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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 December 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 August 31, 2007, there were 6,864,618 shares of Common Stock, $.00067 par value per share, outstanding.



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##### Table of Contents

THE PBSJ CORPORATION

Form 10-Q

For the Quarterly Period Ended December 31, 2006

Table of Contents



|            |  |                                                                                       |  |     
|----------- |  | ------------------------------------------------------------------------------------- |  | ----
|Item Number |  | CAPTION                                                                               |  | PAGE
|            |  |                                                                                      
|PART I:     |  | FINANCIAL INFORMATION                                                                 |  |     
|            |  |                                                                                      
|Item 1.     |  | Unaudited Condensed Consolidated Financial Statements                                 |  | 3   
|            |  |                                                                                      
|Item 2.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 22  
|            |  |                                                                                      
|Item 3.     |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 42  
|            |  |                                                                                      
|Item 4.     |  | Controls and Procedures                                                               |  | 43  
|            |  |                                                                                      
|PART II:    |  | OTHER INFORMATION                                                                     |  |     
|            |  |                                                                                      
|Item 1.     |  | Legal proceedings                                                                     |  | 46  
|            |  |                                                                                      
|Item 1A.    |  | Risk Factors                                                                          |  | 49  
|            |  |                                                                                      
|Item 2.     |  | Issuer Purchases of Equity Securities by Issuer and Affiliated Purchasers             |  | 53  
|            |  |                                                                                      
|Item 3.     |  | Defaults Upon Senior Securities                                                       |  | 53  
|            |  |                                                                                      
|Item 4.     |  | Submission of Matters to a Vote of Security Holders                                   |  | 53  
|            |  |                                                                                      
|Item 5.     |  | Other Information                                                                     |  | 53  
|            |  |                                                                                      
|Item 6.     |  | Exhibits                                                                              |  | 53  
|            | 
|SIGNATURES  |  | 54                                                                                   



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##### Table of Contents

PART 1 FINANCIAL INFORMATION

|Item 1. | Financial Statements
|------- | --------------------

THE PBSJ CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)



|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ----------------- | - | ------- | -
|(Amounts in thousands, except shares and per share amounts)                                                                                                                     |  | December 31,2006 |         |   | September 30,2006 |  
|Assets                                                                                                                                                                          |  |                  |         |   |                   |   |         |  
|Current Assets:                                                                                                                                                                 |  |                  |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                                       |  | $                | 402     |   |                   | $ | 10      |  
|Accounts receivable, net                                                                                                                                                        |  |                  | 75,925  |   |                   |   | 85,210  |  
|Unbilled fees                                                                                                                                                                   |  |                  | 60,539  |   |                   |   | 62,770  |  
|Assets held for sale                                                                                                                                                            |  |                  | 468     |   |                   |   | 4,235   |  
|Other current assets                                                                                                                                                            |  |                  | 6,332   |   |                   |   | 3,609   |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total current assets                                                                                                                                                            |  |                  | 143,666 |   |                   |   | 155,834 |  
|Property and equipment, net                                                                                                                                                     |  |                  | 40,168  |   |                   |   | 40,238  |  
|Cash surrender value of life insurance                                                                                                                                          |  |                  | 10,174  |   |                   |   | 10,055  |  
|Deferred income taxes                                                                                                                                                           |  |                  | 6,847   |   |                   |   | 10,022  |  
|Goodwill                                                                                                                                                                        |  |                  | 21,692  |   |                   |   | 21,692  |  
|Intangible assets, net                                                                                                                                                          |  |                  | 1,379   |   |                   |   | 1,678   |  
|Other assets                                                                                                                                                                    |  |                  | 5,272   |   |                   |   | 5,430   |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total assets                                                                                                                                                                    |  | $                | 229,198 |   |                   | $ | 244,949 |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                            |  |                  |         |   |                   |   |         |  
|Current Liabilities:                                                                                                                                                            |  |                  |         |   |                   |   |         |  
|Accounts payable and accrued expenses                                                                                                                                           |  | $                | 70,483  |   |                   | $ | 88,352  |  
|Liabilities related to assets held for sale                                                                                                                                     |  |                  |        |   |                   |   | 2,099   |  
|Accrued reimbursement liability                                                                                                                                                 |  |                  | 24,217  |   |                   |   | 28,183  |  
|Current portion of long-term debt                                                                                                                                               |  |                  | 14,087  |   |                   |   | 1,644   |  
|Current portion of capital leases                                                                                                                                               |  |                  | 347     |   |                   |   | 274     |  
|Accrued vacation                                                                                                                                                                |  |                  | 11,288  |   |                   |   | 12,173  |  
|Billings in excess of costs                                                                                                                                                     |  |                  | 6,022   |   |                   |   | 4,654   |  
|Deferred income taxes                                                                                                                                                           |  |                  | 19,534  |   |                   |   | 19,740  |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total current liabilities                                                                                                                                                       |  |                  | 145,978 |   |                   |   | 157,119 |  
|Long-term debt, less current portion                                                                                                                                            |  |                  | 6,780   |   |                   |   | 6,909   |  
|Capital leases, less current portion                                                                                                                                            |  |                  | 642     |   |                   |   | 776     |  
|Deferred compensation                                                                                                                                                           |  |                  | 12,906  |   |                   |   | 12,780  |  
|Other liabilities                                                                                                                                                               |  |                  | 7,637   |   |                   |   | 8,454   |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total liabilities                                                                                                                                                               |  |                  | 173,943 |   |                   |   | 186,038 |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Stockholders Equity:                                                                                                                                                           |  |                  |         |   |                   |   |         |  
|Common stock, par value $0.00067, 15,000,000 shares authorized, 6,762,797 and 6,849,214 shares issued and outstanding at December 31,
2006 and September 30, 2006, respectively |  |                  | 5       |   |                   |   | 5       |  
|Retained earnings                                                                                                                                                               |  |                  | 57,215  |   |                   |   | 64,052  |  
|Accumulated other comprehensive loss                                                                                                                                            |  |                  | (1,843  | ) |                   |   | (1,914  | )
|Unearned compensation and other                                                                                                                                                 |  |                  | (122    | ) |                   |   | (3,232  | )
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                                                      |  |                  | 55,255  |   |                   |   | 58,911  |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                                                      |  | $                | 229,198 |   |                   | $ | 244,949 |  
|                                                                                                                                                                                |  |                  |         |   |                   |   |         |  

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



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THE PBSJ CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)



|                                                                 |  |                                 |         |   |      |   |         |  
|---------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                 |  | Three Months Ended December 31, |        
|(Amounts in thousands, except per share amounts)                 |  | 2006                            |         |   | 2005 |  
|Earned revenues:                                                 |  |                                 |         |   |      |   |         |  
|Engineering fees                                                 |  | $                               | 129,714 |   |      | $ | 128,466 |  
|Direct reimbursable expenses                                     |  |                                 | 28,575  |   |      |   | 23,774  |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net earned revenues                                              |  |                                 | 101,139 |   |      |   | 104,692 |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Costs and expenses:                                              |  |                                 |         |   |      |   |         |  
|Direct salaries and direct costs                                 |  |                                 | 37,337  |   |      |   | 37,304  |  
|General and administrative expenses, including indirect salaries |  |                                 | 63,476  |   |      |   | 56,407  |  
|(Gain) loss on recoveries                                        |  |                                 | 23      |   |      |   | (1,298  | )
|Investigation and related costs                                  |  |                                 | 2,021   |   |      |   | 4,780   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Total costs and expenses                                         |  |                                 | 102,857 |   |      |   | 97,193  |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Operating income (loss)                                          |  |                                 | (1,718  | ) |      |   | 7,499   |  
|Other income (expenses):                                         |  |                                 |         |   |      |   |         |  
|Interest expense                                                 |  |                                 | (405    | ) |      |   | (473    | )
|Other, net                                                       |  |                                 | 17      |   |      |   | 136     |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Total other income (expenses)                                    |  |                                 | (388    | ) |      |   | (337    | )
|                                                                 |  |                                 |         |   |      |   |         |  
|Income (loss) before income taxes                                |  |                                 | (2,106  | ) |      |   | 7,162   |  
|Provision for income taxes (benefit)                             |  |                                 | (689    | ) |      |   | 3,634   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net income (loss)                                                |  | $                               | (1,417  | ) |      | $ | 3,528   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net income (loss) per share:                                     |  |                                 |         |   |      |   |         |  
|Basic                                                            |  | $                               | (0.23   | ) |      | $ | 0.50    |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Diluted                                                          |  | $                               | (0.23   | ) |      | $ | 0.47    |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Weighted average shares outstanding:                             |  |                                 |         |   |      |   |         |  
|Basic                                                            |  |                                 | 6,274   |   |      |   | 7,007   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Diluted                                                          |  |                                 | 6,274   |   |      |   | 7,481   |  
|                                                                 |  |                                 |         |   |      |   |         |  

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



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THE PBSJ CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)



|                                                                                       |  |                                 |         |   |      |   |         |  
|-------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                       |  | Three Months Ended December 31, |        
|(Dollars in thousands)                                                                 |  | 2006                            |         |   | 2005 |  
|Cash flows from operating activities:                                                  |  |                                 |         |   |      |   |         |  
|Net income (loss)                                                                      |  | $                               | (1,417  | ) |      | $ | 3,528   |  
|Adjustments to reconcile net income (loss) to net cash (used in) operating activities: |  |                                 |         |   |      |   |         |  
|(Increase) decrease in cash surrender value of life insurance                          |  |                                 | (44     | ) |      |   | 426     |  
|Depreciation and amortization                                                          |  |                                 | 2,825   |   |      |   | 2,637   |  
|Loss (gain) on sale of property and equipment                                          |  |                                 | 4       |   |      |   | (12     | )
|Provision for bad debt and unbillable amounts                                          |  |                                 | 250     |   |      |   | 154     |  
|Provision for deferred income taxes                                                    |  |                                 | 2,932   |   |      |   | 10,699  |  
|Provision for and amortization of deferred compensation                                |  |                                 | 468     |   |      |   | 427     |  
|Change in operating assets and liabilities, net of acquisitions:                       |  |                                 |         |   |      |   |         |  
|Decrease (increase) in accounts receivable                                             |  |                                 | 9,031   |   |      |   | (3,387  | )
|Decrease in unbilled fees and billings in excess of costs                              |  |                                 | 3,599   |   |      |   | 4,436   |  
|Decrease in assets held for sale                                                       |  |                                 | 3,767   |   |      |   | 4,165   |  
|Increase in other current assets                                                       |  |                                 | (2,723  | ) |      |   | (4,688  | )
|Decrease (increase) in other assets                                                    |  |                                 | 160     |   |      |   | (45     | )
|Decrease in accounts payable and accrued expenses                                      |  |                                 | (17,949 | ) |      |   | (25,508 | )
|(Decrease) increase in accrued reimbursement liability                                 |  |                                 | (3,966  | ) |      |   | 569     |  
|Decrease in liabilities of assets held for sale                                        |  |                                 | (2,099  | ) |      |   | (2,120  | )
|Decrease in accrued vacation                                                           |  |                                 | (885    | ) |      |   | (1,572  | )
|(Decrease) increase in other liabilities                                               |  |                                 | (817    | ) |      |   | 485     |  
|                                                                                       |  |                                 |         |   |      |   |         |  
|Net cash used in operating activities                                                  |  |                                 | (6,864  | ) |      |   | (9,806  | )
|                                                                                       |  |                                 |         |   |      |   |         |  
|Cash flows from investing activities:                                                  |  |                                 |         |   |      |   |         |  
|Investment in life insurance policies                                                  |  |                                 | (75     | ) |      |   | (85     | )
|Acquisitions and purchase price adjustments, net of cash acquired                      |  |                                 |        |   |      |   | (40     | )
|Purchases of marketable securities                                                     |  |                                 |        |   |      |   | (17     | )
|Proceeds from the sale of property and equipment                                       |  |                                 | 2       |   |      |   | 12      |  
|Purchases of property and equipment                                                    |  |                                 | (2,428  | ) |      |   | (1,895  | )
|                                                                                       |  |                                 |         |   |      |   |         |  
|Net cash used in investing activities                                                  |  |                                 | (2,501  | ) |      |   | (2,025  | )
|                                                                                       |  |                                 |         |   |      |   |         |  
|Cash flows from financing activities:                                                  |  |                                 |         |   |      |   |         |  
|Borrowings under line of credit                                                        |  |                                 | 70,292  |   |      |   |        |  
|Principal payments under the line of credit                                            |  |                                 | (57,849 | ) |      |   |        |  
|Principal payments under mortgage note payable                                         |  |                                 | (129    | ) |      |   | (75     | )
|Principal payments under capital lease obligations                                     |  |                                 | (95     | ) |      |   | (103    | )
|Common stock:                                                                          |  |                                 |         |   |      |   |         |  
|Proceeds from sale                                                                     |  |                                 |        |   |      |   | 4,276   |  
|Payments for repurchases                                                               |  |                                 | (2,462  | ) |      |   | (7,315  | )
|                                                                                       |  |                                 |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                    |  |                                 | 9,757   |   |      |   | (3,217  | )
|                                                                                       |  |                                 |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                   |  |                                 | 392     |   |      |   | (15,048 | )
|Cash and cash equivalents at beginning of period                                       |  |                                 | 10      |   |      |   | 22,556  |  
|                                                                                       |  |                                 |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                             |  | $                               | 402     |   |      | $ | 7,508   |  
|                                                                                       |  |                                 |         |   |      |   |         |  
|                                                                                       |  |                                
|Non-cash investing and financing activities:                                           |  |                                 |         |   |      |   |         |  
|Property and equipment financed under capital leases                                   |  | $                               | 34      |   |      | $ | 166     |  
|Change in fair value of marketable securities available for sale                       |  | $                               |        |   |      | $ | (3      | )
|Payable to former shareholders for repurchase of stock                                 |  | $                               | 80      |   |      | $ | 744     |  
|Cash paid for interest                                                                 |  | $                               | 653     |   |      | $ | 332     |  
|Cash paid for income taxes                                                             |  | $                               | 1,756   |   |      | $ | 121     |  

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



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The PBSJ Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 December 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, 2006. 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 period ended December 31, 2006 and 2005 are not necessarily indicative of the results to be expected for the fiscal year.

Reclassifications

We have reclassified certain
segment information items in prior-period financial statements to conform to the fiscal year 2007 reorganization of the Companys reportable segments. For additional information, see Note 6, Segment Reporting. These
reclassifications had no effect on the Companys financial position, results of operations, or cash flows for prior periods presented in this Form 10-Q.

Basic and Diluted Earnings Per Share

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



|                                            |  |                                 |  |      
|------------------------------------------- |  | ------------------------------- |  | -----
|                                            |  | Three Months Ended December 31,
|(Amounts in thousands)                      |  | 2006                            |  | 2005 
|Weighted average shares outstandingBasic   |  | 6,274                           |  | 7,007
|Effect of unvested restricted stock         |  |                                |  | 474  
|                                            |  |                                 |  |      
|Weighted average shares outstandingDiluted |  | 6,274                           |  | 7,481
|                                            |  |                                 |  |      

The effect of unvested restricted stock was not included in the computation of diluted net loss
per share during the three-month period ended December 31, 2006 because the effect would have been antidilutive.



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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 contracts, time and materials contracts and fixed price contracts.

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.



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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.

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 a 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 full-time 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 September 30, 2006, there is no outstanding common stock held by individuals no longer employed
by the Company.

During fiscal year 2006, the Company repurchased stock held by employee shareholders who terminated employment
with the Company at a per share price ranging from $24.00 to $27.00, pending completion of the September 30, 2005 valuation. In January 2007, the September 30, 2005 valuation was finalized and established the price per share at $28.00; and
therefore, accruals totaling $2.1 million were recorded as of September 30, 2006 in the accompanying condensed consolidated balance sheet to account for the stock price differentials.

During the first quarter of fiscal 2007, the Company repurchased stock held by employee shareholders who terminated employment with the Company at a per
share price ranging from $24.30 to $28.00, pending completion of the September 30, 2006 valuation. In May 2007, the September 30, 2006 valuation was completed establishing a valuation price of $24.34 per share. At December 31, 2006,
the Company adjusted its accrual for the stock price differentials to account for the September 30, 2006 valuation by decreasing the adjusted accrual balance to approximately $2.1 million at December 31, 2006, which is 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.

Other Employee Stock Sales and Purchases

Eligible employees are allowed to purchase Company stock once a year, during a specified timeframe. With the exception of those considered to be insiders,
as defined, employees who receive bonuses each year are allowed to use their bonus payments received in December following the Companys fiscal year end to make their final payment for their stock purchase.

The stock window usually takes place on an annual basis for a one week period during the month of March. The Company suspended the stock window for March
2006 until the final impact of the restatement of the Companys condensed consolidated financial statements was determined and all SEC filing regulations are met such as, the timely filing of quarterly and annual reports.

The stock window also allowed 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 who are
employees.



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The Company cancelled the stock window for fiscal 2007 because the Company was not current in filing its
quarterly reports for fiscal 2007 with the SEC. Instead the Company authorized an internal market window (internal window) for employee shareholders to purchase and sell shares of the Company. The Company facilitated this internal window
by matching employee shareholders who wished to purchase and sell shares at the September 30, 2006 valuation price of $24.34. The Company had the option, but not the obligation, to purchase any unmatched sell shares that employee shareholders
wished to sell and which did not have a matching employee shareholder purchaser. The internal window started on July 2, 2007 and ended on July 27, 2007. Eligible buyers were employees and directors of the Company and the Companys
ESOP. At the end of the internal window, there were unmatched sell shares. The Company did not exercise its right to purchase the unmatched sell shares. The unmatched sell shares were next offered to the Companys ESOP, which agreed to purchase
all of the unmatched sell shares.

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 condensed 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 beginning with our fourth
quarter of the fiscal year ending September 30, 2007. If the Company had applied SFAS 158 at the end of fiscal year 2006, using the Companys September 30, 2006 actuarial valuation, we would have recorded a pre-tax charge to
accumulated other comprehensive income totaling $876,000 ($545,000 after tax) representing the difference between the funded status of the plan based on the projected benefit obligation and the amounts recorded in the accompanying condensed
consolidated balance sheet at September 30, 2006. The Company is also required to adopt the measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. This provision requires companies to measure plan assets and
benefit obligations as of the date of the companys fiscal year-end. No change in measurement date will be necessary since the Company currently meets this requirement.

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 condensed 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, 2007. We have adopted SAB 108 in our first quarter of fiscal 2007. The adoption of SAB 108 did not have a material impact on
our condensed 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 the Company for fiscal year ending September 30, 2008. The Company is currently evaluating the impact of adopting FIN 48 on its condensed 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 condensed 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 in fiscal year ended September 30, 2005, 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 condensed 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 No. 123, Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 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 have adopted
SFAS 123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The adoption of SFAS 123(R) resulted in the reclassification of the balance of unvested restricted stock, in the amount of $3.1 million, as a credit to unearned
compensation in stockholders equity and a corresponding reduction to retained earnings for the same amount in the accompanying condensed consolidated balance sheet as of December 31, 2006.



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2. (Gain) Loss on Recoveries and Investigation Related Expenses

All assets recovered during the investigation and not yet liquidated, were classified as assets held for sale in the accompanying condensed consolidated
balance sheets and were recorded at their estimated fair value, less estimated costs to sell, as of the date recovered. 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 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. For the three-month periods ended December 31, 2006 and 2005, the (gain) loss on recovered assets is included in (gain) loss on recoveries in the
accompanying condensed consolidated statement of operations.

In the second fiscal quarter of 2006, approximately 19,000 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 on recovery of misappropriated assets
of $537,000 was included in gain on recoveries in the condensed consolidated statements of operations in the second fiscal quarter of 2006.

The Company carries insurance to cover fiduciary and crime liability. The policy is renewed on an annual basis and was in effect for the periods in which the participants misappropriated funds of the Company. The stated aggregate limits for
the annual policies from March 1992 through April 2005 are $22.0 million. The Company filed a claim under the annual policy for the period ending in April 2005 (the 2005 Policy), to recover some of the misappropriation losses which
resulted from the embezzlement. In January 2007, we received $2.0 million insurance proceeds, the stated limit under the 2005 Policy, which has been recorded in the second fiscal quarter of 2007. The Company will be filing additional claims under
each of the annual policies for the periods starting in 1992 through 2004. At the present time, the Company is unable to predict the likely outcome of these claims and accordingly has not recorded any insurance receivable.

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.

The following table sets forth the components
of the gain on recoveries and investigation expenses related to the misappropriation loss:



|                                           |  |                                 |       |      |   |        |  
|------------------------------------------ |  | ------------------------------- | ----- | ---- | - | ------ | -
|                                           |  | Three Months Ended December 31, |      
|(Dollars in thousands)                     |  | 2006                            |       | 2005 |  
|(Gain) loss on recoveries                  |  | $                               | 23    |      | $ | (1,298 | )
|                                           |  |                                 |       |      |   |        |  
|Legal fees related to the investigation    |  |                                 | 563   |      |   | 1,691  |  
|Forensic accounting fees and related costs |  |                                 | 1,422 |      |   | 2,573  |  
|Other                                      |  |                                 | 36    |      |   | 516    |  
|                                           |  |                                 |       |      |   |        |  
|Investigation and related costs            |  |                                 | 2,021 |      |   | 4,780  |  
|                                           |  |                                 |       |      |   |        |  
|Total                                      |  | $                               | 2,044 |      | $ | 3,482  |  
|                                           |  |                                 |       |      |   |        |  



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During the three-month period ended December 31, 2006, the Company recorded a loss on recoveries of
$23,000, consisting of losses on disposal of assets held for sale of approximately $111,000, offset by $88,000 in recoveries of embezzled funds. The Company also incurred approximately $2.0 million 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-month period ended December 31, 2005, the Company recorded a gain from recovered assets totaling $1.3 million and incurred approximately
$4.8 million in costs.

We have not discovered and do not expect to discover any additional misappropriations, and therefore, we have not
recorded any misappropriation losses for the three-month periods ended December 31, 2006 and 2005. The gain/loss from recovered assets and the 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, the Company identified and recovered certain assets
acquired by the participants using misappropriated Company funds. At December 31, 2006, the remaining assets held for sale did not have any outstanding debt, liens or mortgage notes.

In December 2006, the Company sold a real estate asset held for sale for $3.7 million which was subject to a mortgage of $2.1 million. The Company
recognized an additional $98,000 in losses, primarily additional unanticipated closing costs related to the sale and interest payments on the debt. The Company intends to sell the remaining assets as soon as practicable.



|                                             |  |                   |     |   |                    |   |        |  
|-------------------------------------------- |  | ----------------- | --- | - | ------------------ | - | ------ | -
|(Dollars in thousands)                       |  | December 31, 2006 |     |   | September 30, 2006 |  
|Assets held for sale at estimated fair value |  | $                 | 513 |   |                    | $ | 4,545  |  
|Less: estimated costs to sell                |  |                   | (45 | ) |                    |   | (310   | )
|                                             |  |                   |     |   |                    |   |        |  
|Adjusted fair value of assets held for sale  |  |                   | 468 |   |                    |   | 4,235  |  
|Outstanding mortgage liabilities assumed     |  |                   |    |   |                    |   | (2,099 | )
|                                             |  |                   |     |   |                    |   |        |  
|Net fair value of assets held for sale       |  | $                 | 468 |   |                    | $ | 2,136  |  
|                                             |  |                   |     |   |                    |   |        |  

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 December 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. During the three-month period ended December 31, 2006, the Company settled three large cases which resulted in a reduction of the accrual of
approximately $1.1 million, and the remaining decrease in the balance relates to other small cases. As of December 31, 2006 and September 30, 2006, the Company had accruals of approximately $4.5 million and $5.9 million, respectively, for
all potential and existing claims, lawsuits and pending proceedings that, in managements opinion, are probable and can be reasonably estimated.



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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 the Federal Emergency Management Agency (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 sheet as of December 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.

The Company maintains a full range of insurance coverage, including workers compensation, commercial general liability, commercial
automobile and professional liability (including pollution liability) and property coverage. The Companys insurance policies may offset the amount of loss exposure from legal actions.

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 cumulative refund amount, before any payments, resulting from the overstated overhead rates is approximately $41.3 million through December 31, 2006 ($42.0 million as of September 30, 2006), including
interest that the Company will generally be required to reimburse its government clients. At December 31, 2006 and September 30, 2006, the accrued reimbursement liability was $24.2 million and $28.2 million, respectively, in the
accompanying condensed consolidated balance sheets.

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 additional refund amount
was finalized in March 2007 and totaled $425,000.



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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 required 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 those settlements paid during the fiscal year 2006 and the three-month period ended December 31, 2006, are included in the accrued reimbursement liability in the
Companys condensed consolidated financial statements at December 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 provision (benefit) was $(689,000) and $3.6 million, which represented effective tax rates of (32.7) % and 50.7% for the three-month periods ended December 31, 2006 and 2005, respectively.

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.

6. Segment Reporting

In fiscal year 2007, we
restructured our internal organization to better leverage our technical capabilities in servicing the needs of our clients, which resulted in a change in the composition of our reportable segments. Under the new structure, the Company will continue
to provide segment information on four reportable segments: Transportation Services, Construction Management, Civil Engineering, and Environmental Services; however, two types of services, Information Solutions, which was previously reported in the
Environmental Services segment, and Evacuation Planning which was previously reported in the Transportation Services segment, were moved to Civil Engineering. Accordingly, we have reclassified segment information for prior periods presented, as
applicable, to conform to the current reportable segment structure.



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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, reclaimed water, and water supply and treatment.

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



|                                     |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |         |  
|------------------------------------ |  | ---------------------- | ------ | ---------------------- | - | ---------------- |  | - | --------------------- | - |  | ----- | ------ | - |  | - | ------- | -
|(Dollars in thousands) (Unaudited)   |  | TransportationServices |        | ConstructionManagement |   | CivilEngineering |  |   | EnvironmentalServices |   |  | Total |       
|Three Months Ended December 31, 2006 |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |         |  
|Engineering fees                     |  | $                      | 50,295 |                        | $ | 20,530           |  | $ | 30,718                |   |  | $     | 28,171 |   |  | $ | 129,714 |  
|Net earned revenues                  |  |                        | 37,044 |                        |   | 16,709           |  |   | 25,217                |   |  |       | 22,169 |   |  |   | 101,139 |  
|Operating income (loss)              |  |                        | 282    |                        |   | 743              |  |   | (2,530                | ) |  |       | (213   | ) |  |   | (1,718  | )
|Depreciation and amortization        |  |                        | 939    |                        |   | 317              |  |   | 952                   |   |  |       | 617    |   |  |   | 2,825   |  
|Purchases of property and equipment  |  |                        | 843    |                        |   | 357              |  |   | 684                   |   |  |       | 544    |   |  |   | 2,428   |  
|Total assets as of December 31, 2006 |  |                        | 88,868 |                        |   | 36,275           |  |   | 54,278                |   |  |       | 49,777 |   |  |   | 229,198 |  
|                                     |  |                        |        |                        |  
|Three Months Ended December 31, 2005 |  |                        |        |                        |   |                  |  |   |                       |   |  |       |        |   |  |   |         |  
|Engineering fees                     |  | $                      | 46,771 |                        | $ | 21,103           |  | $ | 36,817                |   |  | $     | 23,775 |   |  | $ | 128,466 |  
|Net earned revenues                  |  |                        | 36,301 |                        |   | 17,510           |  |   | 31,689                |   |  |       | 19,192 |   |  |   | 104,692 |  
|Operating income                     |  |                        | 2,383  |                        |   | 460              |  |   | 4,337                 |   |  |       | 319    |   |  |   | 7,499   |  
|Depreciation and amortization        |  |                        | 908    |                        |   | 331              |  |   | 813                   |   |  |       | 585    |   |  |   | 2,637   |  
|Purchases of property and equipment  |  |                        | 647    |                        |   | 336              |  |   | 512                   |   |  |       | 400    |   |  |   | 1,895   |  
|Total assets as of December 31, 2005 |  |                        | 85,891 |                        |   | 38,754           |  |   | 67,612                |   |  |       | 43,662 |   |  |   | 235,919 |  



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7. Long-Term Debt



|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |        |                   |   |      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------ | ----------------- | - | -----
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                               |  | December 31,2006 |        | September 30,2006
|Line of credit                                                                                                                                                                                                                                                                                                                                                       |  | $                | 13,575 |                   | $ | 1,132
|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 (6.0% and 5.98% at December 31, 2006 and September 30, 2006,
respectively). |  |                  | 7,292  |                   |   | 7,421
|Capital lease obligations                                                                                                                                                                                                                                                                                                                                            |  |                  | 989    |                   |   | 1,050
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |        |                   |   |      
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  | 21,856 |                   |   | 9,603
|Less current portion of long-term debt                                                                                                                                                                                                                                                                                                                               |  |                  | 14,087 |                   |   | 1,644
|Less current portion of capital lease obligations                                                                                                                                                                                                                                                                                                                    |  |                  | 347    |                   |   | 274  
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |        |                   |   |      
|                                                                                                                                                                                                                                                                                                                                                                     |  |                 
|Long-term debt and capital lease obligations                                                                                                                                                                                                                                                                                                                         |  | $                | 7,422  |                   | $ | 7,685
|                                                                                                                                                                                                                                                                                                                                                                     |  |                  |        |                   |   |      

We have a $58 million line of credit agreement, inclusive of up to $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 December 31, 2006 and
September 30, 2006, we had letters of credit outstanding totaling $2.3 million and $4.3 million, respectively. As of December 31, 2006 and September 30, 2006, we had letters of credit for $2.2 million to guarantee insurance payments.
In addition, in the second quarter of 2006, we issued a letter of credit which expired in November 2006 and was not renewed, for $2.0 million to cover risk of insolvency for the FDOT. No amounts have been drawn on any of these letters of credit. As
a result of the issuance of these letters of credit and outstanding borrowings, the maximum amount available for borrowing under the line of credit was approximately $42.2 million and $52.6 million as of December 31, 2006 and September 30,
2006, respectively. As of December 31, 2006, debt outstanding under our line of credit increased primarily due to payments made for client reimbursements.

The interest rate (5.85% and 5.82% at December 31, 2006 and September 30, 2006, 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 December 31, 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 6.00% and 5.98% at December 31, 2006 and September 30, 2006, respectively. 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 unaudited financial statements for the quarters ended December 31, 2006, March 31, 2007 and June 30, 2007, so long as 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 all periods in fiscal year 2007.



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##### Table of Contents

The Companys capital leases consisted primarily of equipment. The interest rate used in computing
the minimum lease payments range from 2.23% to 5.23%. The leases were capitalized at the lower of the present value of 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.

The components of all the comprehensive income are as follows:



|                                                                        |  |                                 |        |   |      |   |       |  
|----------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ----- | -
|                                                                        |  | Three Months Ended December 31, |       
|(Dollars in thousands)                                                  |  | 2006                            |        |   | 2005 |  
|Net income (loss)                                                       |  | $                               | (1,417 | ) |      | $ | 3,528 |  
|Other comprehensive income:                                             |  |                                 |        |   |      |   |       |  
|Unrealized loss on available for sale marketable securities, net of tax |  |                                 |       |   |      |   | (2    | )
|Unrealized gain on interest rate swap, net of tax                       |  |                                 |       |   |      |   | 21    |  
|Minimum pension liability adjustment, net of tax                        |  |                                 | 71     |   |      |   |      |  
|                                                                        |  |                                 |        |   |      |   |       |  
|Total comprehensive income (loss)                                       |  | $                               | (1,346 | ) |      | $ | 3,547 |  
|                                                                        |  |                                 |        |   |      |   |       |  

9. Goodwill and Other Intangibles Assets

The carrying amounts of goodwill by segment for December 31, 2006 and September 30, 2006 are as follows:



|         |  |                        |       |                        |   |                  |  |                       |       |       |   |        |  |   |       
|-------- |  | ---------------------- | ----- | ---------------------- | - | ---------------- |  | --------------------- | ----- | ----- | - | ------ |  | - | ------
|         |  | TransportationServices |       | ConstructionManagement |   | CivilEngineering |  | EnvironmentalServices |       | Total
|Goodwill |  | $                      | 3,922 |                        | $ |                 |  | $                     | 2,641 |       | $ | 15,129 |  | $ | 21,692
|         |  |                        |       |                        |   |                  |  |                       |       |       |   |        |  |   |       



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The Companys intangibles assets consisted of the following:



|                         |  |                       |  |                      |       |                         |   |      
|------------------------ |  | --------------------- |  | -------------------- | ----- | ----------------------- | - | -----
|                         |  |                       |  | December 31, 2006   
|(Dollars in thousands)   |  | Estimated UsefulLives |  | Gross CarryingAmount |       | AccumulatedAmortization
|Client list              |  | 10 years              |  | $                    | 1,963 |                         | $ | 937  
|Backlog                  |  | 3 years               |  |                      | 2,679 |                         |   | 2,459
|Website                  |  | 7 years               |  |                      | 200   |                         |   | 117  
|Pension intangible asset |  | 6 years               |  |                      | 1,946 |                         |   | 1,946
|Employee agreements      |  | 3 years               |  |                      | 67    |                         |   | 17   
|                         |  |                       |  |                      |       |                         |   |      
|                         |  |                       |  | $                    | 6,855 |                         | $ | 5,476
|                         |  |                       |  |                      |       |                         |   |      



|                         |  |                       |  |                      |       |                         |   |      
|------------------------ |  | --------------------- |  | -------------------- | ----- | ----------------------- | - | -----
|                         |  |                       |  | September 30, 2006  
|(Dollars in thousands)   |  | Estimated UsefulLives |  | Gross CarryingAmount |       | AccumulatedAmortization
|Client list              |  | 10 years              |  | $                    | 1,963 |                         | $ | 877  
|Backlog                  |  | 3 years               |  |                      | 2,679 |                         |   | 2,232
|Website                  |  | 7 years               |  |                      | 200   |                         |   | 110  
|Pension intangible asset |  | 6 years               |  |                      | 1,946 |                         |   | 1,946
|Employee agreements      |  | 3 years               |  |                      | 67    |                         |   | 12   
|                         |  |                       |  |                      |       |                         |   |      
|                         |  |                       |  | $                    | 6,855 |                         | $ | 5,177
|                         |  |                       |  |                      |       |                         |   |      

10. Related Party Transactions

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, pending completion of the valuation of the Companys stock as of September 30, 2005. At December 31, 2006, the Company had an accrual of $49,400 for the difference between the purchase price and the
September 30, 2005 valuation price of $28.00. At December 31, 2006, the promissory notes bear interest at the rate of 8.25% per annum and such rate is adjusted to the then current prime rate 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 $1.4 million at December 31, 2006 and September 30, 2006, and were included in other liabilities in the accompanying
condensed consolidated balance sheets.



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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, by issuing a promissory note. The additional shares were purchased for $22.40 which represented 80% of the
September 30, 2005 valuation price, pending completion of the valuation of the Companys stock as of September 30, 2006. In May 2007, the September 30, 2006 valuation was completed establishing a valuation price of $24.34 per
share. During the second fiscal quarter of 2007, the Company recorded an additional accrual for the difference between the purchase price and the September 30, 2006 valuation price. The 2007 promissory note currently bears interest at the rate
of 8.25% per annum and such rate is adjusted to the then current prime rate 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.

Both 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.

During the third quarter of fiscal year 2007, as permitted under certain conditions pursuant to the terms of the agreement, the Company discontinued
payments, and the provision of other benefits, to Richard Wickett under his Supplemental Retirement Agreement. Mr. Wickett has the right to appeal the decision. The projected benefit obligation remains accrued as deferred compensation in the
accompanying condensed consolidated balance sheets.

On June 1, 2007, the Company repurchased 21,500 shares of the Companys
stock from a retiring employee for approximately $523,000, comprised of $104,000 in cash and a note in the amount of $419,000. The note bears interest at 8.25% per annum and is adjusted to the then current prime rate of Bank of America on
December 31, of each year. Principal payments of $105,000 and accrued interest are due each year on the anniversary of the note commencing on June 1, 2008 and ending June 1, 2011. The Company paid off the entire note balance in August
2007.

In July 2007, pursuant to the Companys by-laws, the Company did not exercise its right of first refusal to redeem the shares
offered for redemption by John Shearer, our former National Service Director and Senior Vice President. In accordance with the Companys by-laws, the shares were next offered to our ESOP plan; the ESOP plan has agreed to redeem the shares over
the course of five years. The first annual installment of 54,567 shares was redeemed on July 8, 2007 at the established valuation price of $24.34 for a total of $1.3 million. Subsequent annual installments of 10,940, 33,261, 33,261 and 33,261
shares will be redeemed in the second quarter of each fiscal year beginning with fiscal year 2008 by our ESOP plan at a price per share established by future valuations of the Companys shares.

11. Acquisition

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 and liabilities of $3.9 million. EIP specializes in environmental, urban planning, water resource planning and natural resources in California. The EIP acquisition greatly enhances our technical strength in the
California environmental, water and planning markets and enhances our general presence 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 entity 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 the acquisition. The pro forma impact of this acquisition is not material to reported historical operations.



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##### Table of Contents

12. Defined Benefit Retirement Plan

The Company uses a September 30 measurement date for its plans. The following table provides a summary of the Companys periodic costs related
to its defined benefit retirement plan:



|                                              |  |                                 |     |      |   |    
|--------------------------------------------- |  | ------------------------------- | --- | ---- | - | ---
|                                              |  | Three Months Ended December 31,
|(Dollars in thousands)                        |  | 2006                            |     | 2005
|Service benefits earned during period         |  | $                               | 123 |      | $ | 185
|Interest cost on projected benefit obligation |  |                                 | 195 |      |   | 173
|Amortization:                                 |  |                                 |     |      |   |    
|Prior service cost                            |  |                                 |    |      |   | 81 
|Net loss from past experience                 |  |                                 | 109 |      |   | 99 
|                                              |  |                                 |     |      |   |    
|Net periodic pension cost                     |  | $                               | 427 |      | $ | 538
|                                              |  |                                 |     |      |   |    

13. Restricted Stock

Restricted stock awards are offered throughout the year, and are intended to provide long-term incentives to key employees. Awards of restricted stock are subject to transfer restrictions and risk of forfeiture until
they are earned. Shares of restricted stock become fully vested usually over a period of several years of continued employment and are subject to total forfeiture if the employee ceases to be employed prior to the restricted stock vesting date,
except in certain limited circumstances described in the individual restricted stock award agreement. During the restriction period, holders have the rights of shareholders, including the right to vote, but cannot transfer ownership of their shares.

Effective October 1, 2006, we have adopted SFAS 123(R) using the modified prospective method. The adoption of SFAS 123(R) did not
have a material impact on the Companys financial position, results of operations or cash flows. Restricted stock is recorded at fair value on the date of issuance. Pursuant to Company guidelines, the Company may not issue restricted stock if,
after issuing the shares, the total number of restricted shares outstanding would exceed ten percent of the total shares outstanding. The Company satisfies the issuance of restricted stock with newly issued shares.

The Company maintains the following restricted stock plans:

Retention

This program awards restricted shares to key employees in middle management or higher
positions for the purpose of providing long-term incentives. The awards are made on a case-by-case basis at the discretion of Senior Management. These awards are generally issued and become fully vested usually after five years of continuous service
with the Company.

Acquisitions

When the Company acquires a firm, restricted stock is awarded to retain key employees who are generally not the principal owners of the acquired firm. Shares become fully vested usually after three to five years of continuous service with
the Company.

KERP

The
Key Employee Retention Program (KERP), provides an annual restricted stock award equal to five percent of the participants annual gross salary for a period of up to ten years. Benefits vest at age 56 and after ten years of
continuous service with the Company, or upon either retirement, or death, or disability.



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##### Table of Contents

Other

The Company has one other plan under which no new grants have been awarded since fiscal year 1997. As of December 31, 2006, this plan had 187,390 shares outstanding with unrecognized compensation cost of $115,000
which will be recognized through 2017.

The following tables summarize information about the restricted shares:



|                               |  |                        |   |  |                                        |      
|------------------------------ |  | ---------------------- | - |  | -------------------------------------- | -----
|(Shares in thousands)          |  | Restricted Stock Units |   |  | Weighted Average Grant-Date Fair Value
|Unvested at September 30, 2006 |  | 514,663                |   |  | $                                      | 11.11
|Granted                        |  | 10,550                 |   |  |                                        | 24.34
|Vested                         |  | (7,200                 | ) |  |                                        | 14.87
|Forfeited                      |  | (1,500                 | ) |  |                                        | 27.33
|                               |  |                        |   |  |                                        |      
|Unvested at December 31, 2006  |  | 516,513                |   |  | $                                      | 11.35
|                               |  |                        |   |  |                                        |      



|                  |  |                   |  |                                     |       |                                            |   |                                |  |     
|----------------- |  | ----------------- |  | ----------------------------------- | ----- | ------------------------------------------ | - | ------------------------------ |  | ----
|                  |  | OutstandingShares |  | WeightedAverageGrant DateFair Value |       | UnrecognizedCompensationCost(in thousands) |   | RemainingWeightedAveragePeriod
|December 31, 2006 |  |                   |  |                                     |       |                                            |   |                                |  |     
|Retention         |  | 249,514           |  | $                                   | 13.45 |                                            | $ | 1,755                          |  | 4.2 
|Acquisition       |  | 40,941            |  |                                     | 24.44 |                                            |   | 536                            |  | 2.5 
|KERP              |  | 38,668            |  |                                     | 23.29 |                                            |   | 749                            |  | 10.9
|Other             |  | 187,390           |  |                                     | 3.22  |                                            |   | 115                            |  | 5.2 
|                  |  |                   |  |                                     |       |                                            |   |                                |  |     
|                  |  | 516,513           |  | $                                   | 11.35 |                                            | $ | 3,155                          |  | 5.5 
|                  |  |                   |  |                                     |       |                                            |   |                                |  |     

The weighted average grant-date fair values of shares granted during the three-month periods ended
December 31, 2006 and 2005 were $24.34 and $28.00, respectively. The total fair value of shares vested, on the vesting dates, for the three-month periods ended December 31, 2006 and 2005 was approximately $175,000, and $259,000,
respectively. The total amount of compensation expense recognized under these agreements during the three-month periods ended December 31, 2006 and 2005 was $248,000 and $212,000, respectively, and was included in general and administrative
expenses in the accompanying unaudited condensed consolidated statements of operations.



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|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 for 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 assure 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, 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

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 periods ended December 31, 2006 and 2005,
respectively:



|                                                                 |  |                                 |    |  |       |  
|---------------------------------------------------------------- |  | ------------------------------- | -- |  | ----- | -
|                                                                 |  | Three Months Ended December 31, |   
|                                                                 |  | 2006                            |    |  | 2005  |  
|Engineering fees                                                 |  | 128.3                           | %  |  | 122.7 | %
|Direct reimbursable expenses                                     |  | 28.3                            |    |  | 22.7  |  
|                                                                 |  |                                 |    |  |       |  
|Net earned revenues                                              |  | 100.0                           |    |  | 100.0 |  
|Costs and expenses:                                              |  |                                 |    |  |       |  
|Direct salaries and direct costs                                 |  | 36.9                            |    |  | 35.6  |  
|General and administrative expenses, including indirect salaries |  | 62.8                            |    |  | 53.9  |  
|Gain on recoveries                                               |  |                                |    |  | (1.2  | )
|Investigation and related costs                                  |  | 2.0                             |    |  | 4.6   |  
|                                                                 |  |                                 |    |  |       |  
|Operating income (loss)                                          |  | (1.7                            | )  |  | 5.9   |  
|Interest expense                                                 |  | (0.4                            | )  |  | (0.5  | )
|Other, net                                                       |  |                                |    |  | 0.1   |  
|                                                                 |  |                                 |    |  |       |  
|Income (loss) before income taxes                                |  | (2.1                            | )  |  | 5.5   |  
|Provision for income taxes                                       |  | (0.7                            | )  |  | 3.5   |  
|                                                                 |  |                                 |    |  |       |  
|Net income (loss)                                                |  | (1.4                            | )% |  | 2.0   | %
|                                                                 |  |                                 |    |  |       |  



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##### Table of Contents

A summary of our operating results is as follows:



|                                                                 |  |                                 |         |   |      |   |         |  
|---------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                 |  | Three Months Ended December 31, |        
|(Dollars in thousands)                                           |  | 2006                            |         |   | 2005 |  
|Engineering fees                                                 |  | $                               | 129,714 |   |      | $ | 128,466 |  
|Direct reimbursable expenses                                     |  |                                 | 28,575  |   |      |   | 23,774  |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net earned revenues                                              |  |                                 | 101,139 |   |      |   | 104,692 |  
|Costs and expenses:                                              |  |                                 |         |   |      |   |         |  
|Direct salaries and direct costs                                 |  |                                 | 37,337  |   |      |   | 37,304  |  
|General and administrative expenses, including indirect salaries |  |                                 | 63,476  |   |      |   | 56,407  |  
|Gain on recoveries                                               |  |                                 | 23      |   |      |   | (1,298  | )
|Investigation and related costs                                  |  |                                 | 2,021   |   |      |   | 4,780   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Operating income (loss)                                          |  |                                 | (1,718  | ) |      |   | 7,499   |  
|Interest expense                                                 |  |                                 | (405    | ) |      |   | (473    | )
|Other, net                                                       |  |                                 | 17      |   |      |   | 136     |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Income (loss) before income taxes                                |  |                                 | (2,106  | ) |      |   | 7,162   |  
|Provision for income taxes                                       |  |                                 | (689    | ) |      |   | 3,634   |  
|                                                                 |  |                                 |         |   |      |   |         |  
|Net income (loss)                                                |  | $                               | (1,417  | ) |      | $ | 3,528   |  
|                                                                 |  |                                 |         |   |      |   |         |  



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Overview

Business Overview

In fiscal year 2007, we restructured our internal organization to better leverage our technical
capabilities in servicing the needs of our clients, which resulted in a change in the composition of our reportable segments. Under the new structure, the Company will continue to provide segment information on four reportable segments:
Transportation Services, Construction Management, Civil Engineering, and Environmental Services; however, two types of services, Information Solutions, which was previously reported in the Environmental Services segment, and Evacuation Planning
which was previously reported in the Transportation Services segments, were moved to Civil Engineering. Accordingly, we have reclassified segment information for prior periods presented in this Form 10-Q, as applicable, to conform to the current
reportable segment structure.

We provide services to both private and public sector clients, with the public sector comprising
approximately 75% of our engineering fees. Engineering fees increased slightly for the three-month period ended December 31, 2006 when compared to the same period in 2005. The Transportation Services and Environmental Services segments
experienced growth in engineering fees, while the Civil Engineering segment had a significant reduction in engineering fees. The increase in engineering fees in the Transportation Services segment was due to additional projects with the Air National
Guard Bureau (ANGB) and increased projects in the Western Region Structures Programs, partly offset by the temporary stoppage on bidding for new jobs with the TxDOT. The growth in the Environmental Services segment was principally due to
the EIP acquisition (EIP), which was completed on April 30, 2006. The Civil Engineering segment experienced a significant decrease in engineering fees in the three-month period ended December 31, 2006 when compared to the same
period in 2005 primarily due to the decline in the residential market, especially in the California and Southwest markets, which affected the engineering components of our private sector land development services and the completion, in June 2006, of
the work related to the hurricane response projects that hit Florida in calendar years 2004 and 2005. For the three-month period ended December 31, 2005, the Company benefited from the administration and debris removal of the hurricane
projects. Our Construction Management segment experienced a slight decline in engineering fees as a result of delays in executing contracts and the detrimental impact of the winter weather in the current period. The Companys backlog at
December 31, 2006 was approximately $483.3 million as compared to $487.4 million at September 30, 2006.

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. Direct reimbursable expenses are principally passed through to our clients with minimal or no
mark-up. The fluctuation in direct reimbursable expenses, specifically sub-contractor costs, including travel and lodging, will influence the fluctuation of our net earned revenue (NER). A decrease in direct reimbursable expenses will
cause NER to grow at a higher rate than its engineering fees, because more work was being performed by our in-house technical professionals. Conversely, an increase in direct reimbursable expenses will result in lower NER growth relative to the
increase in engineering fees.

Our NER is also impacted by our ability to capture our technical professional staffs time and charge
it to projects. As chargeability of our technical professionals time increases, engineering fees and direct salaries increase along with it, while indirect salaries decrease, as more of the technical staffs time worked is being charged
back to our clients. When chargeability decreases, there is an increase in indirect salaries and a corresponding reduction in direct salaries and engineering fees. All segments experienced increases in indirect salaries during the three-month period
ended December 31, 2006, as compared to the same period in 2005. These increases were primarily due to the retention of our professional staff, during temporary stoppage on bidding for new jobs with TxDOT, in anticipation of executing future
contracts and investing in market development activities. For instance, the Civil Engineering segment retained its professional staff in maintaining the Companys readiness capabilities to respond to future disaster projects.



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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 2006, federal spending remained strong especially in the area of national defense. 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. 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 2007, the economy is in a slow down environment with improving private sector corporate
profitability, while investment in residential housing development is decreasing. When the economy resumes its momentum, we expect the private sector to strengthen, which increases opportunity and fortifies our strategy for greater balance between
the public and private sectors.

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.



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Segment Results of Operations

In fiscal year 2007, we restructured our internal organization to better leverage our technical capabilities in servicing the needs of our clients, which resulted in a change in the composition of our reportable
segments. Under the new structure, the Company will continue to provide segment information on four reportable segments: Transportation Services, Construction Management, Civil Engineering, and Environmental Services; however, two types of services,
Information Solutions, which was previously reported in the Environmental Services segment, and Evacuation Planning which was previously reported in the Transportation Services segment, were moved to Civil Engineering. Accordingly, we have
reclassified segment information for prior periods presented in this Form 10-Q, as applicable, to conform to the current reportable segment 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, structural designs, 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 our clients, including contract administration, inspection, field
testing, scheduling/estimating, instituting project controls and quality assessment. 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, reclaimed water, 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-month periods ended December 31, 2006 as compared to 2005.

Net earned revenue represents the net effect of gross engineering fees 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.



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|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|---------------------------------- |  | ------------------------------- | ------ | - | -------- | ----- | -- | ---- | - | ------ | -------- |  | ----- | -
|                                   |  | Three Months Ended December 31, |       
|(Dollars in thousands) (Unaudited) |  | 2006                            |        |   | % of NER |       |    | 2005 |   |        | % of NER | 
|                                   |  |                                 |       
|Transportation Services            |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Engineering fees                   |  | $                               | 50,295 |   |          | 135.8 | %  |      | $ | 46,771 |          |  | 128.8 | %
|Direct reimbursable expenses       |  |                                 | 13,251 |   |          | 35.8  |    |      |   | 10,470 |          |  | 28.8  |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 37,044 |   |          | 100.0 |    |      |   | 36,301 |          |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 13,780 |   |          | 37.2  |    |      |   | 12,911 |          |  | 35.6  |  
|Indirect salaries                  |  |                                 | 9,350  |   |          | 25.2  |    |      |   | 7,571  |          |  | 20.9  |  
|General and administrative costs   |  |                                 | 12,922 |   |          | 34.9  |    |      |   | 12,246 |          |  | 33.7  |  
|Gain on recoveries                 |  |                                 | 8      |   |          |      |    |      |   | (443   | )        |  | (1.2  | )
|Investigation related expenses     |  |                                 | 702    |   |          | 1.9   |    |      |   | 1,633  |          |  | 4.5   |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Total costs and expenses           |  |                                 | 36,762 |   |          | 99.2  |    |      |   | 33,918 |          |  | 93.4  |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Operating income                   |  | $                               | 282    |   |          | 0.8   | %  |      | $ | 2,383  |          |  | 6.6   | %
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Construction Management            |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Engineering fees                   |  | $                               | 20,530 |   |          | 122.9 | %  |      | $ | 21,103 |          |  | 120.5 | %
|Direct reimbursable expenses       |  |                                 | 3,821  |   |          | 22.9  |    |      |   | 3,593  |          |  | 20.5  |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 16,709 |   |          | 100.0 |    |      |   | 17,510 |          |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 6,714  |   |          | 40.2  |    |      |   | 6,736  |          |  | 38.5  |  
|Indirect salaries                  |  |                                 | 3,473  |   |          | 20.8  |    |      |   | 3,343  |          |  | 19.1  |  
|General and administrative costs   |  |                                 | 5,478  |   |          | 32.8  |    |      |   | 6,354  |          |  | 36.3  |  
|Gain on recoveries                 |  |                                 | 3      |   |          |      |    |      |   | (230   | )        |  | (1.3  | )
|Investigation related expenses     |  |                                 | 298    |   |          | 1.8   |    |      |   | 847    |          |  | 4.8   |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Total costs and expenses           |  |                                 | 15,966 |   |          | 95.6  |    |      |   | 17,050 |          |  | 97.4  |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Operating income                   |  | $                               | 743    |   |          | 4.4   | %  |      | $ | 460    |          |  | 2.6   | %
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Civil Engineering                  |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Engineering fees                   |  | $                               | 30,718 |   |          | 121.8 | %  |      | $ | 36,817 |          |  | 116.2 | %
|Direct reimbursable expenses       |  |                                 | 5,501  |   |          | 21.8  |    |      |   | 5,128  |          |  | 16.2  |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 25,217 |   |          | 100.0 |    |      |   | 31,689 |          |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 9,374  |   |          | 37.2  |    |      |   | 11,451 |          |  | 36.1  |  
|Indirect salaries                  |  |                                 | 7,313  |   |          | 29.0  |    |      |   | 5,276  |          |  | 16.6  |  
|General and administrative costs   |  |                                 | 10,485 |   |          | 41.6  |    |      |   | 9,684  |          |  | 30.6  |  
|Gain on recoveries                 |  |                                 | 6      |   |          |      |    |      |   | (350   | )        |  | (1.1  | )
|Investigation related expenses     |  |                                 | 569    |   |          | 2.3   |    |      |   | 1,291  |          |  | 4.1   |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Total costs and expenses           |  |                                 | 27,747 |   |          | 110.0 |    |      |   | 27,352 |          |  | 86.3  |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Operating income (loss)            |  | $                               | (2,530 | ) |          | (10.0 | )% |      | $ | 4,337  |          |  | 13.7  | %
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Environmental Services             |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Engineering fees                   |  | $                               | 28,171 |   |          | 127.1 | %  |      | $ | 23,775 |          |  | 123.9 | %
|Direct reimbursable expenses       |  |                                 | 6,002  |   |          | 27.1  |    |      |   | 4,583  |          |  | 23.9  |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Net earned revenues (NER)          |  |                                 | 22,169 |   |          | 100.0 |    |      |   | 19,192 |          |  | 100.0 |  
|Direct salaries and direct costs   |  |                                 | 7,469  |   |          | 33.7  |    |      |   | 6,206  |          |  | 32.3  |  
|Indirect salaries                  |  |                                 | 6,131  |   |          | 27.7  |    |      |   | 4,361  |          |  | 22.7  |  
|General and administrative costs   |  |                                 | 8,324  |   |          | 37.5  |    |      |   | 7,572  |          |  | 39.5  |  
|Gain on recoveries                 |  |                                 | 6      |   |          |      |    |      |   | (275   | )        |  | (1.4  | )
|Investigation related expenses     |  |                                 | 452    |   |          | 2.0   |    |      |   | 1,009  |          |  | 5.3   |  
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Total costs and expenses           |  |                                 | 22,382 |   |          | 101.0 | %  |      |   | 18,873 |          |  | 98.3  | %
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  
|Operating income (loss)            |  | $                               | (213   | ) |          | (1.0  | )% |      | $ | 319    |          |  | 1.7   | %
|                                   |  |                                 |        |   |          |       |    |      |   |        |          |  |       |  



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##### Table of Contents

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

Engineering Fees



|                        |  |                                 |         |      |   |          |  |   |          |   |  |       |  
|----------------------- |  | ------------------------------- | ------- | ---- | - | -------- |  | - | -------- | - |  | ----- | -
|                        |  | Three Months Ended December 31, |        
|(Dollars in thousands)  |  | 2006                            |         | 2005 |   | $ Change |  |   | % Change |  
|Transportation Services |  | $                               | 50,295  |      | $ | 46,771   |  | $ | 3,524    |   |  | 7.5   | %
|Construction Management |  |                                 | 20,530  |      |   | 21,103   |  |   | (573     | ) |  | -2.7  | %
|Civil Engineering       |  |                                 | 30,718  |      |   | 36,817   |  |   | (6,099   | ) |  | -16.6 | %
|Environmental Services  |  |                                 | 28,171  |      |   | 23,775   |  |   | 4,396    |   |  | 18.5  | %
|                        |  |                                 |         |      |   |          |  |   |          |   |  |       |  
|Total Engineering Fees  |  | $                               | 129,714 |      | $ | 128,466  |  | $ | 1,248    |   |  | 1.0   | %
|                        |  |                                 |         |      |   |          |  |   |          |   |  |       |  

Engineering fees for the three-month period ended December 31, 2006, were $129.7 million
compared to $128.5 million in the same period in 2005, representing a slight increase of 1.0%. Transportation Services and Environmental Services segments experienced increases in engineering fees, while the Civil Engineering segment experienced a
significant decrease in engineering fees. The backlog volumes decreased by less than 1% in the first quarter of fiscal 2007 from $487.4 million at September 30, 2006 to $483.3 million at December 31, 2006.

In the Transportation Services segment, engineering fees increased 7.5% to $50.3 million in the three-month period ended December 31, 2006 from
$46.8 million in the same period in 2005. The increase in engineering fees was due to an increase in workload in the National Services group and Western Region Structures Programs resulting primarily from additional projects with the ANGB. The
increase in engineering fees for the three-month period ended December 31, 2006 as compared to the same period in 2005 was partly offset by the temporary stoppage on bidding for new jobs with the TxDOT and delays in executing new contracts and
contract supplements in the Southeast and Western Regions with several DOTs and Aviation clients. In the first quarter of fiscal 2007, the backlog volumes of the Transportation Services segment decreased by 3.3% to $232.7 million at
December 31, 2006 from $240.7 million at September 30, 2006.

Engineering fees in our Construction Management segment decreased
2.7% to $20.5 million in the three-month period ended December 31, 2006 from $21.1 million in the same period in 2005. The decrease in engineering fees was primarily due to delays in starting projects with Nevada and Colorado DOT and the winter
shut down, which occurred sooner than last season. Also contributing to the decrease in engineering fees was the expiration of work authorizations with the Texas Tollway Authority (TTA) and the North Texas Turnpike Authority
(NTTA). The Construction Management Services segment level of backlog volumes increased by 6.4% to $76.3 million at December 31, 2006 from $71.8 million at September 30, 2006.

Engineering fees in our Civil Engineering segment decreased 16.6% to $30.7 million in the three-month period ended December 31, 2006 from $36.8
million in the same period in 2005. The decrease in engineering fees was due primarily to the decline in the residential market, especially in the California and Southwest markets, which affected the engineering components of our private sector land
development services. Also impacting the reduction in engineering fees for the three-month period ended December 31, 2006 was the completion, in June 2006, of the work related to the hurricane response projects that hit Florida in calendar
years 2004 and 2005. For the three-month period ended December 31, 2005, the Company benefited from the administration and debris removal of the hurricane projects. Partly offsetting the decrease in engineering fees in the three-month period
ended December 31, 2006 as compared to the same period last year were additional engineering fees earned from several projects with the Federal Emergency management Agency (FEMA). The Civil Engineering level of backlog volumes
stayed flat during the first quarter of fiscal 2007. The backlog volumes were $70.6 million and $71.0 million at December 31, 2006 and September 30, 2006, respectively.



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Our Environmental Services segments engineering fees increased 18.5% to $28.2 million in the
three-month period ended December 31, 2006 from $23.8 million in the same period in 2005. The increase in engineering fees was principally due to the EIP acquisition, which was acquired on April 30, 2006. Engineering fees from EIP,
following the acquisition, were about $3.8 million in the three-month period ended December 31, 2006. The Environmental Services level of backlog volumes stayed flat during the first quarter of fiscal 2007. The backlog volumes were $103.7
million and $103.9 million at December 31, 2006 and September 30, 2006, respectively.

Net Earned Revenue



|                          |  |                                 |         |      |   |          |  |   |          |   |  |       |  
|------------------------- |  | ------------------------------- | ------- | ---- | - | -------- |  | - | -------- | - |  | ----- | -
|                          |  | Three Months Ended December 31, |        
|(Dollars in thousands)    |  | 2006                            |         | 2005 |   | $ Change |  |   | % Change |  
|Transportation Services   |  | $                               | 37,044  |      | $ | 36,301   |  | $ | 743      |   |  | 2.0   | %
|Construction Management   |  |                                 | 16,709  |      |   | 17,510   |  |   | (801     | ) |  | -4.6  | %
|Civil Engineering         |  |                                 | 25,217  |      |   | 31,689   |  |   | (6,472   | ) |  | -20.4 | %
|Environmental Services    |  |                                 | 22,169  |      |   | 19,192   |  |   | 2,977    |   |  | 15.5  | %
|                          |  |                                 |         |      |   |          |  |   |          |   |  |       |  
|Total Net Earned Revenues |  | $                               | 101,139 |      | $ | 104,692  |  | $ | (3,553   | ) |  | -3.4  | %
|                          |  |                                 |         |      |   |          |  |   |          |   |  |       |  

Net earned revenue (NER) was $101.1 million during the three-month period ended
December 31, 2006 as compared to $104.7 million in the same period in 2005, representing a decrease of 3.4%. The decrease in NER was directly related to the growth in direct reimbursable expenses in relation to the slight increase in
engineering fees. Direct reimbursable expenses increased by 20.2 %, as explained below, while engineering fees increased by 1.0%, as previously explained.



|                                   |  |                                 |        |          |      |   |      |   |          |  |      |  
|---------------------------------- |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                   |  | Three Months Ended December 31, |       
|(Dollars in thousands)             |  | 2006                            |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services            |  | $                               | 13,251 |          | 35.8 | % |      | $ | 10,470   |  | 28.8 | %
|Construction Management            |  |                                 | 3,821  |          | 22.9 | % |      |   | 3,593    |  | 20.5 | %
|Civil Engineering                  |  |                                 | 5,501  |          | 21.8 | % |      |   | 5,128    |  | 16.2 | %
|Environmental Services             |  |                                 | 6,002  |          | 27.1 | % |      |   | 4,583    |  | 23.9 | %
|                                   |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Direct Reimbursable Expenses |  | $                               | 28,575 |          | 28.3 | % |      | $ | 23,774   |  | 22.7 | %
|                                   |  |                                 |        |          |      |   |      |   |          |  |      |  

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 increased by 5.6% to 28.3% in the three-month period ended December 31, 2006 from 22.7% in the
same period in 2005. The increase was driven principally by the Transportation Services and Environmental Services segments as a result of the use of subconsultants supporting the increases in engineering fees for these two segments.

Direct reimbursable expenses for our Transportation Services segment increased as a percentage of NER by 7.0% to 35.8% in the three-month period ended
December 31, 2006 from 28.8% in the same period in 2005. This increase was due primarily to the high usage of subconsultants with the new ANGB projects in the National Services group.



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##### Table of Contents

In our Construction Management segment, direct reimbursable expenses in the three-month period ended
December 31, 2006 increased by 6.3% to $3.8 million from $3.6 million in the same period last year. As a percentage of NER, direct reimbursable expenses increased by 2.4% to 22.9% in the three-month period ended December 31, 2006 from
20.5% in the same period in 2005. This increase was due primarily to the use of subcontractors, pending approval of work assignments.

Direct reimbursable expenses in the Civil Engineering segment increased as a percentage of NER by 5.6% to 21.8% in the three-month period ended December 31, 2006 from 16.2% in the same period in 2005. The increase was primarily due to
the substantial use of subconsultants in connection with the FEMA projects, as previously mentioned. The increase was partially offset by a decrease of subconsultants in the private sector land development services and a reduction in travel and
meals costs as the result of the completion, in June 2006, of the work related to debris removal from the Florida hurricanes in calendar 2004 and 2005. In the first quarter of fiscal 2006, the Civil Engineering segment incurred direct reimbursable
costs, including travel and lodging costs, for the employees overseeing debris removal in the areas affected by the disasters.

Our
Environmental Services segment experienced an increase of 31.0% in direct reimbursable expenses in the three-month period ended December 31, 2006 when compared to the same period in 2005. As a percentage of NER, direct reimbursable expenses
increased by 3.2% to 27.1% in the three-month period ended December 31, 2006 from 23.9% in the same period in 2005. The increase was due primarily to an increase in the use of subcontractors related to contracts acquired with the EIP
acquisition.

Operating Income (Loss)



|                                                                                               |  |                                 |        |   |          |       |   |      |   |          |  |      |  
|---------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | -------- | ----- | - | ---- | - | -------- |  | ---- | -
|                                                                                               |  | Three Months Ended December 31, |       
|(Dollars in thousands)                                                                         |  | 2006                            |        |   | % of NER |       |   | 2005 |   | % of NER | 
|Transportation Services                                                                        |  | $                               | 282    |   |          | 0.8   | % |      | $ | 2,383    |  | 6.6  | %
|Construction Management                                                                        |  |                                 | 743    |   |          | 4.4   | % |      |   | 460      |  | 2.6  | %
|Civil Engineering                                                                              |  |                                 | (2,530 | ) |          | -10.0 | % |      |   | 4,337    |  | 13.7 | %
|Environmental Services                                                                         |  |                                 | (213   | ) |          | -1.0  | % |      |   | 319      |  | 1.7  | %
|                                                                                               |  |                                 |        |   |          |       |   |      |   |          |  |      |  
|Total Operating Income (Loss)                                                                  |  |                                 | (1,718 | ) |          | -1.7  | % |      |   | 7,499    |  | 7.2  | %
|                                                                                               |  |                                 |        |   |          |       |   |      |   |          |  |      |  
|Gain/Loss on Recoveries and Investigation and Related Costs, net                               |  |                                 | 2,044  |   |          | 2.0   | % |      |   | 3,482    |  | 3.3  | %
|                                                                                               |  |                                 |        |   |          |       |   |      |   |          |  |      |  
|Total Operating Income before Gain/Loss on Recoveries and Investigation and Related Costs, net |  | $                               | 326    |   |          | 0.3   | % |      | $ | 10,981   |  | 10.5 | %
|                                                                                               |  |                                 |        |   |          |       |   |      |   |          |  |      |  



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During the three-month period ended December 31, 2006, we incurred an operating loss of $(1.7)
million, as compared to operating income of $7.5 million in the same period in 2005, resulting in a negative change of $9.2 million in operating income. The negative change in operating income was due primarily to a decline in business activity,
especially in the residential markets of California and the Southwest, which most affected the engineering components of our private sector land development services, delays in starting projects and the temporary stoppage in bidding for new jobs
with the TxDOT. Also contributing to the negative results was the strategic retention of professional staff to maintain our readiness response capabilities to any disaster projects and investments in market development. The operating results were
also negatively affected by decreases in chargeability across all segments caused by the slowdown in business activity during the first quarter of fiscal 2007. Partly offsetting the negative change in operating results was a decrease of about $1.4
million in gain/loss on recoveries and investigation and related costs, net in the three-month period ended December 31, 2006 as compared to the same period last year. All segments, except Construction Management, had decreases in operating
income in the three-month period ended December 31, 2006 as compared to the same period in 2005. Operating income (loss), as a percentage of NER was (1.7%) in the three-month period ended December 31, 2006, as compared to operating
income of 7.2% in the same period in 2005, representing a negative change of 8.9%. All segments, except Construction Management, experienced decreases in operating income as a percentage of NER, in the three-month period ended December 31, 2006
as compared to the same period in 2005.

We believe that operating income (loss) before gain/loss on recoveries and investigation and
related costs, net is a useful measure in evaluating our results of operations because the 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 gain/loss on
recoveries and investigation and related costs, net was about $326,000 in the three-month period ended December 31, 2006, as compared to operating income of $11.0 million in the same period in 2005, resulting in a decrease in operating income
of $10.7 million. The decrease in operating income before gain/loss on recoveries and investigation and related costs, net was due primarily to a decline in business activity, especially in the residential markets of California and the Southwest,
which most affected the engineering components of our private sector land development services, delays in starting projects and the temporary stoppage in bidding for new jobs with the TxDOT. Also contributing to the decrease in operating income was
the strategic retention of professional staff to maintain our readiness response capabilities to any disaster projects and investments in market development. The decrease in operating results was also affected by decreases in chargeability across
all segments caused by the slowdown in business activity during the first quarter of fiscal 2007. The operating income before gain/loss on recoveries and investigation and related costs, net, as a percentage of NER, for the three-month period ended
December 31, 2006, was 0.3%, as compared to operating income before gain/loss on recoveries and investigation and related costs, net of 10.5% in the same period in 2005, representing a decrease of 10.2%. Gain/loss on recoveries 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 experienced an operating income of 0.8% in
the three-month period ended December 31, 2006, as compared to operating income of 6.6% in the same period in 2005, representing a decrease of 5.8%. The decrease in operating income was primarily due to the temporary stoppage in bidding for new
jobs with the TxDOT. To a lesser extent, delays in executing new contracts and contract supplements in the Southeast and Western Regions with DOTs and several Aviations clients also contributed to the decrease in operating income. Partly
offsetting the decrease in operating income was a decrease in the allocation of gain/loss on recoveries and investigation and related costs, net in the three-month period ended December 31, 2006 as compared to the same period last year. As a
percentage of NER, the Transportation Services segment incurred operating income before gain/loss on recoveries and investigation and related costs, net of 2.7%, in the three-month period ended December 31, 2006, as compared to operating income
before gain/loss on recoveries and investigation and related costs, net of 9.8% in the same period last year, representing a decrease of 7.1%.

The Construction Management segment experienced operating income, as a percentage of NER, of 4.4% in the three-month period ended December 31, 2006, as compared to 2.6% in the same period in 2005, representing an increase of 1.8%. The
increase was primarily the result of improvements in general and administrative costs, resulting from settlements of vehicle insurance claims, and a decrease in the allocation of gain/loss on recoveries and investigation and related costs, net for
the three-month period ended December 31, 2006 as compared to the same period in 2005. This increase was mostly offset by delays in starting projects with State DOTs and the severe winter impact, which started earlier and lasted longer
than last year. Operating income before gain/loss on recoveries and related costs, net, as a percentage of NER, stayed flat at 6.2% in the three-month periods ended December 31, 2006 and 2005, respectively.

The Civil Engineering segment incurred an operating loss of $(2.5) million in the three-month period ended December 31, 2006, as compared to
operating income of $4.3 million in the same period in 2005, resulting in a negative change in operating income of $6.8 million The negative change in operating results was primarily due to the decrease in engineering fees, as previously explained,
and to an increase in indirect salaries resulting from the strategic investment in growing the Federal market program and the retention of professional staff to maintain our readiness response capabilities to any disaster project. To a lesser
extent, the less than optimum chargeability within the engineering components of the private sector also contributed to the increase in indirect salaries and to the negative results for the current quarter. For the three-month ended
December 31, 2006, the Civil Engineering segment incurred an operating loss before gain/loss on recoveries and investigation and related costs, net of $(2.0) million as compared to operating income before gain/loss on recoveries and
investigation and related costs, net of $5.3 million in the same period last year.

The Environmental Services segment experienced an
operating loss of $(213,000) in the three-month period ended December 31, 2006, as compared to operating income of about $319,000 in the same period last year. The decrease in operating income (loss) was primarily the result of an increase in
indirect salaries from the retention of professional staff caused by delays in executing contracts and to a lesser extent investing in market development. Also contributing to the decrease in operating income was a less than desirable chargeability
factor caused by a slowdown in business. As a percentage of NER, the Environmental Services segment operating income (loss) before gain/loss on recoveries and investigation and related costs, net was 1.1%, in the three-month period ended
December 31, 2006, as compared to operating income (loss) before gain/loss on recoveries and investigation and related costs, net of 5.5% in the same period in 2005, representing a decrease of 4.4%.

Costs

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



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Direct Salaries and Direct Costs



|                                       |  |                                 |        |          |      |   |      |   |          |  |      |  
|-------------------------------------- |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                       |  | Three Months Ended December 31, |       
|(Dollars in thousands)                 |  | 2006                            |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services                |  | $                               | 13,780 |          | 37.2 | % |      | $ | 12,911   |  | 35.6 | %
|Construction Management                |  |                                 | 6,714  |          | 40.2 | % |      |   | 6,736    |  | 38.5 | %
|Civil Engineering                      |  |                                 | 9,374  |          | 37.2 | % |      |   | 11,451   |  | 36.1 | %
|Environmental Services                 |  |                                 | 7,469  |          | 33.7 | % |      |   | 6,206    |  | 32.3 | %
|                                       |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Direct Salaries and Direct Costs |  | $                               | 37,337 |          | 36.9 | % |      | $ | 37,304   |  | 35.6 | %
|                                       |  |                                 |        |          |      |   |      |   |          |  |      |  

Direct salaries and direct costs primarily include direct salaries and to a lesser extent
unreimburseable direct costs. Direct salaries and direct costs remained relatively flat at $37.3 million in the three-month period ended December 31, 2006 and the same period in 2005. As a percentage of NER, direct salaries and direct costs
experienced an increase of 1.3% to 36.9% in the three-month period ended December 31, 2006 from 35.6% in the same period in 2005.

As
a percentage of NER, direct salaries and direct costs in the Transportation Services segment increased by 1.6% to 37.2% in the three-month period ended December 31, 2006 from 35.6% in the same period in 2005. This increase was due primarily to
direct salaries incurred prior to execution of new contracts.

Direct salaries and direct costs in the Construction Management segment
stayed flat at $6.7 million in the three-month periods ended December 31, 2006 and 2005, respectively. As a percentage of NER, direct salaries and direct costs increased by 1.7% to 40.2% in the three-month period ended December 31, 2006
from 38.5% in the same period in 2005. This increase is due to labor costs incurred in anticipation of approval of projects.

Direct
salaries and direct costs decreased by 18.1% in the three-month period ended December 31, 2006 as a result of the decrease in engineering fees. As a percentage of NER, direct salaries and direct costs in the Civil Engineering segment increased
by 1.1% to 37.2% in the three-month period ended December 31, 2006 from 36.1% in the same period in 2005. This increase was caused primarily by professional staff working on jobs in anticipation of contract supplements or new contracts not
executed at the end of the current quarter.

Direct salaries and direct costs in the Environmental Services segment increased 20.4% to $7.5
million in the three-month period ended December 31, 2006 from $6.2 million in the same period in 2005. This increase was due primarily to the professional staff added with the acquisition of EIP, as previously explained.



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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 December 31, |       
|(Dollars in thousands)  |  | 2006                            |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services |  | $                               | 9,350  |          | 25.2 | % |      | $ | 7,571    |  | 20.9 | %
|Construction Management |  |                                 | 3,473  |          | 20.8 | % |      |   | 3,343    |  | 19.1 | %
|Civil Engineering       |  |                                 | 7,313  |          | 29.0 | % |      |   | 5,276    |  | 16.6 | %
|Environmental Services  |  |                                 | 6,131  |          | 27.7 | % |      |   | 4,361    |  | 22.7 | %
|                        |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total Indirect Salaries |  | $                               | 26,267 |          | 26.0 | % |      | $ | 20,551   |  | 19.6 | %
|                        |  |                                 |        |          |      |   |      |   |          |  |      |  

Indirect salaries increased 27.8% to $26.3 million in the three-month period ended
December 31, 2006 from $20.6 million in the same period in 2005. Indirect salaries as a percentage of NER increased by 6.4% to 26.0% in the three-month period ended December 31, 2006 from 19.6% in the same period in 2005.

Indirect salaries for the Transportation Services segment increased 23.5% to $9.4 million in the three-month period ended December 31, 2006 from
$7.6 million in the same period in 2005. Transportation Services experienced an increase in indirect salaries as a percentage of NER of 4.3% to 25.2% in the three-month period ended December 31, 2006 from 20.9% in the same period in 2005. The
increase in indirect salaries was due primarily to the temporary work stoppage in obtaining new jobs with the TxDOT and delays in executing new contracts and contract supplements with NCDOT and several aviation related clients. To a lesser extent,
the Transportation Services segment also experienced low chargeability in several groups within the National Services group.

The
Construction Management segment experienced an increase in indirect salaries of 3.9% to $3.5 million in the three-month period ended December 31, 2006 from $3.3 million in the same period in 2005. As a percentage of NER, indirect salaries
increased by 1.7% to 20.8% in the three-month period ended December 31, 2006 from 19.1% in the same period in 2005. This increase was due as a result of delays in getting new contracts in the Western and Central Regions and work stoppage
resulting from the severe winter weather experienced in the current fiscal quarter, which started earlier than last year.

Indirect
salaries for the Civil Engineering segment increased 38.6% to $7.3 million in the three-month period ended December 31, 2006 from $5.3 million in the same period in 2005. As a percentage of NER, indirect salaries increased by 12.4% to 29.0% in
the three-month period ended December 31, 2006 from 16.6% in the same period in 2005. The increase was primarily due to the strategic investment initiative to grow the Federal market program and the retention of our professional staff in
maintaining our readiness capabilities to respond to disaster projects. To a lesser extent, the less than optimum chargeability within the engineering components of the private sector also contributed to the increase in indirect salaries.

The Environmental Services segment experienced an increase in indirect salaries of 40.6% to $6.1 million in the three-month period ended
December 31, 2006 from $4.4 million in the same period in 2005. As a percentage of NER, indirect salaries increased by 5.0% to 27.7% in the three-month period ended December 31, 2006 from 22.7% in the same period in 2005. The increase in
indirect salaries was primarily due to the addition of professional staff with the EIP acquisition and to the retention of technical staff caused by delays in executing contracts and to a lesser extent investing in market development. Also
contributing to the increase in indirect salaries was a lower chargeability caused by a slowdown in business activity.



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|                                     |  |                                 |        |          |      |   |      |   |          |  |      |  
|------------------------------------ |  | ------------------------------- | ------ | -------- | ---- | - | ---- | - | -------- |  | ---- | -
|                                     |  | Three Months Ended December 31, |       
|(Dollars in thousands)               |  | 2006                            |        | % of NER |      |   | 2005 |   | % of NER | 
|Transportation Services              |  | $                               | 12,922 |          | 34.9 | % |      | $ | 12,246   |  | 33.7 | %
|Construction Management              |  |                                 | 5,478  |          | 32.8 | % |      |   | 6,354    |  | 36.3 | %
|Civil Engineering                    |  |                                 | 10,485 |          | 41.6 | % |      |   | 9,684    |  | 30.6 | %
|Environmental Services               |  |                                 | 8,324  |          | 37.5 | % |      |   | 7,572    |  | 39.5 | %
|                                     |  |                                 |        |          |      |   |      |   |          |  |      |  
|Total General & Administrative Costs |  | $                               | 37,209 |          | 36.8 | % |      | $ | 35,856   |  | 34.2 | %
|                                     |  |                                 |        |          |      |   |      |   |          |  |      |  

General and administrative (G&A) costs increased 3.8% to $37.2 million in the
three-month period ended December 31, 2006 from $35.9 million in the same period in 2005. G&A, as a percentage of NER, increased by 2.6% to 36.8% in the three-month period ended December 31, 2006 from 34.2% in the same period in 2005.
The Transportation Services and Civil Engineering segments experienced increases in G&A as a percentage of NER in the three-month period ended December 31, 2006 as compared to the same period in 2005. The majority of the increase is
primarily related to increased legal settlements of $1.9 million, vehicle and equipment leases and related expenses of $429,000, rent expense for real estate of $318,000, resulting primarily from lease renewals at higher rates and bad debt expenses
of $250,000. We also incurred additional increases in software and computer supplies, depreciation and amortization and communication expenses. These increases were partly offset by a decrease in incentive compensation of $2.5 million. Most of 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.

Gain on Recoveries and Investigation and Related Costs

During the three-month period ended December 31, 2006, the Company recorded a loss on recoveries of $23,000, consisting of losses on disposal of assets held for sale of approximately $111,000 net of $88,000 in
recoveries of embezzled funds. The Company also incurred approximately $2.0 million 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-month
period ended December 31, 2005, the Company recorded a gain from recovered assets totaling $1.3 million and incurred approximately $4.8 million in costs. We have not discovered and do not expect to discover any additional misappropriations, and
therefore, we have not recorded any misappropriation losses for the three-month periods ended December 31, 2006 and 2005. The 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.

Income Taxes

The provision for income taxes (benefit) was $(689,000) and $3.6 million, which represented effective tax rates of (32.7)% and 50.7% for the three-month
periods ended December 31, 2006 and 2005, respectively.



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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, 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 $6.8 million in
the three-month period ended December 31, 2006 as compared to net cash used in operating activities of $9.8 million in the same period in 2005, representing an improvement of $3.0 million. The improvement in net cash used in operating
activities was due primarily to the decrease in accounts receivable resulting from the excess of cash collections over billings during the three-month period ended December 31, 2006. Also contributing to the improvement was a smaller decrease
in accounts payable and accrued expenses at December 31, 2006 from September 30, 2006 in comparison to the larger decrease in accounts payable and accrued expenses in the comparable periods in 2005. The decrease was primarily the result of
a smaller payment for incentive compensation accruals in the first quarter of fiscal 2007 relative to the payment made in the same period in fiscal 2006 and a slowdown in activity related to the misappropriation loss. The improvements in cash used
in operating activities were partly offset by the Companys cash flows from projects being negatively impacted by declining business activity in all segments, delays in getting jobs, the temporary stoppage on bidding for new jobs with the
TxDOT, retention of professional staff in anticipation of disaster projects and lower chargeability. The improvements in net cash used in operating activities during the three-month period ended December 31, 2006 as compared to the same period
last year was also impacted by a reduction in the accrued reimbursement liability. The reduction in accrued reimbursement liability was due primarily to a payment to the FDOT in the amount of $4.4 million in the three-month period ended
December 31, 2006.

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 decreased 3.6% to $60.5 million at December 31, 2006 from $62.8 million at
September 30, 2006, as a result of improvements in permitted billings in the three-month period ended December 31, 2006.

Accounts receivable decreased 10.9% to $75.9 million at December 31, 2006 from $85.2 million at September 30, 2006 primarily due to cash collections. The allowance for doubtful accounts increased by about $250,000 to $2.1 million
at December 31, 2006 from $1.8 million at September 30, 2006.

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 expect to incur approximately $2.1 million during the remaining nine months of fiscal year 2007 in investigation related legal
expenses and approximately $300,000 in overhead rate and financial statement audit related expenses during the remaining nine months of fiscal year 2007.



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Cash Flows from Investing Activities

Net cash used in investing activities was $2.5 million and $2.0 million for the three-month periods ended December 31, 2006 and 2005, respectively. Investing activity was primarily related to property and
equipment purchases, such as survey equipment, computer equipment, system software, furniture, and leasehold improvements.

Cash Flows from Financing
Activities

Net cash provided by financing activities for the three-month period ended December 31, 2006 was $9.8 million, as
compared to net cash used in financing activities of $3.2 million in the same period in 2005. The change from net cash used in financing activities in the three-month period ended December 31, 2005 to net cash provided by financing activities
in the three-month period ended December 31, 2006 was primarily attributable to $12.4 million in additional net borrowings under our line of credit and a decrease in payments for repurchase of shares. Partly offsetting the increase in cash
provided by financing activities was a decrease in proceeds from sale of common stock. As previously explained, the Company did not offer any common stock to its employees in fiscal 2007.

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 December 31, 2006 and September 30, 2006, we had letters of credit outstanding totaling $2.3 million and $4.3 million, respectively. As of December 31, 2006 and September 30, 2006, we had letters of credit
for $2.2 million to guarantee insurance payments. In addition, in the second quarter of 2006, we issued a letter of credit which expired in November 2006, for $2.0 million to cover risk of insolvency for the FDOT. No amounts have been drawn on any
of these letters of credit. As a result of the issuance of these letters of credit and outstanding borrowings, the maximum amount available for borrowing under the line of credit was $42.2 million and $52.6 million as of December 31, 2006 and
September 30, 2006, respectively. As of December 31, 2006, debt outstanding under our line of credit has increased primarily due to payments made to clients for overhead reimbursements and vendors and consultants. 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 (5.85% and 5.82% at December 31, 2006 and September 30, 2006, 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 December 31, 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 6.00% and 5.98% at December 31, 2006 and September 30, 2006, respectively. Our adjustable rate mortgage calls for an interest rate based on the 30
day LIBOR plus a margin of .065%.



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Our capital expenditures are generally for purchases of property and equipment. The Company spent $2.4
million and $1.9 million on such expenditures for the three-month period ended December 31, 2006 and 2005, respectively.

The Company
carries insurance to cover fiduciary and crime liability. The policy is renewed on an annual basis and was in effect for the periods in which the Participants misappropriated funds of the Company. The stated aggregate limits for the annual policies
from March 2002 through April 2005 are $22.0 million. The Company filed a claim under the annual policy for the period ending in April 2005 (the 2005 Policy), to recover some of the misappropriation losses which resulted from the
embezzlement. In January 2007, we received $2.0 million, the stated limit under the 2005 Policy. The Company will be filing additional claims under each of the annual policies for the periods starting in 1992 through 2004. At the present time, the
Company is unable to predict the likely outcome of these claims.

A stock window usually takes place on an annual basis for a one week
period during the month of March. The Company suspended the stock window for March 2006 until the final impact of the restatement of the Companys condensed consolidated financial statements was determined and all SEC filing regulations are met
such as, the timely filing of quarterly and annual reports.

The stock window also allowed 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 who are employees.

The Company cancelled the stock window for fiscal 2007
because the Company was not current in filing its quarterly reports for fiscal 2007 with the SEC. Instead the Company authorized an internal market window (internal window) for employee shareholders to purchase and sell shares of the
Company. The Company facilitated this internal window by matching employee shareholders who wished to purchase and sell shares at the September 30, 2006 valuation price of $24.34. The Company had the option, but not the obligation, to purchase
any unmatched sell shares that employee shareholders wished to sell and which did not have a matching employee shareholder purchaser. The internal window started on July 2, 2007 and ended on July 27, 2007. Eligible buyers were employees
and directors of the Company and the Companys ESOP. At the end of the internal window, there were unmatched sell shares. The Company did not exercise its right to purchase the unmatched sell shares. The unmatched sell shares were next offered
to the Companys ESOP, which agreed to purchase all of the unmatched sell shares.

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 2007 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.



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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.

4. Related Party Transactions

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, pending completion of the valuation of the Companys stock as of September 30, 2005. At
December 31, 2006, the Company had an accrual of $49,400 for the difference between the purchase price and the September 30, 2005 valuation price of $28.00. At December 31, 2006, the promissory notes bear interest at the rate of
8.25% per annum and such rate is adjusted to the then current prime rate 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 $1.4 million at
December 31, 2006 and September 30, 2006, and were included in other liabilities in the accompanying condensed consolidated balance sheets.

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, by issuing a promissory note. The additional shares were purchased for $22.40 which represented 80% of the September 30, 2005 valuation
price, pending completion of the valuation of the Companys stock as of September 30, 2006. In May 2007, the September 30, 2006 valuation was completed establishing a valuation price of $24.34 per share. During the second fiscal
quarter of 2007, the Company recorded an additional accrual for the difference between the purchase price and the September 30, 2006 valuation price. The 2007 promissory note currently bears interest at the rate of 8.25% per annum and such
rate is adjusted to the then current prime rate 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.

Both 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.

During the third quarter of fiscal year 2007, as permitted under certain conditions pursuant to the terms of the agreement, the Company discontinued
payments, and the provision of other benefits, to Richard Wickett under his Supplemental Retirement Agreement. Mr. Wickett has the right to appeal the decision. The projected benefit obligation remains accrued as deferred compensation in the
accompanying condensed consolidated balance sheets.

On June 1, 2007, the
Company repurchased 21,500 shares of the Companys stock from a retiring employee for approximately $523,000, comprised of $104,000 in cash and a note in the amount of $419,000. The note bears interest at 8.25% per annum and is adjusted to
the then current prime rate of Bank of America on December 31st, of each year. Principal payments of $105,000 and accrued interest are due each year
on the anniversary of the note commencing on June 1, 2008 and ending June 1, 2011. The Company paid off the entire note balance in August 2007.



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In July 2007, pursuant to the Companys by-laws, the Company did not exercise its right of first
refusal to redeem the shares offered for redemption by John Shearer, our former National Service Director and Senior Vice President. In accordance with the Companys by-laws, the shares were next offered to our ESOP plan; the ESOP plan has
agreed to redeem the shares over the course of five years. The first annual installment of 54,567 shares was redeemed on July 8, 2007 at the established valuation price of $24.34 for a total of $1.3 million. Subsequent annual installments of
10,940, 33,261, 33,261 and 33,261 shares will be redeemed in the second quarter of each fiscal year beginning with fiscal year 2008 by our ESOP plan at a price per share established by future valuations of the Companys shares.

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 condensed 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 beginning with our fourth
quarter of the fiscal year ending September 30, 2007. If the Company had applied SFAS 158 at the end of fiscal year 2006, using the Companys September 30, 2006 actuarial valuation, we would have recorded a pre-tax charge to
accumulated other comprehensive income totaling $876,000 ($545,000 after tax) representing the difference between the funded status of the plan based on the projected benefit obligation and the amounts recorded in the accompanying condensed
consolidated balance sheet at September 30, 2006. The Company is also required to adopt the measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. This provision requires companies to measure plan assets and
benefit obligations as of the date of the companys fiscal year-end. No change in measurement dates will be necessary since the Company currently meets this requirement.

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 condensed 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, 2007. We have adopted SAB 108 in our first quarter of fiscal 2007. The adoption of SAB 108 did not have a material impact on
our condensed 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 the Company for fiscal year ending September 30, 2008. The Company is currently evaluating the impact of adopting FIN 48 on its condensed 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 condensed 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 in fiscal year ended September 30, 2005, 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 condensed 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 No. 123, Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 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 have adopted
SFAS 123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The adoption of SFAS 123(R) resulted in the reclassification of the balance of unvested restricted stock, in the amount of $3.1 million, as a credit to unearned
compensation in stockholders equity and a corresponding reduction to retained earnings for the same amount in the accompanying condensed consolidated balance sheet as of December 31, 2006.

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.



|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



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hedges. We do not hold market-risk sensitive instruments for trading purposes. We do not hold financial instruments or derivative commodity instruments to
hedge any market risk, nor do we currently plan to employ them in the near future.

The interest rate on the mortgage note was 6.00% and
5.98% at December 31, 2006 and September 30, 2006, respectively. Our adjustable rate mortgage calls for an interest rate based on the 30 day LIBOR plus a margin of .065%.

The interest rate (5.85% and 5.82% at December 31, 2006 and September 30, 2006, respectively) on our 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 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. As of December 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 $20.9 million as of December 31, 2006 would have resulted in additional annualized interest costs of approximately $290,000. As of July 31, 2007, debt outstanding has decreased to $15.4 million primarily due to the
pay down of our line of credit from cash from operations. We estimate that a one-percentage point increase in interest rates for this debt would result in additional annualized interest costs of approximately $154,000.

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.

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



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material weaknesses described below, the Company performed additional procedures to ensure that the condensed consolidated

financial statements are prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in
this Quarterly 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. 5) is a control deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis. 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 2006 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | We have hired and will continue to hire additional internal audit professionals who are 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 December 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 December 31, 2006 and September 30, 2006.

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 $425,000.

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, net of settlements paid in fiscal year 2006 and the three-month period ended December 31, 2006, are included in the accrued reimbursement liability in the Companys condensed consolidated financial statements at
December 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.

Our Board of Directors, with the assistance of the Audit Committee, instituted immediate corrective actions and continue to implement 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 were included within our 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 the three-month period ended December 31, 2006, we derived approximately 20.0% 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 to 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 suspended the
stock window for March 2006 until the final impact of the restatement of the Companys condensed consolidated financial statements was determined and all SEC filing regulations are met such as, the timely filing of quarterly and annual reports.
The Company cancelled the stock window for fiscal 2007 because the Company was not current in filing its quarterly reports for fiscal 2007 with the SEC. Instead the Company authorized an internal market window (internal window) for
employee shareholders to purchase and sell shares of the Company. The Company facilitated this internal window by matching employee shareholders who wished to purchase and sell shares at the September 30, 2006 valuation price of $24.34. The
Company had the option, but not the obligation, to purchase any unmatched sell shares that employee shareholders wished to sell and which did not have a matching employee shareholder purchaser. The internal window started on July 2, 2007 and
ended on July 27, 2007. Eligible buyers were employees and directors of the Company and the Companys ESOP. At the end of the internal window, there were unmatched sell shares. The Company did not exercise its right to purchase the
unmatched sell shares. The unmatched sell shares were next offered to the Companys ESOP, which agreed to purchase all of the unmatched sell shares.

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. There is no guarantee the stock window
will be open or will not be delayed in future periods.



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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.

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 ofShares Repurchased |  | Average PricePaid PerShare |       | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |   | Maximum Number of Shares That May Be Purchased Under
the Plans or Programs
|October 1October 31   |  | 38,512                            |  | $                          | 28.09 |                                                                                  |  |                                                                            | 
|November 1November 30 |  | 27,308                            |  | $                          | 25.83 |                                                                                  |  |                                                                            | 
|December 1December 31 |  | 29,648                            |  | $                          | 25.52 |                                                                                  |  |                                                                            | 
|                       |  |                                   |  |                            |       |                                                                                  |   |                                                                            |  
|Total                  |  | 95,468                            |  | $                          | 26.64 |                                                                                  |  |                                                                            | 
|                       |  |                                   |  |                            |       |                                                                                  |   |                                                                            |  



|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: |  | September 21, 2007 |  |  |  | /s/ John B. Zumwalt III  
|       |  |                    |  |  |  | John B. Zumwalt          
|       |  |                    |  |  |  | Chairman of the Board and
|       |  |                    |  |  |  | Chief Executive Officer  
|       |  |                    | 
|Dated: |  | September 21, 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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