----

----

| **UNITED                    STATES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SECURITIES                    AND EXCHANGE COMMISSION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **WASHINGTON,                    D.C. 20549**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| **FORM                    10-Q**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| (Mark                    One)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| þ                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **QUARTERLY                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                    ACT OF                    1934** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | For                    the quarterly period ended    September 30,                    2007 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | or  |
| ¨                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **TRANSITION                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                    ACT OF                    1934** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | For                    the transition period                    from  ______________   to   _______________________ |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Commission                    File Number: 0-10786                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **Insituform                    Technologies, Inc.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (Exact                    name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Delaware                                                                        13-3032158                                                                                                                                                                                            |
| (State                    or other jurisdiction of incorporation or                    organization)                                                  (I.R.S.                    Employer Identification No.)                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| 17988                    Edison Avenue,                    Chesterfield,                    Missouri                                                                  63005-1195                                                                                                                                    |
| (Address                    of principal executive                    offices)                                                                           (Zip                    Code)                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| (636)                    530-8000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (Registrant’s                    telephone number, including area code)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| 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  þ                    No ¨                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Indicate                    by check mark whether the registrant is a large accelerated filer,                    an                    accelerated filer, or a non-accelerated filer. See definition                    of                    “accelerated filer and large accelerated filer” in Rule 12b-2 of the                    Exchange Act.                                                                                                                                                                                                                                                                                              |
| Large                    accelerated ¨                                              Accelerated                    þ                                        Non-accelerated                    ¨ |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Indicate                    by checkmark whether the registrant is a shell company (as defined                    in Rule                    12b-2 of the Exchange Act).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Yes                    ¨                    No þ                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| There                    were 27,469,223 shares of common stock, $.01 par value per share,                    outstanding at October 26, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |

----

----

| **INDEX**                                                |
|---------------------------------------------------------------|
|                                                          |   |
|                                                          | Page |
| **PART                  I—FINANCIAL INFORMATION**  |   |
|                                                          | Item                  1. | Financial                  Statements: |   |
|                                                          |   |   |   |   |
|                                                          |   | Consolidated                  Statements of Operations for the Three and Nine Months Ended September                  30,                  2007 and 2006 | 3 |
|                                                          |   |   |   |   |
|                                                          |   | Consolidated                  Balance Sheets as of September 30, 2007 and December 31,                  2006 | 4 |
|                                                          |   |   |   |   |
|                                                          |   | Consolidated                  Statements of Cash Flows for the Nine Months Ended September 30,                  2007 and                  2006 | 5 |
|                                                          |   |   |   |   |
|                                                          |   | Notes                  to Consolidated Financial Statements | 6 |
|                                                          |   |   |   |   |
|                                                          | Item                  2. | Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations |   |
|                                                          |   |   |   |   |
|                                                          | Item                  3. | Quantitative                  and Qualitative Disclosures About Market Risk | 28 |
|                                                          |   |   |   |   |
|                                                          | Item                  4. | Controls                  and Procedures | 29 |
|                                                          |   |   |   |   |
| **PART                  II—OTHER INFORMATION**          |   |
|                                                          |   |   |   |   |
|                                                          | Item                  1. | Legal                  Proceedings | 30 |
|                                                          |   |   |   |   |
|                                                          | Item                  1A. | Risk                  Factors | 30 |
|                                                          |   |   |   |   |
|                                                          | Item                  6. | Exhibits | 30 |
|                                                          |   |   |   |   |
| **SIGNATURE**                                                 | 31 |
|                                                          |   |   |   |   |
| **INDEX                  TO EXHIBITS**                        | 32 |

----

**PART      I—FINANCIAL INFORMATION**

**Item      1.   Financial Statements**

**INSITUFORM      TECHNOLOGIES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**(Unaudited)**

**(in      thousands, except per share amounts)**

|                                                                                                                                                    |   | **For                the Three Months****Ended                September 30,** |    |   | **For                the Nine Months****Ended                September,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|---------|--------|---------------------------------------------------------------------------|--------|
|                                                                                                                                                    |   | **2007**                                                                      |    |   | **2006**                                                                  |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                    |   |                                                                          |    |   |                                                                      |   |   |   |   |   |   |   |
| **Revenues**                                                                                                                                            |   | $                                                                             | 139,098 |   |                                                                      | $      | 144,076 |   |   | $ | 414,754 |   |   | $ | 441,841 |   |
| **Cost                of revenues**                                                                                                                     |   |                                                                          | 112,766 |   |                                                                      |   | 112,436 |   |   |   | 337,958 |   |   |   | 347,475 |   |
| **Gross                profit**                                                                                                                         |   |                                                                          | 26,332  |   |                                                                      |   | 31,640 |   |   |   | 76,796 |   |   |   | 94,366 |   |
| **Operating                expenses**                                                                                                                   |   |                                                                          | 22,049  |   |                                                                      |   | 24,293 |   |   |   | 71,918 |   |   |   | 73,056 |   |
| **Costs                of closure of tunneling business**                                                                                               |   |                                                                          | 940     |   |                                                                      |   | - |   |   |   | 17,783 |   |   |   | - |   |
| **Operating                income (loss)**                                                                                                              |   |                                                                          | 3,343   |   |                                                                      |   | 7,347 |   |   |   | (12,905 | ) |   |   | 21,310 |   |
| **Other                income (expense):**                                                                                                              |   |                                                                          |    |   |                                                                      |   |   |   |   |   |   |   |   |   |   |   |
|      Interest                expense                                                                                           |   |                                                                          | (1,332  | )      |                                                                      |   | (1,716 | ) |   |   | (4,140 | ) |   |   | (5,142 | ) |
|      Interest                income                                                                                            |   |                                                                          | 689     |   |                                                                      |   | 762 |   |   |   | 2,348 |   |   |   | 2,542 |   |
|      Other                                                                                                                     |   |                                                                          | 790     |   |                                                                      |   | 1,507 |   |   |   | 1,444 |   |   |   | 1,945 |   |
| **Total                other income (expense)**                                                                                                         |   |                                                                          | 147     |   |                                                                      |   | 553 |   |   |   | (348 | ) |   |   | (655 | ) |
| **Income                (loss) before taxes on income (tax benefit)**                                                                                   |   |                                                                          | 3,490   |   |                                                                      |   | 7,900 |   |   |   | (13,253 | ) |   |   | 20,655 |   |
| **Taxes                on income (tax benefit)**                                                                                                        |   |                                                                          | (800    | )      |                                                                      |   | 2,402 |   |   |   | (5,913 | ) |   |   | 6,802 |   |
| **Income                (loss) before minority interests and equity in ****                  earnings (losses) of affiliated companies** |   |                                                                          | 4,290   |   |                                                                      |   | 5,498 |   |   |   | (7,340 | ) |   |   | 13,853 |   |
| **Minority                interests**                                                                                                                   |   |                                                                          | (120    | )      |                                                                      |   | (117 | ) |   |   | (252 | ) |   |   | (242 | ) |
| **Equity                in earnings (losses) of affiliated companies**                                                                                  |   |                                                                          | 312     |   |                                                                      |   | 314 |   |   |   | (8 | ) |   |   | 632 |   |
| **Net                income (loss)**                                                                                                                    |   | $                                                                             | 4,482   |   |                                                                      | $      | 5,695 |   |   | $ | (7,600 | ) |   | $ | 14,243 |   |
|                                                                                                                                                    |   |                                                                          |    |   |                                                                      |   |   |   |   |   |   |   |   |   |   |   |
| **Earnings                (loss) per share:**                                                                                                           |   |                                                                          |    |   |                                                                      |   |   |   |   |   |   |   |   |   |   |   |
| **     **Basic                                                                                                                 |   | $                                                                             | 0.16    |   |                                                                      | $      | 0.21 |   |   | $ | (0.28 | ) |   | $ | 0.53 |   |
| **     **Diluted                                                                                                               |   |                                                                          | 0.16    |   |                                                                      |   | 0.21 |   |   |   | (0.28 | ) |   |   | 0.52 |   |

----

**INSITUFORM      TECHNOLOGIES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE      SHEETS**

**(Unaudited)**

**(in      thousands, except share amounts)**

|                                                                                                                                                                                                                                                                                                                                                 |   | **September                30,****2007** |    |   | **December                31,****2006** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                 |   |                                     |    |   |                                    |   |
| **Assets**                                                                                                                                                                                                                                                                                                                                           |   |                                     |    |   |                                    |   |
| **     Current                Assets**                                                                                                                                                                                                                                                                                      |   |                                     |    |   |                                    |   |
|           Cash                and cash equivalents                                                                                                                                                                                                                                                 |   | $                                        | 78,012  |   |                                    | $      | 96,393 |   |
|           Restricted                cash                                                                                                                                                                                                                                                           |   |                                     | 2,369   |   |                                    |   | 934 |   |
|           Receivables,                net                                                                                                                                                                                                                                                          |   |                                     | 90,629  |   |                                    |   | 90,678 |   |
|           Retainage                                                                                                                                                                                                                                                                                |   |                                     | 34,938  |   |                                    |   | 37,193 |   |
|           Costs                and estimated earnings in excess of billings                                                                                                                                                                                                                        |   |                                     | 52,399  |   |                                    |   | 41,512 |   |
|           Inventories                                                                                                                                                                                                                                                                              |   |                                     | 18,582  |   |                                    |   | 17,665 |   |
|           Prepaid                expenses and other assets                                                                                                                                                                                                                                         |   |                                     | 37,151  |   |                                    |   | 25,989 |   |
| **     Total                current assets**                                                                                                                                                                                                                                                                                |   |                                     | 314,080 |   |                                    |   | 310,364 |   |
| **     Property,                plant and equipment**, less accumulated                depreciation                                                                                                                                                                                                                         |   |                                     | 90,667  |   |                                    |   | 90,453 |   |
| **     Other                assets**                                                                                                                                                                                                                                                                                        |   |                                     |    |   |                                    |   |   |   |
|           Goodwill                                                                                                                                                                                                                                                                                 |   |                                     | 122,622 |   |                                    |   | 131,540 |   |
|           Other                assets                                                                                                                                                                                                                                                              |   |                                     | 22,766  |   |                                    |   | 17,712 |   |
| **     Total                other assets**                                                                                                                                                                                                                                                                                  |   |                                     | 145,388 |   |                                    |   | 149,252 |   |
|                                                                                                                                                                                                                                                                                                                                                 |   |                                     |    |   |                                    |   |   |   |
| **Total                Assets**                                                                                                                                                                                                                                                                                                                      |   | $                                        | 550,135 |   |                                    | $      | 550,069 |   |
|                                                                                                                                                                                                                                                                                                                                                 |   |                                     |    |   |                                    |   |   |   |
| **Liabilities                and Stockholders’ Equity**                                                                                                                                                                                                                                                                                        |   |                                     |    |   |                                    |   |   |   |
| **     Current                liabilities**                                                                                                                                                                                                                                                                                 |   |                                     |    |   |                                    |   |   |   |
|           Current                maturities of long-term debt and notes payable                                                                                                                                                                                                                    |   | $                                        | 6,818   |   |                                    | $      | 16,814 |   |
|           Accounts                payable and accrued expenses                                                                                                                                                                                                                                     |   |                                     | 111,024 |   |                                    |   | 107,320 |   |
|           Billings                in excess of costs and estimated earnings                                                                                                                                                                                                                        |   |                                     | 11,412  |   |                                    |   | 12,371 |   |
| **     Total                current liabilities**                                                                                                                                                                                                                                                                           |   |                                     | 129,254 |   |                                    |   | 136,505 |   |
|      **Long-term                debt**, less current maturities                                                                                                                                                                                                                                                             |   |                                     | 65,000  |   |                                    |   | 65,046 |   |
| **     Other                liabilities**                                                                                                                                                                                                                                                                                   |   |                                     | 8,069   |   |                                    |   | 7,726 |   |
|      **Total                liabilities**                                                                                                                                                                                                                                                                                   |   |                                     | 202,323 |   |                                    |   | 209,277 |   |
|      **Minority                interests**                                                                                                                                                                                                                                                                                  |   |                                     | 2,497   |   |                                    |   | 2,181 |   |
|                                                                                                                                                                                                                                                                                                                                                 |   |                                     |    |   |                                    |   |   |   |
|      **Stockholders’                equity**                                                                                                                                                                                                                                                                          |   |                                     |    |   |                                    |   |   |   |
|           Preferred                stock, undesignated, $.10 par – shares authorized 2,000,000;                none               outstanding                                                                     |   |                                     | -       |   |                                    |   | - |   |
|           Common                stock, $.01 par – shares authorized 60,000,000; shares issued               27,397,973                and 29,597,044; shares outstanding 27,397,973 and                27,239,580 |   |                                     | 274     |   |                                    |   | 296 |   |
|           Additional                paid-in capital                                                                                                                                                                                                                                                |   |                                     | 103,913 |   |                                    |   | 149,802 |   |
|           Retained                earnings                                                                                                                                                                                                                                                         |   |                                     | 228,834 |   |                                    |   | 236,763 |   |
| **          **Treasury                stock – at cost, 0 and 2,357,464 shares                                                                                                                                                                                                                |   |                                     | -       |   |                                    |   | (51,596 | ) |
|           Accumulated                other comprehensive income                                                                                                                                                                                                                                    |   |                                     | 12,294  |   |                                    |   | 3,346 |   |
|      **Total                Stockholders’ Equity**                                                                                                                                                                                                                                                                    |   |                                     | 345,315 |   |                                    |   | 338,611 |   |
|                                                                                                                                                                                                                                                                                                                                                 |   |                                     |    |   |                                    |   |   |   |
| **Total                Liabilities and Stockholders’ Equity**                                                                                                                                                                                                                                                                                  |   | $                                        | 550,135 |   |                                    | $      | 550,069 |   |
|                                                                                                                                                                                                                                                                                                                                                 |   |                                     |    |   |                                    |   |   |   |

----

**INSITUFORM      TECHNOLOGIES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH      FLOWS**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                                                                                                                            |   | **For                the Nine Months****Ended                September 30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|---------|
|                                                                                                                                                                                                                            |   | **    2007**                                             |    |   | **2006** |   |
|                                                                                                                                                                                                                            |   |                                                                         |    |   |   |   |
| **Cash                flows from operating activities:**                                                                                                                                                                        |   |                                                                         |    |   |   |   |
| **Net                income (loss)**                                                                                                                                                                                            |   | $                                                                            | (7,600  | ) |   | $ | 14,243 |   |
| **Adjustments                to reconcile to net cash (used in) provided by operating                activities:**                                                                                                              |   |                                                                         |    |   |   |   |   |   |
|      Depreciation                                                                                                                                                                                      |   |                                                                         | 13,321  |   |   |   | 14,962 |   |
|      Amortization                                                                                                                                                                                      |   |                                                                         | 332     |   |   |   | 943 |   |
|      Deferred                income taxes                                                                                                                                                              |   |                                                                         | (6,928  | ) |   |   | (1,876 | ) |
|      Equity-based                compensation expense                                                                                                                                                  |   |                                                                         | 3,005   |   |   |   | 3,677 |   |
|      Non-cash                charges associated with closure of tunneling business                                                                                                                     |   |                                                                         | 11,955  |   |   |   | - |   |
|      Other                                                                                                                                                                                             |   |                                                                         | (2,269  | ) |   |   | (1,517 | ) |
|      Change                in restricted cash related to operating activities                                                                                                                          |   |                                                                         | (1,404  | ) |   |   | 298 |   |
| **Changes                in operating assets and liabilities:**                                                                                                                                                                 |   |                                                                         |    |   |   |   |   |   |
|      Receivables                net, retainage and costs and estimated earnings in excess of                billings                                                                                   |   |                                                                         | (3,504  | ) |   |   | (17,466 | ) |
|      Inventories                                                                                                                                                                                       |   |                                                                         | (371    | ) |   |   | (965 | ) |
|      Prepaid                expenses and other assets                                                                                                                                                  |   |                                                                         | (10,157 | ) |   |   | (2,683 | ) |
|      Accounts                payable and accrued expenses                                                                                                                                              |   |                                                                         | (2,235  | ) |   |   | 9,808 |   |
| **Net                cash (used in) provided by operating activities**                                                                                                                                                          |   |                                                                         | (5,855  | ) |   |   | 19,424 |   |
|                                                                                                                                                                                                                            |   |                                                                         |    |   |   |   |   |   |
| **Cash                flows from investing activities:**                                                                                                                                                                        |   |                                                                         |    |   |   |   |   |   |
|      Capital                expenditures                                                                                                                                                               |   |                                                                         | (18,997 | ) |   |   | (14,087 | ) |
|      Proceeds                from sale of fixed assets                                                                                                                                                 |   |                                                                         | 4,542   |   |   |   | 3,938 |   |
|      Liquidation                of life insurance cash surrender value                                                                                                                                 |   |                                                                         | -       |   |   |   | 1,423 |   |
| **Net                cash used in investing activities**                                                                                                                                                                        |   |                                                                         | (14,455 | ) |   |   | (8,726 | ) |
|                                                                                                                                                                                                                            |   |                                                                         |    |   |   |   |   |   |
| **Cash                flows from financing activities:**                                                                                                                                                                        |   |                                                                         |    |   |   |   |   |   |
|      Proceeds                from issuance of common stock                                                                                                                                             |   |                                                                         | 2,496   |   |   |   | 3,920 |   |
|      Additional                tax benefit from stock option exercises recorded in                additional          paid-in                capital |   |                                                                         | 148     |   |   |   | 751 |   |
|      Proceeds                from notes payable                                                                                                                                                        |   |                                                                         | 2,648   |   |   |   | 2,795 |   |
|      Principal                payments on notes payable                                                                                                                                                |   |                                                                         | (1,921  | ) |   |   | (3,501 | ) |
|      Proceeds                on line of credit                                                                                                                                                         |   |                                                                         | 22,500  |   |   |   | - |   |
|      Payments                on line of credit                                                                                                                                                         |   |                                                                         | (17,500 | ) |   |   | - |   |
|      Principal                payments on long-term debt                                                                                                                                               |   |                                                                         | (15,768 | ) |   |   | (15,732 | ) |
|      Deferred                financing charges paid                                                                                                                                                    |   |                                                                         | -       |   |   |   | (106 | ) |
| **Net                cash used in financing activities**                                                                                                                                                                        |   |                                                                         | (7,397  | ) |   |   | (11,873 | ) |
|                                                                                                                                                                                                                            |   |                                                                         |    |   |   |   |   |   |
| Effects                of exchange rate changes on cash                                                                                                                                                                         |   |                                                                         | 9,326   |   |   |   | (769 | ) |
| **Net                decrease in cash and cash equivalents for the                period**                                                                                                                                      |   |                                                                         | (18,381 | ) |   |   | (1,944 | ) |
| **Cash                and cash equivalents, beginning of period**                                                                                                                                                               |   |                                                                         | 96,393  |   |   |   | 77,069 |   |
| **Cash                and cash equivalents, end of period**                                                                                                                                                                     |   | $                                                                            | 78,012  |   |   | $ | 75,125 |   |
|                                                                                                                                                                                                                            |   |                                                                         |    |   |   |   |   |   |

----

**INSITUFORM      TECHNOLOGIES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL      STATEMENTS**

**(Unaudited)**

**September      30, 2007**

| **1.  ** | **GENERAL** |
|--------------------|-------------|

| **2.  ** | **EQUITY-BASED                COMPENSATION** |
|--------------------|----------------------------------------------|

|                                                                                                                                                                                                   |   |       |       |   | **Weighted****Average**       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|------------|--------|-------------------------------|--------|
|                                                                                                                                                                                                   |   |       |       |   | **Award                Date** |   |
|                                                                                                                                                                                                   |   | **Shares** |       |   | **Fair                Value** |   |
|             Outstanding                at                December 31, 2006                                                                 |   |       | 131,500    |   |                          | $      | 17.73 |   |
|             Awarded                                                                                                                        |   |       | –    |   |                          |   | – |   |
|             Vested                     |   |       | (56,924    | )      |                          |   | 17.80 |   |
|             Forfeited                                                                                                                      |   |       | (13,776    | )      |                          |   | 18.32 |   |
|             Outstanding                at                September 30, 2007                                                                |   | ** ** | **60,800** |   |                          | **$**  | **17.16** |   |

----

|                                                                                               |   | **Three                Months Ended** |    |   | **Nine                Months Ended** |   |
|----------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------------------------------------|--------|
|                                                                                               |   | **September                30,**      |    |   | **September                30,**     |   |
|                                                                                               |   | **2007**                              |    |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|         Restricted                stock share expense      |   | $                                     | 135     |   |                                 | $      | 193 |   |   | $ | 519 |   |   | $ | 601 |   |
|         Forfeitures                                        |   |                                  | – |   |                                 |   | – |   |   |   | – |   |   |   | (15 | ) |
|         Restricted                stock share expense, net |   |                                  | 135     |   |                                 |   | 193 |   |   |   | 519 |   |   |   | 586 |   |
|         Tax                benefit                         |   |                                  | (53     | )      |                                 |   | (75 | ) |   |   | (202 | ) |   |   | (228 | ) |
|         Net                expense                         |   | **$**                                 | **82**  |   |                                 | **$**  | **118** |   |   | **$** | **317** |   |   | **$** | **358** |   |

|                                                                                                            |   |                           |       |   | **Weighted**                  |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------------------------------|------------|--------|-------------------------------|--------|
|                                                                                                            |   |                           |       |   | **Average**                   |   |
|                                                                                                            |   | **Restricted**                 |       |   | **Award                Date** |   |
|                                                                                                            |   | **Stock                Units** |       |   | **Fair                Value** |   |
|         Outstanding                at                December 31, 2006  |   |                           | –    |   |                          | $      | – |   |
|         Awarded                                                         |   |                           | 61,831     |   |                          |   | 23.85 |   |
|         Shares                distributed                               |   |                           | –    |   |                          |   | – |   |
|         Forfeited                                                       |   |                           | (17,404    | )      |                          |   | 25.60 |   |
|         Outstanding                at                September 30, 2007 |   | ** **                     | **44,427** |   |                          | **$**  | **23.17** |   |

|                                                                                              |   | **Three                Months Ended** |   |   | **Nine                Months Ended** |   |
|---------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                              |   | **September                30,**      |   |   | **September                30,**     |   |
|                                                                                              |   | **2007**                              |   |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|         Restricted                stock unit expense      |   | $                                     | 88     |   |                                 | $      | – |   |   | $ | 305 |   |   | $ | – |   |
|         Forfeitures                                       |   |                                  | (99    | )      |                                 |   | – |   |   |   | (99 | ) |   |   | – |   |
|         Restricted                stock unit expense, net |   |                                  | (11    | )      |                                 |   | – |   |   |   | 206 |   |   |   | – |   |
|         Tax                expense (benefit)              |   |                                  | 4      |   |                                 |   | – |   |   |   | (80 | ) |   |   | – |   |
|         Net                expense                        |   | **$**                                 | **(7** | **)**  |                                 | **$**  | **–** |   |   | **$** | **126** |   |   | **$** | **–** |   |

----

|                                                                                                            |   |                           |        |   | **Weighted**                  |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-------------|--------|-------------------------------|--------|
|                                                                                                            |   |                           |        |   | **Average**                   |   |
|                                                                                                            |   | **Deferred**                   |        |   | **Award                Date** |   |
|                                                                                                            |   | **Stock                Units** |        |   | **Fair                Value** |   |
|         Outstanding                at                December 31, 2006  |   |                           | 93,807      |   |                          | $      | 18.53 |   |
|         Awarded                                                         |   |                           | 61,291      |   |                          |   | 18.48 |   |
|         Shares                distributed                               |   |                           | –     |   |                          |   | – |   |
|         Outstanding                at                September 30, 2007 |   | ** **                     | **155,098** |   |                          | **$**  | **18.51** |   |

|                                                                                                      |   | **Three                Months Ended** |    |   | **Nine                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------------------------------------|--------|
|                                                                                                      |   | **September                30,**      |    |   | **September                30,**     |   |
|                                                                                                      |   | **2007**                              |    |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|         Deferred                stock                unit expense |   | $                                     | – |   |                                 | $      | – |   |   | $ | 608 |   |   | $ | 603 |   |
|         Tax                benefit                                |   |                                  | – |   |                                 |   | – |   |   |   | (236 | ) |   |   | (234 | ) |
|         Net                expense                                |   | **$**                                 | – |   |                                 | **$**  | **–** |   |   | **$** | **372** |   |   | **$** | **369** |   |

|                                                                                        |   |       |          |   |         |   | **Weighted**                  |   |          |
|---------------------------------------------------------------------------------------------|--------|------------|---------------|--------|--------------|--------|-------------------------------|--------|---------------|
|                                                                                        |   |       |          |   | **Weighted** |   | **Average**                   |   |          |
|                                                                                        |   |       |          |   | **Average**  |   | **Remaining**                 |   | **Aggregate** |
|                                                                                        |   |       |          |   | **Exercise** |   | **Contractual**               |   | **Intrinsic** |
|                                                                                        |   | **Shares** |          |   | **Price**    |   | **Term                (Yrs)** |   | **Value**     |
|     Outstanding                at                December 31, 2006      |   |       | 1,298,392     |   |         | $      | 19.85                         |   |          |   |   |
|     Granted                                                             |   |       | 410,012       |   |         |   | 23.94                         |   |          |   |   |
|     Exercised                                                           |   |       | (158,393      | )      |         |   | 14.25                         |   |          |   |   |
|     Forfeited/Expired                                                   |   |       | (295,374      | )      |         |   | 21.44                         |   |          |   |   |
| **    Outstanding                at                September 30, 2007** |   | ** ** | **1,254,637** |   |         | **$**  | **21.49**                     |   | **4.1**       |   | **$       263,857** |
| **    Exercisable                at                September 30, 2007** |   | ** ** | **901,960**   |   |         | **$**  | **21.46**                     |   | **3.4**       |   | **$       244,659** |

----

|                                 |                          |   | **Options                Outstanding** |          |    | **Options                Exercisable** |       |
|--------------------------------------|-------------------------------|--------|----------------------------------------|---------------|---------|----------------------------------------|------------|
|                                 |                          |   |                                   |          |    | **Weighted**                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 |                          |   |                                   |          |    | **Average**                            |       |   | **Weighted** |   |   |   |   |   |   |   |   | **Weighted** |   |   |   |   |
|                                 |                          |   |                                   |          |    | **Remaining**                          |       |   | **Average** |   |   | **Aggregate** |   |   |   |   |   | **Average** |   |   | **Aggregate** |   |
| **Range                of**          |                          |   | **Number**                             |          |    | **Contractual**                        |       |   | **Exercise** |   |   | **Intrinsic** |   |   | **Number** |   |   | **Exercise** |   |   | **Intrinsic** |   |
| **Exercise                Price**    |                          |   | **Outstanding**                        |          |    | **Term                (Yrs)**          |       |   | **Price** |   |   | **Value** |   |   | **Exercisable** |   |   | **Price** |   |   | **Value** |   |
| $                                    | 4.00                - $10.00  |   |                                   |          | 1,400   |                                   |       |   | 0.1 |   |   | $ | 8.75 |   |   | $ | 9,072 |   |   |   | 1,400 |   |   | $ | 8.75 |   |   | $ | 9,072 |   |
| $                                    | 10.01                - $20.00 |   |                                   |          | 606,140 |                                   |       |   | 3.6 |   |   |   | 16.50 |   |   |   | 254,785 |   |   |   | 431,372 |   |   |   | 16.11 |   |   |   | 235,587 |   |
| $20.01                and above      |                          |   |                                   | 647,097       |    |                                   |       | 4.6 |   |   |   | 26.19 |   |   |   | – |   |   |   | 469,188 |   |   |   | 26.42 |   |   |   | – |   |
| **Total                Outstanding** |                          |   | ** **                             | **1,254,637** |    |                                   | ** ** | **4.1** |   |   | **$** | **21.49** |   |   | **$** | **263,857** |   |   | ** ** | **901,960** |   |   | **$** | **21.46** |   |   | **$** | **244,659** |   |

|                                                                                                |   | **For                the Nine Months Ended September 30,** |                           |
|-----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------------------------------|
|                                                                                                |   | **2007**                                                   |                           |   | **2006** |   |
|                                                                                                |   |                                                       |                           |   | Weighted |   |   |   |   |   | Weighted |   |
|                                                                                                |   | Range                                                      |                           |   | Average |   |   | Range |   |   | Average |   |
|         Volatility                                          |   |                                                       | 44.9%–46.4               | % |   |   | 45.0 | % |   |   | 41.7%–45.5 | % |   |   | 41.8 | % |
|         Expected                term                (years) |   |                                                       | 4.5                – 4.8 |   |   |   | 4.6 |   |   |   | 4.8 |   |   |   | 4.8 |   |
|         Dividend                yield                       |   |                                                       | 0.0                            | % |   |   | 0.0 | % |   |   | 0.0 | % |   |   | 0.0 | % |
|         Risk-free                rate                       |   |                                                       | 4.4%–4.6                 | % |   |   | 4.4 | % |   |   | 4.3%–5.0 | % |   |   | 4.3 | % |

**3.**
**  DERIVATIVE      FINANCIAL INSTRUMENTS**

----

|                                                                                                   |         | **Weighted**                 |         |
|--------------------------------------------------------------------------------------------------------|--------------|------------------------------|--------------|
|                                                                                                   |         | **Average**                  |         |
|                                                                                                   |         | **Remaining**                | **Average**  |
|                                                                                                   | **Notional** | **Maturity**                 | **Exchange** |
|                                                                                                   | **Amount**   | **in                Months** | **Rate**     |
|             Canadian                Dollar | 15,000,000   | 6.0                          | 1.002        |

**4.    COMPREHENSIVE      INCOME**

**5.    SHARE      INFORMATION**

|                                                                                                                                                                                                                                                                             |   | **Three                Months Ended** |       |   | **Nine                Months Ended** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|--------|--------------------------------------|--------|
|                                                                                                                                                                                                                                                                             |   | **September                30,**      |       |   | **September                30,**     |   |
|                                                                                                                                                                                                                                                                             |   | **2007**                              |       |   | **2006**                             |   |   | **2007** |   |   | **2006** |   |
|     Weighted                average number of         common                shares used for basic EPS                                                                                                           |   |                                  | 27,316,092 |   |                                 |   | 27,091,398 |   |   |   | 27,284,067 |   |   |   | 27,024,019 |   |
|     Effect                of dilutive stock options and         restricted                stock                                                                                                                 |   |                                  | 203,506    |   |                                 |   | 332,254 |   |   |   | – |   |   |   | 442,564 |   |
|     Weighted                average number of common         shares                and dilutive potential common         stock                used in dilutive EPS |   |                                  | 27,519,598 |   |                                 |   | 27,423,652 |   |   |   | 27,284,067 |   |   |   | 27,466,583 |   |

**6.     INCOME      TAXES**

*Accounting for Uncertainty in Income Taxes — An Interpretation of FASB      Statement No. 109*

----

**7.   CLOSURE      OF TUNNELING BUSINESS**

----

**8.   SEGMENT      REPORTING**

|                                                                     |   | **Three                Months Ended****September                30,****     2007         2006** |    |   | **Nine                Months Ended****September                30,****     2007         2006** |   |
|--------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                     |   |                                                                                                                                                                  |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |
| **    Revenues:**                                    |   |                                                                                                                                                                  |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |
|       Rehabilitation                       |   | $                                                                                                                                                                     | 115,093 |   |                                                                                                                                                                 | $      | 118,269 |   |   | $ | 332,695 |   |   | $ | 355,147 |   |
|       Tunneling                            |   |                                                                                                                                                                  | 13,458  |   |                                                                                                                                                                 |   | 16,002 |   |   |   | 49,163 |   |   |   | 49,843 |   |
|       Tite                Liner            |   |                                                                                                                                                                  | 10,547  |   |                                                                                                                                                                 |   | 9,805 |   |   |   | 32,896 |   |   |   | 36,851 |   |
| **    Total                revenues**                |   | $                                                                                                                                                                     | 139,098 |   |                                                                                                                                                                 | $      | 144,076 |   |   | $ | 414,754 |   |   | $ | 441,841 |   |
|                                                                     |   |                                                                                                                                                                  |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| **    Gross                profit:**                 |   |                                                                                                                                                                  |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
|       Rehabilitation                       |   | $                                                                                                                                                                     | 22,129  |   |                                                                                                                                                                 | $      | 28,927 |   |   | $ | 61,082 |   |   | $ | 83,435 |   |
|       Tunneling                            |   |                                                                                                                                                                  | 692     |   |                                                                                                                                                                 |   | (868 | ) |   |   | 2,724 |   |   |   | (1,318 | ) |
|       Tite                Liner            |   |                                                                                                                                                                  | 3,511   |   |                                                                                                                                                                 |   | 3,581 |   |   |   | 12,990 |   |   |   | 12,249 |   |
| **    Total                gross profit**            |   | $                                                                                                                                                                     | 26,332  |   |                                                                                                                                                                 | $      | 31,640 |   |   | $ | 76,796 |   |   | $ | 94,366 |   |
|                                                                     |   |                                                                                                                                                                  |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| **    Operating                income (loss):**      |   |                                                                                                                                                                  |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
|       Rehabilitation                       |   | $                                                                                                                                                                     | 2,815   |   |                                                                                                                                                                 | $      | 8,225 |   |   | $ | (801 | ) |   | $ | 21,962 |   |
|       Tunneling                            |   |                                                                                                                                                                  | (1,288  | )(1)   |                                                                                                                                                                 |   | (2,963 | ) |   |   | (20,081 | )(1) |   |   | (8,087 | ) |
|       Tite                Liner            |   |                                                                                                                                                                  | 1,816   |   |                                                                                                                                                                 |   | 2,085 |   |   |   | 7,977 |   |   |   | 7,435 |   |
| **    Total                operating income (loss)** |   | $                                                                                                                                                                     | 3,343   |   |                                                                                                                                                                 | $      | 7,347 |   |   | $ | (12,905 | ) |   | $ | 21,310 |   |

|         (1) | Includes                $0.9 million and $17.8 million of charges associated with the closure                of                the tunneling business for the three and nine months ended September                30,                2007, respectively. |
|-----------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                     |   | **Three                Months Ended****September                30,****     2007            2006** |    |   | **Nine                Months Ended****September                30,****     2007         2006** |   |
|--------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                     |   |                                                                                                                                                                                    |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |
| **    Revenues:**                                    |   |                                                                                                                                                                                    |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |
|       United                States         |   | $                                                                                                                                                                                       | 97,496  |   |                                                                                                                                                                 | $      | 108,738 |   |   | $ | 299,002 |   |   | $ | 337,953 |   |
|       Canada                               |   |                                                                                                                                                                                    | 11,916  |   |                                                                                                                                                                 |   | 11,989 |   |   |   | 35,905 |   |   |   | 31,730 |   |
|       Europe                               |   |                                                                                                                                                                                    | 25,549  |   |                                                                                                                                                                 |   | 21,206 |   |   |   | 69,599 |   |   |   | 59,978 |   |
|       Other                foreign         |   |                                                                                                                                                                                    | 4,137   |   |                                                                                                                                                                 |   | 2,143 |   |   |   | 10,248 |   |   |   | 12,180 |   |
| **    Total                revenues**                |   | $                                                                                                                                                                                       | 139,098 |   |                                                                                                                                                                 | $      | 144,076 |   |   | $ | 414,754 |   |   | $ | 441,841 |   |
|                                                                     |   |                                                                                                                                                                                    |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| **    Gross                profit:**                 |   |                                                                                                                                                                                    |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
|       United                States         |   | $                                                                                                                                                                                       | 14,813  |   |                                                                                                                                                                 | $      | 20,562 |   |   | $ | 45,850 |   |   | $ | 64,431 |   |
|       Canada                               |   |                                                                                                                                                                                    | 3,741   |   |                                                                                                                                                                 |   | 4,279 |   |   |   | 11,862 |   |   |   | 11,226 |   |
|       Europe                               |   |                                                                                                                                                                                    | 6,478   |   |                                                                                                                                                                 |   | 6,081 |   |   |   | 15,549 |   |   |   | 15,473 |   |
|       Other                foreign         |   |                                                                                                                                                                                    | 1,300   |   |                                                                                                                                                                 |   | 718 |   |   |   | 3,535 |   |   |   | 3,236 |   |
| **    Total                gross profit**            |   | $                                                                                                                                                                                       | 26,332  |   |                                                                                                                                                                 | $      | 31,640 |   |   | $ | 76,796 |   |   | $ | 94,366 |   |
|                                                                     |   |                                                                                                                                                                                    |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| **    Operating                income (loss):**      |   |                                                                                                                                                                                    |    |   |                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
|       United                States         |   | $                                                                                                                                                                                       | (910    | )(1)   |                                                                                                                                                                 | $      | 2,804 |   |   | $ | (21,419 | )(1) |   | $ | 10,803 |   |
|       Canada                               |   |                                                                                                                                                                                    | 2,441   |   |                                                                                                                                                                 |   | 2,742 |   |   |   | 6,708 |   |   |   | 6,876 |   |
|       Europe                               |   |                                                                                                                                                                                    | 1,330   |   |                                                                                                                                                                 |   | 1,299 |   |   |   | 88 |   |   |   | 1,524 |   |
|       Other                foreign         |   |                                                                                                                                                                                    | 482     |   |                                                                                                                                                                 |   | 502 |   |   |   | 1,718 |   |   |   | 2,107 |   |
| **    Total                operating income (loss)** |   | $                                                                                                                                                                                       | 3,343   | (1)    |                                                                                                                                                                 | $      | 7,347 |   |   | $ | (12,905 | )(1) |   | $ | 21,310 |   |

|         (1) | Includes                $0.9 million and $17.8 million of charges associated with the closure                of                the tunneling business for the three and nine months ended September                30,                2007, respectively. |
|-----------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**9.      ACQUIRED      INTANGIBLE ASSETS**

| **                                             As                of September 30,                2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                     |   | **Gross                Carrying Amount** |   |   | **Accumulated                Amortization** |   |   | **Net                Carrying Amount** |   |
| Amortized                intangible assets:                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |
|        License                agreements                                                                                                                                                                                                                                                              |   | $ | 3,894 |   |   | $ | (1,925 | ) |   | $ | 1,969 |   |
|        Customer                relationships                                                                                                                                                                                                                                                          |   |   | 1,797 |   |   |   | (481 | ) |   |   | 1,316 |   |
|        Patents                and trademarks                                                                                                                                                                                                                                                          |   |   | 17,383 |   |   |   | (13,532 | ) |   |   | 3,851 |   |
|        Non-compete                agreements                                                                                                                                                                                                                                                          |   |   | 317 |   |   |   | (317 | ) |   |   | – |   |
|            Total                                                                                                                                                                                                                                                                  |   | $ | 23,391 |   |   | $ | (16,255 | ) |   | $ | 7,136 |   |

|                                                **As                of                December 31, 2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                |   | **Gross                Carrying Amount** |   |   | **Accumulated                Amortization** |   |   | **Net                Carrying Amount** |   |
| Amortized                intangible assets:                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |
|        License                agreements                                                                                                                                                                                                                                                                         |   | $ | 3,894 |   |   | $ | (1,813 | ) |   | $ | 2,081 |   |
|        Customer                relationships                                                                                                                                                                                                                                                                     |   |   | 1,797 |   |   |   | (391 | ) |   |   | 1,406 |   |
|        Patents                and trademarks                                                                                                                                                                                                                                                                     |   |   | 16,048 |   |   |   | (13,283 | ) |   |   | 2,765 |   |
|        Non-compete                agreements                                                                                                                                                                                                                                                                     |   |   | 3,252 |   |   |   | (3,056 | ) |   |   | 196 |   |
|            Total                                                                                                                                                                                                                                                                             |   | $ | 24,991 |   |   | $ | (18,543 | ) |   | $ | 6,448 |   |

----

|                                                                                                                           |   | **2007** |   |   | **2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|
|         Aggregate                amortization expense                                  |   |     |   |   |     |   |
|              Three                months ended September 30   |   | $        | 68     |   |     | $      | 311 |   |
|              Nine                months ended September 30    |   |     | 332    |   |     |   | 943 |   |
|                                                                                                                           |   |     |   |   |     |   |   |   |
|         Estimated                amortization expense:                                 |   |     |   |   |     |   |   |   |
|              For                year ending December 31, 2007 |   |     | 533    |   |     |   |   |   |
|              For                year ending December 31, 2008 |   |     | 803    |   |     |   |   |   |
|              For                year ending December 31, 2009 |   |     | 803    |   |     |   |   |   |
|              For                year ending December 31, 2010 |   |     | 803    |   |     |   |   |   |
|              For                year ending December 31, 2011 |   |     | 803    |   |     |   |   |   |

**10.    COMMITMENTS      AND CONTINGENCIES**

----

*Boston      Installation*

----

|                                                                                                                                                                                         |   | **Documented****Remediation****Costs** |      |   | **Pre-Judgment****Interest** |   |      | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-----------|--------|------------------------------|--------|-----------|-----------|--------|
|                                                                                                                                                                                         |   | *(in                thousands)*        |      |
|     Claim                recorded June 30, 2005                                                                                                                          |   | $                                      | 5,872     |   |                         | $      | 275       |      |   | $ | 6,147 |   |
|     Interest                recorded July through December 31, 2005                                                                                                      |   |                                   | –   |   |                         |   | 165       |      |   |   | 165 |   |
|     Additional                documented remediation costs recorded in the       second                quarter of                2006 |   |                                   | 526       |   |                         |   | –   |      |   |   | 526 |   |
|     Adjustment                based on current developments(1)                                                                                                           |   |                                   | (343      | )      |                         |   | –   |      |   |   | (343 | ) |
|     Interest                recorded in 2006 and 2007                                                                                                                    |   |                                   | –   |   |                         |   | 866       |      |   |   | 866 |   |
| **    Claim                receivable balance, September 30, 2007**                                                                                                      |   | **$**                                  | **6,055** |   |                         | **$**  | **1,306** |      |   | **$** | **7,361** |   |

| (1)   | During                the second quarter of 2007, the claim was adjusted down by $0.3 million                as                a result of current developments in the matter. Interest was adjusted                accordingly. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Department      of Justice Investigation*

*Other      Litigation*

----

**11.   LONG-TERM      DEBT**

----

**12.  NEW      ACCOUNTING PRONOUNCEMENTS**

*Fair Value Measurements*

*The Fair Value      Option for Financial Assets and Financial Liabilities – Including an      amendment of FASB Statement No. 115 *

----

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

**Forward-Looking      Information**

**Executive      Summary**

----

**Results      of Operations**
*Three and Nine Months Ended September 30, 2007 and      2006*

**Three      Months Ended September 30, 2007**

| **Segment**               |   | **Revenues** |    |   | **Gross****Profit** |   |   | **Gross****Profit****Margin** |   |   | **Operating****Expenses(1)** |   |   | **Operating****Income****(Loss)(1)** |   |   | **Operating****Income                (Loss)****Margin** |   |
|---------------------------|--------|--------------|---------|--------|---------------------|--------|--------|-------------------------------|--------|--------|------------------------------|--------|--------|--------------------------------------|--------|--------|---------------------------------------------------------|--------|
| Rehabilitation            |   | $            | 115,093 |   |                | $      | 22,129 |                          |   |   | 19.2                         | %      |   | $                                    | 19,314 |   |                                                    | $      | 2,815 |   |   |   | 2.4 | % |
| Tunneling                 |   |         | 13,458  |   |                |   | 692    |                          |   |   | 5.1                          |   |   |                                 | 1,980  |   |                                                    |   | (1,288 | ) |   |   | -9.6 |   |
| Tite                Liner |   |         | 10,547  |   |                |   | 3,511  |                          |   |   | 33.3                         |   |   |                                 | 1,695  |   |                                                    |   | 1,816 |   |   |   | 17.2 |   |
|   Total         |   | $            | 139,098 |   |                | $      | 26,332 |                          |   |   | 18.9                         | %      |   | $                                    | 22,989 |   |                                                    | $      | 3,343 |   |   |   | 2.4 | % |

**Three      Months Ended September 30, 2006**

| **Segment**               |   | **Revenues** |    |   | **Gross****Profit                (Loss)** |   |   | **Gross****Profit                (Loss)****Margin** |   |   | **Operating****Expenses** |   |   | **Operating****Income****(Loss)** |   |   | **Operating****Income                (Loss)****Margin** |   |
|---------------------------|--------|--------------|---------|--------|-------------------------------------------|--------|--------|-----------------------------------------------------|--------|--------|---------------------------|--------|--------|-----------------------------------|--------|--------|---------------------------------------------------------|--------|
| Rehabilitation            |   | $            | 118,269 |   |                                      | $      | 28,927 |                                                |   |   | 24.5                      | %      |   | $                                 | 20,702 |   |                                                    | $      | 8,225 |   |   |   | 7.0 | % |
| Tunneling                 |   |         | 16,002  |   |                                      |   | (868   | )                                                   |   |   | -5.4                      |   |   |                              | 2,095  |   |                                                    |   | (2,963 | ) |   |   | -18.5 |   |
| Tite                Liner |   |         | 9,805   |   |                                      |   | 3,581  |                                                |   |   | 36.5                      |   |   |                              | 1,496  |   |                                                    |   | 2,085 |   |   |   | 21.3 |   |
|   Total         |   | $            | 144,076 |   |                                      | $      | 31,640 |                                                |   |   | 22.0                      | %      |   | $                                 | 24,293 |   |                                                    | $      | 7,347 |   |   |   | 5.1 | % |

**Nine      Months Ended September 30, 2007**

| **Segment**               |   | **Revenues** |    |   | **Gross****Profit** |   |   | **Gross****Profit****Margin** |   |   | **Operating****Expenses(1)** |   |   | **Operating****Income****(Loss)(1)** |   |   | **Operating****Income                (Loss)****Margin** |   |
|---------------------------|--------|--------------|---------|--------|---------------------|--------|--------|-------------------------------|--------|--------|------------------------------|--------|--------|--------------------------------------|--------|--------|---------------------------------------------------------|--------|
| Rehabilitation            |   | $            | 332,695 |   |                | $      | 61,082 |                          |   |   | 18.4                         | %      |   | $                                    | 61,883 |   |                                                    | $      | (801 | ) |   |   | -0.2 | % |
| Tunneling                 |   |         | 49,163  |   |                |   | 2,724  |                          |   |   | 5.5                          |   |   |                                 | 22,805 |   |                                                    |   | (20,081 | ) |   |   | -40.8 |   |
| Tite                Liner |   |         | 32,896  |   |                |   | 12,990 |                          |   |   | 39.5                         |   |   |                                 | 5,013  |   |                                                    |   | 7,977 |   |   |   | 24.2 |   |
|   Total         |   | $            | 414,754 |   |                | $      | 76,796 |                          |   |   | 18.5                         | %      |   | $                                    | 89,701 |   |                                                    | $      | (12,905 | ) |   |   | -3.1 | % |

**Nine      Months Ended September 30, 2006**

| **Segment**               |   | **Revenues** |    |   | **Gross****Profit                (Loss)** |   |   | **Gross****Profit                (Loss)****Margin** |   |   | **Operating****Expenses** |   |   | **Operating****Income****(Loss)** |   |   | **Operating****Income                (Loss)****Margin** |   |
|---------------------------|--------|--------------|---------|--------|-------------------------------------------|--------|--------|-----------------------------------------------------|--------|--------|---------------------------|--------|--------|-----------------------------------|--------|--------|---------------------------------------------------------|--------|
| Rehabilitation            |   | $            | 355,147 |   |                                      | $      | 83,435 |                                                |   |   | 23.5                      | %      |   | $                                 | 61,473 |   |                                                    | $      | 21,962 |   |   |   | 6.2 | % |
| Tunneling                 |   |         | 49,843  |   |                                      |   | (1,318 | )                                                   |   |   | -2.6                      |   |   |                              | 6,769  |   |                                                    |   | (8,087 | ) |   |   | -16.2 |   |
| Tite                Liner |   |         | 36,851  |   |                                      |   | 12,249 |                                                |   |   | 33.2                      |   |   |                              | 4,814  |   |                                                    |   | 7,435 |   |   |   | 20.2 |   |
|   Total         |   | $            | 441,841 |   |                                      | $      | 94,366 |                                                |   |   | 21.4                      | %      |   | $                                 | 73,056 |   |                                                    | $      | 21,310 |   |   |   | 4.8 | % |

**       _____________**

| **      **(1) | Consolidated                and tunneling operating expenses include $0.9 million and $17.8 million                of                charges associated with the closure of the tunneling business for                the                three and nine months ended September 30, 2007,                respectively. |
|---------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                      |   | ** Three                Months                Ended**** September                30, 2007 vs. 2006** |   |   | **Nine                Months Ended****September                30, 2007 vs. 2006** |   |
|-------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------|--------|
|                                                                                      |   | **Total**** Increase**** (Decrease)**                                                                |   |   | **Percentage**** Increase**** (Decrease)**                               |   |   | **Total****Increase****(Decrease)** |   |   | **Percentage****Increase****(Decrease)** |   |
| **    Consolidated**                                                  |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |
|       Revenues                                              |   | $                                                                                                              | (4,978 | )      |                                                                               |   | (3.5 | )% |   | $ | (27,087 | ) |   |   | (6.1 | )% |
|       Gross                profit                           |   |                                                                                                           | (5,308 | )      |                                                                               |   | (16.8 | ) |   |   | (17,570 | ) |   |   | (18.6 | ) |
|       Operating                expenses                     |   |                                                                                                           | (2,244 | )      |                                                                               |   | (9.2 | ) |   |   | (1,138 | ) |   |   | (1.6 | ) |
|       Costs                of closure of tunneling business |   |                                                                                                           | 940    |   |                                                                               |   | n/a |   |   |   | 17,783 |   |   |   | n/a |   |
|       Operating                income                       |   |                                                                                                           | (4,004 | )      |                                                                               |   | (54.4 | ) |   |   | (34,215 | ) |   |   | (160.6 | ) |
|                                                                                      |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
| **    Rehabilitation**                                                |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
|       Revenues                                              |   |                                                                                                           | (3,176 | )      |                                                                               |   | (2.7 | ) |   |   | (22,452 | ) |   |   | (6.3 | ) |
|       Gross                profit                           |   |                                                                                                           | (6,798 | )      |                                                                               |   | (23.5 | ) |   |   | (22,353 | ) |   |   | (26.8 | ) |
|       Operating                expenses                     |   |                                                                                                           | (1,388 | )      |                                                                               |   | (6.7 | ) |   |   | 410 |   |   |   | 0.7 |   |
|       Operating                income                       |   |                                                                                                           | (5,410 | )      |                                                                               |   | (65.8 | ) |   |   | (22,763 | ) |   |   | (103.6 | ) |
|                                                                                      |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
| **    Tunneling**                                                     |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
|       Revenues                                              |   |                                                                                                           | (2,544 | )      |                                                                               |   | (15.9 | ) |   |   | (680 | ) |   |   | (1.4 | ) |
|       Gross                profit                           |   |                                                                                                           | 1,560  |   |                                                                               |   | 179.7 |   |   |   | 4,042 |   |   |   | 306.7 |   |
|       Operating                expenses                     |   |                                                                                                           | (1,055 | )      |                                                                               |   | (50.4 | ) |   |   | (1,747 | ) |   |   | (25.8 | ) |
|       Costs                of closure of tunneling business |   |                                                                                                           | 940    |   |                                                                               |   | n/a |   |   |   | 17,783 |   |   |   | n/a |   |
|       Operating                income                       |   |                                                                                                           | 1,675  |   |                                                                               |   | 56.5 |   |   |   | (11,994 | ) |   |   | (148.3 | ) |
|                                                                                      |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
| **    Tite                Liner**                                     |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
|       Revenues                                              |   |                                                                                                           | 742    |   |                                                                               |   | 7.6 |   |   |   | (3,955 | ) |   |   | (10.7 | ) |
|       Gross                profit                           |   |                                                                                                           | (70    | )      |                                                                               |   | (2.0 | ) |   |   | 741 |   |   |   | 6.0 |   |
|       Operating                expenses                     |   |                                                                                                           | 199    |   |                                                                               |   | 13.3 |   |   |   | 199 |   |   |   | 4.1 |   |
|       Operating                income                       |   |                                                                                                           | (269   | )      |                                                                               |   | (12.9 | ) |   |   | 542 |   |   |   | 7.3 |   |
|                                                                                      |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
| **    Interest                Expense and Taxes**                     |   |                                                                                                           |   |   |                                                                               |   |   |   |   |   |   |   |   |   |   |   |
| **      **Interest                expense                   |   |                                                                                                           | (384   | )      |                                                                               |   | (22.4 | ) |   |   | (1,002 | ) |   |   | (19.5 | ) |
| **      **Taxes                on income                    |   |                                                                                                           | (3,202 | )      |                                                                               |   | (133.3 | ) |   |   | (12,715 | ) |   |   | (186.9 | ) |

**Overview**

----

**Rehabilitation      Segment**

*Revenues*

*Gross      Profit and Margin*

*Operating      Expenses*

*Operating      Income and Margin*

----

**Tunneling        Segment**

*Revenues*

*Gross      Profit and Margin*

*Operating      Expenses*

*Tunneling      Closure Charges*

*Operating      Loss and Margin*

|                                                                                         |   | **For                the Three Months****Ended                September 30,** |   |   | **For                the Nine Months****Ended                September 30,** |   |
|----------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------|--------|
|                                                                                         |   | **2007**                                                                      |   |   | **2006**                                                                     |   |   | **2007** |   |   | **2006** |   |
|                                                                                         |   |                                                                          |   |   |                                                                         |   |   |   |   |   |   |   |
|     Operating                loss                                        |   | $                                                                             | (1,288 | )      |                                                                         | $      | (2,963 | ) |   | $ | (20,081 | ) |   | $ | (8,087 | ) |
|     Costs                of closure of tunneling business                |   |                                                                          | 940    |   |                                                                         |   | – |   |   |   | 17,783 |   |   |   | – |   |
|     Operating                loss                excluding closure costs |   | $                                                                             | (348   | )      |                                                                         | $      | (2,963 | ) |   | $ | (2,298 | ) |   | $ | (8,087 | ) |

----

**Tite      Liner Segment**

*Revenues*

*Gross      Profit and Margin*

*Operating      Expenses*

*Operating      Income and Margin*

**Interest      and Other Income (Expense)**

*Interest      Expense*

*Interest      Income*

*Other      Income*

----

**Taxes        on Income (Tax Benefits)**

**Equity      in Earnings (Losses) of Affiliated Companies**

**Contract      Backlog**

|  **Backlog**                                                                                                                                                                                                              |   | **September                30,****2007** |   |   | **June                30,****2007** |   |   | **March                31,****2007** |   |   | **December                31, 2006** |   |   | **September                30,****2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|-------------------------------------|--------|--------|--------------------------------------|--------|--------|--------------------------------------|--------|--------|------------------------------------------|--------|
| *                                (in                millions)* |   |
| Rehabilitation                                                                                                                                                                                                                 |   | $                                        | 208.3  |   |                                | $      | 193.1  |                                 |   | $      | 187.2                                |   |   | $                                        | 201.7  |   |   | $ | 201.2 |   |
| Tunneling                                                                                                                                                                                                                      |   |                                     | 21.9   |   |                                |   | 35.0   |                                 |   |   | 60.6                                 |   |   |                                     | 75.7   |   |   |   | 80.7 |   |
| Tite                Liner                                                                                                                                                                                                      |   |                                     | 16.3   |   |                                |   | 12.5   |                                 |   |   | 14.5                                 |   |   |                                     | 12.8   |   |   |   | 13.2 |   |
| Total                                                                                                                                                                                                                          |   | $                                        | 246.5  |   |                                | $      | 240.6  |                                 |   | $      | 262.3                                |   |   | $                                        | 290.2  |   |   | $ | 295.1 |   |

**Liquidity      and Capital Resources**

***Cash      and Equivalents***

|                                                                                     |   | **September                30,****2007** |   |   | **December                31,****2006** |   |
|------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|-----------------------------------------|--------|
|                                                                                     |   | *(in                thousands)*          |   |
|         Cash                and cash equivalents |   | $                                        | 78,012 |   |                                    | $      | 96,393 |   |
|         Restricted                cash           |   |                                     | 2,369  |   |                                    |   | 934 |   |

*Sources      and Uses of Cash*

----

*Cash        Flows from Operations*

*Cash      Flows from Investing Activities*

*Cash      Flows from Financing Activities*

***Long-Term      Debt***

**Disclosure      of Contractual Obligations and Commercial Commitments**

----

| **Payments                Due by Period**         |   |
|---------------------------------------------------|--------|
| **Cash                Obligations(1)(2)(3)**      |   | **Total** |   |   | **2007** |   |   | **2008** |   |   | **2009** |   |   | **2010** |   |   | **2011** |   |   | **Thereafter** |   |
| Long-term                debt                     |   | $ | 65,000 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 65,000 |   |
| Interest                on long-term debt         |   |   | 24,443 |   |   |   | 1,062 |   |   | ­­4,251 |   |   |   | 4,251 |   |   |   | 4,251 |   |   |   | 4,251 |   |   |   | 6,377 |   |
| Operating                leases                   |   |   | 24,944 |   |   |   | 2,962 |   |   |   | 9,748 |   |   |   | 5,714 |   |   |   | 3,156 |   |   |   | 1,859 |   |   |   | 1,505 |   |
| Total                contractual cash obligations |   | $ | 114,387 |   |   | $ | 4,024 |   |   | $ | 13,999 |   |   | $ | 9,965 |   |   | $ | 7,407 |   |   | $ | 6,110 |   |   | $ | 72,882 |   |

| (1) | Cash                obligations are not discounted. See Notes 10 and 11 to the consolidated                financial statements contained in this report regarding commitments                and                contingencies and financings,                respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Resin                supply contracts are excluded from this table. See “Commodity Risk” under                Part I, Item 3 of this report for further                discussion. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | As                of September 30, 2007, we had $5.0 million of outstanding borrowings                on                the $35.0 million credit facility. The available balance was $14.5                million, and the commitment fee was 0.175%. The remaining $15.5 million                was used for non-interest bearing letters of credit, $14.5 million                of                which were collateral for insurance and $1.0 million for work                performance. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Off-Balance      Sheet Arrangements**

**Recently      Adopted Accounting Pronouncements**

*Accounting for Uncertainty in Income Taxes – an interpretation of      FASB Statement No. 109*

----

**Item      3.  Quantitative and Qualitative Disclosures About Market      Risk**

**Market      Risk**

**Interest      Rate Risk**

**Foreign      Exchange Risk**

**Commodity      Risk**

----

**Item      4. Controls and      Procedures**

----

**PART      II—OTHER INFORMATION**

**Item      1.  Legal Proceedings**

**Item      1A.  Risk Factors**

**Our      success and growth strategy depends on our senior management and our ability      to      attract and retain qualified personnel.**

**Item      6. Exhibits **

----

**SIGNATURE**

|                                 /s/                  David A. Martin                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 David                  A. Martin                                Vice                  President and Chief Financial Officer                                (Principal                  Financial Officer) |

----

**INDEX      TO EXHIBITS**

| 31.1 | Certification                of Alfred L. Woods pursuant to Section 302 of the Sarbanes-Oxley                Act of                2002, filed herewith. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Certification                of David A. Martin pursuant to Section 302 of the Sarbanes-Oxley                Act of                2002, filed herewith. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Certification                of Alfred L. Woods pursuant to 18 U.S.C. Section 1350, as adopted                pursuant                to Section 906 of the Sarbanes-Oxley Act of 2002, filed                herewith. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification                of David A. Martin pursuant to 18 U.S.C. Section 1350, as adopted                pursuant                to Section 906 of the Sarbanes-Oxley Act of 2002, filed                herewith. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|