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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



For the Quarterly Period Ended June 30, 2004



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the transition period from  to



Commission File No. 000-30911



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THE PBSJ CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|FLORIDA                                                        |  | 59-1494168                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



2001 N.W. 107th
AVENUE

MIAMI, FLORIDA 33172-2507

(Address of principal executive offices)



(305) 592-7275

(Registrants telephone number, including area code)



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



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act.)    YES ̈NO  x



As of July 31, 2004, there were 7,714,155 shares of Common Stock, $.00067
par value per share, outstanding.



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##### Table of Contents

THE PBSJ CORPORATION



FORM 10-Q



JUNE 30, 2004



TABLE OF CONTENTS



|                                                                                              |  |         |  |     
|--------------------------------------------------------------------------------------------- |  | ------- |  | ----
|ItemNumber                                                                                    |  | CAPTION |  | PAGE
|                                                                                              | 
|PART I: FINANCIAL INFORMATION                                                                 |  |        
|                                                                                              | 
|Item 1. Financial Statements                                                                  |  | 3      
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12     
|                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 28     
|                                                                                              | 
|Item 4. Controls and Procedures                                                               |  | 28     
|                                                                                              | 
|PART II: OTHER INFORMATION                                                                    |  |        
|                                                                                              | 
|Item 1. Legal Proceedings                                                                     |  | 29     
|                                                                                              | 
|Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities      |  | 29     
|                                                                                              | 
|Item 3. Defaults Upon Senior Securities                                                       |  | 29     
|                                                                                              | 
|Item 4. Submission of Matters to a Vote of Security Holders                                   |  | 29     
|                                                                                              | 
|Item 5. Other Information                                                                     |  | 29     
|                                                                                              | 
|Item 6. Exhibits and Reports on Form 8-K                                                      |  | 30     
|                                                                                              | 
|SIGNATURES                                                                                    |  | 31     



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##### Table of Contents

PART I



Item 1. Financial Statements



THE
PBSJ CORPORATION



CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                                                                                             |  | June 30, 2004 |         |   | September 30, 2003 |  
|                                                                                                                                                                             |  | (Unaudited)   |         |   |                    |  
|Assets                                                                                                                                                                       |  |               |         |   |                    |   |         |  
|Current Assets:                                                                                                                                                              |  |               |         |   |                    |   |         |  
|Cash and cash equivalents                                                                                                                                                    |  | $             | 606     |   |                    | $ | 3,290   |  
|Marketable securities                                                                                                                                                        |  |               | 565     |   |                    |   | 550     |  
|Accounts receivable                                                                                                                                                          |  |               | 53,040  |   |                    |   | 52,510  |  
|Unbilled fees                                                                                                                                                                |  |               | 41,207  |   |                    |   | 39,916  |  
|Other current assets                                                                                                                                                         |  |               | 7,199   |   |                    |   | 4,316   |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Total current assets                                                                                                                                                         |  |               | 102,617 |   |                    |   | 100,582 |  
|                                                                                                                                                                             |  |              
|Property and equipment, net                                                                                                                                                  |  |               | 32,892  |   |                    |   | 31,599  |  
|Cash surrender value of life insurance                                                                                                                                       |  |               | 8,216   |   |                    |   | 7,357   |  
|Deferred income taxes                                                                                                                                                        |  |               | 2,157   |   |                    |   | 5,701   |  
|Goodwill                                                                                                                                                                     |  |               | 13,243  |   |                    |   | 9,452   |  
|Other assets                                                                                                                                                                 |  |               | 2,496   |   |                    |   | 2,186   |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Total assets                                                                                                                                                                 |  | $             | 161,621 |   |                    | $ | 156,877 |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                         |  |               |         |   |                    |   |         |  
|Current Liabilities:                                                                                                                                                         |  |               |         |   |                    |   |         |  
|Accounts payable and accrued expenses                                                                                                                                        |  | $             | 33,388  |   |                    | $ | 33,060  |  
|Current portion of long-term debt                                                                                                                                            |  |               | 4,044   |   |                    |   | 820     |  
|Accrued vacation                                                                                                                                                             |  |               | 8,089   |   |                    |   | 7,598   |  
|Deferred income taxes                                                                                                                                                        |  |               | 18,606  |   |                    |   | 16,691  |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Total current liabilities                                                                                                                                                    |  |               | 64,127  |   |                    |   | 58,169  |  
|                                                                                                                                                                             |  |              
|Long-term debt, less current portion                                                                                                                                         |  |               | 7,903   |   |                    |   | 17,350  |  
|Deferred compensation                                                                                                                                                        |  |               | 7,122   |   |                    |   | 6,544   |  
|Other liabilities                                                                                                                                                            |  |               | 7,469   |   |                    |   | 5,351   |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Total liabilities                                                                                                                                                            |  |               | 86,621  |   |                    |   | 87,414  |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Stockholders Equity:                                                                                                                                                        |  |               |         |   |                    |   |         |  
|Common stock, par value $0.00067, 15,000,000 shares authorized, 7,643,257 and 7,969,780 shares issued and outstanding at June 30, 2004 and
September 30, 2003, respectively. |  |               | 5       |   |                    |   | 5       |  
|Retained earnings                                                                                                                                                            |  |               | 77,016  |   |                    |   | 71,792  |  
|Accumulated other comprehensive loss                                                                                                                                         |  |               | (48     | ) |                    |   | (314    | )
|Unearned compensation                                                                                                                                                        |  |               | (1,973  | ) |                    |   | (2,020  | )
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Total stockholders equity                                                                                                                                                   |  |               | 75,000  |   |                    |   | 69,463  |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  
|Total liabilities and stockholders equity                                                                                                                                   |  | $             | 161,621 |   |                    | $ | 156,877 |  
|                                                                                                                                                                             |  |               |         |   |                    |   |         |  





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



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THE PBSJ CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands)



|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|------------------------------------ |  | --------------------------- | --------- | - | -------------------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                     |  | Three months ended June 30, |           |   | Nine months ended June 30, |  
|                                     |  | 2004                        |           |   | 2003                       |   |           | 2004 |  |   | 2003      |  
|STATEMENTS OF OPERATIONS DATA:       |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|                                     |  |                             |           |  
|Earned revenue:                      |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Engineering fees                     |  | $                           | 112,255   |   |                            | $ | 103,182   |      |  | $ | 325,034   |   |  | $ | 285,631   |  
|                                     |  |                             |           |  
|Direct expenses                      |  |                             | 24,578    |   |                            |   | 21,233    |      |  |   | 67,687    |   |  |   | 60,488    |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Net earned revenue                   |  |                             | 87,677    |   |                            |   | 81,949    |      |  |   | 257,347   |   |  |   | 225,143   |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Costs and expenses:                  |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Direct salaries                      |  |                             | 32,086    |   |                            |   | 30,059    |      |  |   | 93,248    |   |  |   | 81,295    |  
|General and administrative expenses  |  |                             | 48,138    |   |                            |   | 43,500    |      |  |   | 142,768   |   |  |   | 123,731   |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Total costs and expenses             |  |                             | 80,224    |   |                            |   | 73,559    |      |  |   | 236,016   |   |  |   | 205,026   |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Operating income                     |  |                             | 7,453     |   |                            |   | 8,390     |      |  |   | 21,331    |   |  |   | 20,117    |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Other income (expenses):             |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Interest expense                     |  |                             | (225      | ) |                            |   | (269      | )    |  |   | (672      | ) |  |   | (784      | )
|Other, net                           |  |                             | 157       |   |                            |   | 447       |      |  |   | 916       |   |  |   | 864       |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Total other income (expenses)        |  |                             | (68       | ) |                            |   | 178       |      |  |   | 244       |   |  |   | 80        |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Income before income taxes           |  |                             | 7,385     |   |                            |   | 8,568     |      |  |   | 21,575    |   |  |   | 20,197    |  
|                                     |  |                             |           |  
|Provision for income taxes           |  |                             | 3,028     |   |                            |   | 2,913     |      |  |   | 8,846     |   |  |   | 6,867     |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Net income                           |  | $                           | 4,357     |   |                            | $ | 5,655     |      |  | $ | 12,729    |   |  | $ | 13,330    |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Net income per share:                |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|                                     |  |                             |           |  
|Basic                                |  | $                           | .59       |   |                            | $ | .75       |      |  | $ | 1.73      |   |  | $ | 1.76      |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Diluted                              |  | $                           | .55       |   |                            | $ | .71       |      |  | $ | 1.64      |   |  | $ | 1.67      |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Weighted average shares outstanding: |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|                                     |  |                             |           |  
|Basic                                |  |                             | 7,418,052 |   |                            |   | 7,526,752 |      |  |   | 7,347,827 |   |  |   | 7,572,818 |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  
|Diluted                              |  |                             | 7,855,432 |   |                            |   | 7,952,962 |      |  |   | 7,785,207 |   |  |   | 7,999,028 |  
|                                     |  |                             |           |   |                            |   |           |      |  |   |           |   |  |   |           |  



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



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THE PBSJ CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(Unaudited)

(in thousands)



|                                                                                  |  |                           |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                  |  | Nine months ended June 30 |         
|                                                                                  |  | 2004                      |          |   | 2003 |  
|Cash flows from operating activities:                                             |  |                           |          |   |      |   |          |  
|Net income                                                                        |  | $                         | 12,729   |   |      | $ | 13,330   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |          |   |      |   |          |  
|Other                                                                             |  |                           | (1       | ) |      |   | (180     | )
|Depreciation and amortization                                                     |  |                           | 6,465    |   |      |   | 6,261    |  
|Gain on sale of property                                                          |  |                           | (45      | ) |      |   | (293     | )
|Provision for bad debt and unbillable amounts                                     |  |                           | 207      |   |      |   | 123      |  
|Provision for deferred compensation                                               |  |                           | 979      |   |      |   | 832      |  
|Provision for deferred income taxes                                               |  |                           | 5,712    |   |      |   | 3,040    |  
|Changes in operating assets and liabilities, net of acquisitions:                 |  |                           |          |   |      |   |          |  
|(Increase) decrease in accounts receivable                                        |  |                           | (75      | ) |      |   | 7        |  
|Increase in unbilled fees                                                         |  |                           | (888     | ) |      |   | (9,982   | )
|Increase in other current assets                                                  |  |                           | (2,835   | ) |      |   | (2,844   | )
|Increase in Goodwill                                                              |  |                           | (210     | ) |      |   |         |  
|(Increase) decrease in other assets                                               |  |                           | (405     | ) |      |   | 161      |  
|(Decrease) increase in accounts payable and accrued expenses                      |  |                           | (3,125   | ) |      |   | 2,571    |  
|Increase in accrued vacation                                                      |  |                           | 473      |   |      |   | 588      |  
|Increase in other liabilities                                                     |  |                           | 1,743    |   |      |   | 335      |  
|                                                                                  |  |                           |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                           | 20,724   |   |      |   | 13,949   |  
|                                                                                  |  |                           |          |   |      |   |          |  
|Cash flows from investing activities:                                             |  |                           |          |   |      |   |          |  
|Investment in life insurance policies                                             |  |                           | (425     | ) |      |   | (425     | )
|Acquisition of DTI, net of cash acquired                                          |  |                           |         |   |      |   | (1,465   | )
|Acquisition of Welker, net of cash acquired                                       |  |                           |         |   |      |   | (3,600   | )
|Acquisition of TriLine, net of cash acquired                                      |  |                           | (3,720   | ) |      |   |         |  
|Sale of property and equipment                                                    |  |                           | 69       |   |      |   | 840      |  
|Earnout payment on Welker acquisition                                             |  |                           | (1,237   | ) |      |   |         |  
|Purchase of property and equipment                                                |  |                           | (7,336   | ) |      |   | (5,711   | )
|                                                                                  |  |                           |          |   |      |   |          |  
|Net cash used in investing activities                                             |  |                           | (12,649  | ) |      |   | (10,361  | )
|                                                                                  |  |                           |          |   |      |   |          |  
|Cash flows from financing activities:                                             |  |                           |          |   |      |   |          |  
|Borrowings under line of credit                                                   |  |                           | 134,265  |   |      |   | 115,666  |  
|Principal payments under line of credit                                           |  |                           | (139,739 | ) |      |   | (109,328 | )
|Principal payments under notes and mortgage payable                               |  |                           | (749     | ) |      |   | (822     | )
|Proceeds from sale of common stock                                                |  |                           | 7,108    |   |      |   | 4,281    |  
|Purchase of common stock                                                          |  |                           | (11,644  | ) |      |   | (11,869  | )
|                                                                                  |  |                           |          |   |      |   |          |  
|Net cash used in financing activities                                             |  |                           | (10,759  | ) |      |   | (2,072   | )
|                                                                                  |  |                           |          |   |      |   |          |  
|Net (decrease) increase in cash and cash equivalents                              |  |                           | (2,684   | ) |      |   | 1,516    |  
|                                                                                  |  |                          
|Cash and cash equivalents at beginning of year                                    |  |                           | 3,290    |   |      |   | 2,967    |  
|                                                                                  |  |                           |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                         | 606      |   |      | $ | 4,483    |  
|                                                                                  |  |                           |          |   |      |   |          |  



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



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NOTES TO FINANCIAL STATEMENTS (unaudited)



1. Summary of Significant Accounting Policies:



Basis of Presentation



The accompanying financial information has been prepared in accordance with the interim reporting rules and regulations of the Securities and Exchange
Commission, and therefore does not necessarily include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the
United States of America. The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current
and best available information and actual results could differ from those estimates.



In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the interim period contain all adjustments necessary to present fairly the financial position of The PBSJ
Corporation as of June 30, 2004 and the results of their operations and their cash flows for the periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated balance sheet as of September 30, 2003 was derived
from the Companys audited financial statements included in the Companys Form 10-K for the year ended September 30, 2003. The accompanying financial statements should be read in conjunction with the Companys Form 10-K for the year
ended September 30, 2003. The results of operations for the three and nine-month periods ended June 30, 2004 are not necessarily indicative of the results to be expected for the full fiscal year.



Basic and Diluted Earnings Per Share



Basic net income attributable to common stockholders per share has been
computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net income attributable to common stockholders per share reflects the potential dilution that could occur
assuming the inclusion of dilutive potential common shares and has been computed by dividing net income attributable to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive
potential common shares include all outstanding restricted stock awards after applying the treasury stock method.



A reconciliation of the number of shares used in computing basic and diluted earnings per share follows:





|                                              |  |                             |  |                            |  |           |  |          
|--------------------------------------------- |  | --------------------------- |  | -------------------------- |  | --------- |  | ---------
|                                              |  | Three months ended June 30, |  | Nine months ended June 30,
|                                              |  | 2004                        |  | 2003                       |  | 2004      |  | 2003     
|Weighted average shares outstanding   Basic  |  | 7,418,052                   |  | 7,526,752                  |  | 7,347,827 |  | 7,527,818
|Effect of dilutive unvested restricted stock  |  | 437,380                     |  | 426,210                    |  | 437,380   |  | 471,210  
|                                              |  |                             |  |                            |  |           |  |          
|Weighted average shares outstanding  Diluted |  | 7,855,432                   |  | 7,952,962                  |  | 7,785,207 |  | 7,999,028
|                                              |  |                             |  |                            |  |           |  |          



Revenue Recognition



In the course of providing its services, the Company
routinely incurs direct expenses such as sub-contracts for services. Indirect expenses are recorded on an accrual basis and are allocated to contracts based on an overhead rate. In addition, the Company also includes pass-through costs on cost-plus
contracts, which are customer-reimbursable materials, equipment and sub-contractor costs when the Company determines that it is responsible for engineering specification, procurement and management of such cost components on behalf of the customer.
These direct expenses are principally passed through to the Companys clients with minimal or no mark-up and are included in the Companys gross revenues. The Company also reports net earned revenue, which is reflected as gross revenue
less direct expenses. For cost-plus and time and material contracts, the Company reports fees earned based on actual labor multiplied by contractual rates or multipliers. For fixed price contracts, the Company reports fees earned on the percentage
of completion basis, which includes revenue on the basis of costs incurred to date as a percentage of the total estimated costs. Revenues related to unapproved change orders are not recorded until collected.



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Anticipated losses are recognized in total in the period in which they became determinable. Accounts
receivable and unbilled fees are presented net of an allowance for doubtful accounts of $1.1 million at June 30, 2004 and September 30, 2003.



Recent Accounting Pronouncements



In December 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities (FIN 46R), which replaced FIN 46. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights. This interpretation requires
a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or is entitled to receive a majority of the entitys residual returns or
both. The interpretation also requires disclosures about variable interest entities that the Company is not required to consolidate but in which it has a significant variable interest. The Company is required to adopt FIN 46R by the beginning of
Fiscal 2005. Although the Company has not completed its initial evaluation of FIN 46R the adoption of FIN 46R is not expected to have a material impact on the Companys results of operations or financial condition.



In December 2003, the Securities and Exchange Commission staff
(SEC) issued Staff Accounting Bulletin No. 104 (SAB 104), Revenue Recognition, which supercedes Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements. The
primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements and to reflect the accounting guidance issued in Emerging Issues Task Force 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables. Additionally, SAB 104 rescinds the SECs Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101. Selected portions
of the FAQ have been incorporated into SAB 104. The adoption of SAB 104 did not have an effect on our revenue recognition policy or revenues recorded.



In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The objective of this Issue is to provide guidance for identifying impaired investments. EITF 03-1 also provides new disclosure requirements for investments
that are deemed to be temporarily impaired. The accounting provisions of EITF 03-1 are effective for all reporting periods beginning after June 15, 2004, while the disclosure requirements are effective only for annual periods ending after June 15,
2004. The Company has evaluated the impact of the adoption of EITF 03-1 and does not believe that impact will be significant to the Companys overall results of operations or financial position.



Capital Structure



The Company has authorized 15,000,000 shares of common stock (par value
$.00067).



The by-laws of the Company require that common stock
held by shareholders who terminate employment with the Company be offered for sale at fair market value to the Company, which has right of first refusal. Should the Company decline to purchase the shares, the shares must next be offered to the
Companys profit sharing and employee stock ownership plan at fair market value, and then ultimately to full-time employees of the Company. The by-laws of the Company provide that the fair market value be determined by an independent appraisal.
Other than agreements with certain retired Directors as noted in the Proxy, as of June 30, 2004 and September 30, 2003 there is no outstanding common stock relating to employees no longer employed by the Company.



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2. Contingencies:



The Company is involved in legal actions arising in the ordinary course of business. The Company maintains certain insurance coverage, covering
workers compensation, auto liability, general and professional liability (including pollution liability) and property coverage. The Companys insurance policies may offset the amount of loss exposure from legal actions.



As of June 30, 2004, the Company was involved in litigation where plaintiffs
allege damages resulting from the Companys engineering services. The plaintiffs allegations of liability in those cases seek recovery for damages caused by the Company based on various theories of negligence, contributory negligence or
breach of contract.



As of June 30, 2004 and September 30,
2003, the Company had an accrual of approximately $6.8 million and $5.0 million respectively for all potential and existing claims, lawsuits and pending proceedings that, in managements opinion, are probable and estimatable. The Company
expects to pay these liabilities over the next one to three years. Management is of the opinion that the liabilities ultimately resulting from such existing and other pending proceedings, lawsuits and claims should not materially affect the
Companys financial position, results of operations or cash flows.



3.
Income Taxes:



The income tax provision was $8.8 million
and $6.9 million, or an effective tax rate of 41.0% and 34.0%, for the nine-month periods ended June 30, 2004 and 2003, respectively. The increase in the effective tax rate is primarily due to the increase in the valuation allowance for the deferred
taxes related to research and development tax credit carry-forwards. These research and development tax credit carry-forwards, which expire beginning 2017 through 2022, were approximately $8.4 million and $10.3 million as of June 30, 2004 and
September 30, 2003, respectively.



For the past several years,
the Company has generated research and development tax credit related to certain qualifying costs. The qualifying costs relate primarily to the Companys project costs which involved technical uncertainty. These research and development costs
were incurred by the Company in the course of providing services under generally long-term client projects, thereby creating costs associated with recognizable revenue under the project. Because the Company has been unable to utilize the entire
amount of research and development tax credits it has generated each year, the balance sheet reflects a deferred tax asset of $4.0 million and $7.1 million at June 30, 2004 and September 30, 2003, respectively, for the unused credit carryforward. In
addition, because of the uncertainty associated with the ability of the Company to utilize these credits in the future, a valuation allowance of $3.3 million and $2.6 million at June 30, 2004 and September 30, 2003, respectively, has been provided
for this deferred tax asset.



Our effective tax rate is based
on expected income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions. We
establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged. We adjust these reserves in light of changing facts and circumstances, such as the
progress of a tax audit or current developments in tax law. For that matter, with respect to certain credits for increasing research activities that have been utilized to reduce our income taxes payable reported on tax returns open for examination,
we have recorded a reserve of approximately $3.8 million as of June 30, 2004.



A number of years may elapse before a particular matter, for which we have established a reserve, is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. The
Company is not currently under audit by the Internal Revenue Service or any other jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our reserves reflect
the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require use of our cash. Favorable resolution would be recognized as a reduction to our effective tax rate in the year of resolution. Our tax
reserves are presented in the balance sheet within other liabilities.



8



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##### Table of Contents

4. Stockholders Equity



The significant changes in stockholders equity as of June 30, 2004 are as follows:



|                                                                   |  |                        |   |  |        |         |  
|------------------------------------------------------------------ |  | ---------------------- | - |  | ------ | ------- | -
|                                                                   |  | Shares                 |   |  | Amount |        
|                                                                   |  | (dollars in thousands) |  
|Stockholders equity, September 30, 2003                           |  | 7,969,780              |   |  | $      | 69,463  |  
|Net income                                                         |  |                        |   |  |        | 12,729  |  
|Other comprehensive income                                         |  |                        |   |  |        | 266     |  
|Sale of stock                                                      |  | 168,186                |   |  |        | 3,784   |  
|Purchases of stock                                                 |  | (508,163               | ) |  |        | (11,645 | )
|Issuance of restricted stock net of amortization and cancellations |  | 13,454                 |   |  |        | 403     |  
|                                                                   |  |                        |   |  |        |         |  
|Stockholders equity, June 30, 2004                                |  | 7,643,257              |   |  | $      | 75,000  |  
|                                                                   |  |                        |   |  |        |         |  



5. Segment Reporting:



The Company is organized by the services provided to its
customers. Under this organizational structure, the Company has four segments: Transportation, Construction, Civil and Environmental.



Activities in the Transportation business segment generally involve planning, design, right of way acquisition, development and design of intelligent
transportation services and program construction management services for multiple transportation modes, including interstate and primary highways, toll roads, arterials, bridges, transit systems, airports and port facilities. Our Program Management
group provides many of our governmental clients the necessary resources to manage large infrastructure programs from concept through construction. Our services include planning, programming, and contract support.



In the area of the Construction business management, we provide a wide range
of services as an agent for our clients, including contract administration, inspection, field-testing, scheduling/estimating, instituting project controls and quality assessment. Although we do not construct or build any projects, we may act as the
program director of a project whereby on behalf of the owner of the project, we provide scheduling, cost estimating and construction observation services for the project, or our services may be limited to providing construction consulting.



The Civil Engineering business provides general civil
engineering as well as specialized services to public and private clients. Included in these services are: site engineering and surveys, infrastructure engineering, master planning, disaster mitigation planning and response, asset assessment and
management, emergency management and architectural and landscape design.



The Environmental business segment focuses on the delivery of planning, design and construction management services for private and public sector clients related to air quality management, flood insurance studies,
energy planning, hazardous and solid waste management, ecological studies, wastewater treatment, water resources, environmental toxicology analysis, aquatic treatment systems and water supply and treatment.



Financial information relating to the Companys operations by service is
as follows (dollars in thousands):



|                                 |  |                |        |              |   |        |  |               |        |       |   |        |  |   |        
|-------------------------------- |  | -------------- | ------ | ------------ | - | ------ |  | ------------- | ------ | ----- | - | ------ |  | - | -------
|                                 |  |                |        |              |   |        |  |               |        |      
|Three Months Ended June 30, 2004 |  | Transportation |        | Construction |   | Civil  |  | Environmental |        | Total
|Engineering fees                 |  | $              | 45,714 |              | $ | 19,955 |  | $             | 18,805 |       | $ | 27,781 |  | $ | 112,255
|Net earned revenue               |  |                | 34,343 |              |   | 14,847 |  |               | 16,177 |       |   | 22,310 |  |   | 87,677 
|Operating income                 |  |                | 2,638  |              |   | 1,982  |  |               | 735    |       |   | 2,098  |  |   | 7,453  
|Depreciation and amortization    |  |                | 1,212  |              |   | 287    |  |               | 266    |       |   | 346    |  |   | 2,111  
|Total assets                     |  |                | 64,811 |              |   | 27,640 |  |               | 28,458 |       |   | 40,712 |  |   | 161,621
|Capital expenditures             |  |                | 881    |              |   | 321    |  |               | 444    |       |   | 578    |  |   | 2,224  
|                                 |  |                |        |              |   |        |  |               |        |      
|Three Months Ended June 30, 2003 |  | Transportation |        | Construction |   | Civil  |  | Environmental |        | Total
|Engineering fees                 |  | $              | 42,173 |              | $ | 15,165 |  | $             | 17,205 |       | $ | 28,639 |  | $ | 103,182
|Net earned revenue               |  |                | 33,162 |              |   | 11,467 |  |               | 14,887 |       |   | 22,433 |  |   | 81,949 
|Operating income (loss)          |  |                | 4,121  |              |   | 1,682  |  |               | 924    |       |   | 1,663  |  |   | 8,390  
|Depreciation and amortization    |  |                | 780    |              |   | 176    |  |               | 517    |       |   | 684    |  |   | 2,157  
|Total assets                     |  |                | 64,327 |              |   | 23,145 |  |               | 26,443 |       |   | 43,562 |  |   | 157,477
|Capital expenditures             |  |                | 573    |              |   | 180    |  |               | 288    |       |   | 473    |  |   | 1,514  



|                                |  |                |         |              |   |        |  |               |        |       |   |        |  |   |        
|------------------------------- |  | -------------- | ------- | ------------ | - | ------ |  | ------------- | ------ | ----- | - | ------ |  | - | -------
|                                |  |                |         |              |   |        |  |               |        |      
|Nine Months Ended June 30, 2004 |  | Transportation |         | Construction |   | Civil  |  | Environmental |        | Total
|Engineering fees                |  | $              | 130,342 |              | $ | 55,585 |  | $             | 57,232 |       | $ | 81,875 |  | $ | 325,034
|Net earned revenue              |  |                | 99,487  |              |   | 41,824 |  |               | 49,560 |       |   | 66,476 |  |   | 257,347
|Operating income                |  |                | 8,070   |              |   | 5,287  |  |               | 3,109  |       |   | 4,865  |  |   | 21,331 
|Depreciation and amortization   |  |                | 2,822   |              |   | 784    |  |               | 1,260  |       |   | 1,599  |  |   | 6,465  
|Total assets                    |  |                | 64,811  |              |   | 27,640 |  |               | 28,458 |       |   | 40,712 |  |   | 161,621
|Capital expenditures            |  |                | 2,884   |              |   | 1,055  |  |               | 1,506  |       |   | 2,053  |  |   | 7,498  
|                                |  |                |         |              |  
|                                |  |                |         |              |   |        |  |               |        |      
|Nine Months Ended June 30, 2003 |  | Transportation |         | Construction |   | Civil  |  | Environmental |        | Total
|Engineering fees                |  | $              | 116,676 |              | $ | 41,980 |  | $             | 47,962 |       | $ | 79,013 |  | $ | 285,631
|Net earned revenue              |  |                | 90,864  |              |   | 31,202 |  |               | 41,398 |       |   | 61,679 |  |   | 225,143
|Operating income (loss)         |  |                | 9,792   |              |   | 3,833  |  |               | 1,507  |       |   | 4,985  |  |   | 20,117 
|Depreciation and amortization   |  |                | 2,250   |              |   | 511    |  |               | 1,572  |       |   | 1,928  |  |   | 6,261  
|Total assets                    |  |                | 64,327  |              |   | 23,145 |  |               | 26,443 |       |   | 43,562 |  |   | 157,477
|Capital expenditures            |  |                | 2,161   |              |   | 714    |  |               | 1,158  |       |   | 1,678  |  |   | 5,711  



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##### Table of Contents

6. Long-Term Debt(dollars in thousands):



|                                                                                                                                                                                                                                                                                                                                        |  |              |        |                   |   |       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ----------------- | - | ------
|                                                                                                                                                                                                                                                                                                                                        |  | June 30,2004 |        | September 30,2003
|Line of credit, unused availability of $54,240 and $48,766 at June 30, 2004 and September 30, 2003, respectively.                                                                                                                                                                                                                       |  | $            | 3,760  |                   | $ | 9,234 
|Mortgage note payable due in monthly installments, with interest, collateralized by real property; unpaid principal due March 16, 2011.
Interest at LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. (2.02% and 1.77% at June 30, 2004 and September 30, 2003, respectively). |  |              | 8,187  |                   |   | 8,390 
|Note payable to J. Powell & Associates, Inc. due in three annual installments of $333 with interest of 7.12% through October 17,
2003.                                                                                                                                                                                                  |  |              |       |                   |   | 333   
|Capital lease of equipment, interest accrues at 8.3%, collateralized by certain equipment, due in monthly payments of principal and interest
of $36.                                                                                                                                                                                    |  |              |       |                   |   | 213   
|                                                                                                                                                                                                                                                                                                                                        |  |              |        |                   |   |       
|                                                                                                                                                                                                                                                                                                                                        |  |              | 11,947 |                   |   | 18,170
|Less current portion                                                                                                                                                                                                                                                                                                                    |  |              | 4,044  |                   |   | 820   
|                                                                                                                                                                                                                                                                                                                                        |  |              |        |                   |   |       
|Long-term debt                                                                                                                                                                                                                                                                                                                          |  | $            | 7,903  |                   | $ | 17,350
|                                                                                                                                                                                                                                                                                                                                        |  |              |        |                   |   |       



The Company has a $58
million line of credit agreement, inclusive of $3 million in letters of credit, with a bank. The expiration date on the amended line of credit is June 30, 2005. The interest rate (1.87% and 1.62% at June 30, 2004 and September 30, 2003,
respectively) ranges from LIBOR plus 50 basis points to prime minus 125 basis points if the Companys funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if the
Companys funded debt coverage ratio is between 2.5 to 3.0. The line of credit contains clauses requiring the maintenance of various covenants and financial ratios.



On March 19, 2001, we entered into a mortgage note of $9.0 million. The mortgage agreement contains clauses requiring the
maintenance of various covenants and financial ratios. On December 10, 2003, the bank approved an amendment to the mortgage agreement to reflect new conditions for the Tangible Net Worth covenant requirement under the agreement. The mortgage note is
collateralized by our office building located in Maitland, Florida.



The Company was in compliance with all debt covenants at June 30, 2004.



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##### Table of Contents

7. Comprehensive Income:



|                                       |  |                             |       |                            |   |       |  |      |        |  |   |       
|-------------------------------------- |  | --------------------------- | ----- | -------------------------- | - | ----- |  | ---- | ------ |  | - | ------
|                                       |  | Three months ended June 30, |       | Nine months ended June 30,
|                                       |  | 2004                        |       | 2003                       |   | 2004  |  | 2003
|                                       |  | (dollars in thousands)      |       | (dollars in thousands)    
|Net income                             |  | $                           | 4,357 |                            | $ | 5,655 |  | $    | 12,729 |  | $ | 13,330
|                                       |  |                             |       |                           
|Other comprehensive income, net of tax |  |                             | 130   |                            |   | 0     |  |      | 266    |  |   | 94    
|                                       |  |                             |       |                            |   |       |  |      |        |  |   |       
|Comprehensive income                   |  | $                           | 4,487 |                            | $ | 5,655 |  | $    | 12,995 |  | $ | 13,424
|                                       |  |                             |       |                            |   |       |  |      |        |  |   |       



Other comprehensive income is
comprised of unrealized gains and losses on marketable securities and changes in the value of the derivative financial instrument.



8. Goodwill:



During the first quarter of fiscal year 2003, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets.Under SFAS No. 142, purchased
goodwill and intangible assets with indefinite lives are no longer amortized, but instead tested for impairment at least annually. In connection with the adoption of SFAS No. 142, the Company no longer records approximately $0.5 million annually of
amortization relating to its existing goodwill. The Company performed the test for impairment at September 30, 2003 and determined that no impairment exists.



During the nine-month period ended June 30, 2004, the balance in goodwill increased by $3.8 million related to earn-out payments associated with the
Welker and Associates, Inc. acquisition and the acquisition of TriLine Associate, Inc.



9. Acquisition



On June 1, 2004, the Company
acquired 100% of the stock of TriLine Associates, Inc. (TriLine) for $3.72 million in cash. The acquisition of TriLine contributes to the Companys goal of enhancing its presence in the greater Pittsburg area and the State of
Pennsylvania. TriLine specializes in transportation, geotechnical, and environmental services. The purchase price has been preliminarily allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition
date. The allocation of the purchase price resulted in assets of $4.2 million, including approximately $622,000 of intangible assets, $2.3 million of goodwill and liabilities of $520,000. The pro forma impact of the acquisition is not material to
reported historical operations.



10. Subsequent Event



On July 1, 2004, the Company acquired 100% of the stock of W. Koo and
Associates Structural Engineers, Inc. (WKA) for $2.5 million, comprised cash and the Companys common stock. WKA specializes in infrastructure improvements for public, municipal, transit, port authorities and private sector projects
with a primary focus on transportation structures in California.



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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



The following discussion and analysis is provided to increase an understanding of, and should be read in conjunction with, the condensed consolidated
financial statements and accompanying notes. As you read this section, you should also refer to the Companys Annual Report filed on Form 10-K for the fiscal year ended September 30, 2003.



Statements of our intentions, beliefs, expectations or predictions for the
future, denoted by the words anticipate, believe, estimate, expect, project, imply, intend, foresee, and similar expressions, are forward-looking
statements that reflect our current views about future events and are subject to risks, uncertainties and assumptions. Such risks, uncertainties and assumptions include our ability to attract additional business, the timing of projects and the
potential for contract cancellation by our customers, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, changes in general economic conditions and interest rates, the
risk that the Internal Revenue Service or the courts may not accept the amount or nature of one or more items of deduction, loss, income or gain as reported by the Company for tax purposes and the possible outcome of pending litigation and our
actions in connection with such litigation. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.



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



Results of Operations



The following table sets forth the percentage of net earned revenue represented by the items in our condensed consolidated statements of operations:



|                                    |  |                            |   |  |                           |   |  |       |   |  |       |  
|----------------------------------- |  | -------------------------- | - |  | ------------------------- | - |  | ----- | - |  | ----- | -
|                                    |  | Three months endedJune 30, |   |  | Nine months endedJune 30, |  
|                                    |  | 2004                       |   |  | 2003                      |   |  | 2004  |   |  | 2003  |  
|Engineering fees                    |  | 128.0                      | % |  | 125.9                     | % |  | 126.3 | % |  | 126.9 | %
|Direct expenses                     |  | 28.0                       |   |  | 25.9                      |   |  | 26.3  |   |  | 26.9  |  
|                                    |  |                            |   |  |                           |   |  |       |   |  |       |  
|Net earned revenue                  |  | 100.0                      |   |  | 100.0                     |   |  | 100.0 |   |  | 100.0 |  
|Costs and expenses:                 |  |                            |   |  |                           |   |  |       |   |  |       |  
|Direct salaries                     |  | 36.6                       |   |  | 36.7                      |   |  | 36.2  |   |  | 36.1  |  
|General and administrative expenses |  | 54.9                       |   |  | 53.1                      |   |  | 55.5  |   |  | 55.0  |  
|                                    |  |                            |   |  |                           |   |  |       |   |  |       |  
|Operating income                    |  | 8.5                        |   |  | 10.2                      |   |  | 8.3   |   |  | 8.9   |  
|Interest expense                    |  | (0.3                       | ) |  | (0.3                      | ) |  | (0.3  | ) |  | (0.3  | )
|Other, net                          |  | 0.2                        |   |  | 0.6                       |   |  | 0.4   |   |  | 0.4   |  
|                                    |  |                            |   |  |                           |   |  |       |   |  |       |  
|Income before income taxes          |  | 8.4                        |   |  | 10.5                      |   |  | 8.4   |   |  | 9.0   |  
|Provision for income taxes          |  | 3.4                        |   |  | 3.6                       |   |  | 3.4   |   |  | 3.1   |  
|                                    |  |                            |   |  |                           |   |  |       |   |  |       |  
|Net income                          |  | 5.0                        | % |  | 6.9                       | % |  | 5.0   | % |  | 5.9   | %



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##### Table of Contents

A summary of operating results is as follows for the three and nine months ended June 30 (dollars in thousands):



|                           |  |                             |         |      |   |         |  
|-------------------------- |  | --------------------------- | ------- | ---- | - | ------- | -
|                           |  | Three months ended June 30, |        
|                           |  | 2004                        |         | 2003 |  
|Engineering fees           |  | $                           | 112,255 |      | $ | 103,182 |  
|Direct expenses            |  |                             | 24,578  |      |   | 21,233  |  
|                           |  |                             |         |      |   |         |  
|Net earned revenue         |  |                             | 87,677  |      |   | 81,949  |  
|                           |  |                            
|Costs and expenses         |  |                             | 80,224  |      |   | 73,559  |  
|                           |  |                             |         |      |   |         |  
|Operating income           |  |                             | 7,453   |      |   | 8,390   |  
|                           |  |                            
|Other (income) expenses    |  |                             | 68      |      |   | (178    | )
|Provision for income taxes |  |                             | 3,028   |      |   | 2,913   |  
|                           |  |                             |         |      |   |         |  
|Net income                 |  | $                           | 4,357   |      | $ | 5,655   |  
|                           |  |                             |         |      |   |         |  



|                           |  |                            |         |   |      |   |         |  
|-------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                           |  | Nine months ended June 30, |        
|                           |  | 2004                       |         |   | 2003 |  
|Engineering fees           |  | $                          | 325,034 |   |      | $ | 285,631 |  
|Direct expenses            |  |                            | 67,687  |   |      |   | 60,488  |  
|                           |  |                            |         |   |      |   |         |  
|Net earned revenue         |  |                            | 257,347 |   |      |   | 225,143 |  
|                           |  |                           
|Costs and expenses         |  |                            | 236,016 |   |      |   | 205,026 |  
|                           |  |                            |         |   |      |   |         |  
|Operating income           |  |                            | 21,331  |   |      |   | 20,117  |  
|                           |  |                           
|Other income               |  |                            | (244    | ) |      |   | (80     | )
|Provision for income taxes |  |                            | 8,846   |   |      |   | 6,867   |  
|                           |  |                            |         |   |      |   |         |  
|Net income                 |  | $                          | 12,729  |   |      | $ | 13,330  |  
|                           |  |                            |         |   |      |   |         |  



Overview



Engineering Fees for the three-month period ended June 30, 2004 increased by
8.8%, as compared to the same period in 2003. Such amounts for the nine-month periods ended June 30, 2004 increased by 13.8%, as compared to the same period in 2003. The majority of the increase was in the transportation and construction segments.
The three small acquisitions described below, as well as new projects were the primary contributors to the growth in engineering fees. Additionally there was an increase in the number of employees which were primarily of technical professionals,
whose billable labor gets charged to clients, thereby increasing the amount of fees earned by the Company. The acquisitions of Durham Technologies, Inc. (DTI) on December 1, 2002, Welker & Associates, Inc. (Welker) on
March 19, 2003 and TriLine Associates, Inc. on June 1, 2004 also contributed to the increase in engineering fees. In addition, all four segments of the Company experienced increased volumes in backlog at June 30, 2004, as compared to June 30, 2003.



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##### Table of Contents

The Companys net income decreased 23.0% during the three-month period ended June 30, 2004 and
decreased 4.5% during the nine-month period ended June 30, 2004, as compared to the same periods in 2003. The decrease in net income during the three and nine-month periods was primarily the result of a higher effective tax rate and an increase in
general and administrative costs due to annual increases in pay rates, increased insurance costs and a charge of $1.8 million for an errors and omissions claim. The effective tax rate was increased to provide for an increase in the valuation
allowance for the Companys research and development tax credits.



Segment Results of Operations



Our businesses
are reported as four segments, reflecting our management methodology and structure. The accounting policies of the segments are the same as those described in the footnotes to the accompanying condensed consolidated financial statements. We evaluate
performance based on operating profit of the respective segments.



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##### Table of Contents

Transportation



|                   |  |                             |        |                            |       |    |      |   |        |  |          |         |  |       |    |  |   |        
|------------------ |  | --------------------------- | ------ | -------------------------- | ----- | -- | ---- | - | ------ |  | -------- | ------- |  | ----- | -- |  | - | -------
|                   |  | Three months ended June 30, |        | Nine months ended June 30,
|                   |  | 2004                        |        | % Change                   |       |    | 2003 |   | 2004   |  | % Change |         |  | 2003 
|                   |  | (dollars in thousands)      |        | (dollars in thousands)    
|Engineering Fees   |  | $                           | 45,714 |                            | 8.4   | %  |      | $ | 42,173 |  | $        | 130,342 |  | 11.7  | %  |  | $ | 116,676
|Direct Expenses    |  |                             | 11,371 |                            | 26.2  |    |      |   | 9,011  |  |          | 30,855  |  | 19.5  |    |  |   | 25,812 
|Net Earned Revenue |  |                             | 34,343 |                            | 3.6   |    |      |   | 33,162 |  |          | 99,487  |  | 9.5   |    |  |   | 90,864 
|Costs and Expenses |  |                             | 31,705 |                            | 9.2   |    |      |   | 29,041 |  |          | 91,417  |  | 12.8  |    |  |   | 81,072 
|Operating Income   |  | $                           | 2,638  |                            | (36.0 | )% |      | $ | 4,121  |  | $        | 8,070   |  | (17.6 | )% |  | $ | 9,792  



Engineering fees of
$45.7 million for the three-month period ended June 30, 2004 increased 8.4% as compared to $42.2 million for the same period in 2003. For the nine-month period ended June 30, 2004, engineering fees were $130.3 million compared to $116.7 million in
2003, representing an 11.7% increase. Higher volumes from continued growth in the transportation services market and engineering fees from new projects with existing clients were the source of the increase. Some of these projects include the Texas
Department of Transportation and the Federal Highway Administration and Aviation projects around the country, were the primary contributors to this increase during 2004.



Reported net earned revenue was $34.3 million during the three-month period ended June 30, 2004 as compared to $33.2 million
for the same period in 2003, representing an increase of 3.6%. For the nine-month period ended June 30, 2004, net earned revenue was $99.5 million compared to $90.9 million in 2003, representing a 9.5% increase. This increase is directly related to
the increase in engineering fees from internal growth, resulting from additional professionals hired. In addition, the change in net earned revenue is affected by the fluctuation in direct expenses. Direct expenses consist of out-of-pocket expenses
related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. For the nine-month period ended June 30, 2004, direct expenses were $30.9 million compared to $25.8 million in
2003, representing a 19.5% increase. Direct expenses were $11.4 million during the three-month period ended June 30, 2004 as compared to $9.0 million for the same period in 2003, representing an increase of 26.2%. Direct expenses, as a percentage of
net earned revenue, were 33.1% for the three-month period ended June 30, 2004 as compared to 27.2% for the same period in 2003. For the nine-month period ended June 30, 2004, direct expenses, as a percentage of net earned revenue, were 31.0%
compared to 28.4% in 2003. The increase in direct expenses for the three-month and nine-month periods primarily resulted from the need to support the growth in engineering fees through the increased usage of sub-consultants in California, as well as
in aviation projects around the country.



Reported operating
income was $2.6 million for the three-month period ended June 30, 2004 as compared to $4.1 million for the same period in 2003, representing a decrease of 36.0%. For the nine-month period ended June 30, 2004, operating income was $8.1 million
compared to $9.8 million in 2003, representing a 17.6% decrease. Operating income, as a percentage of net earned revenue, was 7.7% for the three-month period ended June 30, 2004 as compared to 12.4% for the same period in 2003. For the nine-month
period ended June 30, 2004, operating income, as a percentage of net earned revenue, was 8.1% compared to 10.8% in 2003. The decrease in operating income and operating income, as a percentage of net earned revenue, is driven by an increase in costs
and expenses.



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Costs and expenses consist of direct salaries that are chargeable to clients and general and
administrative expenses. Direct salaries were $12.6 million for the three-month period ended June 30, 2004, as compared to $12.3 million for the same period in 2003, representing an increase of 2.3%. For the nine-month period ended June 30, 2004,
direct salaries were $36.1 million compared to $33.3 million in 2003, representing an 8.2% increase. Although direct salaries increased for the two periods as compared to the prior periods, which is primarily related to the growth in engineering
fees, direct salaries as a percentage of net earned revenue decreased. Direct salaries as a percentage of net earned revenue was 36.7% for the three-month period ended June 30, 2004 as compared to 37.2% for the same period in 2003. For the
nine-month period ended June 30, 2004, direct salaries as a percentage of net earned revenue was 36.3% compared to 36.7% in 2003. This decrease was driven by a reduction in Transportations chargeability percentage due to additional
professionals being hired during the period to enable further growth in the segment in the future and a slow down in the Tennessee and Alabama markets.



The other component of costs and expenses is general and administrative expenses, which consists of indirect labor and other overhead costs incurred to
run the Company. Indirect labor increased 28.9%, from $3.6 million during the three-month period ended June 30, 2003 to $4.7 million for the same period in 2004. For the nine-month period ended June 30, 2004, indirect labor increased 26.0%,
from $11.3 million in 2003 to $14.2 million in 2004. Indirect labor as a percentage of net earned revenue was 13.7% for the three-month period ended June 30, 2004 as compared to 11.0% for the same period in 2003. For the nine-month period,
indirect labor as a percentage of net earned revenue was 14.3% in 2004 as compared to 12.4% in 2003. The increase in indirect labor is a result of the decrease in chargeability, as explained above.



Other overhead costs increased 10.2%, from $13.1 million during the
three-month period ended June 30, 2003 to $14.4 million for the same period in 2004. For the nine-month period ended June 30, 2004, other overhead costs were $41.1 million, representing a 12.8% increase compared to $36.4 million for the same period
in 2003. Other overhead costs, as a percentage of net earned revenue, were 41.9% for the three-month period ended June 30, 2004 as compared to 39.4% for the same period in 2003. For the nine-month period ended June 30, 2004, other overhead costs, as
a percentage of net earned revenue, was 41.3% compared to 40.1% in 2003. The increase in other overhead costs was partially due to costs associated with the hiring of new technical professionals, such as health insurance and payroll taxes. In
addition, this segment saw higher than normal increases in employee moving expenses and travel costs. Finally, a portion of the increase is due to annual increases in pay rates for existing personnel.



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##### Table of Contents

Civil Engineering



|                   |  |                             |        |                            |       |    |      |   |        |  |          |        |  |       |   |  |   |       
|------------------ |  | --------------------------- | ------ | -------------------------- | ----- | -- | ---- | - | ------ |  | -------- | ------ |  | ----- | - |  | - | ------
|                   |  | Three months ended June 30, |        | Nine months ended June 30,
|                   |  | 2004                        |        | % Change                   |       |    | 2003 |   | 2004   |  | % Change |        |  | 2003 
|                   |  | (dollars in thousands)      |        | (dollars in thousands)    
|Engineering Fees   |  | $                           | 18,805 |                            | 9.3   | %  |      | $ | 17,205 |  | $        | 57,232 |  | 19.3  | % |  | $ | 47,962
|Direct Expenses    |  |                             | 2,628  |                            | 13.4  |    |      |   | 2,318  |  |          | 7,672  |  | 16.9  |   |  |   | 6,564 
|Net Earned Revenue |  |                             | 16,177 |                            | 8.7   |    |      |   | 14,887 |  |          | 49,560 |  | 19.7  |   |  |   | 41,398
|Costs and Expenses |  |                             | 15,442 |                            | 10.6  |    |      |   | 13,963 |  |          | 46,451 |  | 16.4  |   |  |   | 39,891
|Operating Income   |  | $                           | 735    |                            | (20.4 | )% |      | $ | 924    |  | $        | 3,109  |  | 106.3 | % |  | $ | 1,507 



Engineering fees of
$18.8 million for the three-month period ended June 30, 2004 increased 9.3% as compared to $17.2 million for the same period in 2003. For the nine-month period ended June 30, 2004, engineering fees were $57.2 million compared to $48.0 million for
the same period in 2003, representing a 19.3% increase. These increases were attributable to several factors. One of these factors was the acquisition of Durham Technologies, Inc. (DTI) on December 1, 2002. DTI specializes in risk and
emergency management services for public sector clients, primarily federal and local government. Additional contributors to the increased engineering fees within this segment were profitable projects related to Hurricane Isabel in Virginia and the
fires in Southern California. Lastly, this segment has significantly increased its chargeability and made significant steps toward improving project and contract management.



Reported net earned revenue was $16.2 million for the three-month period ended June 30, 2004 as compared to $14.9 million
for the same period in 2003, representing an increase of 8.7%. For the nine-month period ended June 30, 2004, net earned revenue was $49.6 million compared to $41.4 million in 2003, representing a 19.7% increase. The increase directly related to the
increase in engineering fees from new projects and from the acquisition of DTI. In addition, the change in net earned revenue is affected by the fluctuation in direct expenses. Direct expenses consist of out-of-pocket expenses related to the
delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and subcontractor expenses. Direct expenses were $2.6 million during the three-month period ended June 30, 2004 as compared to $2.3 million for the same period
in 2003, representing an increase of 13.4%. For the nine-month period ended June 30, 2004, direct expenses were $7.7 million compared to $6.6 million in 2003, representing a 16.9% increase. For the three-month period ended June 30, 2004, direct
expenses, as a percent of net earned revenue, were 16.2% compared to 15.6% in 2003. For the nine-month period ended June 30, 2004, direct expenses, as a percentage of net earned revenue, were 15.5% compared to 15.9% in 2003. For both periods, the
increase in direct expenses is directly related to the increased use of sub-consultants as a result of the increase in engineering fees.



Reported operating income was $735,000 for the three-month period ended June 30, 2004 as compared to $924,000 for the same period in 2003, representing a
decrease of 20.4%. For the nine-month period ended June 30, 2004, operating income was $3.1 million compared to $1.5 million in 2003, representing a 106.3% increase. Operating income, as a percentage of net earned revenue, was 4.5% for the three
months ended June 30, 2004 as compared to 6.2% for the same period in 2003. For the nine-month period ended June 30, 2004, operating income, as a percentage of net earned revenue, was 6.3% compared to 3.6% in 2003. The decrease in operating income
for the three-month period ending June 30, 2004 is due in part to lower chargeability when compared to the same quarter in 2003, as well as higher general and administrative costs. The increase in operating income and operating income as a
percentage



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of net earned revenue for the nine-month period ending June 30, 2004 is due to increased chargeability and improved
general and administrative cost control, allowing for a reduction in total costs and expenses as a percentage of net earned revenue. As chargeability increases, the Company is able to bill out more of its costs to clients, thereby improving its
profit margin.



Costs and expenses consist of direct salaries
that are chargeable to clients and general and administrative expenses. Direct salaries increased to $5.9 million for the three-month period ended June 30, 2004 from $5.5 million for the period ended June 30, 2003, representing a 6.3% increase.
For the nine-month period ended June 30, 2004, direct salaries were $17.8 million, an increase of 18.9% as compared to $15.0 million for the same period in 2003. Direct salaries as a percentage of net earned revenue, decreased from 37.0% for
the three-month period ended June 30, 2003 to 36.2% for the same period in 2004. For the nine-month periods, direct salaries as a percentage of net earned revenue decreased from 36.1% for the nine-month period ended June 30, 2003 to 35.9% for the
same period in 2004. This increase in direct salaries is a result of increased direct labor charges incurred to support the growth within the segment. Specifically, the nine-month period ended June 30, 2004 saw an increase in overall chargeability.



The other component of costs and expenses is general and
administrative expenses, which consists of indirect labor and other overhead costs incurred to run the Company. Indirect labor increased 15.6%, from $1.9 million for the three-month period ended June 30, 2003, to $2.2 million for the same
period in 2004. For the nine-month period ended June 30, 2004, indirect labor was $6.8 million as compared to $6.0 million for the same period in 2003, representing a 13.0% increase. Indirect labor, as a percentage of net earned revenue, increased
from 12.8% for the three-month period ended June 30, 2003, to 13.6% for the same period in 2004. For the nine-month period, indirect labor as a percentage of net earned revenue decreased from 14.6% in 2003 to 13.8% in 2004. The decrease in
indirect labor as a percentage of net earned revenue for the nine-month period is a result of the increased chargeability within this segment. As chargeability increases, direct labor increases and indirect labor decreases, as more of the technical
staffs time worked is being charged back to clients. The increase in indirect labor as a percentage of net earned revenue for the three-month period is a result of decreased chargeability during the period as compared to the same period in
2003.



Other overhead costs increased both during the
three-month and nine-month periods ended June 30, 2004. For the three-month period ended June 30, 2004, other overhead costs were $7.4 million, as compared to $6.5 million for the same period in 2003. For the nine-month period ended June 30,
2004, other overhead costs were $21.9 million, as compared to $18.9 million for the same period in 2003. The increase in other overhead costs was directly related to the growth in engineering fees, as well as to increases in medical and workers
compensation insurance accruals and increases in pay rates for employees for the new calendar year.



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Environmental



|                   |  |                             |        |                            |       |    |      |   |        |  |          |        |  |       |    |  |   |       
|------------------ |  | --------------------------- | ------ | -------------------------- | ----- | -- | ---- | - | ------ |  | -------- | ------ |  | ----- | -- |  | - | ------
|                   |  | Three months ended June 30, |        | Nine months ended June 30,
|                   |  | 2004                        |        | % Change                   |       |    | 2003 |   | 2004   |  | % Change |        |  | 2003 
|                   |  | (dollars in thousands)      |        | ( dollars in thousands)   
|Engineering Fees   |  | $                           | 27,781 |                            | (3.0  | )% |      | $ | 28,639 |  | $        | 81,875 |  | 3.6   | %  |  | $ | 79,013
|Direct Expenses    |  |                             | 5,471  |                            | (11.8 | )  |      |   | 6,206  |  |          | 15,399 |  | (11.2 | )  |  |   | 17,334
|Net Earned Revenue |  |                             | 22,310 |                            | (0.5  | )  |      |   | 22,433 |  |          | 66,476 |  | 7.8   |    |  |   | 61,679
|Costs and Expenses |  |                             | 20,212 |                            | (2.7  | )  |      |   | 20,770 |  |          | 61,611 |  | 8.7   |    |  |   | 56,694
|Operating Income   |  | $                           | 2,098  |                            | 26.1  | %  |      | $ | 1,663  |  | $        | 4,865  |  | (2.4  | )% |  | $ | 4,985 



Engineering fees of
$27.8 million for the three-month period ended June 30, 2004 decreased 3.0% as compared to $28.6 million for the same period in 2003. For the nine-month period ended June 30, 2004, engineering fees were $81.9 million compared to $79.0 million in
2003, representing a 3.6% increase. Engineering fees have remained stable in the environmental services market for the three and nine-month period compared to the prior periods. Chargeability has also remained stable.



Reported net earned revenue was $22.3 million during the three-month period
ended June 30, 2004 as compared to $22.4 million for the same period in 2003, representing a decrease of 0.5%. For the nine-month period ended June 30, 2004, net earned revenue was $66.5 million compared to $61.7 million in 2003, representing a 7.8%
increase. The increase in net earned revenue for the nine-month period related to the increases in engineering fees as well as the reduction in direct expenses. Direct expenses consist of out-of-pocket expenses related to the delivery of services
such as blueprints, reproductions, CADD/computer charges, and travel and subcontractor expenses. Direct expenses were $5.5 million during the three-month period ended June 30, 2004 as compared to $6.2 million for the same period in 2003,
representing a decrease of 11.8%. For the nine-month period ended June 30, 2004, direct expenses were $15.4 million compared to $17.3 million in 2003, representing an 11.2% decrease. Direct expenses, as a percentage of net earned revenue, were 24.5%
for the three-month period ended June 30, 2004 as compared to 27.7% for the same period in 2003. For the nine-month period ended June 30, 2004, direct expenses, as a percentage of net earned revenue, were 23.2% compared to 28.1% in 2003. The
decrease in direct expenses and direct expenses, as a percentage of net earned revenue, was due primarily to a return to normal direct expense spending in 2004, as compared to 2003. In 2003, direct expenses were larger than normal due to a video
inspection sub-consultant that was being utilized to assist with the beginning stages of a job in California. The greatest volume of the video work was needed in the early stages of the job during the three-month period ended December 31, 2002.
Since then, the volume of video work has decreased, thereby reducing direct expenses.



Reported operating income was $2.1 million for the three-month period ended June 30, 2004 as compared to $1.7 million for the same period in 2003, representing an increase of 26.1%. For the nine-month period ended
June 30, 2004, operating income was $4.9 million compared to $5.0 million in 2003, representing a 2.4% decrease. The nine month operating income includes $800,000 of revenue received for work done in the prior year that had a contingency placed on
it. Operating income as a percentage of net earned revenue was 9.4% for the three-month period ended June 30, 2004 as compared to 7.4% for the same period in 2003. The increase in operating income and operating income as a percentage of net earned
revenue for the three-month period is primarily related to a decrease in indirect costs and other overhead costs described below. For the nine-month period ended June 30, 2004, operating income, as a



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percentage of net earned revenue was 7.3% compared to 8.1% in 2003. The decrease in operating income and operating
income, as a percentage of net earned revenue, for the nine-month period is primarily due to a greater increase in costs and expenses than in net earned revenue during 2004.



Costs and expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. Direct
salaries remained at $7.5 million for the three-month period ended June 30, 2003 and 2004. For the nine-month period ended June 30, 2004, direct salaries increased 9.0%, to $22.3 million, from $20.5 million for the same period in 2003. Direct
salaries, as a percentage of net earned revenue, increased from 33.6% for the three-month period ended June 30, 2003 to 33.7% for the same period in 2004. Direct salaries, as a percentage of net earned revenue, increased from 33.2% for the
nine-month period ended June 30, 2003 to 33.6% for the same period in 2004. The increase in direct salaries and direct salaries, as a percentage of net earned revenue, is directly related to the growth in engineering fees. The increase in direct
salaries is greater than the growth in revenue is a result of increases in salaries of technical personnel due to several highly competitive markets.



The other component of costs and expenses, general and administrative expenses, consists of indirect labor and other overhead costs incurred to run the
Company. Indirect labor decreased 8.2% from $3.4 million for the three-month period ended June 30, 2003 to $3.1 million for the same period in 2004. For the nine-month periods, indirect labor increased 9.2% from $9.5 million in 2003 to $10.4 million
in 2004. As a percentage of net earned revenue, indirect labor was 14.0% for the three-month period ended June 30, 2004, as compared to 15.2% for the same period in 2003. For the nine-month period ended June 30, 2004, indirect labor, as a percentage
of net earned revenue, was 15.6% as compared to 15.4% for the same period in 2003. The decrease in indirect labor and indirect labor, as a percentage of net earned revenue, for the three-month period is due to a slight increase in chargeability
combined with a 4% reduction in staff.



Other overhead costs
decreased 2.7%, from $9.8 million during the three-month period ended June 30, 2003 to $9.6 million for the same period in 2004. For the nine-month period ended June 30, 2004, other overhead costs were $28.9 million, representing an 8.2% increase,
as compared to $26.7 million for the same period in 2003. As a percentage of net earned revenue, other overhead costs decreased during the three-month period from 43.8% during 2003 to 42.9% during 2004. The decrease in other overhead costs for the
three-month period was related to the decrease in engineering fees and due to a focus on cost control by the segment part of which was to reduce non-productive headcount. The increase in other overhead costs for the nine-month period was directly
related to annual increases in pay rates and increases in medical plan insurance accruals.



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##### Table of Contents

Construction Management



|                   |  |                             |        |                            |      |   |      |   |        |  |          |        |  |      |   |  |   |       
|------------------ |  | --------------------------- | ------ | -------------------------- | ---- | - | ---- | - | ------ |  | -------- | ------ |  | ---- | - |  | - | ------
|                   |  | Three months ended June 30, |        | Nine months ended June 30,
|                   |  | 2004                        |        | % Change                   |      |   | 2003 |   | 2004   |  | % Change |        |  | 2003
|                   |  | (dollars in thousands)      |        | (dollars in thousands)    
|Engineering Fees   |  | $                           | 19,955 |                            | 31.6 | % |      | $ | 15,165 |  | $        | 55,585 |  | 32.4 | % |  | $ | 41,980
|Direct Expenses    |  |                             | 5,108  |                            | 38.1 |   |      |   | 3,698  |  |          | 13,761 |  | 27.7 |   |  |   | 10,778
|Net Earned Revenue |  |                             | 14,847 |                            | 29.5 |   |      |   | 11,467 |  |          | 41,824 |  | 34.0 |   |  |   | 31,202
|Costs and Expenses |  |                             | 12,865 |                            | 31.5 |   |      |   | 9,785  |  |          | 36,537 |  | 33.5 |   |  |   | 27,369
|Operating Income   |  | $                           | 1,982  |                            | 17.9 | % |      | $ | 1,682  |  | $        | 5,287  |  | 37.9 |   |  | $ | 3,833 



Engineering fees of $20.0 million for
the three-month period ended June 30, 2004 increased 31.6% as compared to $15.2 million for the same period in 2003. For the nine-month period ended June 30, 2004, engineering fees were $55.6 million compared to $42.0 million in 2003, representing a
32.4% increase. Higher volumes from renewed strength in the construction services market, engineering fees from new projects from existing clients, primarily in the Texas office with the Texas Department of Transportation Turnpike project, and
increased chargeability were the primary reasons for the increase during 2004.



Reported net earned revenue was $14.8 million during the three-month period ended June 30, 2004 as compared to $11.5 million for the same period in 2003, representing an increase of 29.5%. For the nine-month period
ended June 30, 2004, net earned revenue was $41.8 million compared to $31.2 million in 2003, representing a 34.0% increase. The increase in net earned revenue was directly related to the growth in engineering fees. In addition, the change in net
earned revenue is affected by the fluctuation in direct expenses. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and subcontractor expenses.
Direct expenses, as a percentage of net earned revenue, were 34.4% for the three-month period ended June 30, 2004 as compared to 32.2% for the same period in 2003. For the nine-month period ended June 30, 2004, direct expenses, as a percentage of
net earned revenue, were 32.9% as compared to 34.5% for the same period in 2003. The increase in direct expenses is due to the increased use of sub-consultants.



Reported operating income was $2.0 million for the three-month period ended June 30, 2004 as compared to $1.7 million for the same period in 2003,
representing an increase of 17.9%. For the nine-month period ended June 30, 2004, operating income was $5.3 million compared to $3.8 million for the same period in 2003, representing a 37.9% increase. Operating income, as a percentage of net earned
revenue, was 13.4% for the three-month period ended June 30, 2004 as compared to 14.7% for the same period in 2003. For the nine-month period ended June 30, 2004, operating income, as a percentage of net earned revenue, was 12.6% as compared to
12.3% for the same period in 2003. The increase in operating income and operating income, as a percentage of net earned revenue, is due to improved chargeability, which leads to improved profitability since more labor costs are being charged to
clients, and improved control of costs and expenses.



Costs and
expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. Direct salaries increased 30.1%, from $4.7 million, or 40.9% of net earned revenue, for the three-month period ended June 30, 2003 to $6.1
million, or 41.1% of net earned revenue, for the same period in 2004. For the nine-month period ended June 30, 2004, direct salaries increased



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36.2% to $17.1 million, or 40.8% of net earned revenue, from $12.5 million, or 40.2% of net earned revenue, for the same
period in 2003. The increase in direct salaries and direct salaries, as a percentage of net earned revenue, was directly related to the growth in engineering fees and increased chargeability, as mentioned above.



The other component of costs and expenses is general and administrative
expenses, which consists of indirect labor and other overhead costs incurred to run the Company. Indirect labor increased 23.3% from $1.2 million for the three-month period ended June 30, 2003 to $1.4 million for the same period in 2004. For
the nine-month periods, indirect labor increased 20.2% from $3.7 million in 2003 to $4.4 in 2004. Although indirect labor increased, as a percentage of net earned revenue, these costs decreased for both the three-month and nine-month periods ended
June 30, 2004 as compared with 2003. The decrease in indirect salaries, as a percentage of net earned revenue, was primarily due to the improvements made in chargeability as a result of close attention being paid to escalating the utilization of
this segments technical professionals. Other overhead costs increased 35.6%, from $3.9 million during the three-month period ended June 30, 2003 to $5.3 million for the same period in 2004. For the nine-month period ended June 30, 2004, other
overhead costs were $15.1 million, representing a 34.9% increase compared to $11.2 million for the same period in 2003. The increase in other overhead costs is due to annual increases in pay rates and medical plan insurance accruals, as well as
an increase in personnel to support the growth in engineering fees.



Consolidated Results



Engineering fees:



The three-month period ended June 30, 2004 saw an 8.8% increase in
engineering fees, as compared to the same period in 2003. The nine-month period ended June 30, 2004 saw a 13.8% increase in engineering fees, as compared to the same period in 2003. The three small acquisitions described below, as well as new
projects were the primary contributors to the growth in engineering fees. Additionally, there was an increase in the number of employees which were primarily of technical professionals, whose billable labor gets charged back to clients, thereby
increasing the amount of fees earned by the Company. The acquisitions of Durham Technologies, Inc. (DTI) on December 1, 2002, Welker & Associates, Inc. (Welker) on March 19, 2003 and TriLine Associates, Inc. on June 1,
2004 also contributed to the increase in engineering fees. In addition, all four of the Companys segments experienced increased volumes in backlog for the three and nine-month periods ended June 30, 2004, as compared to the same period in
2003.



Other income (expenses):



Other income and expense primarily consists of interest and dividend income
and interest expense. Total other income (expense) was ($68,000) and $178,000 for the three-month periods ended June 30, 2004 and 2003, respectively. For the nine-month periods ended June 30, 2004 and 2003, total other income (expense) were $244,000
and $80,000, respectively. The decrease in other income for the three-month period compared to the prior year is due to the fact that the prior year amount included a gain on the sale of real estate. The increase in other income for the nine-month
period is due to real estate commissions the Company receives when the Companys internal real estate professional represents the Company when obtaining new leased properties and gains on the sale of fixed assets.



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Net Income:



Net income was $4.4 million and $5.7 million for the three-month periods ended June 30, 2004 and 2003. For the nine-month period ended June 30, 2004, net
income was $12.7 million as compared to $13.3 million for the same period in 2003. The percentage of net income to net earned revenue decreased from 6.9% for the three-month period ended June 30, 2003 to 5.0% for the same period in 2004. For the
nine-month period ended June 30, 2004, the percentage of net income to net earned revenue was 5.0% as compared to 5.9% for the same period in 2003. The decrease in 2004 was primarily a result of an increased effective tax rate for the nine-month
period June 30, 2004 and an increase in general and administrative costs due to annual increases in pay rates, increases in the accrual of insurance expenses related to our medical plan and a charge of $1.8 million for an errors and omissions claim.



Income Taxes:



The income tax provision was $8.8 million and $6.9 million, or an effective
tax rate of 41.0% and 34.0%, for the nine-month periods ended June 30, 2004 and 2003, respectively. The increase in the effective tax rate in 2004 was primarily due to the increase in the valuation allowance for the deferred taxes related to
research and development tax credit carry-forwards. These research and development tax credit carry-forwards, which expire beginning 2017 through 2022, were approximately $8.4 million and $10.3 million as of June 30, 2004 and September 30, 2003,
respectively.



For the past several years, the Company
has generated research and development tax credits related to certain qualifying costs. The qualifying costs relate primarily to the Companys project costs which involved technical uncertainty. These research and development costs were
incurred by the Company in the course of providing services under generally long-term client projects, thereby creating costs associated with recognizable revenue under the project. Because the Company has been unable to utilize the entire amount of
research and development tax credits it has generated each year, the balance sheet reflects a deferred tax asset of $4.0 million and $7.1 million at June 30, 2004 and September 30, 2003, respectively, for the unused credit carryforward. In addition,
because of the uncertainty associated to the ability of the Company to utilize these credits in the future, a valuation allowance of $3.3 million and $2.6 million at June 30, 2004 and September 30, 2003, respectively, has been provided for against
this deferred tax asset.



Our effective tax rate is based on
expected income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions. We
establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged. We adjust these reserves in light of changing facts and circumstances, such as the
progress of a tax audit or current developments in tax law. For that matter, with respect to certain credits for increasing research activities that have been utilized to reduce our income taxes payable reported on tax returns open for examination,
we have recorded a reserve of approximately $3.8 million as of June 30, 2004.



A number of years may elapse before a particular matter, for which we have established a reserve, is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. The
Company is not currently under audit by the Internal Revenue Service or any other jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our reserves reflect
the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require use of our cash. Favorable resolution would be recognized as a reduction to our effective tax rate in the year of resolution. Our tax
reserves are presented in the balance sheet within other liabilities.



Liquidity and Capital Resources



Cash Flows from Operating
Activities



Net cash provided by operating activities totaled $20.7 million for
the nine months ended June 30, 2004 as compared to net cash provided by operating activities of $13.9 million for the same period in 2003. The primary sources of net cash provided from operating activities was net income adjusted for non-cash items
including the increase in the valuation allowance for deferred taxes, offset by increases in other current assets and other liabilities, and decreases in accounts payable and accrued expenses.



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Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our
net income. We have not previously paid cash dividends on our common stock and have no present intention of paying cash dividends on our common stock in the foreseeable future. All earnings are retained for investment in our business.



Approximately 90% of our revenues are billed on a monthly basis. The
remaining amounts are billed when we reach certain stages of completion as specified in the contract. Payment terms for accounts receivable and unbilled fees, when billed, are net 30 days. The unbilled fees account increased $1.3 million from $39.9
million at September 30, 2003 to $41.2 million at June 30, 2004. The number of days outstanding for unbilled fees was 35 days at June 30, 2004 and 37 days at September 30, 2003. By comparison, according to PSMJ Resources, Inc., the average days
outstanding for unbilled fees for design firms of comparable size was 27.8 days in 2004 and 27.9 days in 2003.



Accounts receivable remained constant at $53.0 million at June 30, 2004 and September 30, 2003. The allowance for doubtful accounts also remained constant
at $1.1 million at June 30, 2004 and at September 30, 2003. The number of days sales outstanding for accounts receivable was approximately 45 days at June 30, 2004 and 46 days at September 30, 2003. According to PSMJ Resources, Inc., a
marketing research company, the average days sales accounts receivables for design firms of comparable size to us was 68.7 days in 2004 and 75.1 days in 2003.



Cash Flows from Investing Activities



Net cash used in investing activities was $12.6 million for the nine months ended June 30, 2004 as compared to $10.4 million for the same period in 2003.
Investing activity typically consists of fixed asset purchases, such as survey equipment, computer equipment, furniture and leasehold improvements and acquisitions.



On June 1, 2004, the Company acquired 100% of the stock of TriLine Associates, Inc. for $3.7 million, net of cash acquired.
TriLine contributes to the Companys goal of enhancing its presence in the greater Pittsburgh area and the state of Pennsylvania. TriLine specializes in transportation, geotechnical and environmental services.



On December 1, 2002, the Company acquired 100% of the stock of Durham
Technologies, Inc. (DTI) for $1.5 million, net of cash acquired. The acquisition of DTI contributes to the Companys goal of enhancing its presence in the growing Emergency Management Services market. DTIs area of specialty
includes risk management and risk assessment for public sector clients, primarily Federal. The acquisition is accounted for using the purchase method of accounting, and the results of operations are included from the respective date of acquisition.
During the three-month period ended June 30, 2004, the Company made additional earn-out payments of $1.2 million related to the acquisition.



In addition, on March 19, 2003, the Company acquired 100% of the stock of Welker & Associates, Inc. (Welker) for $3.6 million in cash and
$400,000 in restricted stock, totaling a purchase price of $4.0 million. Welker contributes to the Companys goal of enhancing its presence in the growing Atlanta market. Welkers areas of specialty include water, wastewater and
storm-water management for Georgias local governments.



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Cash Flows from Financing Activities



Net cash used in financing activities for the nine months ended June 30, 2004 was $10.8 million, as compared to $2.1 million
for the same period in 2003. The increase in cash used in financing activities is primarily attributable to a reduction in net borrowings under the line of credit and a reduction in net purchases of common stock.



Capital Resources



As of June 30, 2004, the Company had a $58 million revolving line of credit
agreement, inclusive of $3 million in letters of credit, with a bank. On May 6, 2003, this agreement was amended to increase the maximum aggregate principal amount from $37 million to $55 million. All other terms of the agreement remain the same.
The revolving line of credit expires June 30, 2005. The interest rate (1.87% and 1.62% at June 30, 2004 and September 30, 2003, respectively) on the revolving line of credit ranges from LIBOR plus 50 basis points to prime minus 125 basis points if
our funded debt average ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 and 3.0. The amounts outstanding under the revolving line of credit
were $3.8 million and $9.2 million as of June 30, 2004 and September 30, 2003, respectively. The revolving line of credit is collateralized by substantially all of our assets.



Our capital expenditures are generally for purchases of property and equipment. The Company spent $7.3 million and
$5.7 million on such expenditures for the nine months ended June 30, 2004 and 2003. The Company spent $2.2 million and $1.5 million on such expenditures for the three months ended June 30, 2004 and 2003, respectively.



As the Company often does each year, a stock offering took place during the
three-month period ended March 31, 2004. During this offering, 3,000,000 shares of the Companys common stock was made available for sale to all full time employees of the Company, pursuant to The PBSJ Corporation Stock Ownership Plan.



We believe that our existing financial resources, together
with our cash flow from operations and availability under our revolving line of credit, will provide sufficient capital to fund our operations through at lease June 2005.



Inflation



The rate of inflation has not had a material impact on our operations. Moreover, if inflation remains at its recent levels, it is not expected to have a
material impact on our operations for the foreseeable future.



Recent
Accounting Pronouncements



In December 2003, the FASB
issued Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46R), which replaced FIN 46. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling
interest in an entity through means other than voting rights. This interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest
entitys activities or is entitled to receive a majority of the entitys residual returns or both. The interpretation also requires disclosures about variable interest entities that the Company is not required to consolidate



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but in which it has a significant variable interest. The Company is required to adopt FIN 46R by the beginning of Fiscal
2005. Although the Company has not completed its initial evaluation of FIN 46R, the adoption is not expected to have a material impact on the Companys results of operations or financial condition.



In December 2003, the Securities and Exchange Commission staff
(SEC) issued Staff Accounting Bulletin No. 104 (SAB 104), Revenue Recognition, which supercedes Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements. The
primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements and to reflect the accounting guidance issued in Emerging Issues Task Force 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables. Additionally, SAB 104 rescinds the SECs Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101. Selected portions
of the FAQ have been incorporated into SAB 104. The adoption of SAB 104 did not have an effect on our revenue recognition policy or revenues recorded.



In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments. The objective of this Issue is to provide guidance for identifying impaired investments. EITF 03-1 also provides new disclosure requirements for investments that are deemed to be
temporarily impaired. The accounting provisions of EITF 03-1 are effective for all reporting periods beginning after June 15, 2004, while the disclosure requirements are effective only for annual periods ending after June 15, 2004. The company has
evaluated the impact of the adoption of EITF 03-1 and does not believe that impact will be significant to the companys overall results of operations or financial position.



Critical Accounting Policies



In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial
position in the preparation of financial statements in conformity with generally accepted accounting principles. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following
discussion addresses our most critical accounting policies. These policies require management to exercise judgments that are often difficult, subjective and complex due to the necessity of estimating the effect of matters that are inherently
uncertain.



Revenue Recognition



We earn our revenues for the various types of services we provide through
cost-plus, time-and-materials, fixed price contracts, and contracts which combine any of these methods. In the course of providing its services, the Company routinely incurs direct expenses such as sub-contracts for services. In addition, the
Company also includes pass-through costs on cost-plus contracts, which are customer-reimbursable materials, equipment and sub-contractor costs when the Company determines that it is responsible for engineering specification, procurement and
management of such cost components on behalf of the customer. These direct expenses are principally passed through to the Companys clients with minimal or no mark-up and, in accordance with industry practice, are included in the Companys
gross revenues. Accordingly, the Company also reports net earned revenue, which is gross revenue less direct expenses. For cost-plus and time and material contracts, the Company reports fees earned based on actual labor multiplied by contractual
rates or multipliers. For fixed-price contracts, the Company reports fees earned on the percentage of completion basis, which includes revenue on the basis of costs incurred to date as a percentage of the total estimated costs.



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If we do not accurately estimate the resources required or the scope of the work to be performed, or we
do not manage our projects properly within the planned periods of time or we do not meet our clients expectations under the contracts, then future margins may be significantly and negatively affected or losses on existing contracts may need to
be recognized. Any such resulting reductions in margins or contract losses could be material to our results of operations.



Income Taxes



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



We must assess the likelihood that we will be able to recover our deferred
tax assets. If recovery is not likely, we must increase our tax provision by recording a valuation allowance for the deferred tax assets that we estimate will not ultimately be recoverable. As of June 30, 2004 and September 30, 2003, we reported a
valuation allowance of $4.2 million and $2.6 million, respectively.



In addition, the calculation of our tax assets and liabilities involves dealing with uncertainties in the application of complex tax regulations. We may recognize a tax asset or reduce taxes payable for anticipated state or federal tax
credits, such as those relating to the research and development tax credit.



Contingencies



Management estimates are
inherent in the assessment of the Companys exposure to litigation and other legal claims and contingencies. Significant management judgment and reliance on third party experts are utilized in determining probable and or reasonably estimable
amounts to be recorded or disclosed in the Companys financial statements. The results of any changes in accounting estimates are reflected in the financial statements of the period in which the changes are determined.



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Item 3. Quantitative and Qualitative Disclosures about Market Risk



We believe that our exposure to market risks is minimal. We do not hold market-risk sensitive instruments for trading purposes. We entered into one
derivative financial instrument, a swap agreement, to hedge cash flows related to the LIBOR interest rate risk. Both at inception of the hedge and on an ongoing basis, we assume there is no ineffectiveness in the hedging relationship of interest
rate risk involving interest-bearing debt and the interest-rate swap. The effectiveness of the hedge is evaluated on a quarterly basis. Based on a hypothetical 1% point increase in the period ending market interest rate as of June 30, 2004, the
change in the fair value of this liability would be approximately $200,000. We believe this instrument will be highly effective in the hedging of cash flows. We hold no other financial instruments or derivative commodity instruments to hedge any
market risk, nor do we currently plan to employ them in the near future.



The interest rate (1.87% and 1.62% at June 30, 2004 and September 30, 2003, respectively) on our revolving line of credit and term loan ranges from LIBOR plus 50 basis points to prime minus 125 basis points if our
funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 to 3.0. The Company mitigates interest rate risk by continually
monitoring interest rates and electing the lower of the LIBOR or prime rate option available under the line of credit or term loan. As of June 30, 2004, the fair value of the debt is consistent with the outstanding principal balance.



The interest rates under our revolving line of credit and term loan are
variable. To the extent that we have borrowings outstanding, there may be market risk relating to the amount of such borrowings, however, our exposure is minimal due to the short-term nature of these borrowings.



Item 4. Controls and Procedures



Evaluation of disclosure controls and procedures:



Our management, with the participation of John B. Zumwalt, III, our Chief Executive Officer, and W. Scott DeLoach, our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)), as of the end of the period covered by this quarterly report and each has concluded that our disclosure controls and procedures were effective in
ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions
rules and forms.



Changes in internal control over financial
reporting:



No significant changes in the Companys
internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses, were made as a result of
the evaluation.



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PART II



Item 1. Legal Proceedings



We are
party to various legal proceedings arising from our operations. We believe that we have sufficient professional liability insurance such that the outcome of any of these proceedings, individually and in the aggregate, will not have a material
adverse effect on our financial position or results of operations. However, if our insurance company were to deny coverage for a significant judgment or if a judgment were entered against us in an amount greater than our coverage, it could adversely
affect our results of operations. Based upon our previous experience with claims and lawsuits, we believe our insurance coverage is adequate.



Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities



|         |  |                                                                       |  |                            |       |                                                                                |     |                                                                         |    
|-------- |  | --------------------------------------------------------------------- |  | -------------------------- | ----- | ------------------------------------------------------------------------------ | --- | ----------------------------------------------------------------------- | ---
|        
|         |  | Issuer Purchases of Equity Securities for Quarter Ended June 30, 2004
|Period   |  | Total Number Of Shares Bought Back By the Company                     |  | AveragePricePaid per Share |       | Total Number of Shares Purchased as Part ofPublicly Announced Plansor Programs |     | Maximum Numberof shares That Maybe Purchased Under thePlans or Programs
|April-04 |  | 13,580                                                                |  | $                          | 22.50 |                                                                                | N/A |                                                                         | N/A
|         |  |                                                                       |  |                           
|May-04   |  | 50,287                                                                |  | $                          | 22.50 |                                                                                | N/A |                                                                         | N/A
|         |  |                                                                       |  |                           
|June-04  |  | 11,804                                                                |  | $                          | 22.50 |                                                                                | N/A |                                                                         | N/A
|         |  |                                                                       |  |                            |       |                                                                                |     |                                                                         |    
|Total    |  | 75,671                                                                |  | $                          | 22.50 |                                                                                | N/A |                                                                         | N/A
|         |  |                                                                       |  |                            |       |                                                                                |     |                                                                         |    



Item 3. Defaults Upon Senior Securities



None.



Item 4. Submission of Matters to a Vote of Security Holders



None.



Item 5. Other Information



None.



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Item 6. Exhibits and Reports on Form 8-K



(a) Exhibits 



|               |  |                                                                                                                                                                                                                  
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                      
|               | 
|3.1            |  | Articles of Incorporation, as amended (previously filed as Exhibit 3.1 to the Registrants Form 10-Q filed with the Commission on February 13, 2004 and incorporated herein by
reference).                       
|               | 
|3.2            |  | Amended and Restated Corporate Bylaws dated February 1, 2004 (previously filed as Exhibit 3.2 to the Registrants Form 10-Q filed with the Commission on February 13, 2004 and
incorporated herein by reference).
|               | 
|31.1           |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                
|               | 
|31.2           |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                
|               | 
|31.3           |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                
|               | 
|32.1           |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 
|               | 
|32.2           |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 
|               | 
|32.3           |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 

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|* | Filed herewith
|- | --------------



(b) Reports on Form 8-K  None.



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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |                      |  |                                                                     
|---------------------- |  | -------------------- |  | --------------------------------------------------------------------
|                       |  | The PBSJ Corporation
|                       |  |                     
|Dated: August 13, 2004 |  | By                   |  | /s/ W. Scott DeLoach                                                
|                       |  |                      |  | W. Scott DeLoach                                                    
|                       |  |                      |  | Chief Financial Officer (Principal Financial and Accounting Officer)



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EXHIBIT INDEX



|               |  |                                                                                                                                                                                                                  
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                      
|3.1            |  | Articles of Incorporation, as amended (previously filed as Exhibit 3.1 to the Registrants Form 10-Q filed with the Commission on February 13, 2004 and incorporated herein by
reference).                       
|               | 
|3.2            |  | Amended and Restated Corporate Bylaws dated February 1, 2004 (previously filed as Exhibit 3.2 to the Registrants Form 10-Q filed with the Commission on February 13, 2004 and
incorporated herein by reference).
|               | 
|31.1           |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                
|               | 
|31.2           |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                
|               | 
|31.3           |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                
|               | 
|32.1           |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 
|               | 
|32.2           |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 
|               | 
|32.3           |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 

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|* | Filed herewith
|- | --------------