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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



For the Quarterly Period Ended December 31, 2003



OR



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



For the transition period from to
 to



Commission File No. 000-30911



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THE PBSJ CORPORATION

(Exact name of registrant as specified in its charter)



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



2001 N.W. 107th
AVENUE

MIAMI, FLORIDA 33172-2507

(Address of principal executive offices)



(305) 592-7275

(Registrants telephone number, including area code)



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



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



As of January 31, 2004 there were 7,721,609 shares of Common Stock, $.00067
par value per share, outstanding.



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FORM 10-Q



DECEMBER 31, 2003



TABLE OF CONTENTS



|                              |  |                                                                                       |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|ItemNumber                    |  | CAPTION                                                                               |  | PAGE
|PART I: FINANCIAL INFORMATION
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |  | 3   
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13  
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 23  
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 21  
|                             
|PART II: OTHER INFORMATION   
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 22  
|                              |  |                                                                                      
|Item 2.                       |  | Changes in Securities and Use of Proceeds                                             |  | 22  
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 22  
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 22  
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 22  
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                      |  | 22  
|                              | 
|SIGNATURES                    |  | 24                                                                                   



2



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PART I



Item 1. Financial St
atements



THE PBSJ CORPORATION

CONDENSED CONSOLIDATED BALANCE

SHEETS

(in thousands, except share data)



|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                                                                                                 |  | December 31, 2003 |         |   | September 30, 2003 |  
|                                                                                                                                                                                 |  | (Unaudited)       |         |   |                    |  
|Assets                                                                                                                                                                           |  |                   |         |   |                    |   |         |  
|Current Assets:                                                                                                                                                                  |  |                   |         |   |                    |   |         |  
|Cash and cash equivalents                                                                                                                                                        |  | $                 | 2,152   |   |                    | $ | 3,290   |  
|Marketable securities                                                                                                                                                            |  |                   | 616     |   |                    |   | 550     |  
|Accounts receivable, net                                                                                                                                                         |  |                   | 52,590  |   |                    |   | 52,510  |  
|Unbilled fees, net                                                                                                                                                               |  |                   | 34,312  |   |                    |   | 39,916  |  
|Other current assets                                                                                                                                                             |  |                   | 7,364   |   |                    |   | 4,316   |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|                                                                                                                                                                                 |  |                  
|Total current assets                                                                                                                                                             |  |                   | 97,034  |   |                    |   | 100,582 |  
|Property and equipment, net                                                                                                                                                      |  |                   | 32,288  |   |                    |   | 31,599  |  
|Cash surrender value of life insurance                                                                                                                                           |  |                   | 7,706   |   |                    |   | 7,357   |  
|Deferred income taxes                                                                                                                                                            |  |                   | 6,389   |   |                    |   | 5,701   |  
|Other assets                                                                                                                                                                     |  |                   | 11,579  |   |                    |   | 11,638  |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|                                                                                                                                                                                 |  |                  
|Total assets                                                                                                                                                                     |  | $                 | 154,996 |   |                    | $ | 156,877 |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                             |  |                   |         |   |                    |   |         |  
|Current Liabilities:                                                                                                                                                             |  |                   |         |   |                    |   |         |  
|Accounts payable and accrued expenses                                                                                                                                            |  |                   | 31,921  |   |                    |   | 33,060  |  
|Current portion of long-term debt                                                                                                                                                |  |                   | 386     |   |                    |   | 820     |  
|Accrued vacation                                                                                                                                                                 |  |                   | 6,302   |   |                    |   | 7,598   |  
|Deferred income taxes                                                                                                                                                            |  |                   | 17,836  |   |                    |   | 16,691  |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|                                                                                                                                                                                 |  |                  
|Total current liabilities                                                                                                                                                        |  |                   | 56,445  |   |                    |   | 58,169  |  
|                                                                                                                                                                                 |  |                  
|Long-term debt, less current portion                                                                                                                                             |  |                   | 18,061  |   |                    |   | 17,350  |  
|Deferred compensation                                                                                                                                                            |  |                   | 6,721   |   |                    |   | 6,544   |  
|Other liabilities                                                                                                                                                                |  |                   | 5,405   |   |                    |   | 5,351   |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|Total liabilities                                                                                                                                                                |  |                   | 86,632  |   |                    |   | 87,414  |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|Stockholders Equity:                                                                                                                                                            |  |                   |         |   |                    |   |         |  
|Common stock, par value $0.00067, 15,000,000 shares authorized, 7,754,578 and 7,969,780 shares issued and outstanding at December 31, 2003 and
September 30, 2003, respectively. |  |                   | 5       |   |                    |   | 5       |  
|Retained earnings                                                                                                                                                                |  |                   | 70,573  |   |                    |   | 71,792  |  
|Accumulated other comprehensive loss                                                                                                                                             |  |                   | (176    | ) |                    |   | (314    | )
|Unearned compensation                                                                                                                                                            |  |                   | (2,038  | ) |                    |   | (2,020  | )
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|                                                                                                                                                                                 |  |                  
|Total stockholders equity                                                                                                                                                       |  |                   | 68,364  |   |                    |   | 69,463  |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  
|                                                                                                                                                                                 |  |                  
|Total liabilities and stockholders equity                                                                                                                                       |  | $                 | 154,996 |   |                    | $ | 156,877 |  
|                                                                                                                                                                                 |  |                   |         |   |                    |   |         |  



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



3



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THE PBSJ CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

(in thousands)



|                                    |  |                                |         |   |      |   |        |  
|----------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------ | -
|                                    |  | Three months endedDecember 31, |        
|                                    |  | 2003                           |         |   | 2002 |  
|                                    |  | (Unaudited)                    |        
|STATEMENTS OF OPERATIONS DATA:      |  |                                |         |   |      |   |        |  
|Earned revenue:                     |  |                                |         |   |      |   |        |  
|Engineering fees                    |  | $                              | 103,495 |   |      | $ | 85,084 |  
|Direct expenses                     |  |                                | 21,270  |   |      |   | 18,683 |  
|                                    |  |                                |         |   |      |   |        |  
|Net earned revenue                  |  |                                | 82,225  |   |      |   | 66,401 |  
|                                    |  |                                |         |   |      |   |        |  
|                                    |  |                               
|Costs and expenses:                 |  |                                |         |   |      |   |        |  
|Direct salaries                     |  |                                | 29,228  |   |      |   | 23,842 |  
|General and administrative expenses |  |                                | 46,726  |   |      |   | 38,344 |  
|                                    |  |                                |         |   |      |   |        |  
|Total costs and expenses            |  |                                | 75,954  |   |      |   | 62,186 |  
|                                    |  |                               
|Operating income                    |  |                                | 6,271   |   |      |   | 4,215  |  
|                                    |  |                                |         |   |      |   |        |  
|                                    |  |                               
|Other income (expenses):            |  |                                |         |   |      |   |        |  
|Interest expense                    |  |                                | (237    | ) |      |   | (259   | )
|Other, net                          |  |                                | 487     |   |      |   | 235    |  
|                                    |  |                                |         |   |      |   |        |  
|Total other expenses                |  |                                | 250     |   |      |   | (24    | )
|                                    |  |                               
|Income before income taxes          |  |                                | 6,521   |   |      |   | 4,191  |  
|                                    |  |                               
|Provision for income taxes          |  |                                | 2,869   |   |      |   | 1,425  |  
|                                    |  |                                |         |   |      |   |        |  
|                                    |  |                               
|Net income                          |  | $                              | 3,652   |   |      | $ | 2,766  |  
|                                    |  |                                |         |   |      |   |        |  



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



4



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THE PBSJ CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(in thousands)

|                                                                                            |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                            |  | Three months endedDecember 31, |        
|                                                                                            |  | 2003                           |         |   | 2002 |  
|                                                                                            |  | (Unaudited)                    |        
|Cash flows from operating activities:                                                       |  |                                |         |   |      |   |         |  
|Net income                                                                                  |  | $                              | 3,652   |   |      | $ | 2,766   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                                |         |   |      |   |         |  
|Other                                                                                       |  |                                | (178    | ) |      |   | (47     | )
|Depreciation and amortization                                                               |  |                                | 2,228   |   |      |   | 2,074   |  
|Gain on sale of property                                                                    |  |                                | (31     | ) |      |   |        |  
|Provision for bad debt and unbillable amounts                                               |  |                                | 50      |   |      |   | 72      |  
|Provision for deferred income taxes                                                         |  |                                | 365     |   |      |   | 1,000   |  
|Provision for deferred compensation                                                         |  |                                | 329     |   |      |   | 294     |  
|Change in operating assets and liabilities, net of acquisitions:                            |  |                                |         |   |      |   |         |  
|(Increase) decrease in accounts receivable                                                  |  |                                | (131    | ) |      |   | 5,903   |  
|Decrease (increase) in unbilled fees                                                        |  |                                | 5,604   |   |      |   | (1,408  | )
|Increase in other current assets                                                            |  |                                | (3,048  | ) |      |   | (2,039  | )
|Increase in other assets                                                                    |  |                                | (31     | ) |      |   | (15     | )
|Decrease in accounts payable and accrued expenses                                           |  |                                | (4,462  | ) |      |   | (5,954  | )
|Decrease in accrued vacation                                                                |  |                                | (1,296  | ) |      |   | (1,311  | )
|Increase in other liabilities                                                               |  |                                | 218     |   |      |   | 406     |  
|                                                                                            |  |                                |         |   |      |   |         |  
|                                                                                            |  |                               
|Net cash provided by operating activities                                                   |  |                                | 3,269   |   |      |   | 1,741   |  
|                                                                                            |  |                                |         |   |      |   |         |  
|Cash flows from investing activities:                                                       |  |                                |         |   |      |   |         |  
|Investment in life insurance policies                                                       |  |                                | (142    | ) |      |   | (91     | )
|Acquisitions, net of cash acquired                                                          |  |                                |        |   |      |   | (1,331  | )
|Sale of property and equipment                                                              |  |                                | 34      |   |      |   | 15      |  
|Purchase of property and equipment                                                          |  |                                | (2,830  | ) |      |   | (2,514  | )
|                                                                                            |  |                                |         |   |      |   |         |  
|                                                                                            |  |                               
|Net cash used in investing activities                                                       |  |                                | (2,938  | ) |      |   | (3,921  | )
|                                                                                            |  |                                |         |   |      |   |         |  
|Cash flows from financing activities:                                                       |  |                                |         |   |      |   |         |  
|Borrowings under line of credit                                                             |  |                                | 44,400  |   |      |   | 40,993  |  
|Principal payments under line of credit                                                     |  |                                | (43,618 | ) |      |   | (33,412 | )
|Principal payments under notes and mortgage payable                                         |  |                                | (505    | ) |      |   | (514    | )
|Proceeds from sale of common stock                                                          |  |                                | 3,323   |   |      |   | 3,183   |  
|Purchase of common stock                                                                    |  |                                | (5,069  | ) |      |   | (6,464  | )
|                                                                                            |  |                                |         |   |      |   |         |  
|                                                                                            |  |                               
|Net cash (used in) provided by financing activities:                                        |  |                                | (1,469  | ) |      |   | 3,786   |  
|                                                                                            |  |                                |         |   |      |   |         |  
|                                                                                            |  |                               
|Net decrease in cash and cash equivalents                                                   |  |                                | (1,138  | ) |      |   | 1,606   |  
|                                                                                            |  |                               
|Cash and cash equivalents at beginning of year                                              |  |                                | 3,290   |   |      |   | 2,967   |  
|                                                                                            |  |                               
|Cash and cash equivalents at end of year                                                    |  | $                              | 2,152   |   |      | $ | 4,573   |  
|                                                                                            |  |                                |         |   |      |   |         |  



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



5



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NOTES TO FINANCIAL STATEMENTS



|1. | Summary of Significant Accounting Policies:
|-- | -------------------------------------------



Basis of Presentation



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



In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the interim period contain all adjustments necessary to present fairly the financial position of The PBSJ
Corporation as of December 31, 2003 and the results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated balance sheet as of September 30, 2003 was derived from the
Companys audited financial statements included in the Companys Form 10-K for the year ended September 30, 2003. The accompanying financial statements should be read in conjunction with the Companys Form 10-K for the year ended
September 30, 2003. The results of operations for the three-month period ended December 31, 2003 and 2002 are not necessarily indicative of the results to be expected for the fiscal year.



Basic and Diluted Earnings Per Share



Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share, does not require presentation of earnings per share
(EPS) for entities not currently selling their securities in a public market or planning to sell their securities in a public market in the future. Since the Companys securities are not currently publicly traded or in the process
of being registered for public trading in the future, no presentation has been made.



Revenue Recognition



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



6



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Anticipated losses are recognized in total in the period in which they become determinable. Accounts
receivable is presented net of an allowance for doubtful accounts of $1.1 million and $1.1 million at December 31, 2003 and September 30, 2003, respectively. Unbilled fees are presented net of an allowance for estimated unbillable amounts of $0 at
December 31, 2003 and September 30, 2003.



Recent Accounting
Pronouncements



In January 2003, the FASB issued FASB
interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46) and amended it in October 2003, such that it is now effective for the Company in the first quarter of fiscal 2004. Variable interest entities (VIEs) are
entities that lack sufficient equity to finance their activities without additional financial support from another party or whose equity holders lack adequate decision making ability based on criteria set forth in the interpretation. The current FIN
46 guidance is still evolving with several proposed amendments and clarifications recently issued through an exposure draft release. The company has evaluated the total impact of FIN 46, based on the current exposure draft, and the Company does not
expect FIN 46 to have a material impact on its results of operations or financial position.



Capital Structure



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



The by-laws of the Company give the Company the right to purchase back its common stock, at fair market value, held by shareholders who terminate employment with the Company. However, the by-laws also grant the
Company the first right of refusal to repurchase these shares, at which time the shares would be sold to any other eligible fulltime employee of the Company by the selling shareholder. Other than agreements with certain retired Directors as noted in
the Proxy, as of December 31, 2003 and 2002, there is no outstanding common stock relating to employees no longer employed by the Company.



|2. | Contingencies:
|-- | --------------



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



As of December 31, 2003, the Company was involved in litigation where
plaintiffs allege damages resulting from the Companys engineering services. The plaintiffs allegations of liability in those cases seek recovery for damages caused by the Company based on various theories of negligence, contributory
negligence or breach of contract.



As of December 31, 2003, the
Company has an accrual of approximately $5.2 million for all potential and existing claims, lawsuits and pending proceedings that, in managements opinion, are probable. 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.



7



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|3. | Income Taxes:
|-- | -------------



The income tax provision was $2.9 million and $1.4 million, or an effective tax rate of 44.0% and 34.0%, for the three-month periods ended December 31,
2003 and 2002, respectively. The increase in the effective tax rate in 2003 was primarily due to the increase in the valuation allowance for the deferred taxes related to research and development tax credit carry-forwards. These research and
development tax credit carry-forwards, which expire beginning 2017 through 2022, were approximately $10.2 million and $8.4 million as of December 31, 2003 and September 30, 2003, respectively. A valuation allowance of $2.6 million and $2.1 million
at December 31, 2003 and September 30, 2003, respectively, has been provided for against the deferred tax asset related to these tax credit carry-forwards.



|4. | Segment Reporting:
|-- | ------------------



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



|                                     |  |                |        |              |   |        |  |   |               |   |       |   |        |  |   |        
|------------------------------------ |  | -------------- | ------ | ------------ | - | ------ |  | - | ------------- | - | ----- | - | ------ |  | - | -------
|Three Months Ended December 31, 2003 |  |                |        |              |   |        |  |   |               |   |       |   |        |  |   |        
|                                     |  | Transportation |        | Construction |   | Civil  |  |   | Environmental |   | Total
|Engineering fees                     |  | $              | 41,060 |              | $ | 16,679 |  | $ | 19,129        |   |       | $ | 26,627 |  | $ | 103,495
|Net earned revenue                   |  |                | 31,102 |              |   | 13,020 |  |   | 16,637        |   |       |   | 21,466 |  |   | 82,225 
|Operating income                     |  |                | 2,366  |              |   | 1,375  |  |   | 1,522         |   |       |   | 1,008  |  |   | 6,271  
|Depreciation and amortization        |  |                | 793    |              |   | 207    |  |   | 562           |   |       |   | 666    |  |   | 2,228  
|Total assets                         |  |                | 61,493 |              |   | 24,978 |  |   | 28,648        |   |       |   | 39,877 |  |   | 154,996
|Capital expenditures                 |  |                | 1,049  |              |   | 411    |  |   | 560           |   |       |   | 810    |  |   | 2,830  
|                                     |  |                |        |              |  
|Three Months Ended December 31, 2002 |  |                |        |              |   |        |  |   |               |   |       |   |        |  |   |        
|                                     |  | Transportation |        | Construction |   | Civil  |  |   | Environmental |   | Total
|Engineering fees                     |  | $              | 34,815 |              | $ | 12,335 |  | $ | 14,200        |   |       | $ | 23,734 |  | $ | 85,084 
|Net earned revenue                   |  |                | 26,923 |              |   | 9,097  |  |   | 12,119        |   |       |   | 18,262 |  |   | 66,401 
|Operating income (loss)              |  |                | 2,201  |              |   | 846    |  |   | (72           | ) |       |   | 1,240  |  |   | 4,215  
|Depreciation and amortization        |  |                | 743    |              |   | 169    |  |   | 540           |   |       |   | 622    |  |   | 2,074  
|Total assets                         |  |                | 56,777 |              |   | 20,116 |  |   | 23,158        |   |       |   | 38,705 |  |   | 138,756
|Capital expenditures                 |  |                | 954    |              |   | 322    |  |   | 520           |   |       |   | 718    |  |   | 2,514  



8



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



|                                                                                                                                                                                                                                                                                                                                                                       |  |                   |        |                    |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ------------------ | - | ------
|                                                                                                                                                                                                                                                                                                                                                                       |  | December 31, 2003 |        | September 30, 2003
|Line of credit unused availability of $47,984, and $48,766 at December 31, 2003 and September 30, 2003, respectively.                                                                                                                                                                                                                                                  |  | $                 | 10,016 |                    | $ | 9,234 
|                                                                                                                                                                                                                                                                                                                                                                       |  |                  
|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. (1.77% and 1.77% at December 31, 2003 and September 30, 2003, respectively). |  |                   | 8,323  |                    |   | 8,390 
|                                                                                                                                                                                                                                                                                                                                                                       |  |                  
|Note payable to J. Powell & Associates, Inc. due in three annual installments of $333 with interest of 7.12% through October 17,
2003                                                                                                                                                                                                                                  |  |                   | 0      |                    |   | 333   
|                                                                                                                                                                                                                                                                                                                                                                       |  |                  
|Capital lease of equipment, interest accrues at 8.3%, collateralized by certain equipment, due in monthly payments of principal and interest
of $36.                                                                                                                                                                                                                   |  |                   | 108    |                    |   | 213   
|                                                                                                                                                                                                                                                                                                                                                                       |  |                   |        |                    |   |       
|                                                                                                                                                                                                                                                                                                                                                                       |  |                   | 18,447 |                    |   | 18,170
|Less current portion                                                                                                                                                                                                                                                                                                                                                   |  |                   | 386    |                    |   | 820   
|                                                                                                                                                                                                                                                                                                                                                                       |  |                   |        |                    |   |       
|Long-term debt                                                                                                                                                                                                                                                                                                                                                         |  | $                 | 18,061 |                    | $ | 17,350
|                                                                                                                                                                                                                                                                                                                                                                       |  |                   |        |                    |   |       



The Company has a $58
million line of credit agreement, inclusive of $3 million in letters of credit, with a bank. All other terms of the agreement remain the same. The expiration date on the amended line of credit is June 30, 2005. The interest rate (1.62% and 1.62% at
December 31, 2003 and September 30, 2003, respectively) ranges from LIBOR plus 50 basis points to prime minus 125 basis points if the Companys funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to
prime minus 100 basis points if the Companys funded debt coverage ratio is between 2.5 to 3.0. The line of credit contains clauses requiring the maintenance of various covenants and financial ratios.



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



9



---

|6. | Comprehensive Income:
|-- | ---------------------



|                                       |  |                                 |       |      |   |      
|-------------------------------------- |  | ------------------------------- | ----- | ---- | - | -----
|                                       |  | Three months ended December 30,
|                                       |  | 2003                            |       | 2002
|                                       |  | (dollars in thousands)         
|Net income                             |  | $                               | 3,652 |      | $ | 2,766
|Other comprehensive income, net of tax |  |                                 | 138   |      |   | 45   
|                                       |  |                                 |       |      |   |      
|Comprehensive income                   |  | $                               | 3,790 |      | $ | 2,811



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



|7. | Goodwill:
|-- | ---------



During the first quarter of fiscal year 2003, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets.Under SFAS No. 142, purchased
goodwill and intangible assets with indefinite lives are no longer amortized, but instead tested for impairment at least annually. In connection with the adoption of SFAS No. 142, the Company no longer records approximately $0.5 million annually of
amortization relating to its existing goodwill. An assessment was completed at December 31, 2003 and no impairment was determined. The balance of goodwill was $9.5 million and $7.2 million for the three-month periods ended December 31, 2003 and
2002, respectively.



The following contains financial
information relating to the Companys acquired amortizable intangible assets at December 31, 2003 (dollars in thousands):



|                        |  |                        |  |                      |       |                         |   |    
|----------------------- |  | ---------------------- |  | -------------------- | ----- | ----------------------- | - | ---
|                        |  | Estimated Useful Lives |  | Gross CarryingAmount |       | AccumulatedAmortization
|Client List             |  | 10 years               |  | $                    | 700   |                         | $ | 59 
|Client name recognition |  | 2 years                |  |                      | 100   |                         |   | 38 
|Backlog                 |  | 3 years                |  |                      | 640   |                         |   | 169
|Technology/software     |  | 7 years                |  |                      | 200   |                         |   | 31 
|                        |  |                        |  |                      |       |                         |   |    
|                        |  |                        |  | $                    | 1,640 |                         | $ | 297
|                        |  |                        |  |                      |       |                         |   |    



Amortization expense relating to
intangible assets amounted to $90,000 and $0 for the periods ended December 31, 2003 and 2002, respectively.



10



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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 condensed consolidated financial statements and accompanying notes. As you read this section, you should also refer to the Companys Annual Report filed on Form 10-K for the fiscal year ended September 30, 2003.



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



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



Results of Operations



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



|                                    |  |                                 |   |  |       |  
|----------------------------------- |  | ------------------------------- | - |  | ----- | -
|                                    |  | Three months ended December 31, |  
|                                    |  | 2003                            |   |  | 2002  |  
|Engineering fees                    |  | 125.9                           | % |  | 128.1 | %
|Direct expenses                     |  | 25.9                            |   |  | 28.1  |  
|                                    |  |                                 |   |  |       |  
|Net earned revenue                  |  | 100.0                           |   |  | 100.0 |  
|Costs and expenses:                 |  |                                 |   |  |       |  
|Direct salaries                     |  | 35.5                            |   |  | 35.9  |  
|General and administrative expenses |  | 56.8                            |   |  | 57.8  |  
|                                    |  |                                 |   |  |       |  
|Operating income                    |  | 7.6                             |   |  | 6.3   |  
|Interest expense                    |  | (.3                             | ) |  | (.4   | )
|Other, net                          |  | .6                              |   |  | .4    |  
|                                    |  |                                 |   |  |       |  
|Income before income taxes          |  | 7.9                             |   |  | 6.3   |  
|Provision for income taxes          |  | 3.5                             |   |  | 2.1   |  
|                                    |  |                                 |   |  |       |  
|Net income                          |  | 4.4                             | % |  | 4.2   | %
|                                    |  |                                 |   |  |       |  



11



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A summary of operating results is as follows for each of the three months ended December 31 (dollars in thousands):



|                           |  |      |         |      |   |        |  
|-------------------------- |  | ---- | ------- | ---- | - | ------ | -
|                           |  | 2003 |         | 2002 |  
|Engineering fees           |  | $    | 103,495 |      | $ | 85,084 |  
|Direct expenses            |  |      | 21,270  |      |   | 18,683 |  
|                           |  |      |         |      |   |        |  
|Net earned revenue         |  |      | 82,225  |      |   | 66,401 |  
|Costs and expenses         |  |      | 75,954  |      |   | 62,186 |  
|                           |  |      |         |      |   |        |  
|Operating income           |  |      | 6,271   |      |   | 4,215  |  
|Other income (expenses)    |  |      | 250     |      |   | (24    | )
|Provision for income taxes |  |      | 2,869   |      |   | 1,425  |  
|                           |  |      |         |      |   |        |  
|Net income                 |  | $    | 3,652   |      | $ | 2,766  |  
|                           |  |      |         |      |   |        |  



Overview



The three-month period ended December 31, 2003 saw a 21.6% increase in
engineering fees, as compared to the same period in 2002. A 13% increase in the number of employees, new projects and 2 small acquisitions were the contributors to the growth in engineering fees. The increase in the number of employees was primarily
of technical professionals, whose billable labor gets charged back to clients, thereby increasing the amount of fees earned by the Company. In addition, all four of the Companys segments experienced increased volumes in backlog for the
three-month period ended December 31, 2003, as compared to the same period in 2002. The Company defines backlog as contracted work orders less previously recognized revenue on such work orders. The final contributor to the growth in engineering fees
was the acquisition of Durham Technologies, Inc. (DTI) on December 1, 2002, and Welker & Associates, Inc. (Welker) on March 19, 2003. The employees obtained in the acquisitions of these two firms made up approximately
20.1% of the Companys growth in head count.



The
Companys net income increased 35.3% during the three-month period ended December 31, 2003, as compared to the same period in 2002, primarily as a result of the reasons stated above, as well as increased chargeability, or utilization of
billable hours, which allowed increased operating margins on projects. The increases in chargeability are largely related to the pick up in the economy, which allowed the Civil and Construction segments to experience significant increases in their
chargeability percentage (the percentage of the cost of labor hours that are actually billed to clients), thereby increasing the operating margin for the three-month period ended December 31, 2003 for these two segments.



Segment Results of Operations



Our businesses are reported as four segments, reflecting our management
methodology and structure. The accounting policies of the segments are the same as those described in the footnotes to the accompanying consolidated financial statements. We evaluate performance based on operating profit of the respective segments.
The discussion that follows is a summary analysis of the primary changes in operating results by segment for the three months ended December 31, 2003 as compared to 2002.



12



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Transportation



|                   |  |                        |        |          |      |   |      |   |       
|------------------ |  | ---------------------- | ------ | -------- | ---- | - | ---- | - | ------
|                   |  | 2003                   |        | % Change |      |   | 2002
|                   |  | (dollars in thousands)
|Engineering fees   |  | $                      | 41,060 |          | 17.9 | % |      | $ | 34,815
|Direct expenses    |  |                        | 9,958  |          | 26.2 |   |      |   | 7,892 
|Net earned revenue |  |                        | 31,102 |          | 15.5 |   |      |   | 26,923
|Costs and expenses |  |                        | 28,736 |          | 16.4 |   |      |   | 24,722
|Operating income   |  | $                      | 2,366  |          | 7.4  | % |      | $ | 2,201 



Engineering fees of
$41.1 million for the three-month period ended December 31, 2003 increased 17.9%, as compared to the same period in 2002. Higher volumes from continued strength in the transportation services market and engineering fees from new projects were the
primary contributors to this increase during 2003, offset by a small reduction in chargeability.



Reported net earned revenue was $31.1 million during the three-month period ended December 31, 2003 as compared to $26.9 million for the same period in
2002, representing an increase of 15.5%. This increase is directly related to the increase in engineering fees from internal growth, resulting from additional professionals hired. Direct expenses, however, increased at a greater rate than
engineering fees, growing 26.2%, from $7.9 million during the three-month period ended December 31, 2002, to $10.0 million for the same period in 2003. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as
blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct expenses, as a percentage of net earned revenue, was 32.0% for the three-month period ended December 31, 2003 as compared to 29.3% for the same period
in 2002. This increase resulted from the increased usage of sub-consultants in California, as well as in aviation projects around the country.



Reported operating income was $2.4 million for the three-month period ended December 31, 2003 as compared to $2.2 million for the same period in 2002,
representing an increase of 7.4%. Operating income, as a percentage of net earned revenue, was 7.6% for the three-month period ended December 31, 2003 as compared to 8.2% for the same period in 2002. The increase in operating income is derived from
the growth in engineering fees and net earned revenue, resulting from additional professionals hired. However, the decrease in operating income, as a percentage of net earned revenue, is driven by an increase in costs and expenses. Costs and
expenses consist of direct salaries of professionals, whose time is chargeable to clients, and general and administrative expenses. Although direct salaries increased 14.3%, from $9.8 million for the three-month period ended December 31, 2002, to
$11.2 million for the same period in 2003, direct salaries, as a percentage of net earned revenue, decreased from 36.4% for the three-month period ended December 31, 2002 to 36.0% for the same period in 2003. This decrease was driven by a slight
reduction in Transportations chargeability percentage, thereby slightly reducing the operating margin for the three-month period ended December 31, 2003. General and administrative expenses, as a percentage of net earned revenue, increased
from 55.4% for the three-month period ended December 31, 2002 to 56.4% for the same period in 2003, primarily due to the slight reduction in chargeability.



13



---

Civil Engineering



|                        |  |                        |        |          |         |   |      |   |        |  
|----------------------- |  | ---------------------- | ------ | -------- | ------- | - | ---- | - | ------ | -
|                        |  | 2003                   |        | % Change |         |   | 2002 |  
|                        |  | (dollars in thousands) |       
|Engineering fees        |  | $                      | 19,129 |          | 34.7    | % |      | $ | 14,200 |  
|Direct expenses         |  |                        | 2,492  |          | 19.8    |   |      |   | 2,081  |  
|Net earned revenue      |  |                        | 16,637 |          | 37.3    |   |      |   | 12,119 |  
|Costs and expenses      |  |                        | 15,115 |          | 24.0    |   |      |   | 12,191 |  
|Operating income (loss) |  | $                      | 1,522  |          | 2,213.9 | % |      | $ | (72    | )



Engineering fees of
$19.1 million for the three-month period ended December 31, 2003 increased 34.7% as compared to the same period in 2002. This improvement is attributed to several factors. One of these factors was the acquisition of Durham Technologies, Inc.
(DTI) on December 1, 2002. DTI specializes in risk and emergency management services for public sector clients, primarily Federal. Another factor in the improvement of this segment is a profitable emergency response project involving ice
storm clean up in the Eastern region of the United States. Lastly, this segment has significantly increased its chargeability, slowed the growth of general and administrative costs and made significant steps toward improving project and contract
management.



Reported net earned revenue was $16.6 million for
the three-month period ended December 31, 2003 as compared to $12.1 million for the same period in 2002, representing an increase of 37.3%. Net earned revenue increased at a greater rate than engineering fees as a result of a decrease in direct
expenses, specifically the use of sub-consultants. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct
expenses were $2.5 million during the three-month period ended December 31, 2003 as compared to $2.1 million for the same period in 2002, representing an increase of 19.8%. Direct expenses, as a percentage of net earned revenue, decreased from 17.2%
for the three-month period ended December 31, 2002 to 15.0% for the same period in 2003. The decrease in direct expenses and direct expenses, as a percentage of net earned revenue, is due to the decreased use of sub-consultants, as a result of the
increase in chargeability internally.



Reported operating
income was $1.5 million for the three-month period ended December 31, 2003 as compared to an operating loss of $72,000 for the same period in 2002. Operating income (loss), as a percentage of net earned revenue, was 9.1% for the three months ended
December 31, 2003 as compared to (0.6)% for the same period in 2002. The improvement from operating loss in 2002 to operating income in 2003 is due to improved chargeability and reduced general and administrative costs, as a percentage of net earned
revenue, allowing for a reduction in total costs and expenses, as a percentage of net earned revenue. Costs and expenses consist of direct salaries of professionals, whose time is chargeable to clients, and general and administrative expenses.
Direct salaries, as a percentage of net earned revenue, decreased from 35.8% for the three-month period ended December 31, 2002 to 35.1% for the same period in 2003, as a result of technical personnel cut-backs made in this segment. These cut-backs
allowed the remaining technical professionals to increase their utilization. General and administrative expenses, as a percentage of net earned revenue, fell from 64.7% for the three-month period ended December 31, 2002 to 55.8% for the same period
in 2003. The reduction in general and administrative expenses, as a percentage of net earned revenue, is directly related to the improvements in chargeability and cut-backs made in direct labor personnel. Some areas affected by this include medical
costs, payroll taxes, vacation accruals and corporate allocations.



14



---

Environmental



|                   |  |                        |        |          |       |    |      |   |       
|------------------ |  | ---------------------- | ------ | -------- | ----- | -- | ---- | - | ------
|                   |  | 2003                   |        | % Change |       |    | 2002
|                   |  | (dollars in thousands)
|Engineering fees   |  | $                      | 26,627 |          | 12.2  | %  |      | $ | 23,734
|Direct expenses    |  |                        | 5,161  |          | (5.7  | )  |      |   | 5,472 
|Net earned revenue |  |                        | 21,466 |          | 17.5  |    |      |   | 18,262
|Costs and expenses |  |                        | 20,458 |          | 20.2  |    |      |   | 17,022
|Operating income   |  | $                      | 1,008  |          | (18.7 | )% |      | $ | 1,240 



Engineering fees of
$26.6 million for the three-month period ended December 31, 2003 increased 12.2%, as compared to $23.7 million for the same period in 2002. Higher volumes from continued strength in the environmental services market and engineering fees from new
projects were the primary contributors, offset by a slight reduction in chargeability.



Reported net earned revenue was $21.5 million for the three-month period ended December 31, 2003 as compared to $ 18.3 million for the same period in 2002, representing an increase of 17.5%. Net earned revenue
increased at a greater percentage than engineering fees due to a 5.7% decrease in direct expenses for the three-month period ended December 31, 2003, as compared to the same period in 2002. Direct expenses consist of out-of-pocket expenses related
to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and sub-contractor expenses. Direct expenses were $5.1 million during the three-month period ended December 31, 2003 as compared to $5.5 million for the
same period in 2002. Direct expenses, as a percentage of net earned revenue was 24.0% for the three-month period ended December 31, 2003 as compared to 30.0% for the same period in 2002. The decrease in direct expenses and direct expenses, as a
percentage of net earned revenue, is due primarily to a return to normal direct expense spending in 2003, as compared to 2002. In 2002, direct expenses were larger than normal due to a video inspection sub-consultant that was being utilized to
assist with the beginning stages of a job in California. The greatest volume of the video work was needed in the early stages of the job during the three-month period ended December 31, 2002. Since then, the volume of video work has decreased,
thereby reducing direct expenses.



Reported operating income
was $1.0 million for the three-month period ended December 31, 2003 as compared to $1.2 million for the same period in 2002, representing a decrease of 18.7%. Operating income as a percentage of net earned revenue was 4.7% for the three-month period
ended December 31, 2003 as compared to 6.8% for the same period in 2002. The decrease in operating income and operating income, as a percentage of net earned revenue, is due to a greater increase in costs and expenses than in net earned revenue
during 2003. Costs and expenses consist of direct salaries of professionals, whose time is chargeable to clients, and general and administrative expenses. Direct salaries, as a percentage of net earned revenue, decreased from 33.3% for the
three-month period ended December 31, 2002 to 32.6% for the same period in 2003. This decrease is primarily due to a slight reduction in chargeability during the three-month period ended December 31, 2003, as compared to the same period in 2002. A
reduction in chargeability reduces the number of hours that are chargeable to clients, thereby decreasing the potential revenue associated with those hours. At the same time, an increase in non-chargeable hours will increase indirect labor costs,
thereby increasing general and administrative costs. General and administrative expenses, as a percentage of net earned revenue, increased from 59.9% for the three-month period ended December 31, 2002 to 62.7% for the same period in 2003, primarily
as a result of the reduction in chargeability.



15



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Construction Management



|                   |  |                        |        |          |      |   |      |   |       
|------------------ |  | ---------------------- | ------ | -------- | ---- | - | ---- | - | ------
|                   |  | 2003                   |        | % Change |      |   | 2002
|                   |  | (dollars in thousands)
|Engineering fees   |  | $                      | 16,679 |          | 35.2 | % |      | $ | 12,335
|Direct expenses    |  |                        | 3,659  |          | 13.0 |   |      |   | 3,238 
|Net earned revenue |  |                        | 13,020 |          | 43.1 |   |      |   | 9,097 
|Costs and expenses |  |                        | 11,645 |          | 41.1 |   |      |   | 8,251 
|Operating income   |  | $                      | 1,375  |          | 62.7 | % |      | $ | 846   



Engineering fees of
$16.7 million for the three-month period ended December 31, 2003 increased 35.2% as compared to the same period in 2002. Higher volumes from renewed strength in the construction services market, engineering fees from new projects and increased
chargeability were the primary reasons for the increase during 2003.



Reported net earned revenue was $13.0 million for the three-month period ended December 31, 2003 as compared to $9.1 million for the same period in 2002, representing an increase of 43.1%. Net earned revenue increased at a slightly greater
percentage than engineering fees as a result of a decrease in direct expenses. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, and travel and
sub-contractor expenses. Direct expenses were $3.7 million during the three-month period ended December 31, 2003 as compared to $3.2 million for the same period in 2002, representing an increase of 13.0%. Direct expenses, as a percentage of net
earned revenue, decreased from 35.6% for the three-month period ended December 31, 2002 to 28.1% for the same period in 2003. The decrease in direct expenses, as a percent of net earned revenue, is due to slowed growth in the use of sub-consultants,
and the increased utilization of staff internally.



Reported
operating income was $1.4 million for the three-month period ended December 31, 2003 as compared to $846,000 for the same period in 2002, representing a 62.7% increase. Operating income, as a percentage of net earned revenue was 10.6% for the
three-month period ended December 31, 2003 as compared to 9.3% for the same period in 2002. The increase in operating income is due to improved chargeability and reduced general and administrative costs, as a percentage of net earned revenue,
allowing for a reduction in total costs and expenses, as a percentage of net earned revenue. Costs and expenses consist of direct salaries of professionals, whose time is chargeable to clients, and general and administrative expenses. Direct
salaries, as a percentage of net earned revenue, increased slightly from 39.7% for the three-month period ended December 31, 2002 to 39.8% for the same period in 2003. General and administrative expenses, as a percentage of net earned revenue,
decreased from 51.0% for the three-month period ended December 31, 2002 to 49.7% for the same period in 2003. The decrease in general and administrative expenses, as a percentage of net earned revenue, was primarily due to the improvements made in
chargeability as a result of close attention being paid to escalating the utilization of technical professionals.



16



---

Consolidated Results



Other income (expenses):



Other income and expenses primarily consists of interest and dividend income and interest expense. Total other income (expenses) was $250,000 and
($24,000) for the three-month periods ended December 31, 2003 and 2002, respectively. The increase in income is due to real estate commissions of newly leased properties.



Net Income:



Net income was $3.7 million and $2.8 million for the three-month periods ended December 31, 2003 and 2002, respectively. The percentage of net income to
net earned revenue increased from 4.2% for the three-month period ended December 31, 2002 to 4.5% for the three-month period ended December 31, 2003. The increase in 2003 was a result of increased chargeability and slowed increases in general and
administrative costs. An increase in chargeability increases the number of hours that are chargeable to clients, thereby increasing the potential revenue and profit associated with those hours.



Income Taxes:



The income tax provision was $2.9 million and $1.4 million, or an effective tax rate of 44.0% and 34.0%, for the three-month
periods ended December 31, 2003 and 2002, respectively. The increase in the effective tax rate in 2003 was primarily due to the increase in the valuation allowance for the deferred taxes related to research and development tax credit carry-forwards.
These research and development tax credit carry-forwards, which expire beginning 2017 through 2022, were approximately $10.2 million and $8.4 million as of December 31, 2003 and 2002, respectively. A valuation allowance of $2.6 million and $2.1
million at December 31, 2003 and 2002, respectively, has been provided for against the deferred tax asset related to these tax credit carry-forwards.



Liquidity and Capital Resources



Cash Flows From Operating Activities



Net cash provided by operating activities totaled $3.3 million for the three months ended December 31, 2003 as compared to $1.7 million for the same
period in 2002. The increase is primarily a result of the increase in net income and the decrease in unbilled fees, offset by a decrease in accounts payable. Fluctuations in accounts payable are primarily related to direct expenses, where the timing
of payment to subcontractors is directly related to the collection of related receivables. Net income increased 32.0%, from $2.8 million for the three-month period ended December 31, 2002 to $3.7 million for the same period in 2003. This increase
was primarily a result of an increase in chargeability, as stated above.



17



---

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



Approximately 90% of our revenues are billed on a monthly basis. The
remaining amounts are billed when we reach certain stages of completion as specified in the contract. Payment terms for accounts receivable and unbilled fees, when billed, are net 30 days. The unbilled fees account decreased $5.6 million, from $40.0
million at September 30, 2003 to $34.3 million at December 31, 2003. The number of days outstanding for unbilled fees was 31 days and 37 days at December 31, 2003 and September 30, 2003, respectively. By comparison, according to PSMJ Resources,
Inc., the average days outstanding for unbilled fees for design firms of a comparable size was 27.9 days in 2003 and 29.7 days in 2002.



Accounts receivable increased 0.2%, from $52.5 million at September 30, 2003, to $52.6 million at December 31, 2003. The allowance for doubtful accounts
remained the same at $1.1 million for September 30, 2003 and December 31, 2003. The number of days sales outstanding for accounts receivable was approximately 44 days and 46 days at December 31, 2003 and September 30, 2003, respectively.
According to PSMJ Resources, Inc. the average days sales accounts receivables for design firms of comparable size to us was 75.1 days in 2003 and 66.5 days in 2002.



Cash Flows from Investing Activities



Net cash used in investing activities was $2.9 million and $3.9 million for the three months ended December 31, 2003 and
December 31, 2002, respectively. Investing activity typically consists of fixed asset purchases, such as survey equipment, computer equipment, furniture and leasehold improvements. On December 1, 2002, the Company acquired 100% of the stock of
Durham Technologies, Inc. (DTI) for $1.3 million, net of cash acquired. The acquisition of DTI contributes to the Companys goal of enhancing its presence in the growing Emergency Management Services market. DTIs area of
specialty includes risk management and risk assessment for public sector clients, primarily Federal. The acquisition is accounted for using the purchase method of accounting, and the results of operations are included from the respective date of
acquisition.



Cash Flows from Financing
Activities



Net cash provided by financing activities for the
three months ended December 31, 2003 was $1.5 million, as compared to $3.8 million for the same period in 2002. The decrease in cash provided by financing activities is attributable to an increase in principal payments under the Companys line
of credit.



Capital Resources



As of December 31, 2003, the Company had a $58 million revolving line of
credit agreement, inclusive of $3 million in letters of credit, with a bank. The revolving line of credit expires June 30, 2005. The interest rate (1.62% and 1.62% at December 31, 2003 and September 30, 2003, respectively) on the revolving line of
credit ranges from LIBOR plus 50 basis points to prime minus 125 basis points if our funded debt average ratio is less than 2.5. The range increases to



18



---

LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 and 3.0. The
amounts outstanding under the revolving line of credit were $10.0 million and $9.2 million as of December 31, 2003 and September 30, 2003, respectively. The increase in the line of credit was directly related to the reduction in accounts payable and
the payment of employee bonuses related to fiscal year 2003. The revolving line of credit is collateralized by substantially all of our assets.



Our capital expenditures are generally for purchases of property and equipment. The Company spent $2.8 million and $2.5 million on such expenditures for
the three months ended December 31, 2003 and 2002, respectively.



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



We believe that our existing financial resources, together with our cash flow from operations and availability under our revolving line of credit, will provide sufficient capital to fund our operations for fiscal year
2004.



Inflation



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



Recent Accounting Pronouncements



In January 2003, the FASB issued FASB interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46) and amended it in October 2003, such
that it is now effective for the Company in the first quarter of fiscal 2004. Variable interest entities (VIEs) are entities that lack sufficient equity to finance their activities without additional financial support from another parties or
whose equity holders lack adequate decision making ability based on criteria set forth in the interpretation. The current FIN 46 guidance is still evolving with several proposed amendments and clarifications recently issued through an exposure draft
release. The company has evaluated the total impact of FIN 46, based on the current exposure draft, and the Company does not expect FIN 46 to have a material impact on its results of operations or financial position.



Critical Accounting Policies



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



Revenue Recognition



We earn our revenues for the various types of services we provide through cost-plus, time-and-materials, fixed price contracts, and contracts which
combine any of these methods. In the course of providing its services, the Company routinely incurs direct expenses such as sub-contracts for services. In addition, the Company also includes pass-through costs on cost-plus contracts, which are
customer-



19



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



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



Income Taxes



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



We
must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we must increase our tax provision by recording a valuation allowance for the deferred tax assets that we estimate will not ultimately be
recoverable. As of December 31, 2003 and September 30, 2003, we reported a valuation allowance of $2.6 million and $2.1 million, respectively.



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



Contingencies



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



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------



We believe that our exposure to market risks is minimal. We do not hold market-risk sensitive instruments for trading purposes. We entered into one
derivative financial instrument, a swap agreement, to hedge cash flows related to the LIBOR interest rate risk. Both at inception of the hedge and on an ongoing basis, we assume there is no ineffectiveness in the hedging relationship of interest
rate risk involving interest-bearing debt and the interest-rate swap. The effectiveness of the hedge is evaluated on a quarterly basis. Based on a hypothetical 1% point increase in the period ending market interest rate as of December 31, 2002, the
change in the fair value of this liability would be approximately $200,000.



20



---

We believe this instrument will be highly effective in the hedging of cash flows. We hold no other financial instruments
or derivative commodity instruments to hedge any market risk, nor do we currently plan to employ them in the near future.



The interest rate (1.62% at December 31, 2003 and September 30, 2003, respectively) on our revolving line of credit and term loan ranges from LIBOR plus
50 basis points to prime minus 125 basis points if our funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 to 3.0. The
Company mitigates interest rate risk by continually monitoring interest rates and electing the lower of the LIBOR or prime rate option available under the line of credit or term loan. As of December 31, 2003, the fair value of the debt is consistent
with the outstanding principal balance.



The interest rates
under our line of credit and mortgage notes payable are variable. To the extent that we have borrowings outstanding, there is market risk related to such borrowings, however, our exposure is minimal due to the short-term nature of these borrowings.



|Item 4. | Controls and Procedures
|------- | -----------------------



Evaluation of disclosure controls and procedures:



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



Changes in internal controls:



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



21



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PART II



|Item 1. | Legal Proceedings
|------- | -----------------



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



|Item 2. | Changes in Securities and Use of Proceeds
|------- | -----------------------------------------



At the annual meeting of the shareholders held on January 21, 2004, our shareholders approved three amendments to our by-laws that modify the rights of the holders of our Common Stock. Our by-laws have been amended to
(i) clarify that in the event the Company exercises its right not to redeem an employees shares of stock and our Employee Profit Sharing and Stock Ownership Plan and Trust likewise does not redeem such shares of stock, the employee may offer
such shares to other eligible full-time employee shareholders; (ii) allow for electronic notification of meeting notices; and (iii) make it mandatory for employees surrendering or selling their shares to provide the share certificates to the Company
within 30 days of the event triggering such surrender or sale. The full text of our amended by-laws is attached as an exhibit hereto. The above description is a summary of the amendments to our by-laws and is qualified in its entirety by the
provisions of our amended by-laws.



|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 and Reports on Form 8-K
|------- | --------------------------------



(a) Exhibits



|               |  |                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                      
|               | 
|3.1            |  | Articles of Incorporation, as amended *                                                                                                          
|               | 
|3.2            |  | Amended and Restated Corporate Bylaws dated February 1, 2004 *                                                                                   
|               | 
|4.1            |  | Articles of Incorporation, as amended (included as exhibit 3.1)                                                                                  
|               | 
|4.2            |  | Amended and Restated Corporate Bylaws dated February 1, 2004 ( included as exhibit 3.2).                                                         
|               | 
|31.1           |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *



22



---

|     |  |                                                                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.2 |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|     | 
|31.3 |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|     | 
|32.1 |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
|     | 
|32.2 |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
|     | 
|32.3 |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

---

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



|(b) | Reports on Form 8-K
|--- | -------------------



Report filed on Form 8-K for February 2, 2004 



On January 21, 2004, at the Companys annual stockholders meeting, the Company announced Mr. W. Scott DeLoach, as its new Chief Financial
Officer, replacing Mr. Richard A. Wickett, who still resides as the Companys Chairman and Treasurer. During 2003, Mr. DeLoach held the positions of Corporate Controller, National Service Director of Administration, Treasurer and Executive Vice
President. Replacing Mr. DeLoach in his old position as Corporate Controller is Mrs. Kathryn J. Wilson. Mrs. Wilson served as the Companys Assistant Controller and Associate Vice President during 2003.



In addition, Mr. H. Michael Dye, who retired but continued to serve one final
year on the Companys Board of Directors during 2003, has stepped down from the Board of Directors, effective February 1, 2004, as he enters full retirement.



23



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SIGNATURES



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



|       |  |                   |  |                      |  |     |  |                                         
|------ |  | ----------------- |  | -------------------- |  | --- |  | ----------------------------------------
|       |  |                   |  | The PBSJ Corporation
|       |  |                   |  |                     
|Dated: |  | February 13, 2004 |  |                      |  | By: |  | /s/    W. Scott DeLoach                 
|       |  |                   |  |                      |  |     |  | W. Scott DeLoach Chief Financial
Officer



|       |  |                   |  |  |  |     |  |                                                           
|------ |  | ----------------- |  |  |  | --- |  | ----------------------------------------------------------
|       |  |                   |  | 
|Dated: |  | February 13, 2004 |  |  |  | By: |  | /s/    John B. Zumwalt,
III                               
|       |  |                   |  |  |  |     |  | John B. Zumwalt, III Chief Executive Officer and
President



24



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EXHIBIT INDEX



|               |  |                                                                                                                                                                                                          
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               | 
|Exhibit Number |  | Description                                                                                                                                                                                              
|               | 
|3.1            |  | Articles of Incorporation, as amended *                                                                                                                                                                  
|               | 
|3.2            |  | Amended and Restated Corporate Bylaws dated February 1, 2004 *                                                                                                                                           
|               | 
|4.1            |  | Articles of Incorporation, as amended (included as exhibit 3.1)                                                                                                                                          
|               | 
|4.2            |  | Amended and Restated Corporate Bylaws dated February 1, 2004 (included as exhibit 3.2).                                                                                                                  
|               | 
|31.1           |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. *
|               | 
|31.2           |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Sarbanes-Oxley Act of 2002. *                                                                                                                
|               | 
|31.3           |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                        
|               | 
|32.1           |  | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                        
|               | 
|32.2           |  | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                        
|               | 
|32.3           |  | Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                        

---

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



25