounts. To date, the Company has not incurred losses related to cash and
cash equivalents.

The Company’s contract receivables consist principally of contract receivables from agencies and departments of, as
well as from prime contractors to, the federal government, other governments, and commercial organizations. The Company
believes that this credit risk with respect to contract receivables, is limited due to the credit worthiness of the U.S. government.
Contract receivable credit risk is also limited due to a large number of customers in differing agencies of the U.S. government.
The Company extends credit in the normal course of operations and does not require collateral from its clients.

The Company has historically been, and continues to be, heavily dependent upon contracts with the federal government
and is subject to audit by agencies of the federal government. Such audits determine, among other things, whether an
adjustment of invoices rendered to the government is appropriate under the underlying terms of the contracts. Management
does not expect any significant adjustments as a result of government audits that will adversely affect the Company’s financial
position.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and contingent

F-12

liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

During the first quarter of fiscal year 2016, the Company elected to early-adopt ASU 2015-17, Balance Sheet
Classification of Deferred Taxes (Topic 740) on a retrospective basis. As required by ASU 2015-17, all deferred tax assets
and liabilities are classified as non-current within the consolidated balance sheets. As a result of the adoption of ASU 2015-
17, the Company reclassified $8.0 million in current deferred tax liabilities to long-term liabilities within the consolidated
balance sheet at December 31, 2015.

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Improvements to Employee
Share-Based Payment Accounting (Topic 718). ASU 2016-09 requires excess tax benefits and deficiencies from shares vested
or settled to be recognized in the provision for income taxes in the statement of comprehensive income instead of additional
paid-in-capital. In addition, the classification of cash flows from excess tax benefits and deficiencies changed from a financing
activity to an operating activity and cash flows from the repurchase of shares for employees’ tax withholdings are required
to be a financing activity. The standard also requires the election of a company-wide policy to account for forfeitures as an
estimate or as they occur in recognizing stock-based compensation expense.

During the second quarter of 2016, the Company elected to early adopt ASU 2016-09. As a result of the adoption,
effective January 1, 2016, adjustments made to record excess tax benefits from shares vested or settled are recognized in the
statement of comprehensive income instead of within additional paid-in-capital. The Company elected to implement the
required change related to the classification of cash flows from excess tax benefits as an operating activity on a prospective
basis. With regard to the classification of employee tax withholdings, the adoption had no impact on the Company’s
statements of cash flows as such activities have historically been presented as a financing activity. Finally, the Company
elected to continue its policy to account for forfeitures as an estimate in recognizing stock-based compensation expense.

The adoption of ASU 2016-09 resulted in the recognition of excess tax benefits in the Company’s provision for income
taxes rather than additional paid-in-capital of $0.7 million for the 2016 fiscal year. In addition, the Company’s net cash
provided by operating activities increased $0.7 million with a corresponding decrease to net cash provided by financing
activities for the 2016 fiscal year.

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09
provides a single comprehensive revenue recognition framework and supersedes almost all existing revenue recognition
guidance including industry-specific revenue guidance. Included in the new principles-based revenue recognition model are
changes to the basis for determining the timing for revenue recognition. In addition, the standard expands and improves
revenue disclosures. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606):
Deferral of Effective Date, to amend ASU 2014-09 to defer the effective date of the new revenue recognition standard. In
accordance with this update, the Company has elected to adopt the requirements of the new standard effective January 1,
2018. The guidance permits the Company to either apply the requirements retrospectively to all prior periods presented (full
retrospective), or apply the requirements in the year of adoption, through a cumulative adjustment (modified retrospective).
Under the full retrospective approach, the 2016, 2017 and 2018 financial statements would be adjusted to reflect the effects
of adopting the new standard. Under the modified retrospective approach, the new standard would apply for the period
beginning January 1, 2018, to new contracts and to those contracts that were not completed as of January 1, 2018. For those
contracts not completed as of January 1, 2018, this would result in a cumulative catch-up adjustment to retained earnings.

The Company continues to evaluate and track the impact of adopting ASU 2014-09 on the nature and timing of revenues
and expanded disclosure requirements. As of December 2016, the Company completed its preliminary assessment. As part
of that assessment, the Company evaluated significant revenue streams and key contracts within those revenue streams to
identify potential revenue recognition differences and to consider if these differences could have a material impact as a result
of applying the new guidance. Based upon our assessment, the Company anticipates that the new standard may likely result
in a change in the timing of our revenue recognition for performance incentives received from clients. Performance incentives
are currently recognized as revenue when specific quantitative goals are achieved; however, under the new standard, the
Company will be required to estimate the amount of the incentive that will be earned at the inception of the contract and
recognize the incentive over the term of the contract. Based on our analysis, this difference will not result in a material change
F-13

to our annual revenue recognized but may accelerate the revenue recognized on a quarterly basis. As a large percentage of
the Company’s revenue is transaction based (cost-based and time-and-materials), we do not expect the new standard to impact
these revenue streams. In some of our arrangements, particularly media purchases within our digital space, we recognize
revenue on a net versus gross basis. We are evaluating the impact of the new guidance on our gross versus net assessment.

At this time, the Company has not selected an adoption method (full retrospective or modified retrospective) and
continues to evaluate and track the impact the new guidance and method of the adoption will have on its consolidated financial
statements. Adoption of the new ASU will not only involve a final assessment of the impacts on our revenue, costs and related
disclosures, but also on our existing policies, processes and controls as they relate to revenue recognition. Therefore, our
evaluation of the ASU will continue throughout 2017. As part of our implementation efforts, the Company is and will continue
to review and modify existing policies, processes and controls that will need to change as a result of implementing the new
guidance. In addition, to ensure an effective rollout, we are incorporating a detailed training and communication plan to key
stakeholders within the scope of the overall project.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update revises an entity’s accounting for
operating leases and requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than
12 months. This update also requires certain qualitative and specific quantitative disclosures. ASU 2016-02 does not
significantly change the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a
lessee. This update is effective for the first interim and annual periods beginning after December 15, 2018, with early adoption
permitted. The guidance requires that lessees recognize assets and liabilities on the balance sheet for the rights and obligations
created by all leases with terms of more than 12 months. The new guidance also requires disclosures designed to give financial
statement users information on the amount, timing, and cash flows arising from leases. These disclosures include qualitative
and quantitative information. The Company continues to evaluate the impact of adopting ASU 2016-02, the elections to be
made at adoption in a modified retrospective approach, and the timing of adoption and its impact on any debt refinancing.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and
Cash Payments (Topic 230). This update addresses eight specific cash flow issues with the objective of reducing the existing
diversity in practice. This update is effective for the Company for its fiscal year 2018, with early adoption permitted. The
Company is currently evaluating the impact of adopting ASU 2016-15. The statement is not expected to have a material
impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230), which
requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in
the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and
restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 becomes effective for fiscal years
beginning after December 15, 2017, and interim periods within those fiscal years. Any adjustments will be applied
retrospectively. Early adoption is permitted. The Company is evaluating the impact on its consolidated financial statements
resulting from the future adoption of the standard. Restricted cash is currently included within operating cash flows within
the consolidated statement of cash flows for all periods presented.

In January 2017, the FASB issued ASU 2017-04, Intangibles- Goodwill and Other (Topic 350) that simplifies the
subsequent measurement of goodwill by eliminating Step 2 from the current goodwill impairment test in the event that there
is evidence of an impairment based on qualitative or quantitative assessments. ASU 2017-04 does not change how the
goodwill impairment is identified, and the Company will continue to perform a qualitative assessment annually to determine
whether the two step impairment test is required. Under the current accounting standards, the impairment loss to recognize
under Step 2 of the impairment test requires the Company to calculate the implied fair value of goodwill by assigning fair
value to the reporting unit's assets and liabilities as if the reporting unit has been acquired in a business combination, and
subtracting the implied goodwill from the carrying amount of the goodwill. The new standard would require the Company to
determine the fair value of the reporting unit and subtracting it from its carrying amount. ASU 2017-04 is effective for the
Company for fiscal years after December 15, 2019, and early adoption is permitted. ASU 2017-04 is required to be adopted
prospectively, and the adoption is effective for annual goodwill impairment tests performed in the year of adoption. The
Company is currently evaluating the impact of the adoption of ASU 2017-04 on the consolidated financial statements.

F-14

NOTE 3—CONTRACT RECEIVABLES

Contract receivables consisted of the following at December 31:

Billed ........................................................................................................................ $
Unbilled ....................................................................................................................
Retainages ................................................................................................................
Other.........................................................................................................................
Allowance for doubtful accounts .............................................................................
Contract receivables, net .......................................................................................... $

168,012 $
108,432
5,088
2,424
(2,591 )
281,365 $

159,985
90,262
5,486
3,370
(2,138)
256,965

2016

2015

Contract receivables, net of the established allowance, are stated at amounts expected to be realized in future periods.
Unbilled receivables result from revenue that has been earned in advance of billing. Unbilled receivables can be invoiced at
contractually defined intervals or milestones, as well as upon completion of the contract or government audits. The Company
anticipates that the majority of unbilled receivables will be substantially billed and collected within one year, and therefore,
classifies them as current assets in accordance with industry practice.

NOTE 4—PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

Leasehold improvements .......................................................................................... $
Software ...................................................................................................................
Furniture and equipment ..........................................................................................
Computers ................................................................................................................

Accumulated depreciation and amortization ............................................................
Total property and equipment, net ........................................................................... $

2016

2015

17,847 $
41,269
26,570
28,874
114,560
(74,076 )
40,484 $

17,064
41,902
28,734
28,928
116,628
(71,203)
45,425

Depreciation expense for property and equipment for the years ended December 31, 2016, 2015, and 2014, was

approximately $16.3 million, $15.8 million, and $13.1 million, respectively.

NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the fiscal years ended December 31 were as follows:

Balance as of January 1 ............................................................................................ $
Goodwill resulting from the Trade NTE business combination ..............................
Goodwill resulting from the Mostra business combination (1)(2) ...............................
Goodwill resulting from the CityTech business combination (1) ..............................
Goodwill resulting from the Olson business combination (1)(2) ................................
Effect of foreign currency translation ......................................................................
Balance as of December 31 ...................................................................................... $

687,404 $
191
654
—
267
(4,833 )
683,683 $

687,778
—
(380)
(29)
3,410
(3,375)
687,404

2016

2015

(1) During the year ended December 31, 2015, the Company recorded changes to goodwill representing
adjustments during the measurement-period (up to one year from the date of an acquisition) as well as
new information related to acquisitions during the year ended December 31, 2014. These goodwill

F-15

adjustments were not significant to our previously reported operating results or financial position. See
further discussion of the Company’s business combinations in “Note 6—Business Combinations.”

(2) During the year ended December 31, 2016, the Company recorded changes to goodwill representing
adjustments for deferred tax balances relating to acquired assets and liabilities. These balances were
not significant to our previously reported operating results or financial position.

Other Intangible Assets

Intangible assets with definite lives are primarily amortized over periods ranging from approximately 4 to 10 years. The
weighted-average period of amortization for all intangible assets as of December 31, 2016, is 8.7 years. The customer-related
intangible assets related to the business combinations, which consist of customer contracts, backlog, and non-contractual
customer relationships, are being amortized based on estimated cash flows and respective estimated economic benefit of the
assets. The weighted-average period of amortization of the customer-related intangibles is 8.7 years. Intangible assets related
to acquired developed technology are being amortized on an accelerated basis over a weighted-average period of 5.5 years.
Intangible assets with an indefinite life consist of a domain name.

Other intangibles consisted of the following at December 31:

Gross
Carrying
Value

2016

Accumulated
Amortization

Net
Carrying
Value

Customer-related .............................................................. $
Developed technology ......................................................
Total amortizable intangible assets ..................................
Intangible with indefinite life ...........................................
Total intangible assets ...................................................... $

115,806 $
1,463
117,269
95
117,364 $

(70,090) $
(1,145)
(71,235)
—
(71,235) $

45,716
318
46,034
95
46,129

Gross
Carrying
Value

2015

Accumulated
Amortization

Net
Carrying
Value

117,654 $
1,463
119,117 $

(59,412) $
(806)
(60,218) $

58,242
657
58,899

Aggregate amortization expense for the years ended December 31, 2016, 2015, and 2014, was approximately $12.5
million, $17.2 million, and $10.4 million, respectively. The estimated future amortization expense relating to intangible assets
is as follows:

Year ending December 31,
2017 ......................................................................................................................................................... $
2018 .........................................................................................................................................................
2019 .........................................................................................................................................................
2020 .........................................................................................................................................................
2021 .........................................................................................................................................................
Thereafter .................................................................................................................................................
Total ......................................................................................................................................................... $

10,846
8,432
6,124
4,527
4,082
12,023
46,034

F-16

NOTE 6—BUSINESS COMBINATIONS

Trade NTE

In November 2016, the Company acquired Trade NTE, LLC. (“Trade NTE”), a Georgia-based company specializing
in strategic marketing and branding services. The acquisition enhanced the Company’s branding services through effective
engagements between clients and customers. The acquisition was immaterial to the Company’s financial statements taken as
a whole.

Olson

In November 2014, the Company completed the acquisition of OCO Holdings, Inc. and its various subsidiaries,
including Olson + Co., Inc. (collectively, “Olson”), a leading provider of marketing technology and digital services based in
Minneapolis, Minnesota. As a result of the acquisition, Olson became a wholly owned subsidiary of the Company. The
aggregate purchase price of approximately $298.2 million in cash was funded by the Company’s Credit Facility (as defined
in “Note 9 – Long-Term Debt” below). The acquisition expanded the Company’s existing digital technology and strategic
communications work and strengthened its ability to bring more integrated solutions to an expanded client base, including
multi-channel marketing initiatives across web, mobile, email, social, print, broadcast and off-premise platforms.

The acquisition was accounted for under the acquisition method. The allocation of the total purchase price to the tangible
and intangible assets and liabilities of Olson was based on management’s estimate of fair value as of the acquisition date and
was completed in the fourth quarter of 2015. The Company engaged an independent valuation firm to assist management in
the allocation of the purchase price to goodwill and to other acquired intangible assets. The excess of the purchase price over
the estimated fair value of the net tangible assets acquired was approximately $293.4 million. The Company has allocated
approximately $228.5 million to goodwill and $64.9 million to other intangible assets. The goodwill recorded as part of the
acquisition primarily reflects the value of providing an established platform to leverage the Company’s existing digital
interactive technologies and domain expertise, synergies expected to arise from providing end-to-end customer solutions to
a combined client-base across all channels, as well as any intangible assets that do not qualify for separate recognition. The
weighted average amortization period for the amount allocated to other intangible assets in total is 9.6 years from the
acquisition date. The intangible assets consist of approximately $60.3 million of customer-related intangibles that are being
amortized over 10.2 years from the acquisition date, $4.0 million of marketing-related intangibles that were amortized over
1.2 years from the acquisition date, and $0.6 million of developed technology intangibles that are being amortized over 6.2
years from the acquisition date. Olson was a stock purchase for tax purposes; therefore, goodwill and amortization of other
intangibles created via this acquisition are not deductible for income tax purposes.

During the year ended December 31, 2015, the Company recorded an increase to goodwill of $3.4 million related to
measurement-period adjustments to the preliminary purchase price allocation. The measurement-period adjustments were
primarily related to reductions of $7.3 million and $5.9 million to the valuation of fixed assets and accrued expenses and
other liabilities, as well as a $1.8 million holdback adjustment that increased the purchase price to $298.2 million. Goodwill
adjustments were not significant to our previously reported operating results or financial position.

The results of operations of the Olson acquisition are included in the Company’s consolidated statements of
comprehensive income for the year ended December 31, 2016 and 2015. For the year ended December 31, 2014, Olson
contributed net revenues of $23.0 million and net earnings of $2.2 million since the acquisition date of November 5, 2014,
excluding transaction-related acquisition costs of $1.6 million, as well as interest expense, amortization of intangible assets
resulting from the acquisition, stock-based compensation expense, corporate allocations and integration costs.

The following unaudited condensed pro forma information presents combined financial information as if the acquisition
of Olson had been effective at the beginning of fiscal year 2013. As a result, fiscal year 2014 represents the pro forma results
for year two of the acquisition. The pro forma information includes adjustments reflecting changes in the amortization of
intangibles, stock-based compensation expense, and interest expense, an adjustment to eliminate $2.6 million of operating
income related to the reduction of an Olson contingent liability that was settled as a result of the acquisition and records
income tax effects as if Olson had been included in the Company’s results of operations.

F-17

Pro forma Information for the Year Ended December 31,
(Unaudited)

Revenue ................................................................................................................................................ $
Operating income ..................................................................................................................................
Net income ............................................................................................................................................
Earnings per share:
Basic earnings per share ........................................................................................................................ $
Diluted earnings per share ..................................................................................................................... $

2014

1,167,787
78,518
42,461

2.17
2.12

CityTech

In March 2014, the Company acquired CityTech, Inc. (“CityTech”), a Chicago-based digital interactive consultancy
specializing in enterprise applications development, web experience management, mobile application development, cloud
enablement, managed services, and customer experience management solutions. The acquisition added expertise to the
Company’s content management capabilities and complemented its digital and interactive business. During the first quarter
of 2015, the Company finalized its valuation of the assets acquired and liabilities assumed as a result of the acquisition. The
purchase was immaterial to the Company’s financial statements taken as a whole.

Mostra

In February 2014, the Company completed its acquisition of Mostra SA (“Mostra”), a strategic communications
consulting company based in Brussels, Belgium. Mostra offered end-to-end, multichannel communications solutions to assist
government and commercial clients, in particular the European Commission. The acquisition extended the Company’s
strategic communications capabilities globally to complement its policy work and enhanced its strategy of providing a full
suite of services that leverages its research and advisory services. During the first quarter of 2015, the Company finalized its
valuation of the assets acquired and liabilities assumed as a result of the acquisition. The purchase was immaterial to the
Company’s financial statements taken as a whole.

NOTE 7—ACCRUED SALARIES AND BENEFITS

Accrued salaries and benefits consisted of the following at December 31:

Accrued paid time off and leave ........................................................................... $
Accrued salaries ...................................................................................................
Accrued bonuses, liability-classified awards and commissions ...........................
Accrued payroll taxes and withholdings ..............................................................
Accrued medical ...................................................................................................
Other.....................................................................................................................
Total accrued salaries and benefits ....................................................................... $

11,342 $
9,443
13,590
22
3,026
6,580
44,003 $

10,573
7,406
11,213
6,154
2,520
5,252
43,118

2016

2015

F-18

NOTE 8—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at December 31:

Accrued subcontractor and other direct costs ....................................................... $
Deposits ................................................................................................................
Accrued IT and software licensing costs ..............................................................
Accrued insurance premiums ...............................................................................
Accrued professional services ..............................................................................
Other accrued expenses and current liabilities .....................................................
Total accrued expenses and other current liabilities ............................................. $

2016

2015

30,153 $
12,389
5,349
1,028
795
2,917
52,631 $

25,905
5,547
5,139
1,107
673
4,630
43,001

NOTE 9—LONG-TERM DEBT

The Company entered into a Fourth Amended and Restated Business Loan and Security Agreement with a syndication
of 11 commercial banks on May 16, 2014, which was further modified on November 5, 2014 (the “Credit Facility”). The
Credit Facility matures on May 16, 2019, and allows for borrowings of up to $500.0 million without a borrowing base
requirement, taking into account financial, performance-based limitations and provides for an “accordion,” which permits
additional revolving credit commitments of up to $100.0 million, subject to lenders’ approval. The Company has the option
to borrow funds under the Credit Facility at interest rates based on both LIBOR (1, 3, or 6 month rates) and prime rates, plus
their applicable margins, and are payable monthly. The Credit Facility provides for stand-by letters of credit aggregating up
to $30.0 million that reduce the funds available under the Credit Facility when issued. The Credit Facility is collateralized by
substantially all of the assets of the Company and requires that the Company remain in compliance with certain financial and
non-financial covenants. The financial covenants, as defined in the Credit Facility, require, among other things, that the
Company maintain, on a consolidated basis for each quarter, a fixed charge coverage ratio of not less than 1.25 to 1.00 and a
leverage ratio of not more than 3.75 to 1.00. As of December 31, 2016, the Company was in compliance with its covenants
under the Credit Facility.

The Credit Facility was subject to a commitment fee on the unused portion of the Credit Facility of 0.25% per annum

at December 31, 2016 and 2015.

As of December 31, 2016, the available borrowing capacity under the Credit Facility (excluding the accordion) was
$237.2 million. Taking into account the financial and performance-based limitations, the available borrowing capacity
(excluding the accordion) was $195.0 million as of December 31, 2016.

Long-term debt outstanding and the weighted average interest rate at December 31 is summarized as follows:

2016

2015

Revolving Line of Credit/Swing Line .......................... $

Weighted
Average

Debt
Outstanding
259,389

Interest Rate

2.46% $

Debt
Outstanding
311,532

Weighted
Average
Interest Rate

2.23 %

Debt Issuance Cost

The Company’s debt issuance costs, which are included within other assets, are amortized over the term of indebtedness.
Amortizable debt issuance costs were $5.8 million as of both December 31, 2016 and December 31, 2015. Accumulated
amortization related to debt issuance costs was $4.5 million and $4.0 million, as of December 31, 2016 and 2015, respectively.
Amortization expense of $0.5 million was recorded for each of the years ended December 31, 2016, 2015, and 2014.

F-19

Letters of Credit

At December 31, 2016 and 2015, the Company had nine outstanding letters of credit totaling approximately $3.4

million and $3.7 million, respectively. These letters of credit are renewed annually.

NOTE 10—DERIVATIVE INSTRUMENTS

On September 30, 2016, the Company entered into a floating-to-fixed interest rate hedge agreement for an aggregate
notional amount of $100.0 million which hedges a portion of the Company’s floating rate indebtedness. The swap transaction
was intended to mitigate the Company’s interest rate risk as it provided for the Company to pay a fixed rate of 1.22% per
annum plus the applicable margin pursuant to the Credit Facility. Notwithstanding the terms of the interest rate hedge
transaction, the Company is ultimately obligated for all amounts due and payable under the Credit Facility. The cash flows
from the interest rate swap agreement begins January 31, 2018 and the hedge matures January 31, 2023. The Company
designated the swap as a cash flow hedge.

On December 1, 2016, the Company sold the interest rate hedge agreement. The fair value of the interest rate hedge, as
of the date of the sale, was recorded in other comprehensive income and will be recognized into earnings when earnings are
impacted by the cash flows of the hedged items, the interest payments on the Credit Facility or its replacement from January
31, 2018 to January 31, 2023.

NOTE 11—INCOME TAXES

The domestic and foreign components of income before provision for income taxes are as follows (in thousands) for

the years ended December 31:

Domestic ...................................................................................... $
Foreign .........................................................................................
Income before income taxes ......................................................... $

69,159 $
5,348
74,507 $

54,150 $
9,450
63,600 $

53,597
10,553
64,150

2016

2015

2014

Income tax expense consisted of the following for the years ended December 31:

Current:

Federal .................................................................................. $
State ......................................................................................
Foreign .................................................................................
Total current .........................................................................

Deferred:

Federal ..................................................................................
State ......................................................................................
Foreign .................................................................................
Total deferred .......................................................................
Income Tax Expense .................................................................... $

2016

2015

2014

12,979 $
3,514
1,932
18,425

8,872
1,222
(596)
9,498
27,923 $

14,797 $
2,669
1,475
18,941

4,562
512
216
5,290
24,231 $

13,383
3,151
3,563
20,097

3,264
399
360
4,023
24,120

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and income tax purposes.

F-20

Deferred tax assets (liabilities) consisted of the following at December 31:

Deferred Tax Assets

2016

2015

Allowance for bad debt ......................................................................... $
Accrued paid time off ............................................................................
Accrued bonus .......................................................................................
Foreign net operating loss (NOL) carry forward ...................................
Federal/state net operating loss (NOL) carry forward ...........................
Stock option compensation ...................................................................
Deferred rent .........................................................................................
Deferred compensation ..........................................................................
Foreign tax credits .................................................................................
State tax credits .....................................................................................
Federal tax credits .................................................................................
Foreign exchange ..................................................................................
Accrued liabilities and other ..................................................................

Less: Valuation Allowance ................................................................................
Total Deferred Tax Assets .................................................................................

Deferred Tax Liabilities

Retention ...............................................................................................
Prepaid expenses ..................................................................................
Payroll taxes ..........................................................................................
Unbilled revenue ...................................................................................
Depreciation ..........................................................................................
Amortization .........................................................................................
Deferred gain and other .........................................................................
Total Deferred Tax Liabilities ...........................................................................
Total Net Deferred Tax Liability ...................................................................... $

1,008 $
2,592
55
1,371
3,010
4,292
5,423
3,662
2,631
1,784
225
5,349
3,378
34,780
(1,131 )
33,649

(1,684 )
(1,654 )
(617 )
(8,728 )
(6,664 )
(51,842 )
(1,574 )
(72,763 )
(39,114 ) $

831
2,416
149
933
6,458
4,792
5,376
2,908
1,914
1,339
225
1,879
2,643
31,863
(933)
30,930

(1,860)
(1,040)
(502)
(8,093)
(7,186)
(44,867)
(708)
(64,256)
(33,326)

At both December 31, 2016 and 2015, the Company had net operating loss (“NOL”) carry-forwards for foreign income

taxes of approximately $4.1 million and $6.9 million, respectively, all of which may be carried forward indefinitely.

At December 31, 2016, the Company had NOL carry-forwards for federal and state income tax purposes of
approximately $5.2 million, which expire in 2034. The Company also had federal tax credits totaling $0.2 million, all of
which may be carried forward indefinitely. The Company acquired these NOLs and credits as a result of its purchase of Olson
in November 2014. Internal Revenue Code Section 382 imposes an annual limitation on the use of a corporation’s NOLs, tax
credits and other carryovers after an “ownership change” occurs.

Section 382 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may
offset with pre-ownership change NOLs and credits. In general, the annual limitation is determined by multiplying the value
of the corporation’s stock immediately before the ownership change (subject to certain adjustments) by the applicable long-
term tax-exempt rate. Any unused portion of the annual limitation is available for use in future years until such NOLs are
scheduled to expire (in general, NOLs may be carried forward 20 years). The Company presently estimates that it will be
able to fully utilize the acquired NOLs and credits prior to their expiration.

At December 31, 2016, the Company had gross state income tax credit carry-forwards of approximately $2.9 million,
which expire between 2017 and 2025. A deferred tax asset of approximately $1.8 million (net of federal benefit) has been
established related to these state income tax credit carry-forwards as of December 31, 2016.

The need to establish valuation allowances for deferred assets is based on a more-likely-than-not threshold that the
benefit of such assets will be realized in future periods. Appropriate consideration has been given to all available evidence,
including historical operating results, projections of taxable income, and tax planning alternatives. The Company concluded
that a valuation allowance of approximately $1.1 million and $0.9 million was required for tax attributes related to specified
foreign jurisdictions as of December 31, 2016 and 2015, respectively.

F-21

The net change in the total valuation allowance for 2016 was an increase of approximately $0.2 million compared to
2015. The $0.2 million increase is comprised primarily of additional valuation allowance recorded against net operating
losses incurred in foreign jurisdictions where the Company is winding down operations. This increase is offset partially by
the release of a valuation allowance in another foreign jurisdiction where the Company has ongoing operations to reflect the
benefit realized from the utilization of net operating loss and other deduction carryforwards related to the reorganization of
a business unit in that jurisdiction.

The Company made no provisions for deferred U.S. income taxes or additional foreign taxes on any unremitted earnings
of its controlled foreign subsidiaries because the Company considers these earnings to be permanently invested. If these
earnings were repatriated, in the form of dividends or otherwise, the Company would be subject to U.S. income tax on these
earnings. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the
complexities associated with this hypothetical calculation; however, unrecognized foreign tax credit carry forwards would
be available to reduce some portion of the related U.S. tax liability. The Company has $2.6 million of foreign tax credits
available for carry forward related to its foreign branch operations as of December 31, 2016.

The total amount of unrecognized tax benefits as of December 31, 2016 and 2015, was $1.2 million and $0.4 million,
respectively. Included in the balance as of December 31, 2016 and 2015, were $1.0 million and $0.3 million, respectively, of
tax positions that, if recognized, would impact the effective tax rate.

The unrecognized tax benefit reconciliation, excluding penalty and interest, is as follows:

Unrecognized tax benefits at January 1, 2014 ......................................................................................... $
Increase (decrease) in unrecognized tax benefits ..............................................................................
Unrecognized tax benefits at December 31, 2014 ...................................................................................
Decrease attributable to settlements ..................................................................................................
Increase attributable to tax positions taken during a prior period ......................................................
Decrease attributable to lapse of statute of limitations ......................................................................
Unrecognized tax benefits at December 31, 2015 ...................................................................................
Increase attributable to tax positions taken during a prior period ......................................................
Decrease attributable to lapse of statute of limitations ......................................................................
Unrecognized tax benefits at December 31, 2016 ................................................................................... $

702
—
702
(174)
12
(140)
400
925
(140)
1,185

The Company’s policy is not to recognize accrued interest and penalties related to unrecognized tax benefits as a
component of tax expense. The Company had approximately $0.2 million and $0.1 million of accrued penalty and interest at
December 31, 2016, and 2015, respectively.

The Company’s 2013 through 2016 tax years remain subject to examination by the Internal Revenue Service for federal
tax purposes. Certain significant state and foreign tax jurisdictions are also either currently under examination or remain open
under the statute of limitations and subject to examination for the tax years from 2012 to 2016.

Although the Company believes it has adequately provided for all uncertain tax positions, amounts asserted by taxing
authorities could be greater than the Company’s accrued position. Accordingly, additional provisions on federal, state and
foreign income tax related matters could be recorded in the future as revised estimates are made or the underlying matters
are effectively settled or otherwise resolved. Conversely, the Company could settle positions with the tax authorities for
amounts lower than have been accrued. The Company believes it is reasonably possible that, during the next 12 months, the
Company’s liability for uncertain tax positions may decrease by approximately $0.4 million.

F-22

The Company’s provision for income taxes differs from the anticipated federal statutory rate. Approximate differences

between the statutory rate and the Company’s provision are as follows:

2016

2015

2014

Taxes at statutory rate ...........................................................
State taxes, net of federal benefit ..........................................
Foreign tax rate differential ...................................................
Other permanent differences .................................................
Prior year tax adjustments .....................................................
Unrecognized tax benefits .....................................................
Valuation Allowance Release ...............................................
Equity-based Compensation ..................................................
Tax credits .............................................................................
Taxes at effective rate ...........................................................

35.0%
3.9%
(0.1)%
0.8%
(1.0)%
1.0%
(0.3)%
(1.0)%
(0.8)%
37.5%

35.0%
3.9%
(0.3)%
1.9%
(1.9)%
—
—
—
(0.5)%
38.1%

35.0%
4.2%
(0.6)%
2.0%
(2.3)%
—
—
—
(0.7)%
37.6%

NOTE 12—ACCUMULATED OTHER COMPREHENSIVE LOSS

As of December 31, 2016 and 2015, accumulated other comprehensive loss, net of tax, included the following:

Foreign currency translation adjustments ................................................................. $
Gain on sale of interest rate hedge agreement (1) ......................................................
Total ......................................................................................................................... $

11,815 $
(2,175 )
9,640 $

7,491
—
7,491

2016

2015

(1) Represents the fair value of interest rate hedge agreements, designated as a cash flow hedge, which was sold on
December 1, 2016. The fair value of the interest rate hedge agreement was recorded in other comprehensive
income and will be reclassified to earnings when earnings are impacted by the hedged items, the interest payments
on the Credit Facility or its replacement from January 31, 2018 to January 31, 2023 (See Note 10 Derivative
Instruments).

NOTE 13—ACCOUNTING FOR STOCK-BASED COMPENSATION

Stock Incentive Plans

On June 5, 2015, the Company’s stockholders approved an amendment (the “Amendment”) to the ICF International,
Inc. 2010 Omnibus Incentive Plan (as amended, the “Omnibus Plan”). The Amendment, among other items, increased the
new shares available for issuance under the Omnibus Plan by 1,540,000 shares from 3,550,000 to 5,090,000 (for an aggregate
5,966,186 shares, which includes shares that remained available under the 2006 Long-Term Equity Incentive Plan when the
Omnibus Plan was initially adopted). The Omnibus Plan provides for the granting of options, stock appreciation rights,
restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based
awards to all officers, key employees, and non-employee directors of the Company. Under the terms of the Omnibus Plan,
shares awarded that are not stock options or stock appreciation rights, are counted as 1.93 shares deducted for every one share
delivered under those awards. Shares awarded that are stock options or stock appreciation rights are counted as a single share
deducted from the Omnibus Plan for every one share delivered under those awards. As of December 31, 2016, the Company
had approximately 2.2 million shares available to grant under the Amended Plan. CSRSUs have no impact on the shares
available for grant under the Omnibus Plan, and have no impact on the calculated shares used in earnings per share
calculations.

F-23

The total stock-based compensation expense for the years ended December 31, 2016, 2015, and 2014, the unrecognized
compensation expense at December 31, 2016, and the weighted-average period to recognize the remaining unrecognized
shares are as follows:

Stock-Based Compensation

Recognized
December 31,

Unrecognized

2016

2015

2014

December 31,
2016

909 $
6,325

1,546 $
7,409

1,866 $
7,881

134
14,030

Weighted-
Average
Period to
Recognize
(years)
0.2
2.4

7,091

4,414

3,207

17,114

2.7

741
877
15,943 $

645
727
14,741 $

481
—
13,435 $

—
2,346
33,624

—

1.6

Stock Options .......................... $
Restricted Stock Units .............
Cash-Settled Restricted Stock

Units ......................................

Non-Employee Director

Awards ..................................
Performance Shares .................
$

The assumptions of employment termination forfeiture rates used in the determination of fair value of stock awards
during calendar year 2016 were based on the Company’s historical average from October 2006 through the 12 months
preceding the reporting period. The expected annualized forfeiture rates used varied from 3.7% to 9.4%, and the Company
does not expect these termination rates to vary significantly in the future.

Stock Options

Option awards are granted with an exercise price equal to the market value of the Company’s common stock on the
date of grant. All options outstanding as of December 31, 2016 have a 10-year contractual term. Options generally have a
vesting term of three or four years. There were no option awards granted during 2016 and 2015. The fair value assumptions
using the Black-Scholes-Merton pricing model for awards granted in 2014 were 5.1 years for the expected life, 33.0% for
historical volatility, and 1.5% for the risk-free rate of return.

The following table summarizes the changes in outstanding stock options:

Number of
Shares

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value
(in thousands)

Outstanding at January 1, 2014 ....................................................
Exercised ..............................................................................
Granted .................................................................................
Forfeited/Expired ..................................................................
Outstanding at December 31, 2014 ..............................................
Exercised ..............................................................................
Granted .................................................................................
Forfeited/Expired ..................................................................
Outstanding at December 31, 2015 ..............................................
Exercised ..............................................................................
Granted .................................................................................
Forfeited/Expired ..................................................................
Outstanding at December 31, 2016 ..............................................

694,552 $
(85,063) $
166,861 $
(9,426) $
766,924 $
(43,919) $
— $
— $
723,005 $
(128,301) $
— $
(7,297) $
587,407 $

Vested plus expected to vest at December 31, 2016 ....................
Exercisable at December 31, 2016 ...............................................

587,204 $
535,376 $

24.34
21.53
40.68
25.53
28.20
21.23
—
—
28.62
23.65

—

40.68
29.56 $

29.55 $
28.47 $

15,064

15,061
14,308

F-24

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $55.20 as of
December 31, 2016. The total intrinsic value of options exercised was $2.5 million, $0.8 million, and $1.5 million for the
years ended December 31, 2016, 2015, and 2014, respectively. The weighted average grant date fair value of options granted
was $13.00 for the year ended December 31, 2014. The fair value of shares vested was $1.3 million, $2.0 million, and $1.8
million for the years ended December 31, 2016, 2015, and 2014, respectively. As of December 31, 2016, the weighted-
average remaining contractual term for options vested and expected to vest was 5.7 years, and for exercisable options was
5.5 years.

Information regarding stock options outstanding as of December 31, 2016 is summarized below:

OPTIONS OUTSTANDING

OPTIONS EXERCISABLE

Range of
Exercise Prices
$ 9.05 – $25.00 ...............................................
$25.01 – $28.00 ...............................................
$28.01 – $41.00 ...............................................
$9.05 to $41.00 ...............................................

Number
Outstanding
As of
December 31,
2016

Weighted
Average
Remaining
Contractual
Term

Weighted
Average
Exercise
Price

Number
Exercisable
As of
December 31,
2016

Weighted
Average
Exercise
Price

131,267
300,107
156,033
587,407

3.7 $
5.8 $
7.1 $
5.7 $

23.37
26.48
40.68
29.56

131,267 $
300,107 $
104,002 $
535,376 $

23.37
26.48
40.68
28.47

Restricted Stock Units

RSUs generally have a vesting term of three or four years. Upon vesting, the employee is issued one share of stock for
each RSU he or she holds. The fair value of shares vested was $7.2 million, $6.3 million, and $8.2 million for the years ended
December 31, 2016, 2015, and 2014, respectively.

A summary of the Company’s RSUs is presented below.

Number of
Shares

Weighted-
Average
Grant Date
Fair Value

Aggregate
Intrinsic
Value
(in thousands)

Non-vested RSUs at January 1, 2014 ......................................
Granted ............................................................................
Vested ..............................................................................
Cancelled .........................................................................
Non-vested RSUs at December 31, 2014 ................................
Granted ............................................................................
Vested ..............................................................................
Cancelled .........................................................................
Non-vested RSUs at December 31, 2015 ................................
Granted ............................................................................
Vested ..............................................................................
Cancelled .........................................................................
Non-vested RSUs at December 31, 2016 ................................
RSUs expected to vest in the future ........................................

756,188 $
265,811 $
(333,321 ) $
(44,791 ) $
643,887 $
250,159 $
(233,899 ) $
(104,243 ) $
555,904 $
240,868 $
(221,659 ) $
(67,115 ) $
507,998 $
507,998 $

25.13
39.48
24.73
27.33
31.10
39.04
26.85
36.76
35.40
34.68
32.45
37.60
36.12 $
36.12 $

28,041
28,041

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $55.20 per share

as of December 31, 2016.

F-25

Cash-Settled Restricted Stock Units

CSRSUs generally have a vesting term of four years. A summary of the Company’s CSRSUs is presented below.

Weighted-
Average
Grant
Date Fair
Value

Aggregate
Intrinsic
Value
(in thousands)

Number of
Shares

Non-vested CSRSUs at January 1, 2014 ......................................
Granted .................................................................................
Vested ...................................................................................
Cancelled ..............................................................................
Non-vested CSRSUs at December 31, 2014 ................................
Granted .................................................................................
Vested ...................................................................................
Cancelled ..............................................................................
Non-vested CSRSUs at December 31, 2015 ................................
Granted .................................................................................
Vested ...................................................................................
Cancelled ..............................................................................
Non-vested CSRSUs at December 31, 2016 ................................
CSRSUs expected to vest in the future ........................................

200,299 $
416,432 $
(47,742) $
(31,870) $
537,119 $
121,015 $
(78,033) $
(133,438) $
446,663 $
233,790 $
(146,619) $
(70,812) $
463,022 $
463,022 $

28.23
39.12
27.55
32.12
36.36
39.35
33.29
38.14
37.18
34.29
34.70
37.55
35.96 $
35.96 $

25,559
25,559

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $55.20 per share
as of December 31, 2016. The fair value of CSRSUs vested and settled in cash for the years ended December 31, 2016, 2015,
and 2014 was $5.9 million, $2.9 million and $1.7 million, respectively.

Non-Employee Director Awards

The Company grants awards of unregistered shares to its non-employee directors on a quarterly basis under its Annual
Equity Election. The awards are issued from the Company’s treasury stock and have no impact on the shares available for
grant under the Omnibus Plan. Non-employee director awards do not include vesting conditions; thus, there was no
unrecognized expense related to these awards at December 31, 2016.

A summary of the Company’s non-employee director awards granted by fiscal year is presented below.

For the Year ended December 31,

Number of
Shares
Granted

Weighted-
Average
Grant Date
Fair Value

2014 ................................................................................................
2015 ................................................................................................
2016 ................................................................................................

15,872 $
18,109 $
15,299 $

36.08
35.62
39.32

Performance Shares

In the first quarter of 2015, the Company’s Board of Directors approved a performance-based share program (the
“Program”) that provides for the issuance of PSAs to its senior management. Under the Program, the number of PSAs that
the participant will receive depends on the Company’s achievement of two performance goals during two performance
periods. The performance goals under the Program are based on a performance condition (i) the Company’s compounded
annual growth rate in earnings per share (“EPS”) during a performance period from January 1, 2015 through December 31,
2016, and a market condition (ii) the Company’s cumulative total shareholder return (“rTSR”) relative to its peer group
during a performance period from January 1, 2015 through December 31, 2017. The PSAs will only be eligible to vest
following the expiration of the three-year performance period ending on December 31, 2017. Actual shares vested will be
subject to both continued employment by the Company (barring certain exceptions allowing for partial performance periods)
and actual financial measures achieved. The actual number of shares of common stock that will be issued to each participant
at the end of the applicable performance period will be determined by multiplying the award by the product of two

F-26

percentages, one based on the Company’s EPS performance and a second one based on the Company’s rTSR performance,
subject to a minimum and maximum performance level.

A summary of the Company’s PSAs is presented below.

Weighted-
Average
Grant
Date Fair
Value

Aggregate
Intrinsic
Value
(in thousands)

Number of
Shares

Non-vested PSAs at January 1, 2015 ...........................................
Granted .................................................................................
Vested ...................................................................................
Cancelled ..............................................................................
Non-vested PSAs at December 31, 2015 .....................................
Granted .................................................................................
Vested ...................................................................................
Cancelled ..............................................................................
Non-vested PSAs at December 31, 2016 .....................................
PSAs expected to vest in the future ..............................................

—
58,822 $
—
—
58,822 $
74,574 $
—
(3,422) $
129,974 $
129,974 $

—
44.21
—
—
44.21
37.75
—
41.61
40.57 $
40.57 $

7,175
7,175

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $55.20 per share
as of December 31, 2016. The fair value of the awards is estimated on the grant date using a Monte Carlo simulation model
due to the market condition for the rTSR component. The fair value assumptions using the Monte Carlo simulation model
for awards in 2015 and 2016 were 0.0% for both dividend yields, 29.3% and 30.9% for historical volatility, respectively, and
1.0% for both risk-free rate of returns, respectively.

NOTE 14—EARNINGS PER SHARE

Earnings Per Share

EPS is computed by dividing reported net income by the weighted-average number of shares outstanding. Diluted EPS
considers the potential dilution that could occur if common stock equivalents were exercised or converted into stock. The
difference between the basic and diluted weighted-average equivalent shares with respect to the Company’s EPS calculation
is due entirely to the assumed exercise of stock options and the vesting and settlement of RSUs. PSAs are included in the
computation of diluted shares only to the extent that the underlying performance conditions (i) are satisfied as of the end of
the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related
performance period and the result would be dilutive under the treasury stock method. For the years ended December 31,
2016, 2015, and 2014, approximately 163,564, 167,849, and 151,611 anti-dilutive weighted-average shares were excluded
from the calculation of EPS because they were anti-dilutive.

The dilutive effect of stock options, RSUs, and performance shares for each period reported is summarized below:

Basic weighted-average shares outstanding ................................. $
Effect of potential exercise of stock options, RSUs, and

performance shares ....................................................................
Diluted weighted-average shares outstanding .............................. $

2016

2015
(in thousands)

2014

18,989 $

19,335 $

19,608

427
19,416 $

328
19,663 $

389
19,997

F-27

NOTE 15—SHARE REPURCHASE PROGRAM

The Company's Board of Directors approved a share repurchase plan effective in November 2013 and expiring in
November 2015, which authorized the Company to repurchase its outstanding common stock. In March 2015, the plan was
amended to increase the amount authorized for repurchases from $35.0 million to $75.0 million as of the date of the
amendment, not to exceed the amount allowed under the Credit Facility. Our Credit Facility limits share repurchases to $75.0
million during the duration of the Credit Facility, net of new issuances as defined in the Credit Facility. In the third quarter
of 2015, the Company's Board of Directors approved a new share repurchase plan effective in November 2015 that extends
the share repurchase plan through November 2017 and authorizes share repurchases in the aggregate up to $75.0 million, not
to exceed the amount allowed under the Credit Facility.

Purchases under this program may be made from time to time at prevailing market prices in open market purchases or
in privately negotiated transactions pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as
amended and in accordance with applicable insider trading and other securities laws and regulations. The purchases are
funded from existing cash balances and/or borrowings, and the repurchased shares are held in treasury and used for general
corporate purposes. The timing and extent to which the Company repurchases its shares will depend upon market conditions
and other corporate considerations as may be considered in the Company’s sole discretion.

During the year ended December 31, 2016, the Company repurchased 317,493 shares totaling $11.9 million under this

program. As of December 31, 2016, approximately $37.7 million remained available under the share repurchase plan.

NOTE 16—COMMITMENTS AND CONTINGENCIES

Litigation and Claims

The Company is involved in various legal matters and proceedings arising in the ordinary course of business. While
these matters and proceedings cause it to incur costs, including, but not limited to, attorneys’ fees, the Company currently
believes that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on our
financial position, results of operations, or cash flows.

Road Home Contract

On June 10, 2016, the Office of Community Development (the “OCD”) of the State of Louisiana filed a written
administrative demand with the Louisiana Commissioner of Administration against ICF Emergency Management Services,
L.L.C. (“ICF Emergency”), a subsidiary of the Company, in connection with ICF Emergency’s administration of the Road
Home Program (the “Program”). The Program contract was a three-year, $912 million contract awarded to the Company in
2006 and that ended, as scheduled, in 2009. The Program was primarily intended to help homeowners and landlords of small
rental properties affected by Hurricanes Rita and Katrina. In its administrative demand, the OCD sought approximately
$200.8 million in alleged overpayments to Program grant recipients. The State separately supplemented the amount of
recovery it is seeking in total approximately $214.3 million. The State of Louisiana, through the Division of Administration,
also filed suit in Louisiana state court on June 10, 2016 broadly alleging and seeking recoupment for the same claim made in
the administrative proceeding submission before the Louisiana Commissioner of Administration. On September 21, 2016,
the Commissioner of the Division of Administration notified OCD and the Company of his decision to defer jurisdiction of
the administrative demand filed by the OCD. In so doing, the Commissioner declined to reach a decision on the merits, stated
that his deferral would not be deemed to grant or deny any portion of the OCD’s claim, and authorized the parties to proceed
on the matter in the previously filed judicial proceeding. The Company continues to believe that this claim has no merit,
intends to vigorously defend its position, and has therefore not recorded a liability as of December 31, 2016.

Operating Leases

On March 8, 2010, the Company entered into a new lease that replaced its prior headquarters lease, which was due to
expire in October 2012. The new lease was initially for approximately 258,000 square feet, with approximately 72,000 square
feet of additional space subsequently added. The lease commenced on April 1, 2010, and will expire on December 31, 2022.

F-28

Base rent under the agreement is approximately $0.9 million per month with annual escalations fixed at 2.5% per year,
yielding a total lease commitment of approximately $150.6 million over the twelve-year term of the lease.

The Company has entered into various other operating leases for equipment and office space. Certain facility leases
may contain fixed escalation clauses, certain facility leases require the Company to pay operating expenses in addition to
base rental amounts, and nine leases require the Company to maintain letters of credit. Future minimum rental payments
under all non-cancelable operating leases are as follows:

Year ending December 31,
2017 ............................................................................................................................................................... $
2018 ...............................................................................................................................................................
2019 ...............................................................................................................................................................
2020 ...............................................................................................................................................................
2021 ...............................................................................................................................................................
Thereafter .......................................................................................................................................................
Total ............................................................................................................................................................... $

37,308
35,591
33,278
30,603
29,688
52,284
218,752

Minimum lease payments have been reduced by minimum sublease rentals of $0.1 million due in the future under non-

cancelable subleases.

Rent expense is recognized on a straight-line basis over the lease term, net of sublease payments. Rent expense consists

of the following for the years ended December 31:

Rent ........................................................................................ $
Sublease income ....................................................................
Total rent expense .................................................................. $

39.5 $
(0.1)
39.4 $

40.0 $
(0.1 )
39.9 $

35.8
(0.1)
35.7

2016

2015

2014

NOTE 17—EMPLOYEE BENEFIT PLANS

Retirement Savings Plan

Effective June 30, 1999, the Company established the ICF Consulting Group Retirement Savings Plan (the “Retirement
Savings Plan”). The Retirement Savings Plan is a defined contribution profit sharing plan with a cash or deferred arrangement
under Section 401(k) of the Internal Revenue Code.

Participants in the Retirement Savings Plan are able to elect to defer up to 70% of their compensation subject to statutory
limitations, and are entitled to receive 100% employer matching contributions for the first 3% and 50% for the next 2% of
their compensation. Contribution expense related to the Retirement Savings Plan for the years ended December 31, 2016,
2015, and 2014, was approximately $14.9 million, $13.1 million, and $12.3 million, respectively.

Deferred Compensation Plan

Certain key employees of the Company are eligible to defer a specified percentage of their cash compensation by having
it contributed to a nonqualified deferred compensation plan. Eligible employees may elect to defer up to 80% of their base
salary and up to 100% of performance bonuses, reduced by any amounts withheld for the payment of taxes or other deductions
required by law. Participants are at all times 100% vested in their account balances. The Company funds its deferred
compensation liabilities by making cash contributions to a Rabbi Trust at the time the salary or bonus being deferred would
otherwise be payable to the employee. The liability to plan participants is materially funded at all times and the plan does not
have a material net impact on the Company’s results of operations.

Employee Stock Purchase Plan

The Company has a 2006 Employee Stock Purchase Plan (“ESPP”) under which one million shares have been
authorized for issuance. The ESPP allows eligible employees to purchase shares of our common stock through payroll
deductions up to $25,000 per calendar year over six-month offering periods at a discount not to exceed 5% of the market

F-29

value on the date of each purchase period. For the year ended December 31, 2016, 24,401 shares were purchased by
employees, at an average purchase price of $44.61, and 752,111 shares remain available for future issuance. The Company
does not recognize compensation expense related to the ESPP.

NOTE 18—SUPPLEMENTAL INFORMATION

Valuation and Qualifying Accounts

Allowance for Doubtful Accounts

Balance at beginning of period ............................................... $
Bad debt expense ....................................................................
Net recoveries (write-offs) .....................................................
Effect of foreign currency translation ....................................
Balance at end of period ......................................................... $

2016

2015

2014

2,138 $
1,089
(635)
(1)
2,591 $

1,887 $
268
(8 )
(9 )
2,138 $

1,753
272
(138)
—
1,887

NOTE 19—SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

1Q(1)

2016

2015

Contract revenue ........... $ 283,599 $ 305,419 $ 306,520 $ 289,559 $ 273,527 $ 288,949 $ 288,951 $ 280,805
Operating income .......... 17,694 19,358 23,776 21,965 15,962 18,734 21,497 19,038
Net income ....................
9,174 11,545 10,750
Earnings per share:

9,891 10,583 13,437 12,673

7,900

Basic ...................... $
Diluted ...................

0.52 $
0.51

0.56 $
0.55

0.71 $
0.70

0.67 $
0.65

0.41 $
0.40

0.47 $
0.47

0.60 $
0.59

0.56
0.55

Weighted-average
common shares
outstanding
(in thousands)

Basic ...................... 18,994 19,008 18,965 18,988 19,450 19,475 19,316 19,102
Diluted ................... 19,273 19,293 19,329 19,512 19,838 19,706 19,556 19,373

(1) Includes adjustments for the adoption ASU 2016-09 in the second quarter of 2016.

F-30

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BOARD OF DIRECTORS

Eileen O’Shea Auen
Chief Executive Officer
Deep Run Consulting, LLC

Dr. Edward H. Bersoff
Managing Director
PFF, LLC

Dr. Srikant M. Datar
Arthur Lowes Dickinson Professor
Harvard Business School

Cheryl W. Grisé
Retired Executive Vice President
Eversource Energy (f/k/a Northeast
Utilities)

Sanjay Gupta
Executive Vice President of Marketing,
Innovation & Corporate Relations
Allstate

Leslye G. Katz
Retired Senior Vice President and
Chief Financial Officer
IMS Health, Inc.

Sudhakar Kesavan
Chairman and Chief Executive Officer
ICF International, Inc.

Peter M. Schulte
Managing Partner and Founder
CM Equity Partners

TRANSFER AGENT

American Stock Transfer & Trust
Company 6201 15th Avenue
Brooklyn, New York 11219
1-800-937-5449

INDEPENDENT AUDITOR

Grant Thornton LLP
2010 Corporate Ridge, Suite 400
McLean, Virginia 22102
1-703-847-7500

INVESTOR CONTACT

Lynn Morgen/Betsy Broad
MBS Value Partners
501 Madison Avenue, Floor 12A
New York, New York 10022
1-212-223-4147

CORPORATE OFFICE

ICF International, Inc.
9300 Lee Highway
Fairfax, Virginia 22031
1-703-934-3603
info@icf.com

EXECUTIVE LEADERSHIP

Sudhakar Kesavan
Chairman and Chief Executive Officer

John Wasson
President and Chief Operating Officer

James C. Morgan
Executive Vice President and Chief Financial Officer

Andrea Baier
Senior Vice President
Corporate Growth & Strategic Accounts

Louise Clements
Executive Vice President
Olson

Gene Costa
Senior Vice President
Europe & Asia

James E. Daniel
Executive Vice President, General Counsel and
Assistant Secretary

John George
Senior Vice President and Chief Information Officer

Ellen Glover
Executive Vice President
Transformation & Resiliency Solutions

Eric Hamann
Senior Vice President
Corporate Development

Colette LaForce
Senior Vice President and Chief Marketing Officer

James Lawler
Executive Vice President and Chief Human Resources
Officer

Philip Mihlmester
Executive Vice President
Energy Global Sector Lead

Sergio Ostria
Executive Vice President
Business & Infrastructure Solutions

Dr. Barbara Rudin
Executive Vice President
Social & Analytic Solutions

Dr. David Speiser
Executive Vice President
Strategy

Robert Toth
Senior Vice President
Contracts & Administration

...

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