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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 March 31, 2006

OR



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

For the transition period from  to

Commission File Number 0-30911



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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.)

5300 West Cypress Street, Suite 200

Tampa, Florida 33607

(Address of principal executive offices)

(813) 282-7275

(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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

 ̈Large accelerated filer ̈Accelerated filer    x  Non-accelerated filer

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

As of April 30, 2007 there were 6,668,606 shares of Common Stock, $.00067 par value per share, outstanding. There is no public trading market for the
registrants common stock.



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##### Table of Contents

THE PBSJ CORPORATION

Form 10-Q

For the Quarterly Period Ended March, 31 2006

Table of Contents



|            |  |                                                                                       |  |     
|----------- |  | ------------------------------------------------------------------------------------- |  | ----
|Item Number |  | CAPTION                                                                               |  | PAGE
|PART 1:     |  | FINANCIAL INFORMATION                                                                 |  |     
|            |  |                                                                                      
|Item 1.     |  | Financial Statements                                                                  |  | 3   
|            |  |                                                                                      
|Item 2.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20  
|            |  |                                                                                      
|Item 3.     |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 44  
|            |  |                                                                                      
|Item 4.     |  | Controls and Procedures                                                               |  | 44  
|            |  |                                                                                      
|PART II:    |  | OTHER INFORMATION                                                                     |  |     
|            |  |                                                                                      
|Item 1.     |  | Legal proceedings                                                                     |  | 47  
|            |  |                                                                                      
|Item 1A.    |  | Risk Factors                                                                          |  | 50  
|            |  |                                                                                      
|Item 2.     |  | Issuer Purchases of Equity Securities by Issuer and Affiliated Purchasers             |  | 54  
|            |  |                                                                                      
|Item 3.     |  | Defaults Upon Senior Securities                                                       |  | 54  
|            |  |                                                                                      
|Item 4.     |  | Submission of Matters to a Vote of Security Holders                                   |  | 54  
|            |  |                                                                                      
|Item 5.     |  | Other Information                                                                     |  | 54  
|            |  |                                                                                      
|Item 6.     |  | Exhibits                                                                              |  | 54  
|            | 
|SIGNATURES  |  | 55                                                                                   



2



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##### Table of Contents

PART 1 FINANCIAL INFORMATION

Item 1. Financial Statements

THE PBSJ CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------------ | - | ------- | -
|(Dollars in thousands, except shares and per share amounts)                                                                                                                  |  | March 31, 2006 |         |   | September 30, 2005 |  
|Assets:                                                                                                                                                                      |  |                |         |   |                    |   |         |  
|Current Assets:                                                                                                                                                              |  |                |         |   |                    |   |         |  
|Cash and cash equivalents                                                                                                                                                    |  | $              | 20      |   |                    | $ | 22,556  |  
|Marketable securities at fair value                                                                                                                                          |  |                | 680     |   |                    |   | 636     |  
|Accounts receivable, net                                                                                                                                                     |  |                | 65,716  |   |                    |   | 67,493  |  
|Unbilled fees                                                                                                                                                                |  |                | 74,460  |   |                    |   | 69,658  |  
|Assets held for Sale                                                                                                                                                         |  |                | 8,648   |   |                    |   | 9,289   |  
|Shareholder subscription receivable                                                                                                                                          |  |                |        |   |                    |   | 4,276   |  
|Other current assets                                                                                                                                                         |  |                | 5,326   |   |                    |   | 2,039   |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Total current assets                                                                                                                                                         |  |                | 154,850 |   |                    |   | 175,947 |  
|Property and equipment, net                                                                                                                                                  |  |                | 37,084  |   |                    |   | 36,741  |  
|Cash surrender value of life insurance                                                                                                                                       |  |                | 9,601   |   |                    |   | 9,602   |  
|Deferred income taxes                                                                                                                                                        |  |                | 9,879   |   |                    |   | 4,817   |  
|Goodwill                                                                                                                                                                     |  |                | 17,777  |   |                    |   | 17,736  |  
|Intangible assets, net                                                                                                                                                       |  |                | 1,125   |   |                    |   | 1,820   |  
|Other assets                                                                                                                                                                 |  |                | 1,627   |   |                    |   | 4,984   |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Total assets                                                                                                                                                                 |  | $              | 231,943 |   |                    | $ | 251,647 |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Liabilities and Stockholders Equity:                                                                                                                                        |  |                |         |   |                    |   |         |  
|Current Liabilities:                                                                                                                                                         |  |                |         |   |                    |   |         |  
|Accounts payable and accrued expenses                                                                                                                                        |  | $              | 55,699  |   |                    | $ | 84,223  |  
|Liabilities related to assets held for sale                                                                                                                                  |  |                | 4,606   |   |                    |   | 4,627   |  
|Accrued reimbursement liability                                                                                                                                              |  |                | 39,253  |   |                    |   | 34,772  |  
|Current portion of long-term debt                                                                                                                                            |  |                | 512     |   |                    |   | 408     |  
|Current portion of capital lease obligations                                                                                                                                 |  |                | 274     |   |                    |   | 341     |  
|Accrued vacation                                                                                                                                                             |  |                | 10,308  |   |                    |   | 10,163  |  
|Billings in excess of costs                                                                                                                                                  |  |                | 3,997   |   |                    |   | 3,339   |  
|Deferred income taxes                                                                                                                                                        |  |                | 24,086  |   |                    |   | 7,568   |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Total current liabilities                                                                                                                                                    |  |                | 138,735 |   |                    |   | 145,441 |  
|Long-term debt, less current portion                                                                                                                                         |  |                | 7,170   |   |                    |   | 7,425   |  
|Capital leases, less current portion                                                                                                                                         |  |                | 677     |   |                    |   | 512     |  
|Deferred compensation                                                                                                                                                        |  |                | 12,363  |   |                    |   | 11,994  |  
|Other liabilities                                                                                                                                                            |  |                | 8,149   |   |                    |   | 8,443   |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Total liabilities                                                                                                                                                            |  |                | 167,094 |   |                    |   | 173,815 |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Stockholders Equity:                                                                                                                                                        |  |                |         |   |                    |   |         |  
|Common stock, par value $0.00067, 15,000,000 shares authorized, 7,092,618 and 7,720,527 shares issued and outstanding at March 31, 2006
and September 30, 2005, respectively |  |                | 5       |   |                    |   | 5       |  
|Retained earnings                                                                                                                                                            |  |                | 69,920  |   |                    |   | 82,991  |  
|Accumulated other comprehensive loss                                                                                                                                         |  |                | (1,908  | ) |                    |   | (1,957  | )
|Unearned compensation and other                                                                                                                                              |  |                | (3,168  | ) |                    |   | (3,207  | )
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Total stockholders equity                                                                                                                                                   |  |                | 64,849  |   |                    |   | 77,832  |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  
|Total liabilities and stockholders equity                                                                                                                                   |  | $              | 231,943 |   |                    | $ | 251,647 |  
|                                                                                                                                                                             |  |                |         |   |                    |   |         |  

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



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##### Table of Contents

THE PBSJ CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)



|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ---------------------------- | ------- | - | -------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                 |  | Three Months Ended March 31, |         |   | Six Months Ended March 31, |  
|(Dollars in thousands, except per share amounts)                 |  | 2006                         |         |   | 2005                       |   |         | 2006 |  |   | 2005    |  
|Earned revenue:                                                  |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Engineering fees                                                 |  | $                            | 133,751 |   |                            | $ | 122,993 |      |  | $ | 262,217 |   |  | $ | 250,610 |  
|Direct reimbursable expenses                                     |  |                              | 26,550  |   |                            |   | 26,755  |      |  |   | 50,324  |   |  |   | 61,881  |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Net earned revenue                                               |  |                              | 107,201 |   |                            |   | 96,238  |      |  |   | 211,893 |   |  |   | 188,729 |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Costs and expenses:                                              |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Direct salaries and direct costs                                 |  |                              | 40,617  |   |                            |   | 36,346  |      |  |   | 77,921  |   |  |   | 71,340  |  
|General and administrative expenses, including indirect salaries |  |                              | 61,299  |   |                            |   | 51,527  |      |  |   | 117,706 |   |  |   | 99,368  |  
|Misappropriation loss (recoveries), net                          |  |                              | (451    | ) |                            |   | 1,682   |      |  |   | (1,749  | ) |  |   | 3,636   |  
|Investigation and related costs                                  |  |                              | 3,335   |   |                            |   | 102     |      |  |   | 8,115   |   |  |   | 102     |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Total costs and expenses                                         |  |                              | 104,800 |   |                            |   | 89,657  |      |  |   | 201,993 |   |  |   | 174,446 |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                                 |  |                              | 2,401   |   |                            |   | 6,581   |      |  |   | 9,900   |   |  |   | 14,283  |  
|                                                                 |  |                              |         |  
|Other income (expenses):                                         |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Interest expense                                                 |  |                              | (484    | ) |                            |   | (510    | )    |  |   | (957    | ) |  |   | (1,025  | )
|Other, net                                                       |  |                              | 127     |   |                            |   | 24      |      |  |   | 263     |   |  |   | 79      |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Total other income (expenses)                                    |  |                              | (357    | ) |                            |   | (486    | )    |  |   | (694    | ) |  |   | (946    | )
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes                                       |  |                              | 2,044   |   |                            |   | 6,095   |      |  |   | 9,206   |   |  |   | 13,337  |  
|                                                                 |  |                              |         |  
|Provision for income taxes                                       |  |                              | 1,038   |   |                            |   | 2,606   |      |  |   | 4,672   |   |  |   | 5,703   |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                       |  | $                            | 1,006   |   |                            | $ | 3,489   |      |  | $ | 4,534   |   |  | $ | 7,634   |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Net income per share:                                            |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Basic                                                            |  | $                            | 0.15    |   |                            | $ | 0.48    |      |  | $ | 0.66    |   |  | $ | 1.04    |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Diluted                                                          |  | $                            | 0.14    |   |                            | $ | 0.45    |      |  | $ | 0.62    |   |  | $ | 0.98    |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Weighted average shares outstanding:                             |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Basic                                                            |  |                              | 6,776   |   |                            |   | 7,290   |      |  |   | 6,893   |   |  |   | 7,341   |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Diluted                                                          |  |                              | 7,247   |   |                            |   | 7,763   |      |  |   | 7,365   |   |  |   | 7,814   |  
|                                                                 |  |                              |         |   |                            |   |         |      |  |   |         |   |  |   |         |  

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



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##### Table of Contents

THE PBSJ CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)



|                                                                                            |  |                           |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                            |  | Six Months EndedMarch 31, |        
|(Dollars in thousands)                                                                      |  | 2006                      |         |   | 2005 |  
|Cash flows from operating activities:                                                       |  |                           |         |   |      |   |         |  
|Net income                                                                                  |  | $                         | 4,534   |   |      | $ | 7,634   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                           |         |   |      |   |         |  
|Increase (decrease) in cash surrender value of life insurance                               |  |                           | 371     |   |      |   | (376    | )
|Depreciation and amortization                                                               |  |                           | 5,282   |   |      |   | 5,088   |  
|Gain on sale of property and equipment                                                      |  |                           | (35     | ) |      |   | (12     | )
|Gain from shares recovered                                                                  |  |                           | (537    | ) |      |   |         |  
|Provision for bad debt and unbillable amounts                                               |  |                           | 309     |   |      |   | 40      |  
|Provision for deferred income taxes                                                         |  |                           | 11,424  |   |      |   | 8,782   |  
|Provision for and amortization of deferred compensation                                     |  |                           | 749     |   |      |   | 922     |  
|Change in operating assets and liabilities, net of acquisitions:                            |  |                           |         |   |      |   |         |  
|(Increase) decrease in accounts receivable                                                  |  |                           | 1,468   |   |      |   | (7,851  | )
|(Increase) decrease in unbilled fees and billings in excess of costs                        |  |                           | (4,144  | ) |      |   | 3,974   |  
|Decrease in assets held for sale                                                            |  |                           | 4,376   |   |      |   |        |  
|Increase in other current assets                                                            |  |                           | (3,287  | ) |      |   | (3,264  | )
|(Increase) decrease in other assets                                                         |  |                           | (380    | ) |      |   | (433    | )
|Decrease in accounts payable and accrued expenses                                           |  |                           | (30,146 | ) |      |   | (10,586 | )
|Decrease in liabilities of assets held for sale                                             |  |                           | (2,120  | ) |      |   |        |  
|Increase in accrued reimbursement liability                                                 |  |                           | 4,481   |   |      |   | 5,268   |  
|Increase in accrued vacation                                                                |  |                           | 145     |   |      |   | 354     |  
|Decrease in other liabilities                                                               |  |                           | 480     |   |      |   | (1,042  | )
|                                                                                            |  |                           |         |   |      |   |         |  
|Net cash (used in) provided by operating activities                                         |  |                           | (7,030  | ) |      |   | 8,498   |  
|                                                                                            |  |                           |         |   |      |   |         |  
|Cash flows from investing activities:                                                       |  |                           |         |   |      |   |         |  
|Investment in life insurance policies                                                       |  |                           | (370    | ) |      |   | (280    | )
|Acquisitions and purchase price adjustments, net of cash acquired                           |  |                           | (40     | ) |      |   | (185    | )
|Purchases of marketable securities                                                          |  |                           | (21     | ) |      |   | (40     | )
|Proceeds from the sale of property and equipment                                            |  |                           | 34      |   |      |   | 16      |  
|Purchase of property and equipment                                                          |  |                           | (4,624  | ) |      |   | (4,020  | )
|                                                                                            |  |                           |         |   |      |   |         |  
|Net cash used in investing activities                                                       |  |                           | (5,021  | ) |      |   | (4,509  | )
|                                                                                            |  |                           |         |   |      |   |         |  
|Cash flows from financing activities:                                                       |  |                           |         |   |      |   |         |  
|Borrowings under line of credit                                                             |  |                           | 7,766   |   |      |   | 76,292  |  
|Payments under line of credit                                                               |  |                           | (7,766  | ) |      |   | (73,466 | )
|Principal payments under notes and mortgage payable                                         |  |                           | (152    | ) |      |   | 13      |  
|Principal payments under capital lease obligations                                          |  |                           | (206    | ) |      |   | (320    | )
|Common stock:                                                                               |  |                           |         |   |      |   |         |  
|Proceeds from sale                                                                          |  |                           | 4,276   |   |      |   | 121     |  
|Payments for repurchase                                                                     |  |                           | (14,403 | ) |      |   | (8,451  | )
|                                                                                            |  |                           |         |   |      |   |         |  
|Net cash used in financing activities                                                       |  |                           | (10,485 | ) |      |   | (5,811  | )
|                                                                                            |  |                           |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                   |  |                           | (22,536 | ) |      |   | (1,822  | )
|Cash and cash equivalents at beginning of period                                            |  |                           | 22,556  |   |      |   | 1,910   |  
|                                                                                            |  |                           |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $                         | 20      |   |      | $ | 88      |  
|                                                                                            |  |                           |         |   |      |   |         |  
|Non-cash investing and financing activities:                                                |  |                           |         |   |      |   |         |  
|Property and equipment financed under capital leases                                        |  | $                         | 331     |   |      | $ | 236     |  
|Change in fair value of marketable securities available for sale                            |  | $                         | 23      |   |      | $ | 26      |  
|Payable to former shareholders for repurchase of stock                                      |  | $                         | 1,621   |   |      | $ |        |  
|Notes payable issued in exchange for shares                                                 |  | $                         | 1,335   |   |      | $ |        |  
|Cash paid for interest                                                                      |  | $                         | 99      |   |      | $ | 126     |  
|Cash paid for income taxes                                                                  |  | $                         | 2,602   |   |      | $ | 1,936   |  

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



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##### Table of Contents

The PBSJ Corporation

Notes to Condensed Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Basis of Presentation

The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the interim reporting rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and
regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the interim period contain all adjustments, which
are of a normal and recurring nature, necessary to present fairly the financial position of The PBSJ Corporation (the Company) as of March 31, 2006 and the results of operations and cash flows for the periods presented. The
accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements included in the Companys Form 10-K for the year ended
September 30, 2005. The accounting policies followed for interim financial reporting are the same as disclosed in Note 1 of the notes to the consolidated financial statements included in the Companys Annual Report on Form 10-K. The
results of operations for the three-month and six-month periods ended March 31, 2006 and 2005 are not necessarily indicative of the results to be expected for the fiscal year.

Basic and Diluted Earnings Per Share

Basic net income per share has been computed by dividing net
income by the weighted average number of common shares outstanding. Diluted net income 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
by the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential common shares include all outstanding restricted stock awards.

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



|                                              |  |                             |  |                           |  |       |  |      
|--------------------------------------------- |  | --------------------------- |  | ------------------------- |  | ----- |  | -----
|                                              |  | Three Months EndedMarch 31, |  | Six Months EndedMarch 31,
|(Shares in thousands)                         |  | 2006                        |  | 2005                      |  | 2006  |  | 2005 
|Weighted average shares outstanding - Basic   |  | 6,776                       |  | 7,290                     |  | 6,893 |  | 7,341
|Effect of dilutive unvested restricted stock  |  | 471                         |  | 473                       |  | 472   |  | 473  
|                                              |  |                             |  |                           |  |       |  |      
|Weighted average shares outstanding - Diluted |  | 7,247                       |  | 7,763                     |  | 7,365 |  | 7,814
|                                              |  |                             |  |                           |  |       |  |      

Revenue Recognition

The Company recognizes engineering fees from different types of services under a variety of different types of contracts. In recognizing engineering fees, the Company evaluates each contractual arrangement to
determine the applicable authoritative accounting methodology to apply to each contract.

In the course of providing its services, the
Company principally uses three types of contracts from which it earns revenue: cost-plus contract, time and materials contract and fixed price contract.



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##### Table of Contents

Cost-plus Contracts. Under Cost-plus contracts, the Company charges clients negotiated rates based on
direct and indirect costs in addition to a profit component. The Company recognizes engineering fees at the time services are performed. The amount of revenue is based on its actual labor costs incurred plus a recovery of indirect costs and a profit
component. In negotiating cost-plus contracts, the Company estimates direct labor costs and indirect costs and then adds a profit component, which is a percentage of total recoverable costs, to arrive at a total dollar value for the contract.
Indirect expenses are recorded as incurred and are allocated to contracts. If the actual labor costs incurred are less than estimated, the revenues from a project will be less than estimated. If the actual labor costs incurred plus a recovery of
indirect costs and profit exceed the initial negotiated total contract amount, the Company must obtain a contract modification to receive payment for such overage. If a contract modification or change order is not approved by our client, the Company
may be able to pursue a claim to receive payment. Engineering fees from claims are recognized when collected.

Time and Materials
Contracts. The Company recognizes engineering fees for Time and Materials contracts at the time services are performed. The amount of revenue is based on the actual number of hours it spends on the projects, multiplied by contractual rates or
multipliers. In addition, the Companys clients reimburse it for its actual out-of-pocket costs of materials and other direct reimbursable expenses that it incurs in connection with its performance under these contracts.

Fixed Price Contracts. For Fixed Price Contracts, the Company recognizes engineering fees based on the percentage-of-completion method whereby fees are
recognized based on the ratio of actual cost of work performed to date to the current total estimated contract costs (generally using the cost-to-cost method). In making such estimates, judgments are required to determine potential delays or changes
in schedules, the costs of materials and labor, liability claims, contract disputes, or achievement of specified performance goals. At the time a loss on a contract becomes evident and estimable, the Company records the entire amount of the
estimated loss.

Change orders that result from modification of an original contract are taken into consideration for revenue recognition
when it results in a change of total contract value and is approved by our clients. Engineering fees relating to unapproved change orders are recognized when collected.

The Companys federal government contracts are subject to the Federal Acquisition Regulations (FAR). These regulations are partially incorporated into many local and state agency contracts. The FAR
limits the recovery of certain specified indirect costs on contracts subject to such regulations. In accordance with industry practice, most of the Companys federal government contracts are subject to termination at the discretion of the
client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the termination date.

Contracts
that fall under FAR are generally cost-plus contracts and are subject to audit by the government, primarily the Defense Contract Audit Agency (DCAA), which reviews the Companys overhead rates, operating systems and costs proposals.
As a result of its audits, the DCAA may disallow costs if it determines that the Company has accounted for such costs in a manner inconsistent with generally accepted cost accounting standards.

Direct Reimbursable Expenses

Direct reimbursable
expenses are primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for procurement and management of such
cost components on behalf of the Companys clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up.



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Capital Structure

The by-laws of the Company require that common stock held by employee 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 plans at fair market value, and then ultimately to shareholders who are employees of the
Company. The by-laws of the Company provide that the fair market value be determined by an appraisal. Other than agreements with certain retired Directors, as of March 31, 2006 and September 30, 2005, there is no outstanding common stock
held by individuals no longer employed by the Company.

During the six month period ended March 31, 2006, the Company
repurchased stock held by employee shareholders who terminated employment with the Company at a price ranging from $24.00 to $27.00, pending completion of the September 30, 2005 valuation. The September 30, 2005 valuation established the
price per share at $28.00. At March 31, 2006, the Company had an accrual of $1.6 million for the stock price differential, included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet.

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.

Recent Accounting Pronouncements

On
February 15, 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities, which allows an entity the
irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be
recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective for the Companys financial statements for the fiscal year ending September 30, 2009, with earlier
adoption permitted. Management is currently evaluating the impact and timing of the adoption of SFAS 159 on the Companys consolidated financial statements.

In September 2006, FASB issued SFAS No. 158 (SFAS 158), Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. This standard requires an employer to
recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income. The Company is required to adopt the recognition and related disclosure provisions of SFAS 158 for the fiscal year ending September 30, 2007. The Company is also required to adopt the
measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. The Company is still evaluating the impact of this standard on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 prescribes a single
definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting provisions of SFAS 157 will be effective for
the Company for the fiscal year ending September 30, 2009. The Company does not believe the adoption of SFAS 157 will have a material impact on its consolidated financial statements.



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In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108
addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect
as a cumulative effect adjustment to beginning of year retained earnings. SAB 108 will be effective for the Company for the fiscal year ending September 30, 2008. The Company does not believe the adoption of SAB 108 will have a material impact
on its consolidated financial statements.

In July 2006, the FASB issued Interpretation (FIN) No. 48 Accounting
for Uncertainty in Income Taxes  an interpretation of FASB No. 109 (FIN 48). This interpretation establishes guidelines and thresholds that must be met for the recognition and measurement of a tax position taken or
expected to be taken in a tax return. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, ( FSP 115-1 and 124-1) which address the determination as to when an investment is impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. FSP 115-1 and 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. The guidance in FSP 115-1 and 124-1 amends FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and Accounting Principles Board
(APB) Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. FSP 115-1 and 124-1 is effective for reporting periods beginning after December 15, 2005. The adoption of FSP
115-1 and 124-1 did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154
(SFAS 154),Accounting Changes and Error Corrections (SFAS 154), which replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3 Reporting Accounting Changes in
Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a
change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is
effective for accounting changes and correction of errors made in the first annual reporting period beginning after December 15, 2005. We early adopted SFAS 154 and have reported and disclosed the correction of errors in our previously reported
consolidated financial statements in accordance with SFAS 154. The other reporting and disclosure requirements of SFAS 154 did not have a material impact on our consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which is a
revision of SFAS 123, Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first annual period beginning after December 2005, with early adoption encouraged. We are required to adopt SFAS
123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The Company is currently evaluating the impact of adopting SFAS 123(R) on our consolidated financial statements.



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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 but in which it has a significant variable interest. We are
required to adopt FIN 46R immediately for entities created after December 31, 2003 and at the beginning of fiscal year 2006 for all other entities. The adoption of FIN 46R did not have a material impact on our consolidated financial statements.

2. Misappropriation Loss

In
March 2005, subsequent to the issuance of the Companys 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in our information systems and
treasury departments, collectively, (the participants). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were
discovered in March 2005.

Shortly after this discovery, an investigation sub-committee was formed comprised of the three outside members
of our Corporate Audit Committee. These three outside members were subsequently appointed to the Board of Directors and became the three members of the Audit Committee of the Board of Directors. The Audit Committee retained independent counsel to
conduct an investigation and advise the Audit Committee in connection with the investigation. The independent counsel retained forensic accountants, including accountants experienced in conducting forensic audits for companies that perform contracts
for federal, state and local governments to assist with the investigation.

The investigation team discovered that at least $36.6 million
was misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1,
1998 was unavailable. The participants in the embezzlement scheme used several methods to misappropriate the funds while engaging in conduct to conceal the misappropriated amounts. This conduct included among other things, recording and changing
normal recurring journal entries and overstating accruals in prior periods to facilitate improper write-offs of misappropriated funds.

The
misappropriation loss and concealment also resulted in the overstatement of overhead rates which the Company used in connection with certain government contracts. As a result, in these instances, some of our billings to our government clients relied
on or incorporated the overstated overhead rates, and as a result revenues were overstated and we incurred refund obligations to these clients. We have also recorded an accrual for the estimated reimbursement to our clients.



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Overstatement of Amounts Billed for Overhead

The Company determined that the misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in
connection with certain of our government contracts. As a result, some of our government clients were overcharged for the Companys services. During the review of the overhead expenses, the Company identified certain instances of costs
erroneously included in our overhead cost pool which were unallowable under applicable regulations and an error in our calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the
unallowable costs and general and administrative expense errors also led to the overstatement of overhead rates which the Company used in connection with certain of its government contracts. As a result, in these instances, some of our billings to
our government clients relied on or incorporated the overstated overhead rates.

The Company determined corrected overhead rates
considering the impact of the misappropriations and considering the impact of additional errors identified. The Company and its advisors have been working with its government clients to finalize the refund amount (See Note 4 for further discussion).
The Company estimates that the total refund amount, before any payments, resulting from the overstated overhead rates before payments is approximately $40.6 million through March 31, 2006 ($37.1 million as of fiscal year 2005), including
interest that the Company will generally be required to reimburse its government clients. At March 31, 2006 and September 30, 2005, the accrued reimbursement liability was $39.3 million and $34.8 million, respectively, in the accompanying
condensed consolidated balance sheets.

Misappropriation Loss, Investigation Related Expenses and Recovery of Assets

The misappropriation loss for the three and six-month periods ended March 31, 2006 previously described is presented net of the gain from recovered
assets. All assets recovered during the investigation and not yet liquidated, are classified as assets held for sale in the accompanying condensed consolidated balance sheets and are recorded at estimated fair value, less estimated costs to sell, as
of the date recovered. The recovered assets consist of personal homes, condominiums and other real estate, automobiles, funds from bank accounts, jewelry, fine-arts and cash proceeds from the liquidation of personal retirement accounts. Some of the
real estate recovered was acquired subject to existing debt, liens or mortgage notes. Such debt is reported as liabilities related to assets held for sale in the accompanying condensed consolidated balance sheets. The Company does not own any other
assets held for sale other than those recovered during the investigation. Gain from recovered assets has been recognized at the estimated fair value of the assets recovered, less related debt and estimated costs to sell the assets. The gain from
recovered assets is included in misappropriation loss, net of recoveries in the accompanying condensed consolidated statements of operations for the three and six-month periods ended March 31, 2006 and 2005.

In April 2005, approximately 174,000 shares of the Companys common stock were surrendered. These shares were not included in assets held for sale,
as the estimated fair value of such shares was recorded as a reduction of stockholders equity. The gain from recovered assets of $4.7 million was included in misappropriation loss, net of recoveries in the third fiscal quarter of 2005. In the
second fiscal quarter of 2006, approximately 19,180 shares of the Companys common stock were surrendered. These shares were not included in assets held for sale, as the estimated fair value of such shares was also recorded as a reduction of
stockholders equity. The gain on recovery of misappropriated assets of $537,000 was included in misappropriation loss, net of recoveries in the accompanying condensed consolidated statements of operations for the three and six-month periods
ended March 31, 2006.

In addition to the misappropriation loss, the Company has incurred certain professional fees and other costs
that relate to the investigation of the embezzlement and the recovery of assets. These expenses include legal fees, forensic audit fees and related costs, and other costs associated with the recovery of misappropriated assets. Collectively, these
costs are stated as investigation and related costs in the accompanying condensed consolidated statements of operations and are recorded in the period the costs are incurred.



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The following table sets forth the components of the misappropriation loss and related investigation
expenses:



|                                           |  |                                |       |   |                                |   |                              |  |   |                              |   |  |   |      
|------------------------------------------ |  | ------------------------------ | ----- | - | ------------------------------ | - | ---------------------------- |  | - | ---------------------------- | - |  | - | -----
|(Dollars in thousands)                     |  | Three MonthsEndedMarch 31,2006 |       |   | Three MonthsEndedMarch 31,2005 |   | Six MonthsEndedMarch 31,2006 |  |   | Six MonthsEndedMarch 31,2005
|Misappropriation loss                      |  | $                              |      |   |                                | $ | 1,682                        |  | $ |                             |   |  | $ | 3,636
|Less: gain from recovered assets           |  |                                | (451  | ) |                                |   |                             |  |   | (1,749                       | ) |  |   |     
|                                           |  |                                |       |   |                                |   |                              |  |   |                              |   |  |   |      
|Misappropriation loss (recoveries), net    |  |                                | (451  | ) |                                |   | 1,682                        |  |   | (1,749                       | ) |  |   | 3,636
|                                           |  |                                |       |   |                                |   |                              |  |   |                              |   |  |   |      
|Legal fees related to the investigation    |  |                                | 1,173 |   |                                |   | 55                           |  |   | 2,864                        |   |  |   | 55   
|Forensic accounting fees and related costs |  |                                | 1,877 |   |                                |   | 40                           |  |   | 4,450                        |   |  |   | 40   
|Other                                      |  |                                | 285   |   |                                |   | 7                            |  |   | 801                          |   |  |   | 7    
|                                           |  |                                |       |   |                                |   |                              |  |   |                              |   |  |   |      
|Investigation and related costs            |  |                                | 3,335 |   |                                |   | 102                          |  |   | 8,115                        |   |  |   | 102  
|                                           |  |                                |       |   |                                |   |                              |  |   |                              |   |  |   |      
|Total                                      |  | $                              | 2,884 |   |                                | $ | 1,784                        |  | $ | 6,366                        |   |  | $ | 3,738
|                                           |  |                                |       |   |                                |   |                              |  |   |                              |   |  |   |      

During the three and six month periods ended March 31, 2006, we recorded a gain from
recovered assets totaling $451,000 and $1.7 million, respectively. During the three and six month periods ended March 31, 2005, we recorded misappropriation losses of $1.7 million and $3.6 million respectively. Additionally, for the three and
six-month periods ended March 31, 2006, we incurred approximately $3.3 million and $8.1 million, respectively, in costs to investigate and quantify the impact of the embezzlement, and in costs related to the recovery and maintenance of certain
assets. During the three and six-month periods ended March 31, 2005, we incurred approximately $102,000 in costs. The misappropriation loss, gain from recovered assets, and investigation and related costs have been allocated to our segments
based on the individual segments proportionate share of general and administrative (G&A) costs to total Company G&A costs.

3.
Assets Held for Sale

During the course of the investigation into the misappropriations (See Note 2 for further discussion), the
Company identified and recovered certain assets acquired by the participants using misappropriated Company funds. Assets recovered during the investigation and not yet liquidated, are classified as assets held for sale in the accompanying condensed
consolidated balance sheets and are recorded at estimated fair value less estimated costs to sell. The recovered assets consisted of personal homes, condominiums and other real estate, automobiles, funds from bank accounts, jewelry, fine-arts and
cash proceeds from the liquidation of personal retirement accounts. Some of the real estate recovered was acquired subject to existing debt, liens or mortgage notes. Such debt is reported as liabilities of assets held for sale in the accompanying
condensed consolidated balance sheets at March 31, 2006.

During the first quarter of fiscal year 2006, the Company recovered
additional assets from the investigation with a total estimated fair value of approximately $1.4 million, excluding the gain on shares recovered, which was not subject to debt, liens or mortgage notes.

During the six-month period ended March 31, 2006, the Company sold assets for a total of $5.8 million which were subject to related liabilities of
$2.1 million. The Company did not recognize any additional gains or losses related to the sales of these assets since they were recorded at their fair value less estimated costs to sell.



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|                                             |  |               |        |   |                   |   |        |  
|-------------------------------------------- |  | ------------- | ------ | - | ----------------- | - | ------ | -
|(Dollars in thousands)                       |  | March 31,2006 |        |   | September 30,2005 |  
|Assets held for sale at estimated fair value |  | $             | 9,285  |   |                   | $ | 10,180 |  
|Less: estimated costs to sell                |  |               | (637   | ) |                   |   | (891   | )
|                                             |  |               |        |   |                   |   |        |  
|Adjusted fair value of assets held for sale  |  |               | 8,648  |   |                   |   | 9,289  |  
|Outstanding mortgage liabilities assumed     |  |               | (4,606 | ) |                   |   | (4,627 | )
|                                             |  |               |        |   |                   |   |        |  
|Net fair value of assets held for sale       |  | $             | 4,042  |   |                   | $ | 4,662  |  
|                                             |  |               |        |   |                   |   |        |  

Additionally, as of September 30, 2005, two real estate properties were not available for
sale since the required renovations were completed in fiscal year 2006, at which time they were classified as assets held for sale. As of September 30, 2005, the Company classified these recovered assets for a total of $4.1 million in other
assets and $2.3 million of related liabilities in other liabilities in its consolidated balance sheet. The Company does not have any other assets held for sale other than those recovered.

During the remaining six months of fiscal year 2006 and first fiscal quarter of 2007, the Company sold assets for a total of $8.4 million which were
subject to related liabilities of $4.6 million. The Company did not recognize any additional gains or losses related to the sales of these assets since they were recorded at their fair value less estimated costs to sell. The Company intends to sell
the remaining assets as soon as practicable.

4. Commitments and Contingencies

The Company is obligated under various non-cancelable leases for office facilities, furniture and equipment. Certain leases contain renewal options,
escalation clauses and payment of certain other operating expenses of the properties. In the normal course of business, leases that expire are expected to be renewed or replaced by leases for other properties.

As of March 31, 2006, there were various legal proceedings pending against the Company, 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. The Company
accrues for contingencies when a loss is probable and the amounts can be reasonably estimated. As of March 31, 2006, the Company had an accrual of approximately $5.7 million for all potential and existing claims, lawsuits and pending
proceedings that, in managements opinion, are probable and can be reasonably estimated.

In July 1998, we entered into an agreement
with West Frisco Development Corporation (WFDC) to provide various services, among which was a flood plain study to be used by WFDC, the City of Frisco and FEMA. In 2003, the City of Frisco retained the services of a third-party
architecture and engineering firm in connection with the extension and widening of Teel Road which lies within the greater drainage basin included in the Companys original flood plain study. This architecture and engineering firms
assessment of the flood plain study determined that the Company used incorrect assumptions when calculating the size of the drainage culverts required for the increased development of the areas transportation infrastructure. Based on this
assessment, the Company has entered into negotiations with the City of Frisco to correct the drainage needs to support the Teel Road expansion project. As a result, the Company had recorded an estimated liability of $3.1 million to cover the costs
associated with correcting the drainage needs of the Teel Road expansion project. Included in this estimate is the purchase of a parcel of land for $1.5 million, the remaining balance of $1.6 million is reflected in other liabilities in the
accompanying condensed consolidated balance sheets as of March 31, 2006.

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.



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The Company maintains a full range of insurance coverage, including workers compensation, 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.

In July 2006, we entered into a settlement agreement with the State of Texas, Department of Transportation which resolves all claims that the State of
Texas may have had against us for overpayments related to the restatement of overhead rates on billings on or before April 30, 2006 under contracts with that agency based on our payment of approximately $5.4 million and provides for the
determination of the appropriate overhead rate for billings after April 30, 2006. In November 2006, we entered into a settlement agreement with the Florida Department of Transportation which resolves all claims that agency may have had against
us for the overstatement of rates on billings through September 30, 2005 (and with respect to cost contracts through September 30, 2006) under our contracts with them based on our payment of approximately $12.5 million. This settlement
agreement also provided for the determination of the appropriate overhead rate refund for fiscal year 2006 billings under fixed price contracts. The refund amount was finalized in March 2007 and totaled $0.4 million.

In January 2007, we reached a settlement agreement with the Department of Justice, Civil Division on behalf of it and all other federal agencies with
which we have contracts to resolve all federal claims including claims under the Federal Civil False Claims Act, related to the overstatements of overhead rates on our contracts with federal agencies. The agreement requires approximately $6.5
million of reimbursement payments for all contract amounts through September 30, 2005 which was paid in January 2007.

The settlements
described above, excluding settlements paid in the six-month period ended March 31, 2006, are included in the accrued reimbursement liability in the Companys condensed consolidated financial statements at March 31, 2006. We are in
discussions with our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

In the course of our investigation of the accounting irregularities and misappropriations, it was determined that there were possible violations relating
to past political contributions by us and certain of our employees. The United States Attorneys Office for the Southern District of Florida (Miami) and the Federal Bureau of Investigation have conducted an investigation relating to
improper campaign contributions including improper use of political action committees. We produced documents and other information to the government and fully cooperated with the investigation. Criminal charges have been filed against two of the
Companys former chairmen. At the present time, we believe it is unlikely that criminal charges will be filed against us in this matter, but the authorities are not precluded from bringing charges, and circumstances may change.

The United States Securities & Exchange Commission is also conducting an investigation of the accounting irregularities and misappropriations of
funds described above. We are fully cooperating with the investigation and have produced documents and other information to the commission. At the present time, we are unable to predict the likely outcome of this investigation.

5. Income Taxes

The income tax provisions
were $1.0 million and $2.6 million, and $4.7 million and $5.7 million, or effective tax rates of 50.8% and 42.8%, and 50.7% and 42.8%, for the three and six-month periods ended March 31, 2006 and 2005, 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 management believes involved technical uncertainty. These research and development costs were incurred by the Company in the course of providing services generally under 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 condensed consolidated
balance sheets reflect a deferred tax asset of $5.6 million and $5.5 million as of March 31, 2006 and September 30, 2005, respectively, for the unused research and development tax credit carry forwards. The credits will expire beginning
2017 through 2022.



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The Companys effective tax rate is based on expected income, statutory tax rates and tax planning
opportunities available in the various jurisdictions in which the Company operates. Significant judgment is required in determining the effective tax rate and in evaluating the Companys tax positions. The Company establishes reserves when,
despite its belief that the tax return positions are fully supportable, it believes that certain positions, if challenged, we believe will likely be resolved unfavorably to us. These reserves are adjusted in light of changing facts and
circumstances, such as the progress of a tax audit or current developments in tax law. The Companys annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or
the timing of resolution of any particular matter, the Company believes that its reserves reflect the probable outcome of known tax contingencies. Resolution of the tax contingencies would be recognized as an increase or decrease to the
Companys tax rate in the period of resolution.

6. Segment Reporting

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

Activities in the Transportation
Services 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. The Program Management group of our Transportation segment provides many of its governmental clients the necessary resources to manage
large infrastructure programs from concept through construction. Services include planning, programming, and contract support.

The
Construction Management segment provides a wide range of services as an agent for the Companys clients, including contract administration, inspection, field-testing, scheduling/estimating, instituting project controls and quality assessment.
The Company provides scheduling, cost estimating and construction observation services for the project, or its services may be limited to providing construction consulting.

The Civil Engineering segment 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 Services 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.



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Financial information relating to the Companys operations by segment is as follows:



|                                    |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |        
|----------------------------------- |  | ---------------------- | ------ | ---------------------- | - | ---------------- |  | - | --------------------- | - |  | ----- | ------ | - |  | - | -------
|(Dollars in thousands)              |  | TransportationServices |        | ConstructionManagement |   | CivilEngineering |  |   | EnvironmentalServices |   |  | Total
|Three Months Ended March 31, 2006   |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |        
|Engineering fees                    |  | $                      | 52,294 |                        | $ | 22,201           |  | $ | 28,889                |   |  | $     | 30,367 |   |  | $ | 133,751
|Net earned revenue                  |  |                        | 40,532 |                        |   | 18,495           |  |   | 23,758                |   |  |       | 24,416 |   |  |   | 107,201
|Operating income                    |  |                        | 1,481  |                        |   | 670              |  |   | 311                   |   |  |       | (61    | ) |  |   | 2,401  
|Depreciation and amortization       |  |                        | 948    |                        |   | 325              |  |   | 683                   |   |  |       | 689    |   |  |   | 2,645  
|Total assets                        |  |                        | 87,820 |                        |   | 38,304           |  |   | 53,786                |   |  |       | 52,033 |   |  |   | 231,943
|Purchases of property and equipment |  |                        | 1,000  |                        |   | 479              |  |   | 612                   |   |  |       | 638    |   |  |   | 2,729  
|                                    |  |                        |        |                        |  
|Three Months Ended March 31, 2005   |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |        
|Engineering fees                    |  | $                      | 51,087 |                        | $ | 20,791           |  | $ | 23,250                |   |  | $     | 27,865 |   |  | $ | 122,993
|Net earned revenue                  |  |                        | 38,691 |                        |   | 16,578           |  |   | 17,691                |   |  |       | 23,278 |   |  |   | 96,238 
|Operating income                    |  |                        | 4,663  |                        |   | 1,549            |  |   | (1,133                | ) |  |       | 1,502  |   |  |   | 6,581  
|Depreciation and amortization       |  |                        | 948    |                        |   | 317              |  |   | 689                   |   |  |       | 666    |   |  |   | 2,620  
|Total assets                        |  |                        | 77,766 |                        |   | 32,773           |  |   | 52,493                |   |  |       | 42,728 |   |  |   | 205,760
|Purchases of property and equipment |  |                        | 758    |                        |   | 349              |  |   | 521                   |   |  |       | 492    |   |  |   | 2,120  
|                                    |  |                        |        |                        |  
|(Dollars in thousands)              |  | TransportationServices |        | ConstructionManagement |   | CivilEngineering |  |   | EnvironmentalServices |   |  | Total
|Six Months Ended March 31, 2006     |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |        
|Engineering fees                    |  | $                      | 99,282 |                        | $ | 43,304           |  | $ | 60,807                |   |  | $     | 58,824 |   |  | $ | 262,217
|Net earned revenue                  |  |                        | 76,966 |                        |   | 36,005           |  |   | 51,397                |   |  |       | 47,525 |   |  |   | 211,893
|Operating income                    |  |                        | 3,892  |                        |   | 1,130            |  |   | 4,689                 |   |  |       | 189    |   |  |   | 9,900  
|Depreciation and amortization       |  |                        | 1,857  |                        |   | 656              |  |   | 1,364                 |   |  |       | 1,405  |   |  |   | 5,282  
|Total assets                        |  |                        | 87,820 |                        |   | 38,304           |  |   | 53,786                |   |  |       | 52,033 |   |  |   | 231,943
|Purchases of property and equipment |  |                        | 1,650  |                        |   | 815              |  |   | 1,045                 |   |  |       | 1,114  |   |  |   | 4,624  
|                                    |  |                        |        |                        |  
|Six Months Ended March 31, 2005     |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |        
|Engineering fees                    |  | $                      | 94,718 |                        | $ | 39,916           |  | $ | 63,934                |   |  | $     | 52,042 |   |  | $ | 250,610
|Net earned revenue                  |  |                        | 72,806 |                        |   | 31,209           |  |   | 41,677                |   |  |       | 43,037 |   |  |   | 188,729
|Operating income                    |  |                        | 7,707  |                        |   | 2,017            |  |   | 2,591                 |   |  |       | 1,968  |   |  |   | 14,283 
|Depreciation and amortization       |  |                        | 1,859  |                        |   | 614              |  |   | 1,301                 |   |  |       | 1,314  |   |  |   | 5,088  
|Total assets                        |  |                        | 77,766 |                        |   | 32,773           |  |   | 52,493                |   |  |       | 42,728 |   |  |   | 205,760
|Purchases of property and equipment |  |                        | 1,453  |                        |   | 664              |  |   | 946                   |   |  |       | 957    |   |  |   | 4,020  

7. Long-Term Debt



|                                                                                                                                                                                                                                                                                                                                                                   |  |               |       |                   |   |      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ----- | ----------------- | - | -----
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                             |  | March 31,2006 |       | September 30,2005
|Line of credit                                                                                                                                                                                                                                                                                                                                                     |  | $             |      |                   | $ |     
|Mortgage note payable due in monthly installments starting on April 16, 2001, 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 (5.43% and 4.51% at March 31, 2006 and September 30, 2005,
respectively). |  |               | 7,681 |                   |   | 7,833
|Capital lease obligations                                                                                                                                                                                                                                                                                                                                          |  |               | 952   |                   |   | 853  
|                                                                                                                                                                                                                                                                                                                                                                   |  |               |       |                   |   |      
|                                                                                                                                                                                                                                                                                                                                                                   |  |               | 8,633 |                   |   | 8,686
|Less current portion of long-term debt                                                                                                                                                                                                                                                                                                                             |  |               | 512   |                   |   | 408  
|Less current portion of capital lease obligations                                                                                                                                                                                                                                                                                                                  |  |               | 274   |                   |   | 341  
|                                                                                                                                                                                                                                                                                                                                                                   |  |               |       |                   |   |      
|Long-term debt and capital lease obligations                                                                                                                                                                                                                                                                                                                       |  | $             | 7,847 |                   | $ | 7,937
|                                                                                                                                                                                                                                                                                                                                                                   |  |               |       |                   |   |      



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The Company has a $58 million line of credit agreement, inclusive of $10 million in letters of credit,
with Bank of America, N.A. (the Bank). The expiration date on the line of credit is June 30, 2008. The letters of credit reduce the maximum amount available for borrowing. As of March 31, 2006 and September 30, 2005, the
Company had letters of credit outstanding totaling $5.4 million and $3.4 million, respectively. No amounts have been drawn on any of these letters of credit. As a result of this issuance of these letters of credit, the maximum amount available for
borrowing under the line of credit was $52.6 million and $54.6 million as of March 31, 2006 and September 30, 2005, respectively.

The interest rate (5.33% and 4.36% at March 31, 2006 and September 30, 2005, 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 including minimum levels of net worth, a minimum coverage ratio of certain fixed charges and a minimum leverage ratio of earnings before interest, taxes, depreciation and amortization to funded debt. The Company was in compliance
with or obtained a waiver of default of the line of credit financial covenants as of September 30, 2006. The line of credit is collateralized by substantially all of the Companys assets.

On March 19, 2001, the Company entered into a mortgage note with an original principal amount of $9.0 million due in monthly installments starting
on April 16, 2001, with interest. Interest on the mortgage is LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. A balloon payment is due on the mortgage on March 16, 2011. The
effective interest rate on the mortgage note was 5.43% and 4.51% at March 31, 2006 and September 30, 2005, respectively. We used an interest rate swap (the Swap) agreement in order to minimize the adverse impact of the floating
interest rate characteristics of the Companys long term debt obligations. The swap converts the floating interest rate on the note payable to a fixed rate of 6.28%. On March 16, 2006, the Companys swap expired. Our adjustable rate
mortgage calls for an interest rate based on the 30 day LIBOR plus a margin of .065%. The mortgage agreement contains clauses requiring the maintenance of various covenants and financial ratios. The mortgage note is collateralized by the office
building located in Maitland, Florida. The Bank has provided us a waiver of default caused by our failure to deliver to the Bank audited financial statements for fiscal year 2006 and unaudited financial statements for the quarters ended
December 31, 2006 and March 31, 2007, so long as the fiscal year 2006 financial statements are delivered to the Bank no later than May 31, 2007 and the quarterly statements are delivered no later than September 30, 2007. The bank
has also provided a waiver of the minimum net worth covenant for fiscal year 2006 and all periods in fiscal year 2007.

The Companys
capital leases consisted primarily of equipment. The interest rate used in computing the minimum lease payments range from 2.02% to 4.84%. The leases were capitalized using the lower of the minimum lease payments or the fair market value of the
equipment at the inception of the lease.

8. Comprehensive Income

Comprehensive income consists of net income and other gains and losses affecting shareholders investment and minimum pension liability that, under
Generally Accepted Accounting Principles (GAAP), are excluded from net income.



17



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##### Table of Contents

The components of all the comprehensive income are as follows:



|                                                                                             |  |                              |       |      |                            |       |      |  |      |       |  |   |       |  
|-------------------------------------------------------------------------------------------- |  | ---------------------------- | ----- | ---- | -------------------------- | ----- | ---- |  | ---- | ----- |  | - | ----- | -
|                                                                                             |  | Three Months Ended March 31, |       |      | Six Months Ended March 31, |      
|(Dollars in thousands)                                                                       |  | 2006                         |       | 2005 |                            |       | 2006 |  | 2005 |      
|Net Income                                                                                   |  | $                            | 1,006 |      | $                          | 3,489 |      |  | $    | 4,534 |  | $ | 7,634 |  
|Other comprehensive income:                                                                  |  |                              |       |      |                            |       |      |  |      |       |  |   |       |  
|Unrealized gain (loss) on available for sale marketable securities held for sale, net of tax |  |                              | 16    |      |                            | (2    | )    |  |      | 14    |  |   | 16    |  
|Unrealized gain (loss) on interest rate swap, net of tax                                     |  |                              | 14    |      |                            | (2    | )    |  |      | 35    |  |   | 63    |  
|Minimum pension liability adjustment, net of tax                                             |  |                              |      |      |                            | (49   | )    |  |      |      |  |   | (98   | )
|                                                                                             |  |                              |       |      |                            |       |      |  |      |       |  |   |       |  
|Total comprehensive income                                                                   |  | $                            | 1,036 |      | $                          | 3,436 |      |  | $    | 4,583 |  | $ | 7,615 |  
|                                                                                             |  |                              |       |      |                            |       |      |  |      |       |  |   |       |  

9. Goodwill and Other Intangibles Assets

The changes in the carrying amounts of goodwill by segment for the six-month period ended March 31, 2006 are as follows:



|                                 |  |                                 |       |                        |   |                  |  |                       |       |       |   |        |  |   |       
|-------------------------------- |  | ------------------------------- | ----- | ---------------------- | - | ---------------- |  | --------------------- | ----- | ----- | - | ------ |  | - | ------
|                                 |  | Six Months Ended March 31, 2006
|(Dollars in thousands)           |  | TransportationServices          |       | ConstructionManagement |   | CivilEngineering |  | EnvironmentalServices |       | Total
|Goodwill, beginning of period    |  | $                               | 3,650 |                        | $ |                 |  | $                     | 2,641 |       | $ | 11,445 |  | $ | 17,736
|Other purchase price adjustments |  |                                 | 41    |                        |   |                 |  |                       |      |       |   |       |  |   | 41    
|                                 |  |                                 |       |                        |   |                  |  |                       |       |       |   |        |  |   |       
|Goodwill, end of period          |  | $                               | 3,691 |                        | $ |                 |  | $                     | 2,641 |       | $ | 11,445 |  | $ | 17,777
|                                 |  |                                 |       |                        |   |                  |  |                       |       |       |   |        |  |   |       

The Companys intangibles assets consisted of the following:



|                         |  |                       |                      |                    |                         |  |   |      
|------------------------ |  | --------------------- | -------------------- | ------------------ | ----------------------- |  | - | -----
|                         |  | Estimated UsefulLives |                      | March 31, 2006    
|(Dollars in thousands)   |  |                       | Gross CarryingAmount |                    | AccumulatedAmortization
|Client list              |  | 10 years              |                      | $                  | 1,453                   |  | $ | 739  
|Backlog                  |  | 3 years               |                      |                    | 1,799                   |  |   | 1,656
|Website                  |  | 7 years               |                      |                    | 200                     |  |   | 95   
|Pension intangible asset |  | 6 years               |                      |                    | 1,946                   |  |   | 1,783
|                         |  |                       |                      |                    |                         |  |   |      
|                         |  |                       |                      | $                  | 5,398                   |  | $ | 4,273
|                         |  |                       |                      |                    |                         |  |   |      
|                         |  |                      
|                         |  | Estimated UsefulLives |                      | September 30, 2005
|(Dollars in thousands)   |  |                       | Gross CarryingAmount |                    | AccumulatedAmortization
|Client list              |  | 10 years              |                      | $                  | 1,453                   |  | $ | 607  
|Client name recognition  |  | 2 years               |                      |                    | 100                     |  |   | 100  
|Backlog                  |  | 3 years               |                      |                    | 1,799                   |  |   | 1,269
|Website                  |  | 7 years               |                      |                    | 200                     |  |   | 81   
|Pension intangible asset |  | 6 years               |                      |                    | 1,946                   |  |   | 1,621
|                         |  |                       |                      |                    |                         |  |   |      
|                         |  |                       |                      | $                  | 5,498                   |  | $ | 3,678
|                         |  |                       |                      |                    |                         |  |   |      



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##### Table of Contents

10. Acquisitions

On April 30, 2006, we acquired 100% of the stock of EIP Associates (EIP) for $6.0 million, net of cash acquired of $15,000, comprised of $5.5 million in cash, $334,000 accrued additional purchase
price and $200,000 held in escrow. The purchase price was allocated to the respective assets and liabilities based on their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $9.0 million,
including approximately $1.5 million of intangible assets and $3.7 million of goodwill, none of which is deductible for tax purposes, and liabilities of $3.9 million. The weighted average amortization period for the identifiable intangible assets is
2.8 years. EIP specializes in environmental, urban planning, water resource planning and natural resources in California.

The primary
factor that contributed to a purchase price that resulted in the recognition of goodwill in our acquisition is the intellectual capital of the skilled professionals and senior technical personnel associated with the acquired entities which does not
meet the criteria for recognition as an asset apart from goodwill. The results of operations of the above acquisition are included from the date of each acquisition. The pro forma impact of these acquisitions are not material to reported historical
operations.

11. Retirement Plans

The Company uses a September 30 measurement date for its plans. The following table provides a summary of the Companys periodic costs:



|                                              |  |                             |     |                           |   |      |  |      |       |  |   |      
|--------------------------------------------- |  | --------------------------- | --- | ------------------------- | - | ---- |  | ---- | ----- |  | - | -----
|                                              |  | Three Months EndedMarch 31, |     | Six Months EndedMarch 31,
|(Dollars in thousands)                        |  | 2006                        |     | 2005                      |   | 2006 |  | 2005
|Service benefits earned during period         |  | $                           | 185 |                           | $ | 162  |  | $    | 370   |  | $ | 486  
|Interest cost on projected benefit obligation |  |                             | 173 |                           |   | 160  |  |      | 346   |  |   | 480  
|Amortization:                                 |  |                             |     |                           |   |      |  |      |       |  |   |      
|Prior service cost                            |  |                             | 81  |                           |   | 81   |  |      | 162   |  |   | 243  
|Net loss from past experience                 |  |                             | 99  |                           |   | 91   |  |      | 198   |  |   | 273  
|                                              |  |                             |     |                           |   |      |  |      |       |  |   |      
|Net periodic pension expense                  |  | $                           | 538 |                           | $ | 494  |  | $    | 1,076 |  | $ | 1,482
|                                              |  |                             |     |                           |   |      |  |      |       |  |   |      



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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 unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Form
10-Q.

This Form 10-Q and the information incorporated by reference in it include and are based on forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements
in these sections. These statements can sometimes be identified by the fact that they do not relate strictly to historical or current facts and they frequently are accompanied by words such as may, will,
anticipate, estimate, expect, or intend and similar terms and expressions. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and
forecasted demographic and economic trends relating to our industry, and statements relating to our ability to be awarded government contracts, the adoption of certain laws by Congress, our ability to compete effectively with other firms that
provide similar services, our ability to attract and retain clients, our ability to achieve future growth and success, our expectations for the public and private sector economic growth, the outcome of our internal investigation and the various
on-going government investigations, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially
different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that may impact such
forward-looking statements include, among others, 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, our ability to
comply with new laws and regulations, our insurance coverage covering certain events, the timing and amount of the spending bills adopted by the federal government and the states, our ability to complete our internal investigation in a timely
manner, the outcome of the investigations by the Department of Justice, the United States Attorneys Office, the Securities and Exchange Commission, the Federal Bureau of Investigation, 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 we report for tax
purposes and the possible outcome of pending litigation, legal proceedings and governmental investigations and our actions in connection with such litigation, proceedings and investigations, as well as certain other risks including those set forth
under the heading Risk Factors and elsewhere in this Form 10-Q and in other reports filed by the Company with the Securities and Exchange Commission. All forward-looking statements included herein are only made as of the date such
statements are made, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Subsequent written and oral forward-looking statements
attributable to the Company or to persons acting on its behalf are qualified in their entirety to the cautionary statements set forth above and elsewhere in this Form 10-Q and in other reports filed by the Company with the Securities and Exchange
Commission.

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.



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##### Table of Contents

Misappropriation Loss

In March 2005, subsequent to the issuance of the Companys 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in
our information systems and treasury departments, collectively, (the participants). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until
the misappropriations were discovered. The investigation discovered that at least $36.6 million was misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to
January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable.

The
Company determined that the misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in connection with certain of our government contracts. As a result, some of our government clients were
overcharged for the Companys services. During the review of the overhead rate calculations, the Company identified certain instances of costs erroneously included in our overhead cost pool which were unallowable under applicable regulations
and an error in our calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the unallowable costs and general and administrative errors also led to the overstatement of overhead rates
which the Company used in connection with certain government contracts.

1. 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 for
the three-month and six-month periods ended March 31, 2006 and 2005, respectively:



|                                                                 |  |                             |   |  |                           |   |  |       |   |  |       |  
|---------------------------------------------------------------- |  | --------------------------- | - |  | ------------------------- | - |  | ----- | - |  | ----- | -
|                                                                 |  | Three Months EndedMarch 31, |   |  | Six Months EndedMarch 31, |  
|                                                                 |  | 2006                        |   |  | 2005                      |   |  | 2006  |   |  | 2005  |  
|Engineering fees                                                 |  | 124.8                       | % |  | 127.8                     | % |  | 123.7 | % |  | 132.8 | %
|Direct reimbursable expenses                                     |  | 24.8                        |   |  | 27.8                      |   |  | 23.7  |   |  | 32.8  |  
|                                                                 |  |                             |   |  |                           |   |  |       |   |  |       |  
|Net earned revenue                                               |  | 100.0                       |   |  | 100.0                     |   |  | 100.0 |   |  | 100.0 |  
|                                                                 |  |                             |   | 
|Costs and expenses:                                              |  |                             |   |  |                           |   |  |       |   |  |       |  
|Direct salaries and direct costs                                 |  | 37.9                        |   |  | 37.8                      |   |  | 36.8  |   |  | 37.8  |  
|General and administrative expenses, including indirect salaries |  | 57.2                        |   |  | 53.5                      |   |  | 55.5  |   |  | 52.7  |  
|Misappropriation loss                                            |  | (0.4                        | ) |  | 1.7                       |   |  | (0.8  | ) |  | 1.9   |  
|Investigation and related costs                                  |  | 3.1                         |   |  | 0.1                       |   |  | 3.8   |   |  | 0.1   |  
|                                                                 |  |                             |   |  |                           |   |  |       |   |  |       |  
|Operating income                                                 |  | 2.2                         |   |  | 6.9                       |   |  | 4.7   |   |  | 7.5   |  
|Interest expense                                                 |  | (0.5                        | ) |  | (0.5                      | ) |  | (0.5  | ) |  | (0.5  | )
|Other, net                                                       |  | 0.1                         |   |  |                          |   |  | 0.1   |   |  |      |  
|                                                                 |  |                             |   |  |                           |   |  |       |   |  |       |  
|Income before income taxes                                       |  | 1.8                         |   |  | 6.4                       |   |  | 4.3   |   |  | 7.0   |  
|Provision for income taxes                                       |  | 1.0                         |   |  | 2.7                       |   |  | 2.2   |   |  | 3.0   |  
|                                                                 |  |                             |   |  |                           |   |  |       |   |  |       |  
|Net income                                                       |  | 0.8                         | % |  | 3.7                       | % |  | 2.1   | % |  | 4.0   | %
|                                                                 |  |                             |   |  |                           |   |  |       |   |  |       |  



21



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##### Table of Contents

A summary of our operating results for the three-month and six-month periods ended March 31, 2006
and 2005 is as follows:



|                                                                 |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------- |  | --------------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|(Dollars in thousands)                                           |  | Three Months EndedMarch 31, |         |   | Six Months EndedMarch 31, |  
|                                                                 |  | 2006                        |         |   | 2005                      |   |         | 2006 |  |   | 2005    |  
|Engineering fees                                                 |  | $                           | 133,751 |   |                           | $ | 122,993 |      |  | $ | 262,217 |   |  | $ | 250,610 |  
|Direct reimbursable expenses                                     |  |                             | 26,550  |   |                           |   | 26,755  |      |  |   | 50,324  |   |  |   | 61,881  |  
|                                                                 |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net earned revenue                                               |  |                             | 107,201 |   |                           |   | 96,238  |      |  |   | 211,893 |   |  |   | 188,729 |  
|                                                                 |  |                             |         |  
|Costs and expenses:                                              |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Direct salaries and direct costs                                 |  |                             | 40,617  |   |                           |   | 36,346  |      |  |   | 77,921  |   |  |   | 71,340  |  
|General and administrative expenses, including indirect salaries |  |                             | 61,299  |   |                           |   | 51,527  |      |  |   | 117,706 |   |  |   | 99,368  |  
|Misappropriation loss                                            |  |                             | (451    | ) |                           |   | 1,682   |      |  |   | (1,749  | ) |  |   | 3,636   |  
|Investigation and related costs                                  |  |                             | 3,335   |   |                           |   | 102     |      |  |   | 8,115   |   |  |   | 102     |  
|                                                                 |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                                 |  |                             | 2,401   |   |                           |   | 6,581   |      |  |   | 9,900   |   |  |   | 14,283  |  
|Interest expense                                                 |  |                             | (484    | ) |                           |   | (510    | )    |  |   | (957    | ) |  |   | (1,025  | )
|Other, net                                                       |  |                             | 127     |   |                           |   | 24      |      |  |   | 263     |   |  |   | 79      |  
|                                                                 |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes                                       |  |                             | 2,044   |   |                           |   | 6,095   |      |  |   | 9,206   |   |  |   | 13,337  |  
|Provision for income taxes                                       |  |                             | 1,038   |   |                           |   | 2,606   |      |  |   | 4,672   |   |  |   | 5,703   |  
|                                                                 |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                       |  | $                           | 1,006   |   |                           | $ | 3,489   |      |  | $ | 4,534   |   |  | $ | 7,634   |  
|                                                                 |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  

Overview

Business Overview

We provide services to both private and public sector clients, with the public sector comprising
approximately 75% of our revenues. Our business is divided in four segments, consisting of Transportation, Civil Engineering, Construction Management and Environmental. During the six-month period ended March 31, 2006, the Company experienced a
4.6% growth in engineering fees. All segments, except Civil Engineering, experienced increases in engineering fees. The increase in engineering fees for the Transportation Services segment was due to new projects and additional assignments from the
TxDOT. The growth in the Construction Management segment was due primarily to additional work with Georgia and Florida DOTs. The Civil Engineering segment experienced a decrease in engineering fees resulting from the winding down of the
hurricanes disaster response projects that hit Florida in calendar years 2005 and 2004. Our Environmental Services benefited from contracts with FEMA and the State of Georgia and the California Department of Water Resources. The Companys
backlog at the end of March 31, 2006 was approximately at the same volume as at the end of September 30, 2005.

We earn revenue
for time spent on projects, in addition to certain direct reimbursable expenses of our projects, such as travel and lodging, blueprints and sub-contractor expenses. The fluctuation in direct reimbursable expenses, specifically sub-contractor costs,
including travel and lodging, will influence the fluctuation of our net earned revenue (NER). For instance, our Civil Engineering segment experienced a significant decrease in direct reimbursable expenses during the six-month period
ended March 31, 2006, as compared to the same period in 2005, resulting from a reduction in subcontractors costs, including travel and lodging, related to the debris removal from the Florida hurricanes in calendar 2004 and 2005. As a
result, our Civil Engineering segments NER grew at a greater rate than its engineering fees, because more work was being performed by our in-house technical professionals.



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Business Environment

The need to modernize and upgrade the transportation infrastructure in the United States has been a source of continued business for us through the last ten years. Fueling the initial growth in this market was the
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). In 1998, ISTEA was reauthorized as the Transportation Equity Act for the 21st Century (TEA-21), earmarking $218 billion for highway and transit projects
through 2003. Prior to the expiration of TEA-21 on September 30, 2003, the U.S. Congress and President Bush signed a five-month extension of the program. Since then, a series of additional extensions have been granted, the most recent of which
occurred on July 30, 2005 and was set to expire on August 14, 2005, however, on August 10, 2005, the President signed into law the Safe, Accountable, Flexible, Efficient Transportation Act: A Legacy for Users (SAFETEA-LU).
The SAFETEA-LU guarantees funding for highways, highway safety, and public transportation totaling $244.1 billion. SAFETEA-LU ensures that state agencies that depend largely on federal transportation funding, will continue to make investments needed
to maintain and grow the vital transportation infrastructure.

The demand for our construction management services has also been fueled by
the legislation and industry trends that are driving the growth in our Transportation and Environmental business segments, including ISTEA and TEA-21. These trends have created a large number of infrastructure projects throughout the United States,
which are subject to increasingly complex governmental regulations. The market could level out or shrink slightly until a new Federal transportation funding bill is passed. The potential impact is currently minimal, but increases as time passes
until the bill is passed. Projects/programs that depend on the Federal gas tax funding are being delayed, which may eventually lead to a temporary reduction in demand for the services we provide.

In 2005, the economy was in a period of slow recovery with improving private sector corporate profitability, while investment in residential
housing development continued at high rates. Federal spending remained strong especially in the area of national defense, which increased opportunity and fortified our strategy for greater balance between the public and private sectors. The state
and local government markets remained weak but the market for our specialized services in the area of risk and emergency management strengthened due in part to hurricanes and wild fires. Near term expectations are for the Federal Department of
Defense and Homeland Security sectors to remain strong. As the economy expands its recovery, we expect the private sector to strengthen. State and local government markets will remain weak but will improve as increased tax revenue from private
sector recovery trickles into the government sector.

In recent years, significant environmental laws at the federal, state and
local levels have been enacted in response to public concern over the health of the nations air, water, and natural resources. Those laws and their implementation through regulation affect numerous industrial and governmental actions and form
a key market driver for the services of our Environmental business segment. Two federal environmental laws, The Safe Drinking Water Act of 1974 and the Clean Water Act of 1972, continue to drive this segment of our business. Pursuant to these laws,
Congress has authorized significant monies to assist state and local governments. According to the EPA, as much as $23 billion a year will be needed for construction and upgrade of water and wastewater treatment facilities over the next 20 years.

Segment Results of Operations

Our businesses are reported as four segments, reflecting our management methodology and structure:

Activities in the
Transportation Services 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. The Program Management group of our Transportation segment provides many of its governmental clients the necessary resources to
manage large infrastructure programs from concept through construction. Services include planning, programming, and contract support.



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##### Table of Contents

The Construction Management segment provides a wide range of services including planning, traffic
engineering, intelligent transportation systems (ITS), corridor planning, highway design, structural design, alternate project delivery, program management, toll facility design, aviation services, multi-modal/transit systems and
right-of-way. In fiscal year 2006, this segment added at-risk construction management projects to its services. We also 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. We currently serve transportation departments in 19 states and perform toll services in 9 states for both public
and private toll clients.

The Civil Engineering segment provides architectural engineering and 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, infrastructure protection, asset management,
emergency management and architectural and landscape architecture design.

The Environmental Services 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.

The accounting
policies of the segments are the same as those described in the notes to the accompanying condensed consolidated financial statements. We evaluate performance based on operating income (loss) of the respective segments. The discussion that follows
is a summary analysis of the primary changes in operating results by segment for the three and six-month period ended March 31, 2006 as compared to 2005.



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##### Table of Contents

Net earned revenue represents the net effect of gross revenues less direct reimbursable expenses. Direct
reimbursable expenses are primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for procurement and
management of such cost components on behalf of the Companys clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up. Indirect salaries represent wages earned by technical personnel
not assigned to client billable projects and administrative and support personnel wages as well.



|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|-------------------------------- |  | ---------------------------- | ------ | - | -------------------------- | ----- | -- | ---- | - | ------ | -------- |  | ----- | ---- |  | - | -------- | - |  | ----- | - | -------- | - | ------ |  | ----- | -
|                                 |  | Three Months Ended March 31, |        |   | Six Months Ended March 31, |      
|                                 |  | 2006                         |        |   | % of NER                   |       |    | 2005 |   |        | % of NER |  |       | 2006 |  |   | % of NER |   |  | 2005  |   | % of NER |  
|Transportation Services          |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |         
|Engineering fees                 |  | $                            | 52,294 |   |                            | 129.0 | %  |      | $ | 51,087 |          |  | 132.0 | %    |  | $ | 99,282   |   |  | 129.0 | % |          | $ | 94,718 |  | 130.1 | %
|Direct reimbursable expenses     |  |                              | 11,762 |   |                            | 29.0  |    |      |   | 12,396 |          |  | 32.0  |      |  |   | 22,316   |   |  | 29.0  |   |          |   | 21,912 |  | 30.1  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Net earned revenues (NER)        |  |                              | 40,532 |   |                            | 100.0 |    |      |   | 38,691 |          |  | 100.0 |      |  |   | 76,966   |   |  | 100.0 |   |          |   | 72,806 |  | 100.0 |  
|Direct salaries and direct costs |  |                              | 15,139 |   |                            | 37.4  |    |      |   | 14,570 |          |  | 37.7  |      |  |   | 28,090   |   |  | 36.5  |   |          |   | 27,455 |  | 37.7  |  
|Indirect salaries                |  |                              | 8,387  |   |                            | 20.7  |    |      |   | 6,880  |          |  | 17.8  |      |  |   | 15,978   |   |  | 20.8  |   |          |   | 14,041 |  | 19.3  |  
|General and administrative costs |  |                              | 14,446 |   |                            | 35.6  |    |      |   | 11,940 |          |  | 30.9  |      |  |   | 26,734   |   |  | 34.7  |   |          |   | 22,251 |  | 30.6  |  
|Misappropriation loss            |  |                              | (179   | ) |                            | (0.4  | )  |      |   | 601    |          |  | 1.6   |      |  |   | (624     | ) |  | (0.8  | ) |          |   | 1,315  |  | 1.8   |  
|Investigation and related costs  |  |                              | 1,258  |   |                            | 3.1   |    |      |   | 37     |          |  | 0.1   |      |  |   | 2,896    |   |  | 3.8   |   |          |   | 37     |  | 0.1   |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Total costs and expenses         |  |                              | 39,051 |   |                            | 96.3  |    |      |   | 34,028 |          |  | 87.9  |      |  |   | 73,074   |   |  | 94.9  |   |          |   | 65,099 |  | 89.4  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Operating income                 |  | $                            | 1,481  |   |                            | 3.7   | %  |      | $ | 4,663  |          |  | 12.1  | %    |  | $ | 3,892    |   |  | 5.1   | % |          | $ | 7,707  |  | 10.6  | %
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Construction Management          |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Engineering fees                 |  | $                            | 22,201 |   |                            | 120.0 | %  |      | $ | 20,791 |          |  | 125.4 | %    |  | $ | 43,304   |   |  | 120.3 | % |          | $ | 39,916 |  | 127.9 | %
|Direct reimbursable expenses     |  |                              | 3,706  |   |                            | 20.0  |    |      |   | 4,213  |          |  | 25.4  |      |  |   | 7,299    |   |  | 20.3  |   |          |   | 8,707  |  | 27.9  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Net earned revenues (NER)        |  |                              | 18,495 |   |                            | 100.0 |    |      |   | 16,578 |          |  | 100.0 |      |  |   | 36,005   |   |  | 100.0 |   |          |   | 31,209 |  | 100.0 |  
|Direct salaries and direct costs |  |                              | 7,503  |   |                            | 40.6  |    |      |   | 6,732  |          |  | 40.6  |      |  |   | 14,239   |   |  | 39.5  |   |          |   | 13,001 |  | 41.7  |  
|Indirect salaries                |  |                              | 2,964  |   |                            | 16.0  |    |      |   | 2,518  |          |  | 15.2  |      |  |   | 6,307    |   |  | 17.5  |   |          |   | 5,417  |  | 17.4  |  
|General and administrative costs |  |                              | 6,852  |   |                            | 37.0  |    |      |   | 5,486  |          |  | 33.1  |      |  |   | 13,206   |   |  | 36.7  |   |          |   | 10,157 |  | 32.5  |  
|Misappropriation loss            |  |                              | (78    | ) |                            | (0.4  | )  |      |   | 276    |          |  | 1.7   |      |  |   | (308     | ) |  | (0.9  | ) |          |   | 600    |  | 1.9   |  
|Investigation and related costs  |  |                              | 584    |   |                            | 3.2   |    |      |   | 17     |          |  | 0.1   |      |  |   | 1,431    |   |  | 4.0   |   |          |   | 17     |  | 0.1   |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Total costs and expenses         |  |                              | 17,825 |   |                            | 96.4  |    |      |   | 15,029 |          |  | 90.7  |      |  |   | 34,875   |   |  | 96.9  |   |          |   | 29,192 |  | 93.5  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Operating income                 |  | $                            | 670    |   |                            | 3.6   | %  |      | $ | 1,549  |          |  | 9.3   | %    |  | $ | 1,130    |   |  | 3.1   | % |          | $ | 2,017  |  | 6.5   | %
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Civil Engineering                |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Engineering fees                 |  | $                            | 28,889 |   |                            | 121.6 | %  |      | $ | 23,250 |          |  | 131.4 | %    |  | $ | 60,807   |   |  | 118.3 | % |          | $ | 63,934 |  | 153.4 | %
|Direct reimbursable expenses     |  |                              | 5,131  |   |                            | 21.6  |    |      |   | 5,559  |          |  | 31.4  |      |  |   | 9,410    |   |  | 18.3  |   |          |   | 22,257 |  | 53.4  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Net earned revenues (NER)        |  |                              | 23,758 |   |                            | 100.0 |    |      |   | 17,691 |          |  | 100.0 |      |  |   | 51,397   |   |  | 100.0 |   |          |   | 41,677 |  | 100.0 |  
|Direct salaries and direct costs |  |                              | 9,066  |   |                            | 38.2  |    |      |   | 6,919  |          |  | 39.1  |      |  |   | 19,143   |   |  | 37.2  |   |          |   | 15,795 |  | 37.9  |  
|Indirect salaries                |  |                              | 5,013  |   |                            | 21.1  |    |      |   | 3,304  |          |  | 18.7  |      |  |   | 9,203    |   |  | 17.9  |   |          |   | 7,941  |  | 19.1  |  
|General and administrative costs |  |                              | 8,726  |   |                            | 36.7  |    |      |   | 8,159  |          |  | 46.1  |      |  |   | 16,924   |   |  | 32.9  |   |          |   | 14,471 |  | 34.7  |  
|Misappropriation loss            |  |                              | (98    | ) |                            | (0.4  | )  |      |   | 418    |          |  | 2.4   |      |  |   | (395     | ) |  | (0.8  | ) |          |   | 855    |  | 2.1   |  
|Investigation and related costs  |  |                              | 740    |   |                            | 3.1   |    |      |   | 24     |          |  | 0.1   |      |  |   | 1,833    |   |  | 3.6   |   |          |   | 24     |  | 0.1   |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Total costs and expenses         |  |                              | 23,447 |   |                            | 98.7  |    |      |   | 18,824 |          |  | 106.4 |      |  |   | 46,708   |   |  | 90.9  |   |          |   | 39,086 |  | 93.8  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Operating income (loss)          |  | $                            | 311    |   |                            | 1.3   | %  |      | $ | (1,133 | )        |  | (6.4  | )%   |  | $ | 4,689    |   |  | 9.1   | % |          | $ | 2,591  |  | 6.2   | %
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Environmental Services           |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Engineering fees                 |  | $                            | 30,367 |   |                            | 124.4 | %  |      | $ | 27,865 |          |  | 119.7 | %    |  | $ | 58,824   |   |  | 123.8 | % |          | $ | 52,042 |  | 120.9 | %
|Direct reimbursable expenses     |  |                              | 5,951  |   |                            | 24.4  |    |      |   | 4,587  |          |  | 19.7  |      |  |   | 11,299   |   |  | 23.8  |   |          |   | 9,005  |  | 20.9  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Net earned revenues (NER)        |  |                              | 24,416 |   |                            | 100.0 |    |      |   | 23,278 |          |  | 100.0 |      |  |   | 47,525   |   |  | 100.0 |   |          |   | 43,037 |  | 100.0 |  
|Direct salaries and direct costs |  |                              | 8,909  |   |                            | 36.5  |    |      |   | 8,125  |          |  | 34.9  |      |  |   | 16,449   |   |  | 34.6  |   |          |   | 15,089 |  | 35.1  |  
|Indirect salaries                |  |                              | 5,875  |   |                            | 24.1  |    |      |   | 5,500  |          |  | 23.6  |      |  |   | 11,302   |   |  | 23.8  |   |          |   | 10,446 |  | 24.3  |  
|General and administrative costs |  |                              | 9,036  |   |                            | 37.0  |    |      |   | 7,740  |          |  | 33.3  |      |  |   | 18,052   |   |  | 38.0  |   |          |   | 14,644 |  | 34.0  |  
|Misappropriation loss            |  |                              | (96    | ) |                            | (0.4  | )  |      |   | 387    |          |  | 1.7   |      |  |   | (422     | ) |  | (0.9  | ) |          |   | 866    |  | 2.0   |  
|Investigation and related costs  |  |                              | 753    |   |                            | 3.1   |    |      |   | 24     |          |  | 0.1   |      |  |   | 1,955    |   |  | 4.1   |   |          |   | 24     |  | 0.1   |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Total costs and expenses         |  |                              | 24,477 |   |                            | 100.2 |    |      |   | 21,776 |          |  | 93.5  |      |  |   | 47,336   |   |  | 99.6  |   |          |   | 41,069 |  | 95.4  |  
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  
|Operating income (loss)          |  | $                            | (61    | ) |                            | (0.2  | )% |      | $ | 1,502  |          |  | 6.5   | %    |  | $ | 189      |   |  | 0.4   | % |          | $ | 1,968  |  | 4.6   | %
|                                 |  |                              |        |   |                            |       |    |      |   |        |          |  |       |      |  |   |          |   |  |       |   |          |   |        |  |       |  



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##### Table of Contents

Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

Engineering Fees



|                        |  |                              |         |      |   |          |  |          |        |  |      |  
|----------------------- |  | ---------------------------- | ------- | ---- | - | -------- |  | -------- | ------ |  | ---- | -
|                        |  | Three Months Ended March 31, |         |      |   |          | 
|(Dollars in thousands)  |  | 2006                         |         | 2005 |   | $ Change |  | % Change |       
|Transportation Services |  | $                            | 52,294  |      | $ | 51,087   |  | $        | 1,207  |  | 2.4  | %
|Construction Management |  |                              | 22,201  |      |   | 20,791   |  |          | 1,410  |  | 6.8  | %
|Civil Engineering       |  |                              | 28,889  |      |   | 23,250   |  |          | 5,639  |  | 24.3 | %
|Environmental Services  |  |                              | 30,367  |      |   | 27,865   |  |          | 2,502  |  | 9.0  | %
|                        |  |                              |         |      |   |          |  |          |        |  |      |  
|Total Engineering Fees  |  | $                            | 133,751 |      | $ | 122,993  |  | $        | 10,758 |  | 8.7  | %
|                        |  |                              |         |      |   |          |  |          |        |  |      |  

Engineering fees for the three-month period ended March 31, 2006, were $133.8 million
compared to $123.0 million in the same period in 2005, representing an 8.7% increase. Substantially all of the increase was in the Civil Engineering, Environmental Services and Construction Management segments.

In the Transportation Services segment, engineering fees increased 2.4% to $52.3 million in the three-month period ended March 31, 2006 from $51.1
million in the same period in 2005. The increase included new projects and additional assignments on existing contracts awarded by the Texas DOT in the Central Region, partly offset with decreases in work assignments with the Nevada DOT in the
Western Region.

Engineering fees in our Construction Management segment increased 6.8% to $22.2 million in the three-month period ended
March 31, 2006 from $20.8 million in the same period in 2005. The increase is due to additional work with existing customers in the Southeast Region, including Georgia and Florida DOTs. In addition, the Construction Management segment
experienced significant growth in their Construction Consulting practice.

Engineering fees in our Civil Engineering segment increased
24.3% to $28.9 million in the three-month period ended March 31, 2006 from $23.3 million in the same period in 2005. During the three-month period ended March 31, 2006, the Civil Engineering segment experienced a significant increase in
engineering fees resulting from the addition of several large lump sum contracts with the Department of Defense. This increase in engineering fees was partly offset by the winding down of work related to the administration and management of debris
removal from the large response projects related to the calendar years 2004 and 2005 hurricanes.

Our Environmental Services segment
experienced growth in its engineering fees for the three-month period ended March 31, 2006 as compared to the same period in 2005. Engineering fees increased 9.0% to $30.4 million in the three-month period ended March 31, 2006 from $27.9
million in the same period in 2005. The increase is primarily attributable to organic growth, including two significant new contracts with FEMA and the State of Georgia and a new contract with the California Department of Water Resources. To a
lesser extent, engineering fees increased as a result of the LWC acquisition, which was acquired on February 1, 2005. The current quarter impact of the LWC acquisition was approximately $556,000.



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##### Table of Contents

Net Earned Revenue



|                          |  |                              |         |      |   |          |  |          |        |  |      |  
|------------------------- |  | ---------------------------- | ------- | ---- | - | -------- |  | -------- | ------ |  | ---- | -
|                          |  | Three Months Ended March 31, |         |      |   |          | 
|(Dollars in thousands)    |  | 2006                         |         | 2005 |   | $ Change |  | % Change |       
|Transportation Services   |  | $                            | 40,532  |      | $ | 38,691   |  | $        | 1,841  |  | 4.8  | %
|Construction Management   |  |                              | 18,495  |      |   | 16,578   |  |          | 1,917  |  | 11.6 | %
|Civil Engineering         |  |                              | 23,758  |      |   | 17,691   |  |          | 6,067  |  | 34.3 | %
|Environmental Services    |  |                              | 24,416  |      |   | 23,278   |  |          | 1,138  |  | 4.9  | %
|                          |  |                              |         |      |   |          |  |          |        |  |      |  
|Total Net Earned Revenues |  | $                            | 107,201 |      | $ | 96,238   |  | $        | 10,963 |  | 11.4 | %
|                          |  |                              |         |      |   |          |  |          |        |  |      |  

Net earned revenue (NER) was $107.2 million during the three-month period ended
March 31, 2006 as compared to $96.2 million for the same period in 2005, representing an increase of 11.4%. This increase was directly related to the increase in engineering fees, as previously explained and a very slight reduction in direct
reimbursable expenses, which is explained below.



|                                   |  |                              |        |          |      |   |      |   |          |  |      |  
|---------------------------------- |  | ---------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                   |  | Three Months Ended March 31, |       
|(Dollars in thousands)             |  | 2006                         |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services            |  | $                            | 11,762 |          | 29.0 | % |      | $ | 12,396   |  | 32.0 | %
|Construction Management            |  |                              | 3,706  |          | 20.0 | % |      |   | 4,213    |  | 25.4 | %
|Civil Engineering                  |  |                              | 5,131  |          | 21.6 | % |      |   | 5,559    |  | 31.4 | %
|Environmental Services             |  |                              | 5,951  |          | 24.4 | % |      |   | 4,587    |  | 19.7 | %
|                                   |  |                              |        |          |      |   |      |   |          |  |      |  
|Total Direct Reimbursable Expenses |  | $                            | 26,550 |          | 24.8 | % |      | $ | 26,755   |  | 27.8 | %
|                                   |  |                              |        |          |      |   |      |   |          |  |      |  

The change in our NER is affected by the fluctuation in our direct reimbursable expenses. Direct
reimbursable expenses is primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for procurement and management
of such cost components on behalf of the Companys clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up. As a percentage of NER, direct reimbursable expenses decreased by 3.0% to
24.8% for the three-month period ended March 31, 2006 from 27.8% in the same period in 2005. The decrease was driven by the Civil Engineering, Construction Management and Transportation Services segments. This decrease was partially offset by
an increase experienced by the Environmental Services segment.

Direct reimbursable expenses for our Transportation Services segment
decreased as a percentage of NER by 3.0% to 29.0% for the three-month period ended March 31, 2006 from 32.0% in the same period in 2005. This decrease is due primarily to a reduction of subcontractors during the current quarter.

In our Construction Management segment, direct reimbursable expenses as a percentage of NER decreased by 5.4% to 20.0% in the three-month period ended
March 31, 2006 from 25.4% in the same period in 2005. This decrease was primarily due to a market shift from direct reimbursable projects to more lump sum and all-inclusive billing rates contracts in the Central and Southeast regions. The shift
started in fiscal year 2005 and has continued during the current fiscal quarter.

Direct reimbursable expenses in the Civil Engineering
segment decreased as a percentage of NER by 9.8% to 21.6% in the three-month period ended March 31, 2006 from 31.4% in the same period in 2005. The decrease was primarily due to a reduction in subcontractors costs related to debris removal from
the Florida hurricanes in calendar 2004 and 2005. In Fiscal year 2005, the Civil Engineering segment incurred significant subcontractors costs and travel and lodging costs for the hundreds of employees overseeing debris removal in the areas
affected by the disasters.



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##### Table of Contents

Our Environmental Services segment experienced an increase of 29.7% in direct reimbursable expenses for
the three-month period ended March 31, 2006 when compared to the same period in 2005. As a percentage of NER, direct reimbursable expenses increased by 4.7% to 24.4% for the three-month period ended March 31, 2006 from 19.7% in the same
period in 2005. This increase was due primarily to the use of subcontractors required with the contracts acquired with the LWC acquisition and the new contract with the Department of Water Resources in the State of California, as previously stated.

Operating Income (loss)



|                                                                                             |  |                              |       |   |          |      |   |      |   |        |          |  |      |  
|-------------------------------------------------------------------------------------------- |  | ---------------------------- | ----- | - | -------- | ---- | - | ---- | - | ------ | -------- |  | ---- | -
|                                                                                             |  | Three Months Ended March 31, |      
|(Dollars in thousands)                                                                       |  | 2006                         |       |   | % of NER |      |   | 2005 |   |        | % of NER | 
|Transportation Services                                                                      |  | $                            | 1,481 |   |          | 3.7  | % |      | $ | 4,663  |          |  | 12.1 | %
|Construction Management                                                                      |  |                              | 670   |   |          | 3.6  | % |      |   | 1,549  |          |  | 9.3  | %
|Civil Engineering                                                                            |  |                              | 311   |   |          | 1.3  | % |      |   | (1,133 | )        |  | -6.4 | %
|Environmental Services                                                                       |  |                              | (61   | ) |          | -0.2 | % |      |   | 1,502  |          |  | 6.5  | %
|                                                                                             |  |                              |       |   |          |      |   |      |   |        |          |  |      |  
|Total Operating Income                                                                       |  |                              | 2,401 |   |          | 2.2  | % |      |   | 6,581  |          |  | 6.8  | %
|                                                                                             |  |                              |       |  
|Misappropriation Loss (Recoveries) and Investigation and Related Costs, net                  |  |                              | 2,884 |   |          | 2.7  | % |      |   | 1,784  |          |  | 1.9  | %
|                                                                                             |  |                              |       |   |          |      |   |      |   |        |          |  |      |  
|Total Operating Income before Misappropriation Loss and Investigation and Related Costs, net |  | $                            | 5,285 |   |          | 4.9  | % |      | $ | 8,365  |          |  | 8.7  | %
|                                                                                             |  |                              |       |   |          |      |   |      |   |        |          |  |      |  

Operating income was $2.4 million in the three-month period ended March 31, 2006 as compared
to $6.6 million in the same period in 2005 representing a decrease of 63.5%. The decrease in total operating income is primarily the result of an increase in investigation and related costs of $3.2 million partially offset by an increase in gains
from recovered assets of $451,000 and a reduction in misappropriation loss of $1.7 million for the three-month period ended March 31, 2005. Also contributing to the decrease in operating income is an increase in indirect salaries from time
spent on business development and lower chargeability from acquisitions. All segments, except for the Civil Engineering segment, had decreases in operating income in the three-month period ended March 31, 2006 as compared to the same period in
2005. Operating income, as a percentage of NER, decreased by 4.6% to 2.2% in the three-month period ended March 31, 2006 from 6.8% in the same period in 2005. All segments, except the Civil Engineering segment, also experienced decreases in
operating income as a percentage of NER, in the three-month period ended March 31, 2006 as compared to the same period in 2005.

We
believe that operating income before misappropriation loss and investigation and related costs is a useful measure in evaluating our results of operations because the misappropriation loss, recoveries and investigation and related costs are unusual
items which do not reflect the costs or revenues of our provision of services in the given year. While the misappropriation occurred over a long period, the recoveries and investigation costs are realized when recovered or incurred and not in
relation to the period when the misappropriation occurred. We believe this measure is helpful for us and for our investors to evaluate the results of our operations and make comparisons between periods.

Operating income before misappropriation loss and investigation and related costs, net was $5.3 million for the three-month period ended March 31,
2006 as compared to $8.4 million for the same period in 2005, representing a decrease of 36.8%. Operating income before misappropriation loss and related costs, net, as a percentage of NER, decreased by 3.8% to 4.9% in the three-month period ended
March 31, 2006 from 8.7% in the same period in 2005. Misappropriation loss and investigation and related costs, net are treated as corporate overhead costs, and as such, are allocated to each respective segment. The allocation is based on the
segments proportionate share of general and administrative (G&A) costs to total Company G&A costs.



28



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##### Table of Contents

As a percentage of NER, the Transportation Services segments operating income decreased by 8.4% to
3.7% in the three-month period ended March 31, 2006 from 12.1% in the same period in 2005. This decrease was primarily driven by lower multiplier on some contracts and the increase in misappropriation loss and investigation and related costs,
net. As a percentage of NER, the Transportation Services segments operating income before misappropriation loss and investigation and related costs, net decreased by 7.4% to 6.3% in the three-month period ended March 31, 2006 from 13.7%
in the same period in 2005. This decrease experienced by the Transportation Services segment was driven by lower multipliers on some contracts.

The Construction Management segment experienced a decrease in operating income of 131.2% in the three-month period ended March 31, 2006 when compared to the same period in 2005. This decrease is primarily driven by the increase in
misappropriation loss and investigation and related costs, net. The Construction Management segment experienced a decrease in operating income before misappropriation loss and related costs, net, of 36.2% in the three-month period ended
March 31, 2006 when compared to the same period in 2005. Factors contributing to the decrease include expenditures incurred in marketing and business development in the West and Southeast regions and additional costs incurred in promoting
safety initiatives throughout this segment.

As a percentage of NER, the Civil Engineering segments operating income was $311,000 for
the three-month period ended March 31, 2006 as compared to a loss of $1.1 million in the same period in 2005. This increase was primarily driven by additional contracts with the Department of Defense, offset by an increase in misappropriation
loss and investigation and related costs, net. As a percentage of NER, the Civil Engineering segments operating income before misappropriation loss and investigation and related costs, was $ 1.0 million for the three-month period ended
March 31, 2006 as compared to a loss of $ 0.7 million in the same period in 2005. This significant improvement resulted from the work that was generated from the addition of the lump sum contracts with the Department of Defense, as
previously explained.

The Environmental Services segments operating income decreased to a loss of $61,000 for the three-month period
ended March 31, 2006 from operating income of $1.5 million in the same period in 2005. This decrease was primarily driven by decreased chargeability and the increase in misappropriation loss and investigation and related costs, net. The
Environmental Services segment experienced a decrease in operating income before misappropriation loss and investigation and related costs, net of 68.8% for the three-month period ended March 31, 2006 when compared to the same period in 2005.
This decrease was primarily due to decreased chargeability, partially due to the transition of the LWC acquisition and expenditures for marketing and business development.

Costs

Costs consist
principally of direct salaries that are chargeable to clients and overhead and general and administrative expenses.

Direct Salaries
and Direct Costs



|                                       |  |                              |        |          |      |   |      |   |          |  |      |  
|-------------------------------------- |  | ---------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                       |  | Three Months Ended March 31, |       
|(Dollars in thousands)                 |  | 2006                         |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services                |  | $                            | 15,139 |          | 37.4 | % |      | $ | 14,570   |  | 37.7 | %
|Construction Management                |  |                              | 7,503  |          | 40.6 | % |      |   | 6,732    |  | 40.6 | %
|Civil Engineering                      |  |                              | 9,066  |          | 38.2 | % |      |   | 6,919    |  | 39.1 | %
|Environmental Services                 |  |                              | 8,909  |          | 36.5 | % |      |   | 8,125    |  | 34.9 | %
|                                       |  |                              |        |          |      |   |      |   |          |  |      |  
|Total Direct Salaries and Direct Costs |  | $                            | 40,617 |          | 37.9 | % |      | $ | 36,346   |  | 37.8 | %
|                                       |  |                              |        |          |      |   |      |   |          |  |      |  



29



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##### Table of Contents

Direct salaries and direct costs primarily includes direct salaries and to a lesser extent
unreimburseable direct costs. Direct salaries and direct costs were $40.6 million for the three-month period ended March 31, 2006, as compared to $36.3 million for the same period in 2005, representing an increase of 11.8%. This increase is
directly related to the increase in engineering fees. As a percentage of NER, direct salaries and direct costs increased slightly by 0.1% to 37.9% for the three-month period ended March 31, 2006 from 37.8% in the same period in 2005.

The Transportation Services segment experienced an increase in direct salaries and direct costs of 3.9% to $15.1 million in the
three-month period ended March 31, 2006 compared to $14.6 million in the same period in 2005. However, as a percentage of NER, direct salaries and direct costs decreased slightly by 0.3% to 37.4% in the three-month period ended March 31,
2006 from 37.7% in the same period in 2005, reflecting improvements in capturing labor billable costs to clients.

Direct salaries and
direct costs in the Construction Management segment increased 11.5%. This increase is in line with the growth in NER for the three-month period ended March, 31, 2006 as compared to the same period in 2005. This is primarily due to increased
chargeability and profitability resulting from the shifting of direct reimbursable projects to lump sum and all-inclusive billing rates contracts in the Central and Southeast regions, as previously explained.

Direct salaries and direct costs in the Civil Engineering segment increased 31.0%, and as a percentage of NER, direct salaries and direct costs decreased
by 0.9% to 38.2% in the three-month period ended March 31, 2006 from 39.1% in the same period in 2005. This was due primarily to the higher profitability of the lump sum contracts with the Department of Defense, as previously explained.

Direct salaries and direct costs in the Environmental Services segment increased 9.6%, and as a percentage of NER, direct salaries
increased by 1.6% to 36.5% in the three-month period ended March 31, 2006 from 34.9% in the same period in 2005. This increase was due primarily to the professional staff added with the acquisition of LWC, as previously explained.

General and Administrative Costs, including Indirect Salaries

The other component of costs is indirect costs, which include indirect salaries, and general and administrative costs.



|                        |  |                              |        |          |      |   |      |   |          |  |      |  
|----------------------- |  | ---------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                        |  | Three Months Ended March 31, |       
|(Dollars in thousands)  |  | 2006                         |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services |  | $                            | 8,387  |          | 20.7 | % |      | $ | 6,880    |  | 17.8 | %
|Construction Management |  |                              | 2,964  |          | 16.0 | % |      |   | 2,518    |  | 15.2 | %
|Civil Engineering       |  |                              | 5,013  |          | 21.1 | % |      |   | 3,304    |  | 18.7 | %
|Environmental Services  |  |                              | 5,875  |          | 24.1 | % |      |   | 5,500    |  | 23.6 | %
|                        |  |                              |        |          |      |   |      |   |          |  |      |  
|Total Indirect Salaries |  | $                            | 22,239 |          | 20.7 | % |      | $ | 18,202   |  | 18.9 | %
|                        |  |                              |        |          |      |   |      |   |          |  |      |  

Indirect salaries increased 22.2% to $22.2 million in the three-month period ended March 31,
2006 from $18.2 million in the same period in 2005. Indirect salaries as a percentage of NER increased by 1.8% to 20.7% in the three-month period ended March 31, 2006 from 18.9% in the same period in 2005.

Indirect salaries for the Transportation Services segment increased 21.9% to $8.4 million in the three-month period ended March 31, 2006 from $6.9
million in the same period in 2005. Transportation Services experienced an increase in indirect salaries, as a percentage of NER, of 2.9% in the three-month period ended March 31, 2006 to 20.7% from 17.8% in the same period in 2005. This
increase was primarily due to time spent on marketing and business development.



30



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##### Table of Contents

The Construction Management segment experienced an increase in indirect salaries of 17.7% to $3.0 million
in the three-month period ended March 31, 2006 from $2.5 million in the same period in 2005. As a percentage of NER, indirect salaries increased by 0.8% to 16.0% in the three-month period ended March 31, 2006 as compared to 15.2% in the
same period in 2005. The increase in indirect salaries was due primarily to the additional expenditure incurred in marketing and business development in the West and Southeast Regions.

Indirect salaries for the Civil Engineering segment increased 51.7% to $5.0 million in the three-month period ended March 31, 2006 from $3.3 million
in the same period in 2005. As a percentage of NER, indirect salaries increased by 2.4% to 21.1% in the three-month period ended March 31, 2006 from 18.7% in the same period in 2005. This increase resulted from additional time spent on business
development.

The Environmental Services segment experienced an increase in indirect salaries of 6.8% to $5.9 million in the three-month
period ended March 31, 2006 from $5.5 million in the same period in 2005. As a percentage of NER, indirect salaries increased by 0.5% to 24.1% in the three-month period ended in March 31, 2006 as compared to 23.6% in the same period in
2005. The increase in indirect salaries was primarily due to decreased chargeability partially due to the transition of the LWC acquisition and additional focus on marketing and business development.



|                                     |  |                              |        |          |      |   |      |   |          |  |      |  
|------------------------------------ |  | ---------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                     |  | Three Months Ended March 31, |       
|(Dollars in thousands)               |  | 2006                         |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services              |  | $                            | 14,446 |          | 35.6 | % |      | $ | 11,940   |  | 30.9 | %
|Construction Management              |  |                              | 6,852  |          | 37.0 | % |      |   | 5,486    |  | 33.1 | %
|Civil Engineering                    |  |                              | 8,726  |          | 36.7 | % |      |   | 8,159    |  | 46.1 | %
|Environmental Services               |  |                              | 9,036  |          | 37.0 | % |      |   | 7,740    |  | 33.3 | %
|                                     |  |                              |        |          |      |   |      |   |          |  |      |  
|Total General & Administrative Costs |  | $                            | 39,060 |          | 36.4 | % |      | $ | 33,325   |  | 34.6 | %
|                                     |  |                              |        |          |      |   |      |   |          |  |      |  

General and administrative (G&A) costs increased 17.2%, to $39.1 million for the
three-month period ended March 31, 2006 from $33.3 million in the same period in 2005. G&A, as a percentage of NER, increased by 1.8% to 36.4% in the three-month period ended March 31, 2006 from 34.6% in the same period in 2005. All
segments except Civil Engineering experienced increases in G&A as a percentage of NER for the three-month period ended March 31, 2006 as compared to the same period in 2005. The majority of the increase is primarily related to increased
medical insurance premiums and flex benefits of $1.8 million, legal settlements and fees of $1.6 million, rent expense for real estate of $0.5 million, payroll taxes of $0.7 million, and incentive compensation of $1.3 million. We also incurred
additional expenses for travel and related expenses, bad debt expense, business development, professional fees, equipment and vehicle leases and related expenses and software and computer supplies. These costs are generally considered corporate
costs which benefit all segments and are allocated to the respective segments based on the individual segments proportionate share of G&A costs as compared to total Company G&A costs.

Misappropriation Loss and Investigation and Related Costs

As described elsewhere in this Form 10-Q, we have recorded $1.7 million in adjustments to disclose the effect of misappropriations of company assets for the three month period ended March 31, 2005. For the three
month period ended March 31, 2006 we have recorded a gain of $0.5 million. During the three-month periods ended March 31, 2006 and 2005 we have incurred approximately $3.3 million and $0.1 million, respectively in costs to investigate and
quantify the impact of the embezzlement, and in costs related to the recovery and maintenance of certain assets. The misappropriation loss, recorded gain from recovered assets, and the investigation and related costs have been allocated to our
segments based on the individual segments proportionate share of G&A costs to total Company G&A costs.



31



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##### Table of Contents

Six months Ended March 31, 2006 Compared to Six months Ended March 31, 2005

Engineering Fees



|                        |  |                            |         |      |   |          |  |   |          |   |  |      |  
|----------------------- |  | -------------------------- | ------- | ---- | - | -------- |  | - | -------- | - |  | ---- | -
|                        |  | Six Months Ended March 31, |         |      |   |          |  |  
|(Dollars in thousands)  |  | 2006                       |         | 2005 |   | $ Change |  |   | % Change |  
|Transportation Services |  | $                          | 99,282  |      | $ | 94,718   |  | $ | 4,564    |   |  | 4.8  | %
|Construction Management |  |                            | 43,304  |      |   | 39,916   |  |   | 3,388    |   |  | 8.5  | %
|Civil Engineering       |  |                            | 60,807  |      |   | 63,934   |  |   | (3,127   | ) |  | -4.9 | %
|Environmental Services  |  |                            | 58,824  |      |   | 52,042   |  |   | 6,782    |   |  | 13.0 | %
|                        |  |                            |         |      |   |          |  |   |          |   |  |      |  
|Total Engineering Fees  |  | $                          | 262,217 |      | $ | 250,610  |  | $ | 11,607   |   |  | 4.6  | %
|                        |  |                            |         |      |   |          |  |   |          |   |  |      |  

Engineering fees for the six-month period ended March 31, 2006, increased $11.6 million to
$262.2 million compared to $250.6 million in the same period in 2005. The Environmental Services, Construction Management and Transportation Services segments experienced increases in engineering fees for the six-month period ended March 31,
2006. These increases were partly offset by a decrease experienced by the Civil Engineering segment.

In the Transportation Services
segment, engineering fees increased by 4.8% to $99.3 million in the six-month period ended March 31, 2006 from $94.7 million in the same period in 2005. The Transportation Services segment increase in revenue resulted from new projects and
additional assignments on existing contracts awarded by the Texas DOT (TxDOT) in the Central Region. This increase was partly offset by decreases in work assignments with the Nevada DOT in the Western Region.

Engineering fees from our Construction Management segment increased 8.5% to $43.3 million in the six-month period ended March 31, 2006 from $39.9
million in the same period in 2005. The increase is due to additional work with existing customers in the Southeast Region, including Georgia and Florida DOTs. In addition, the Construction Management segment experienced significant growth in their
Construction Consulting practice. This increase was partly offset by the winding down of the disaster hurricanes projects that hit Florida in calendar years 2004 and 2005 and jobs ending in Arkansas and Texas.

Engineering fees from Civil Engineering services decreased 4.9% to $60.8 million in the six-month period ended March 31, 2006 from $63.9 million in
the same period in 2005. The decrease in engineering fees was due primarily to the winding down of work related to the hurricane response projects that hit Florida in calendar years 2004 and 2005. In the six-month period ended March 31, 2005,
the Civil Engineering segment greatly benefited from the management and administration of debris removal in the areas affected by the hurricanes. This reduction in engineering fees also reduced the amount of reimbursable expenses for the current
period, as explained below. During the six-month period ended March 31, 2006, this segment benefited from some large lump sum contracts with the Department of Defense, offsetting a portion of the overall decrease in engineering fees.

Engineering fees in our Environmental Services segment experienced an increase of 13.0% to $58.8 million for the six-month period ended
March 31, 2006 from $52.0 million in the same period in 2005. The increase is primarily attributable to organic growth, including two significant new contracts with FEMA and the State of Georgia and a new contract with the California Department
of Water Resources. To a lesser extent, engineering fees increased as a result of the LWC acquisition, which was acquired on February 1, 2005. The current period impact of the LWC acquisition was approximately $1.9 million.



32



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##### Table of Contents

Net Earned Revenue



|                          |  |                            |         |      |   |          |  |          |        |  |      |  
|------------------------- |  | -------------------------- | ------- | ---- | - | -------- |  | -------- | ------ |  | ---- | -
|                          |  | Six Months Ended March 31, |         |      |   |          | 
|(Dollars in thousands)    |  | 2006                       |         | 2005 |   | $ Change |  | % Change |       
|Transportation Services   |  | $                          | 76,966  |      | $ | 72,806   |  | $        | 4,160  |  | 5.7  | %
|Construction Management   |  |                            | 36,005  |      |   | 31,209   |  |          | 4,796  |  | 15.4 | %
|Civil Engineering         |  |                            | 51,397  |      |   | 41,677   |  |          | 9,720  |  | 23.3 | %
|Environmental Services    |  |                            | 47,525  |      |   | 43,037   |  |          | 4,488  |  | 10.4 | %
|                          |  |                            |         |      |   |          |  |          |        |  |      |  
|Total Net Earned Revenues |  | $                          | 211,893 |      | $ | 188,729  |  | $        | 23,164 |  | 12.3 | %
|                          |  |                            |         |      |   |          |  |          |        |  |      |  

Net earned revenue was $211.9 million for the six-month period ended March 31, 2006 as
compared to $188.7 million in the same period in 2005, representing an increase of 12.3%. This increase was directly related to the decrease in direct reimbursable expenses and partially offset by an increase in engineering fess, as previously
explained.



|                                   |  |                            |        |          |      |   |      |   |          |  |      |  
|---------------------------------- |  | -------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                   |  | Six Months Ended March 31, |       
|(Dollars in thousands)             |  | 2006                       |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services            |  | $                          | 22,316 |          | 29.0 | % |      | $ | 21,912   |  | 30.1 | %
|Construction Management            |  |                            | 7,299  |          | 20.3 | % |      |   | 8,707    |  | 27.9 | %
|Civil Engineering                  |  |                            | 9,410  |          | 18.3 | % |      |   | 22,257   |  | 53.4 | %
|Environmental Services             |  |                            | 11,299 |          | 23.8 | % |      |   | 9,005    |  | 20.9 | %
|                                   |  |                            |        |          |      |   |      |   |          |  |      |  
|Total Direct Reimbursable Expenses |  | $                          | 50,324 |          | 23.7 | % |      | $ | 61,881   |  | 32.8 | %
|                                   |  |                            |        |          |      |   |      |   |          |  |      |  

In addition, the change in our NER is affected by the fluctuation in our direct reimbursable
expenses. Direct reimbursable expenses are primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for
procurement and management of such cost components on behalf of the Companys clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up. As a percentage of NER, direct reimbursable
expenses decreased by 9.1% to 23.7% for the six-month period ended March 31, 2006 from 32.8% in the same period in 2005. The decrease was driven principally by the Civil Engineering segment.

In our Transportation Services segment, direct reimbursable expenses remained flat in the six-month period ended March 31, 2006 as compared to the
same period in 2005. As a percentage of NER, direct reimbursable expenses decreased by 1.1% to 29.0% in the six-month period ended March 31, 2006 from 30.1% in the same period in 2005. This decrease was due to NER growing at a higher percentage
than direct reimbursable expenses.

In our Construction Management segment, direct reimbursable expenses as a percentage of NER decreased
by 7.6% to 20.3% in the six-month period ended March 31, 2006 from 27.9% in the same period in 2005. This decrease was primarily due to a market shift from direct reimbursable projects to more lump sum and all-inclusive billing rates contracts
in the Central and Southeast regions. The shift started in fiscal year 2005 and has continued into fiscal year 2006.

In our Civil
Engineering segment direct reimbursable expenses as a percentage of NER decreased by 35.1% to 18.3% for the six-month period ended March 31, 2006 from 53.4% in the same period in 2005. The decrease was primarily due to a significant reduction
in subcontractors costs related to debris removal from the Florida hurricanes in calendar 2004 and 2005. In fiscal year 2005, the Civil Engineering incurred significant subcontractors costs, including travel and lodging costs for the hundreds
of employees overseeing debris removal in the areas affected by the disasters.



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Our Environmental Services segment experienced an increase of 25.5% in direct reimbursable expenses in
the six-month period ended March 31, 2006 when compared to the same period in 2005. The Environmental segment experienced an increase in direct reimbursable expenses as a percentage of NER of 2.9% to 23.8% in the six-month period ended
March 31, 2006 from 20.9% in the same period in 2005. This increase was due primarily to the use of subcontractors required with the contracts acquired with the LWC acquisition and the new contract with the Department of Water Resources in the
State of California, as previously stated.

Operating Income



|                                                                                             |  |                            |        |          |     |   |      |   |          |  |      |  
|-------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | -------- | --- | - | ---- | - | -------- |  | ---- | -
|                                                                                             |  | Six Months Ended March 31, |       
|(Dollars in thousands)                                                                       |  | 2006                       |        | % of NER |     |   | 2005 |   | % of NER | 
|Transportation Services                                                                      |  | $                          | 3,892  |          | 5.1 | % |      | $ | 7,707    |  | 10.6 | %
|Construction Management                                                                      |  |                            | 1,130  |          | 3.1 | % |      |   | 2,017    |  | 6.5  | %
|Civil Engineering                                                                            |  |                            | 4,689  |          | 9.1 | % |      |   | 2,591    |  | 6.2  | %
|Environmental Services                                                                       |  |                            | 189    |          | 0.4 | % |      |   | 1,968    |  | 4.6  | %
|                                                                                             |  |                            |        |          |     |   |      |   |          |  |      |  
|Total Operating Income                                                                       |  |                            | 9,900  |          | 4.7 | % |      |   | 14,283   |  | 7.6  | %
|                                                                                             |  |                            |        |         
|Misappropriation Loss (Recoveries) and Investigation and Related Costs, net                  |  |                            | 6,366  |          | 3.0 | % |      |   | 3,738    |  | 2.0  | %
|                                                                                             |  |                            |        |          |     |   |      |   |          |  |      |  
|Total Operating Income before Misappropriation Loss and Investigation and Related Costs, net |  | $                          | 16,266 |          | 7.7 | % |      | $ | 18,021   |  | 9.5  | %
|                                                                                             |  |                            |        |          |     |   |      |   |          |  |      |  

Operating income was $9.9 million in the six-month period ended March 31, 2006 as compared to
$14.3 million in the same period in 2005 representing a decrease of 31.5%. The decrease in total operating income is primarily the result of $8.1 million in investigation related costs for the six-month period ended March 31, 2006, offset by
gain from recovered assets of $1.7 million. All segments except Civil Engineering had decreases in operating income in the six-month period ended March 31, 2006 as compared to the same period in 2005. Operating income, as a percentage of NER,
decreased by 3.0% to 4.6% in the six-month period ended March 31, 2006 from 7.6% in the same period in 2005. All segments except for Civil Engineering experienced decreases in operating income as a percentage of NER, in the six-month period
ended March 31, 2006 as compared to the same period in 2005.

We believe that operating income before misappropriation loss and
investigation and related costs is a useful measure in evaluating our results of operations because the misappropriation loss, recoveries and investigation and related costs are unusual items which do not reflect the costs or revenues of our
provision of services in the given year. While the misappropriation occurred over a long period, the recoveries and investigation costs are realized when recovered or incurred and not in relation to the period when the misappropriation occurred. We
believe this measure is helpful for us and for our investors to evaluate the results of our operations and make comparisons between periods.

Operating income before misappropriation loss and investigation and related costs, net was $16.3 million for the six-month period ending March 31, 2006 as compared to $18.0 million for the same period in 2005, representing a decrease
of 9.7%. Operating income before misappropriation loss and related costs, net, as a percentage of NER, decreased by 1.8% to 7.7% in the six-month period ended March 31, 2006 from 9.5% in the six-month period ending March 31, 2005.
Misappropriation loss and investigation and related costs, net are treated as corporate overhead costs, and as such, are allocated to each respective segment. The allocation is based on the segments proportionate share of general and
administrative (G&A) costs to total Company G&A costs.



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As a percentage of NER, the Transportation Services segments operating income decreased by 5.5% to
5.1% in the six-month period ended March 31, 2006 from 10.6% for the same period in 2005. This decrease was primarily driven by lower multipliers and the increase in misappropriation loss and investigation related costs, net. As a percentage of
NER, the Transportation Services segments operating income before misappropriation loss and investigation and related costs, net decreased by 4.4% to 8.0% in the six-month period ended March 31, 2006 from 12.4% for the same period in
2005. This decrease experienced by the Transportation Services segment was driven by lower multipliers on some contracts.

The Construction
Management segment experienced a decrease in operating income of 78.5% in the six-month period ended March 31, 2006 when compared to the same period in 2005. This decrease is primarily driven by the increase in misappropriation loss and
investigation related costs, net. The Construction Management segment experienced a decrease in operating income before misappropriation loss and related costs, net, of 14.5% in the six-month period ended March 31, 2006 when compared to the
same period in 2005. Factors contributing to the decrease include expenditures incurred in marketing and business development in the West and Southeast regions and additional costs incurred in promoting safety initiatives throughout this segment.

As a percentage of NER, the Civil Engineering segment operating income before misappropriation loss and investigation and related costs,
net increased by 2.9% to 9.1% in the six-month period ended March 31, 2006 from 6.2% in the same period in 2005. This increase was primarily driven by additional contracts with the Department of Defense, partially offset by an increase in
misappropriation loss and investigation related costs, net. As a percentage of NER, the Civil Engineering segment operating income before misappropriation loss and investigation and related costs, net increased by 3.6% to 11.9% in the six-month
period ended March 31, 2006 from 8.3% in the same period in 2005. The increase resulted primarily from the work that was generated from the addition of the lump sum contracts with the Department of Defense, as previously explained.

The Environmental Services segments operating income decreased by $1.8 million to $189,000 in the six-month period ended March 31, 2006
from $2.0 million in the same period in 2005. This decrease is primarily driven by an increase in misappropriation loss and investigation and related costs, net. The Environmental Services segment experienced a decrease in operating income before
misappropriation loss and investigation and related costs, net of 39.7% for the six-month period ended March 31, 2006 when compared to the same period in 2005. This decrease was primarily due to decreased chargeability, partially due to the
transition of the LWC acquisition and expenditures for marketing and business development.

Costs

Costs consist principally of direct salaries that are chargeable to clients and overhead and general and administrative expenses.

Direct Salaries and Direct Costs



|                                       |  |                            |        |          |      |   |      |   |          |  |      |  
|-------------------------------------- |  | -------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                       |  | Six Months Ended March 31, |       
|(Dollars in thousands)                 |  | 2006                       |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services                |  | $                          | 28,090 |          | 36.5 | % |      | $ | 27,455   |  | 37.7 | %
|Construction Management                |  |                            | 14,239 |          | 39.5 | % |      |   | 13,001   |  | 41.7 | %
|Civil Engineering                      |  |                            | 19,143 |          | 37.2 | % |      |   | 15,795   |  | 37.9 | %
|Environmental Services                 |  |                            | 16,449 |          | 34.6 | % |      |   | 15,089   |  | 35.1 | %
|                                       |  |                            |        |          |      |   |      |   |          |  |      |  
|Total Direct Salaries and Direct Costs |  | $                          | 77,921 |          | 36.8 | % |      | $ | 71,340   |  | 37.8 | %
|                                       |  |                            |        |          |      |   |      |   |          |  |      |  



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Direct salaries and direct costs primarily includes direct salaries and to a lesser extent
unreimburseable direct costs. Direct salaries and direct costs were $77.9 million for the six-month period ended March 31, 2006, as compared to $71.3 million in the same period in 2005, representing an increase of 9.2%. This increase is
directly related to an improvement in billable labor cost resulting from a shift to more lump sum contracts. As a percentage of NER, all segments experienced a decrease from a year ago. On a Company basis, direct salaries and direct costs as a
percentage of NER decreased by 1.0% to 36.8% for the six-month period ended March 31, 2006 from 37.8% in the same period in 2005.

Direct salaries and direct costs in the Transportation Services segment increased 2.3% to $28.1 million for the six-month period ended March 31, 2006 from $27.5 million in the same period in 2005. However, as a percentage of NER,
direct salaries and direct costs decreased by 1.2% to 36.5% for the six-month period ended March 31, 2006 from 37.7% in the same period in 2005, reflecting improvements in capturing labor billable costs to clients.

Direct salaries and direct costs in the Construction Management segment increased 9.5% to $14.2 million for the six-month period ended March 31,
2006 from $13.0 million in the same period in 2005. As a percentage of NER, direct salaries and direct costs decreased by 2.2% to 39.5% for the six-month period ended March 31, 2006 from 41.7% in the same period in 2005. This decrease is due to
increased chargeability and profitability resulting from the shifting of direct reimbursable projects to lump sum and all-inclusive billing rates contracts in the Central and Southeast regions, as previously explained.

Direct salaries and direct costs in the Civil Engineering segment increased 21.2% to 19.1 million in the six-month period ended March 31, 2006
from $15.8 million in the same period in 2005. As a percentage of NER, direct salaries and direct costs decreased by 0.7% to 37.2% for the six-month period ended March 31, 2006 from 37.9% in the same period in 2005. This decrease was due in
part from the higher profitability of the lump sum contracts with the Department of Defense, as previously explained.

Direct salaries and
direct costs in the Environmental Services segment increased 9.0% to $16.4 million for the six-month period ended March 31, 2006 from $15.1 million in the same period in 2005. As a percentage of NER, direct salaries and direct costs decreased
0.5% to 34.6% for the six-month period ended March 31, 2006 from 35.1% in the same period in 2005. The increase in direct salaries and direct costs was due primarily to the professional staff added with the acquisitions of LWC, as previously
explained. As a percentage of NER, direct salaries and direct costs stayed proportionately in line with NER in the six-month period ended March 31, 2006 as compared to the same period in 2005.

General and Administrative Costs, including Indirect Salaries

The other component of costs is indirect costs, which include indirect salaries, and general and administrative costs.



|                        |  |                            |        |          |      |   |      |   |          |  |      |  
|----------------------- |  | -------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                        |  | Six Months Ended March 31, |       
|(Dollars in thousands)  |  | 2006                       |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services |  | $                          | 15,978 |          | 20.8 | % |      | $ | 14,041   |  | 19.3 | %
|Construction Management |  |                            | 6,307  |          | 17.5 | % |      |   | 5,417    |  | 17.4 | %
|Civil Engineering       |  |                            | 9,203  |          | 17.9 | % |      |   | 7,941    |  | 19.1 | %
|Environmental Services  |  |                            | 11,302 |          | 23.8 | % |      |   | 10,446   |  | 24.3 | %
|                        |  |                            |        |          |      |   |      |   |          |  |      |  
|Total Indirect Salaries |  | $                          | 42,790 |          | 20.2 | % |      | $ | 37,845   |  | 20.1 | %
|                        |  |                            |        |          |      |   |      |   |          |  |      |  

Indirect salaries increased 13.1% to $42.8 million during the six-month period ended
March 31, 2006 from $37.8 million in the same period in 2005. Indirect salaries, as a percentage of NER, increased slightly by 0.1% to 20.2% for the six-month period ended March 31, 2006 from 20.1% in the same period in 2005.



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##### Table of Contents

The Transportation Services segment experienced an increase in indirect salaries of 13.8% to $16.0
million for the six-month period ended March 31, 2006 from $14.0 million in the same period in 2005. As a percentage of NER, indirect salaries increased by 1.5% to 20.8% for the six-month period ended March 31, 2006 from 19.3% in the same
period in 2005. The increase in indirect salaries as a percentage of NER is due to additional time spent in marketing and business development.

The Construction Management segment experienced an increase in indirect salaries of 16.4% to $6.3 million for the six-month period ended March 31, 2006 from $5.4 million in the same period in 2005. As a percentage of NER, indirect
salaries increased by 0.1% to 17.5% for the six-month period ended March 31, 2006 from 17.4% in the same period in 2005. The increase in indirect salaries was due primarily to the additional expenditure incurred in marketing and business
development in the West and Southeast Regions.

The Civil Engineering segment experienced an increase in indirect salaries of 15.9% to $9.2
million for the six-month period ended March 31, 2006 from $7.9 million in the same period in 2005. As a percentage of NER, indirect salaries decreased by 1.2% to 17.9% for the six-month period ended March 31, 2006 from 19.1% in the same
period in 2005. This decrease resulted from NER growing at a proportionately higher rate than the increase in indirect salaries. The increase in NER for the six-month period ended March 31, 2006 was the result of a significant reduction in
direct reimbursable expenses and the addition of lump sum contracts with the Department of Defense, as previously explained.

Indirect
salaries in our Environmental Services segment increased by 8.2% to $11.3 million for the six-month period ended March 31, 2006 from $10.4 million in the same period in 2005. Indirect salaries, as a percentage of NER decreased by 0.5% to 23.8%
for the six-month period ended March 31, 2006 from 24.3% in the same period in 2005. The increase in indirect salaries was primarily due to decreased chargeability partially due to the transition of the LWC acquisition and additional focus on
marketing and business development.



|                                     |  |                            |        |          |      |   |      |   |          |  |      |  
|------------------------------------ |  | -------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                     |  | Six Months Ended March 31, |       
|(Dollars in thousands)               |  | 2006                       |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services              |  | $                          | 26,734 |          | 34.7 | % |      | $ | 22,251   |  | 30.6 | %
|Construction Management              |  |                            | 13,206 |          | 36.7 | % |      |   | 10,157   |  | 32.5 | %
|Civil Engineering                    |  |                            | 16,924 |          | 32.9 | % |      |   | 14,471   |  | 34.7 | %
|Environmental Services               |  |                            | 18,052 |          | 38.0 | % |      |   | 14,644   |  | 34.0 | %
|                                     |  |                            |        |          |      |   |      |   |          |  |      |  
|Total General & Administrative Costs |  | $                          | 74,916 |          | 35.4 | % |      | $ | 61,523   |  | 32.6 | %
|                                     |  |                            |        |          |      |   |      |   |          |  |      |  

G&A costs increased 22.0%, to $75.0 million for the six-month period ended March 31, 2006
from $61.5 million during same period in 2005. G&A as a percentage of NER increased by 2.8% to 35.4% for the six-month period ended March 31, 2006 as compared to 32.6% in the same period in 2005. All segments, except the Civil Engineering
segment, experienced increases in G&A as a percentage of NER for the six-month period ended March 31, 2006 as compared to the same period in 2005. The majority of the increase is primarily related to increased medical insurance premiums and
flex benefits of $2.9 million, legal settlements and fees of $1.6 million, rent expense for real estate of $1.1 million, payroll taxes of $1.1 million, incentive compensation of $1.6 million and deferred compensation of $1.0 million. We also
incurred additional expenses for insurance, travel and related expenses, business development, professional fees, communication, equipment and vehicle leases and software and computer supplies. These costs are generally considered corporate costs
which benefit all segments and are allocated to the respective segments based on the individual segments proportionate share of G&A costs as compared to total Company G&A costs.



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Misappropriation Loss and Investigation and Related Costs

As described elsewhere in this Form 10-Q, during the six-month period ended March 31, 2006, we recorded a gain from recovered assets totaling
$1.7 million. During the six-month period ended March 31, 2005, we recorded misappropriation losses of $3.6 million. Additionally, for the six-month periods ended March 31, 2006 and 2005, we incurred $8.1 million and $102,000,
respectively, in costs to investigate and quantify the impact of the embezzlement, and in costs related to the recovery and maintenance of certain assets. The misappropriation loss, gain from recovered assets, and investigation and related costs
have been allocated to our segments based on the individual segments proportionate share of general and administrative (G&A) costs to total Company G&A costs.

Income Taxes

The income tax provisions were $1.0 million and $2.6 million and $4.7 million
and $5.7 million, or effective tax rates of 50.8% and 42.8% and 50.7% and 42.8%, for the three and six-month periods ended March 31, 2006 and 2005, 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
management believes involved technical uncertainty. These research and development costs were incurred by the Company in the course of providing services generally under 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 condensed consolidated balance sheets reflect a deferred tax asset of $5.6 million
and $5.5 million as of March 31, 2006 and September 30, 2005, respectively, for the unused research and development tax credit carry forwards. The credits will expire beginning 2017 through 2022.

The Companys effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available in the various
jurisdictions in which the Company operates. Significant judgment is required in determining the effective tax rate and in evaluating the Companys tax positions. The Company establishes reserves when, despite its belief that the tax return
positions are fully supportable, it believes that certain positions, if challenged, will likely be resolved unfavorably to us. These reserves are adjusted in light of changing facts and circumstances, such as the progress of a tax audit or current
developments in tax law. The Companys annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or the timing of resolution of any particular matter, the Company
believes that its reserves reflect the probable outcome of known tax contingencies. Resolution of the tax contingencies would be recognized as an increase or decrease to the Companys tax rate in the period of resolution.

2. Financial Condition and Capital Resources

Cash Flows from
Operating Activities

Net cash used in operating activities totaled $7.0 million for the six-month period ended March 31, 2006 as
compared to net cash provided by operating activities of $8.5 million for the same period in 2005. The reduction in net cash provided by operating activities during the six-month period ended March 31, 2006 from the same period in 2005 was
primarily due to a reduction in accounts payable and accrued expenses and an increase in accounts receivable. The reduction in payables and accrued expenses reflects payments made to vendors and consultants during the three-month period ended
December 31, 2005. The decrease in net cash provided by operating activities was partially offset by the proceeds from the disposal of assets held for sale and the provision for deferred taxes at March 31, 2006 over December 31, 2005.



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Approximately 80% 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 contracts. Payment terms for accounts receivable and unbilled fees, when billed, are net 30 days. Unbilled fees increased 6.9%, to $74.5 million at March 31, 2006 from $69.7 million at
September 30, 2005.

Accounts receivable decreased 2.6%, to $65.7 million at March 31, 2006, from $67.5 million at
September 30, 2005 primarily due to the growth in engineering fees. The allowance for doubtful accounts increased to $1.5 million from $1.2 million at September 30, 2005.

During fiscal year 2007, we have incurred additional costs in connection with the investigations and with the restatement of our previously issued
consolidated financial statements. We have incurred $6.1 million during the remaining six months of fiscal year 2006. We have also incurred, during fiscal year 2007, an additional $3.7 million in investigation related legal expenses and
approximately $800,000 in overhead rate and financial statement audit related expenses during fiscal year 2007. Additionally, we expect to spend approximately $23.2 million in client reimbursements during fiscal year 2007, and an additional $5.8
million thereafter. We may also incur additional fees and penalties from various government regulatory agencies as a result of the final outcome of the ongoing investigations.

Cash Flows from Investing Activities

Net cash used in investing activities was $5.0 million and $4.5
million for the six-month period ended March 31, 2006 and 2005, respectively. Investing activity was primarily related to fixed asset purchases, such as survey equipment, computer equipment, furniture and leasehold improvements.

During the six-month period ended March 31, 2005, we completed two acquisitions. On October 1, 2004 we acquired 100% of the stock of Croslin
Associates, Inc. for a purchase price of $727,000, net of cash acquired, comprised of $397,000 in cash, $30,000 held in escrow and 11,111 shares of our common stock valued at approximately $300,000. On February 1, 2005 we acquired 100% of the
stock of Land and Water Consulting, Inc. for a purchase price of $1,337,000, net of cash acquired of $13,000, for $323,000 in cash and 33,862 shares of our common stock valued at approximately $914,000.

Cash Flows from Financing Activities

Net cash
used in financing activities for the six-month period ended March 31, 2006 was $10.5 million, as compared to net cash used in financing activities of $5.8 million for the same period in 2005. The increase in net cash used in financing
activities during the six-month period ended March 31, 2006 from the same period in 2005 is primarily attributable to an increase in the payments for the repurchase of common stock from employees of $6.0 million and a decrease in the proceeds
from the fiscal year 2005 sale of common stock to employees of $4.2 million. As previously explained, the Company did not offer any common stock to its employees in fiscal year 2006. The increase in net cash used in financing activities was partly
offset by a decrease in borrowings under our line of credit of $2.8 million.



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##### Table of Contents

Capital Resources

We have a $58 million line of credit agreement, inclusive of $10 million in letters of credit, with Bank of America, N.A. (the Bank). The original expiration date on the line of credit is June 30,
2008. The letters of credit reduce the maximum amount available for borrowing. As of March 31, 2006 and September 30, 2005, we had letters of credit totaling $5.4 million and $3.4 million, respectively. No amounts have been drawn on any of
these letters of credit. As a result of the issuance of these letters of credit, the maximum amount available for borrowing under the line of credit was $52.6 million and $54.6 million as of March 31, 2006 and September 30, 2005,
respectively. Although our most significant source of cash has historically been generated from operations, in the event that cash flows from operations are insufficient to cover our working capital needs, we would access our revolving line of
credit facility.

The interest rate (5.33% and 4.36% at March 31, 2006 and September 30, 2005, respectively) on the revolving
line of credit 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 and 3.0. There were no outstanding amounts under the revolving line of credit as of March 31, 2006 and September 30, 2005.

On March 19, 2001, the Company entered into a mortgage note with an original principal amount of $9.0 million due in monthly installments starting on April 16, 2001, with interest. Interest on the mortgage
is LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. A balloon payment is due on the mortgage on March 16, 2011. The effective interest rate on the mortgage note was 5.43% and 4.51% at
March 31, 2006 and September 30, 2005, respectively. We used an interest rate swap (the Swap) agreement in order to minimize the adverse impact of the floating interest rate characteristics of the Companys long term debt
obligations. The swap effectively converted the floating interest rate on the note payable to a fixed rate of 6.28%. On March 16, 2006, the Companys swap expired. Our adjustable rate mortgage calls for an interest rate based on the 30 day
LIBOR plus a margin of .065%. We do not anticipate entering into any additional swap agreements.

Our capital expenditures are generally
for purchases of property and equipment. The Company spent $4.6 million and $4.0 million on such expenditures for the six-month period ended March 31, 2006 and 2005, respectively.

On April 30, 2006, we acquired 100% of the stock of EIP Associates (EIP) for $6.0 million, net of cash acquired of $15,000, comprised of
$5.5 million in cash, $334,000 accrued additional purchase price and $200,000 held in escrow.

A stock offering usually takes place on an
annual basis for a one week period during the month of March. The Company suspended the stock offering window for March 2006 until the final impact of the restatement of the Companys consolidated financial statements is
determined. The Company is planning to open the stock window for fiscal year 2007 in June 2007. During this offering, shares of the Companys common stock will be available for sale to employees of the Company, pursuant to The PBSJ
Corporation Stock Ownership Plan.

The stock window will also allow existing
shareholders to offer shares of common stock for sale to the Company. Under the corporate by-laws, the Company has the first right of refusal to purchase these shares. If the Company declines to purchase the offered shares, they are offered to
the Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP) and then to all shareholders. The Company believes it will be able to fund purchases it chooses to execute using cash from operations and accessing the revolving credit line
facility, if necessary. Should the number of shares offered for sale potentially cause the Company to violate its debt covenants, the Company would restrict the purchase of shares until compliance is achieved. As of April 30, 2007 there were 6,668,606 shares held by employees with a total value of $162.3 million.



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##### Table of Contents

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 for fiscal year 2006 and beyond.

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.

3. Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than operating leases for most of our office facilities and certain equipment. Minimum operating
lease obligations payable in future years are presented below in Contractual Obligations.

4. Related Party Transactions

We lease office space in a building which houses our Marietta, Georgia operations from BCE Properties, which is owned and controlled by James Belk.
Mr. Belk is a former owner of Welker and a Vice-President and Project Director of ours. The lease was assumed in connection with our acquisition of Welker in March 2003. The rental cost of the space is $17,600 per month. On May 31, 2006,
the lease expired and was not renewed. In June 2006, we moved our Marietta, Georgia operations to a new location.

We lease office space in
a building which houses our Missoula, Montana operations from Cedar Enterprises, which is owned and controlled by Charlie K. Vandam. Mr. Vandam is a former owner of LWC and a Senior Program Manager of ours. The lease was assumed in connection
with our acquisition of LWC in February 2005. The rental cost of the space is $9,500 per month.

We lease office space in a building which
houses our Helena, Montana operations from Prickly Pear Enterprises, which is owned and controlled by Paul Callahan. Mr. Callahan is a former owner of LWC and a Vice-President and Senior Division Manager of ours. The lease was assumed in
connection with our acquisition of LWC in February 2005. The rental cost of the space is $1,800 per month.

At the annual meeting of the
shareholders held on January 28, 2005, the shareholders approved a proposal to authorize the Company to execute an agreement with Richard Wickett, our former Chairman of the Board from 2002 to February 2005 and former Chief Financial Officer
from 1993 to 2004, to allow him to retain his 138,607 shares of the Companys stock, exclusive of his shares owned through the Companys Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP), upon retirement and
offer for sale the shares, in blocks of 46,000, 46,000 and 46,607 shares in February 2005, 2006 and 2007, respectively, at a price determined at the valuation at the fiscal year end immediately preceding the redemption period.

Pursuant to the Companys by-laws, the Company is permitted to repurchase stock by delivery
of a promissory note to the employee. On February 23, 2006 the Company repurchased 46,000 shares and 3,400 shares, respectively, of the Companys stock from Richard Wickett and Kathryn Wilson in the original principal amounts of $1.2
million and $92,000, respectively. The shares were repurchased for $27.00 per share which represents the September 30, 2004 share price. At March 31, 2006, the Company had an accrual of $49,400 for the difference between the purchase price
and the September 30, 2005 share value of $28.00. The notes currently bear interest at the rate of 7.5% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31stof each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued
interest due and payable on the five year anniversary of the date of issuance. The balances of the notes and the accrual for the stock price differential were approximately $1.4 million at March 31, 2006 and were included in other liabilities
in the accompanying condensed consolidated balance sheet.



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On February 13, 2007, the Company repurchased
an additional 46,607 shares of the Companys stock from Richard Wickett in the original principal amount of approximately $1.0 million. The additional shares were purchased for $22.40 which represents 80% of the September 30, 2005 share
price, pending completion of the evaluation of the Companys stock as of September 30, 2006. In fiscal year 2007, the Company recorded a liability for the difference between the purchase price and the September 30, 2006 share price.
The 2007 note currently bears interest at the rate of 8.25% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31stof each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five
year anniversary of the date of issuance. The notes are subject to the Companys right of set off, which permits the Company to set off all claims it may have against the payee against amounts due and owing under the notes.

5. Recent Accounting Pronouncements

On
February 15, 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities, which allows an entity the
irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be
recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective for the Companys financial statements for the fiscal year ending September 30, 2009, with earlier
adoption permitted. Management is currently evaluating the impact and timing of the adoption of SFAS 159 on the Companys consolidated financial statements.

In September 2006, FASB issued SFAS No. 158 (SFAS 158), Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. This standard requires an employer to
recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income. The Company is required to adopt the recognition and related disclosure provisions of SFAS 158 for the fiscal year ending September 30, 2007. The Company is also required to adopt the
measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. The Company is still evaluating the impact of this standard on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 prescribes a single
definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting provisions of SFAS 157 will be effective for
the Company for the fiscal year ending September 30, 2009. The Company does not believe the adoption of SFAS 157 will have a material impact on its consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 addresses how the effects of prior year
uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether
either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to
beginning of year retained earnings. SAB 108 will be effective for the Company for the fiscal year ending September 30, 2008. The Company does not believe the adoption of SAB 108 will have a material impact on its consolidated financial
statements.



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In July 2006, the FASB issued Interpretation (FIN) No. 48 Accounting for
Uncertainty in Income Taxes  an interpretation of FASB No. 109 (FIN 48). This interpretation establishes guidelines and thresholds that must be met for the recognition and measurement of a tax position taken or
expected to be taken in a tax return. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, ( FSP 115-1 and 124-1) which address the determination as to when an investment is impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. FSP 115-1 and 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. The guidance in FSP 115-1 and 124-1 amends FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and Accounting Principles Board
(APB) Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. FSP 115-1 and 124-1 is effective for reporting periods beginning after December 15, 2005. The adoption of FSP
115-1 and 124-1 did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154
(SFAS 154), Accounting Changes and Error Corrections (SFAS 154), which replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3 Reporting Accounting Changes in
Interim Financial Statements. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a
change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is
effective for accounting changes and correction of errors made in the first annual reporting period beginning after December 15, 2005. We early adopted SFAS 154 and have reported and disclosed the correction of errors in our previously reported
consolidated financial statements in accordance with SFAS 154. The other reporting and disclosure requirements of SFAS 154 did not have a material impact on our consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which is a
revision of SFAS 123, Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first annual period beginning after December 2005, with early adoption encouraged. We are required to adopt SFAS
123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The Company is currently evaluating the impact of adopting SFAS 123(R) on our consolidated financial statements.

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 but in which it has a significant variable interest. We are required to adopt FIN 46R immediately for entities created after
December 31, 2003 and at the beginning of fiscal year 2006 for all other entities. The adoption of FIN 46R did not have a material impact on our consolidated financial statements.



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6. Critical Accounting Policies

For a discussion of our critical accounting policies, see Managements Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the fiscal year ended
September 30, 2006 which is being filed simultaneously with this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are
subject to interest rate risk through outstanding balances on our variable rate debt. We may mitigate this risk by paying down additional outstanding balances on our variable rate loans, refinancing with fixed rate permanent debt or obtaining cash
flow hedges. 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. On March 10, 2006, our swap
expired. 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. Our adjustable rate mortgage calls for an interest rate based on the 30-day
LIBOR plus a margin of .065%. We do not anticipate entering into any additional swap agreements.

The interest rate (5.33% and 4.36% at
March 31, 2006 and December 31, 2005, respectively) on our revolving line of credit and mortgage note 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. We mitigate 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 mortgage note. As of March 31, 2006, the fair value of the debt approximates the outstanding principal balance due to the variable rate nature of such instruments.

The interest rates under our revolving line of credit and mortgage note are variable and accordingly we have exposure to market risk. To the extent that
we have borrowings outstanding, there is market risk relating to the amount of such borrowings. We estimate that a one-percentage point increase in interest rates for debt outstanding of $7.7 million as of March 31, 2006 would have resulted in
additional annualized interest costs of approximately $77,000. This analysis did not consider the impact of the swap since it expired in March 2006. As of April 30, 2007, debt outstanding has increased to $28.2 million primarily due to payments
made for client reimbursements under our line of credit. We estimate that a one-percentage point increase in interest rates for this debt would result in additional annualized interest costs of approximately $282,000.

The sensitivity analysis, described above, contains certain simplifying assumptions (for example, it does not consider the impact of changes in
prepayment risk or credit spread risk). Therefore, although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.

Item 4.Controls and Procedures

Attached as exhibits to this Form 10-Q are
certifications of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the Exchange Act).

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.



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As of the end of the period covered by this report, the Company carried out an evaluation, under the
supervision and with the participation of the Audit Committee and management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15(e). Based upon, and as of the date of, this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were not effective,
because of the material weaknesses discussed below. In light of the material weaknesses described below, the Company performed additional procedures to ensure that the consolidated financial statements are prepared in accordance with generally
accepted accounting principles. Accordingly, management believes that the financial statements included in this Annual Report fairly present in all material respects the Companys financial condition, results of operations and cash flows for
the periods presented.

Material Weakness in Internal Control Over Financial Reporting

A material weakness (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) is a control
deficiency, or combinations of control deficiencies, that results in more than a remote risk that a material misstatement in our annual or interim financial statements will not be prevented or detected. The Company identified the following material
weaknesses:

1) Entity-Level Controls

The Company did not design and maintain effective entity-level controls as defined in Internal ControlIntegrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission(COSO).
This deficiency relates to the risk assessment component of internal control as defined by COSO. Specifically:

The Company did not conduct
a formal fraud risk assessment to consider the risk of material misstatements due to fraud, giving consideration to potential fraud schemes, or other internal or external factors such as pressures or incentives affecting the Company. A fraud risk
assessment is designed to identify and evaluate fraud risk factors that could enable fraud to occur within the organization. The fraud risk assessment involves an expanded focus on considerations of where fraud risk factors may exist within the
entity and the potential fraud schemes that could be perpetrated.

This condition constitutes deficiencies in both the design and operation
of entity-level controls.

2) Inadequate Controls Related to the Closing and Financial Reporting Cycles

Several significant deficiencies in the design and operating effectiveness of internal controls over the monthly close, quarterly, and year-end reporting
cycles were identified which were considered material weaknesses when aggregated. Specifically, the significant deficiencies include inaccurate and untimely bank reconciliations, reconciliations of year-end journal entries to the general ledger and
identification and accounting for loss contracts in progress on a timely basis. The affected accounts include cash, fixed assets, unbilled fees, accounts payable, engineering fees and direct reimbursable expenses.

Status of Remediation of Prior Year and Currently Identified Material Weaknesses

We have implemented several changes to our internal control over financial reporting in response to the material weaknesses identified in our 2005 Form 10-K and those described above. To address the material
weaknesses, we have implemented the following procedures:



| |  |  | We have emphasized certain controls and improved the controls designed to safeguard our cash assets and have implemented additional segregation of duties.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | We have enhanced our expertise by hiring new accounting and finance personnel with substantial knowledge of financial accounting principles and procedures
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have engaged consultants with significant expertise in the areas of income tax and governmental accounting to advise and provide support in these areas.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Controls have been enhanced to restrict access to software, operating systems and Company data along with a review of access privileges.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have begun hiring additional internal audit professionals who will be responsible for performing the fraud risk assessment and monitoring the Companys
internal controls.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Internal Control Over Financial Reporting

Except as described above, there have been no changes to the Companys internal control over financial reporting that occurred during the
Companys fiscal quarter ended March 31, 2006, that have materially affected, or are reasonably likely to affect, the Companys internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Companys management, including the CEO
and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further,
because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts
of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that
any systems design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of a systems control effectiveness into future periods are subject to risks. Over time, controls may
become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.



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PART II. Other Information

ITEM 1.Legal Proceedings

We are party to several pending 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 and financial
position.

We maintain a full range of insurance coverages, including workers compensation, commercial general liability (which
includes property coverage), commercial automobile, and professional liability (which includes pollution coverage). Our professional liability coverage is on a claims-made basis meaning the coverage applies to claims made during a policy
year regardless of when the causative action took place. All other coverages are occurrence-basis meaning that the policy in place when the injury or damage occurred is the policy that responds regardless of when the claim is made. Our
professional liability limits per policy year are $45 million with a per claim deductible of $125,000 plus an annual aggregate of $3 million. Based on our experience with claims and lawsuits we believe that the current levels of coverage are
adequate for all of our present operational activities although such coverages may not prove to be adequate in all cases. A successful catastrophic claim or aggregate of several large claims in amounts in excess of our insurance coverages in any
policy year could have a material adverse effect on our financial position and results of operation.

In July 1998, we entered into an
agreement with West Frisco Development Corporation (WFDC) to provide various services, among which was a flood plain study to be used by WFDC, the City of Frisco and FEMA. In 2003, the City of Frisco retained the services of a
third-party architecture and engineering firm in connection with the extension and widening of Teel Road which lies within the greater drainage basin included in the Companys original flood plain study. This architecture and engineering
firms assessment of the flood plain study determined that the Company used incorrect assumptions when calculating the size of the drainage culverts required for the increased development of the areas transportation infrastructure. Based
on this assessment, the Company has entered into negotiations with the City of Frisco to correct the drainage needs to support the Teel Road expansion project. As a result, the Company had recorded an estimated liability of $3.1 million to cover the
costs associated with correcting the drainage needs of the Teel Road expansion project. Included in this estimate is the purchase of a parcel of land for $1.5 million, the remaining balance of $1.6 million is reflected in other liabilities in the
accompanying condensed consolidated balance sheets as of March 31, 2006 and September 30, 2005.

Misappropriation Loss

In March 2005, subsequent to the issuance of the Companys 2004 financial statements, we discovered misappropriations of Company
funds by our former Chief Financial Officer and two former employees who worked in our information systems and treasury departments, collectively, (the participants). The participants colluded and circumvented controls to misappropriate
funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were discovered.

Shortly after
this discovery, an investigation sub-committee was formed comprised of the three outside members of our Corporate Audit Committee. These three outside members were subsequently appointed to the Board of Directors and became the three members of the
Audit Committee of the Board of Directors. The Audit Committee retained independent counsel to conduct an investigation and advise the Audit Committee in connection with the investigation. The independent counsel retained forensic accountants,
including accountants experienced in conducting forensic audits for companies that perform contracts for federal, state and local governments to assist with the investigation.



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The investigation team discovered that at least $36.6 million was misappropriated between January 1,
1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable. The participants in
the embezzlement scheme used several methods to misappropriate the funds while engaging in conduct to conceal the misappropriated amounts. This conduct included among other things, recording and changing normal recurring journal entries and
overstating accruals in prior periods to facilitate improper write-offs of misappropriated funds.

The Company determined that the
misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in connection with certain of our government contracts. As a result, some of our government clients were overcharged for the
Companys services. During the review of the overhead rate calculations, the Company identified certain instances of costs erroneously included in our overhead cost pool which were unallowable under applicable regulations and an error in our
calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the unallowable costs and general and administrative errors also led to the overstatement of overhead rates which the Company
used in connection with certain government contracts.

The Audit Committee, at the direction of the Corporate Board, disclosed the
overstatement of our overhead rate to our clients and other appropriate government agencies, including the Department of Justice (DOJ). We have been cooperating with our clients and such agencies to determine the amount of our
reimbursement obligations and any other amounts we may be obligated to pay in order to resolve these issues. The DOJ and certain other governmental entities have been investigating the misappropriations and the overstatement of overhead rates.

In July 2006, we entered into a settlement agreement with the State of Texas Department of Transportation which resolves all claims that
the State of Texas may have had against us for overpayments related to the restatement of overhead rates on billings on or before April 30, 2006 under contracts with that agency based on our payment of approximately $5.4 million and provides
for the determination of the appropriate overhead rate for billings after April 30, 2006. In November 2006, we entered into a settlement agreement with the Florida Department of Transportation which resolves all claims that agency may have had
against us for the overstatement of rates on billings through September 30, 2005 (and with respect to cost contracts through September 30, 2006) under our contracts with them based on our payment of approximately $12.5 million. This
settlement agreement also provided for the determination of the appropriate overhead rate refund for fiscal year 2006 billings under fixed price contracts. The refund amount was finalized in March 2007 and totaled $0.4 million.

In January 2007, we reached a settlement agreement with the Department of Justice, Civil Division on behalf of it and all other federal agencies with
which we have contracts to resolve all federal claims including claims under the Federal Civil False Claims Act, related to the overstatements of overhead rates on our contracts with federal agencies. The agreement requires approximately $6.5
million of reimbursement payments for all contract amounts through September 30, 2005.

The ouststanding settlements described above
are included in the accrued reimbursement liability in the Companys consolidated financial statements at September 30, 2005. Those settlements which were settled subsequent to September 30, 2006 are included in the accrued
reimbursement liability at September 30, 2006. We are in discussions with our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

Our Board of Directors, with the assistance of the CAC and the Audit Committee, instituted immediate corrective actions and began implementing long-term
measures to implement new financial controls and establish procedures to safeguard assets and to establish more accurate accounting and financial reporting practices. These long-term measures are included within our new Ethics and Compliance
Program.



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In an effort to recover assets that were misappropriated, the Company has instituted lawsuits against
certain persons who received money from one or more of the participants in the embezzlement scheme. The Company continues to incur costs associated with such lawsuits, and the Company may not prevail in these lawsuits. In the event that the Company
does prevail, the Company may not actually recover assets from the persons who were sued by the Company.

In the course of our
investigation of the accounting irregularities and misappropriations, it was determined that there were possible violations relating to past political contributions by us and certain of our employees. The United States Attorneys Office
for the Southern District of Florida (Miami) and the Federal Bureau of Investigation have conducted an investigation relating to improper campaign contributions including improper use of political action committees. We produced documents and other
information to the government and fully cooperated with the authorities. Criminal charges have been filed against two of the Companys former chairmen. Authorities have verbally informed the Companys external legal counsel that unless
adverse additional information is discovered they do not intend to charge the Company. At the present time, we believe it is unlikely that criminal charges will be filed against us in this matter, but the authorities are not precluded from bringing
charges, and circumstances may change.

The United States Securities & Exchange Commission is also conducting an investigation of
the accounting irregularities and misappropriations of funds described above. We are fully cooperating with the investigation and have produced documents and other information to the commission. At the present time, we are unable to predict the
likely outcome of this investigation.



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ITEM 1A. Risk Factors

In addition to the factors discussed elsewhere in this Report, the following risks
and uncertainties could materially adversely affect the Companys business, financial condition, and results of operations. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial
also may impair the Companys business operations and financial condition.

Certain Risks Related to Our Marketplace and Our Operations

We are involved in litigation, legal proceedings and governmental investigations, which could have a material adverse effect on our profitability
and financial position.

We are involved in litigation, legal proceedings and governmental investigations that are significant and described in more
detail in Item 3 Legal Proceedings. Such litigation, proceedings and investigations could have a material adverse effect on our profitability and financial position if decided adversely.

Unpredictable downturns in the financial markets, and reduced federal, state and local government budget spending could cause our revenues to fluctuate and
adversely affect our revenue and operating results.

Downturns in the financial markets can impact the capital expenditures of our clients. In
particular, our private sector clients, and the markets in which we provide services, may from time to time experience periods of economic decline. Any prolonged downturn in the financial markets could negatively impact our ability to determine
demand for our services. We cannot be certain that economic or political conditions will be generally favourable or that there will not be significant fluctuations adversely affecting our industry as a whole or key markets we target.

The demand for our government related services is contingent upon the level of government funding for new and existing infrastructure projects. As such, government
funding is dependent upon policy objectives being in line with infrastructure needs. Any shift in policy away from these initiatives can impact our ability to secure current funding for projects and obtain new projects.

We operate in a highly competitive market. If we are unable to offer competitive services, our business may be adversely affected.

We have numerous competitors in the various marketplaces in which we operate. Our competitors range from large diversified firms having substantially greater financial
resources and a larger technical staff than us, to smaller more specialized, low cost structure niche firms. It is not possible to estimate the extent of competition which our present or future activities will encounter because of changing
competitive conditions, customer requirements, technological developments, political environments and other factors.

We continue to see significant price
competition and customer demand for higher service completion levels. There is also significant price competition in the marketplace for federal, state and local government contracts as a result of budget issues, political pressure and other factors
beyond our control. Our operating results could be negatively impacted should we be unable to achieve the necessary revenue growth to sustain profitable operating margins within our service lines.

Pending or future governmental audits could result in findings which require downward adjustments of our revenue; and, under certain circumstances, could cause us
to incur significant liabilities or restrict our business activities.

We are party to numerous contracts with government agencies, which require
strict compliance with applicable laws, regulations, standards and contractual requirements. These agencies routinely conduct financial statement audits, attestation audits, or performance audits of their contracts to detect and report material
non-compliance, fraud, internal control deficiencies, and to ensure adherence to generally accepted government auditing standards which include AICPA fieldwork standards.



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If these audits identify costs which have been incorrectly billed, either directly or indirectly, to government
contracts, the government agencies may not reimburse us for these costs, or if we have already been reimbursed, we may be required to refund these reimbursements.

Our internal controls may not prevent or detect specific isolated or deceitful violations of applicable laws, regulations, standards or contractual requirements. If these agencies determine that we or one of our subcontractors has engaged
in illegal conduct, we may be subject to civil or criminal penalties, and this may impair our ability to obtain new work.

We derive a significant
portion of our engineering fees from a few clients, and the loss of these clients could have a material adverse impact on our financial performance.

In fiscal 2006, we derived approximately 25.0% of our engineering fees from various districts and departments of the FDOT and the TxDOT under numerous contracts. While we believe the loss of any individual contract would not have a material
adverse effect on our results of operations and would not adversely impact our ability to continue work under our other contracts with these clients, the loss of all the FDOT or the TxDOT contracts would have a material adverse effect on our results
of operations by causing a material decrease in our engineering fees and profits.

Our backlog is subject to cancellation and unexpected adjustments,
which could have a negative impact on future earnings.

Backlog represents the revenues associated with contracted task orders which are scheduled
to commence in future periods, less previously recognized revenue on such task orders. Projects may remain in our backlog for prolonged periods of time prior to commencement, and our ability to realize revenues from our backlog is contingent on the
availability of funding from federal, state and local government agencies. Most government agency contracts contain cancellation clauses, which if exercised, would cause a reduction in our backlog, and adversely affect future revenues. Future
project cancellations and scope adjustments could further reduce the dollar amount of our backlog and the revenues and profits that we actually earn.

If we are unable to accurately estimate the revenues, costs, time and resources on our contractual commitments, we may incur a lower profit or loss on the contract.

We generally earn revenue for the services we provide through three principal types of contracts; cost-plus, time-and-materials, and fixed price contracts. Cost-plus contracts are usually subject to negotiated
ceiling amounts, and limit the recovery of certain specified indirect costs. If we underestimate our costs, and our costs exceed the contract ceiling amount, we may not be reimbursed for such costs. Under time-and-materials contracts, we negotiate
hourly billing rates and charge our clients based on actual time expended. If we underestimate our total contract costs, we may not recover these costs from our client, and the project may not be profitable for us. Under fixed price contracts, we
receive a fixed sum negotiated in advance, regardless of actual costs incurred. If we underestimate our revenue and costs for the specified scope of work, we may experience significant over-runs and negatively impact profit margin or realize a loss
on the contract. Under these types of contracts, we bear the inherent risk that actual performance cost may exceed the estimated contract price.

If we are unable to retain and recruit highly qualified personnel to fulfill our contractual obligations, our business may be adversely affected.

Our employees are our most valuable resource. Many of our technical personnel are highly specialized in their respective disciplines. Since we derive substantially all of our engineering fees from services performed
by our professional staff, our failure to retain and attract professional staff could negatively impact our ability complete our projects and secure new contracts.



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Failure to meet the covenants of our existing revolving credit facility could result in the loss of use of our
available line of credit.

Failure to meet any of the covenant terms of our existing revolving credit facility could result in an event of default.
If an event of default occurs, and we are unable to receive a waiver of default, our lender may increase our borrowing costs, restrict our ability to obtain additional borrowings, accelerate all amounts outstanding or enforce their interest against
all collateral pledged. In the past, we have obtained written waivers of default from our lender, but no assurances can be given that we will be able to obtain the necessary waivers in the future. In addition, we can not declare dividends or incur
additional debt without written approval from our lender, which could significantly restrict our ability to raise additional capital. Our inability to raise additional capital could lead to working capital deficits that could have a materially
adverse effect on our operations in future periods.

We may be negatively impacted as a result of litigation or other proceedings relating to past
political contributions by us and certain of our employees.

In the course of our investigation of the accounting irregularities and
misappropriation, it was determined that there were possible irregularities relating to past political contributions by us and certain of our employees. The United States Attorneys Office for the Southern District of Florida and the
Federal Bureau of Investigation are now conducting an investigation into this matter. An unfavorable resolution or outcome resulting from this investigation may cause irreparable damage to our reputation and negatively impact our ability to
secure new contracts with existing governmental clients.

Certain Risks Related to Owning Our Stock

Because no public market exists for our stock, the ability of our shareholders to sell their common stock is limited.

There is no public market for our common stock. In order to provide some liquidity to our shareholders, we have historically maintained a limited annual stock offering
period, which we call the stock window. The stock window has permitted existing shareholders to offer their shares for sale back to us during a predetermined period at a price determined by an appraisal. Although the stock window is intended to
provide some liquidity to shareholders, the aggregate number of shares offered for sale during the stock window may be greater than the aggregate number of shares sought to be purchased by authorized buyers. As a result, sell orders may be prorated,
and shareholders may not be able to sell all of the shares they desire to sell during the stock window. We did not open the stock window in fiscal year 2006, and there is no guarantee the stock window will be open or will not be delayed in future
periods. Shareholders who desire to sell their shares in the future will only be able to do so if there are authorized buyers willing to purchase such shares during an open stock window.

The ability of shareholders to sell or transfer their common stock is restricted.

Only our employees,
directors, and The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP) may own our common stock. We have incorporated significant restrictions on the transfer of our common stock which limit our shareholders
ability to sell their stock. All shares must be initially offered for sale back to us at the price determined by an appraisal. If we decline to purchase the shares, the ESOP Plan may purchase such shares. Should the ESOP Plan decline to purchase the
shares, the shareholders may offer their shares for sale to other shareholders who are full-time employees. The other shareholders have the right to purchase such shares based on each shareholders proportionate ownership of all issued shares.
Because our shares are subject to transfer restrictions, shareholders who desire to sell all their shares may not be able to do so.

Pursuant to the
Companys by-laws, the Company is permitted to repurchase stock by delivery of a promissory note to the employee. Because the principal payable pursuant to any such promissory note may be paid at any time prior to the five year anniversary of
the date of issuance, a stockholder may not receive a cash payment for his shares until such five year anniversary.



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Because we do not intend to pay dividends, our shareholders will benefit from an investment in our common stock
only if our stock price appreciates.

We have never declared or paid dividends to holders of our common stock. We expect to retain all future
earnings for investment in our business, and do not expect to pay any cash dividends in the near future. As a result, the positive return of an investment in our common stock is solely dependable on future appreciation in value of our common stock
and future earnings. There is no guarantee that our stock will appreciate in value or even maintain the original price at which it was purchased.

The value of our stock may be negatively impacted by current and future governmental agency investigations.

An unfavorable
resolution or outcome resulting from working with various government agencies to resolve the amount or reimbursement obligations may result in a material adverse impact to our enterprise value, and may adversely impact the future value of our share
price. In addition, we are currently under investigation by the United States Attorneys Office for the Southern District of Florida and the Federal Bureau of Investigation for possible irregularities relating to past political contributions
made by us and certain of our employees. In the event that criminal charges are filed against the Company, the future value of our share price may be impacted.



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ITEM 2.Issuer Purchases of Equity Securities by Issuer and Affiliated Purchasers



|                         |  |                                        |  |                             |       |                                                                               |   |                                                                         |  
|------------------------ |  | -------------------------------------- |  | --------------------------- | ----- | ----------------------------------------------------------------------------- | - | ----------------------------------------------------------------------- | -
|                         |  | Total Number of Shares Repurchased
(1) |  | Average PricePaid Per Share |       | Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs |   | Maximum Number ofShares That May BePurchased Under thePlans or Programs
|January 1 - January 31   |  | 1,117                                  |  | $                           | 28.00 |                                                                               |  |                                                                         | 
|February 1 - February 28 |  | 11,019                                 |  | $                           | 28.00 |                                                                               |  |                                                                         | 
|March 1 - March 31       |  | 319,067                                |  | $                           | 28.00 |                                                                               |   |                                                                         |  
|                         |  |                                        |  |                             |       |                                                                               |   |                                                                         |  
|Total                    |  | 331,203                                |  | $                           | 28.00 |                                                                               |  |                                                                         | 
|                         |  |                                        |  |                             |       |                                                                               |   |                                                                         |  

ITEM 3. Defaults Upon Senior Securities

None.

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

None.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

A list of exhibits to this Report is set forth in the Exhibit Index appearing elsewhere
in this Report and is incorporated herein by reference.



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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                             
|                    |  |  |  | (Registrant)                                     
|                    |  | 
|Dated: May 24, 2007 |  |  |  | /s/ John B. Zumwalt                              
|                    |  |  |  | John B. Zumwalt                                  
|                    |  |  |  | Chairman and Chief Executive Officer             
|                    |  | 
|Dated: May 24, 2007 |  |  |  | /s/ Donald J. Vrana                              
|                    |  |  |  | Donald J. Vrana                                  
|                    |  |  |  | Senior Vice President and Chief Financial Officer



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                         
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                             
|31.1          |  | Rule 13a-14(a) certification by John B. Zumwalt, III, Chairman and Chief Executive Officer.                                                                                                                                                             
|              | 
|31.2          |  | Rule 13a-14(a) certification by Donald J. Vrana, Senior Vice President and Chief Financial Officer.                                                                                                                                                     
|              | 
|32            |  | Certification of by John B. Zumwalt, III, Chairman and Chief Executive Officer and Donald J. Vrana, Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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