----

----

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

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

----

----

| PART      I—FINANCIAL INFORMATION                                                                       |   |
|---------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                          |   |
| Item      1. Financial Statements:                                                                       |   |
|                                                                                                          |   |
| Consolidated Statements of Operations for the Three and      Nine Months Ended September 30, 2008 and 2007    | 3      |
|                                                                                                          |   |
| Consolidated      Balance Sheets as of September 30, 2008 and December 31,      2007                          | 4      |
|                                                                                                          |   |
| Consolidated      Statements of Cash Flows for the Nine Months Ended September 30, 2008 and      2007         | 5      |
|                                                                                                          |   |
| Notes to      Consolidated Financial Statements                                                               | 6      |
|                                                                                                          |   |
| Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of      Operations | 17     |
|                                                                                                          |   |
| Item      3. Quantitative and Qualitative Disclosures About Market      Risk                             | 29     |
|                                                                                                          |   |
| Item      4. Controls and Procedures                                                                     | 30     |
|                                                                                                          |   |
| PART      II—OTHER INFORMATION                                                                          |   |
|                                                                                                          |   |
| Item      1. Legal Proceedings                                                                           | 31     |
|                                                                                                          |   |
| Item      1A. Risk Factors                                                                               | 31     |
|                                                                                                          |   |
| Item      6. Exhibits                                                                                    | 31     |
|                                                                                                          |   |
| SIGNATURE                                                                                                     | 32     |
|                                                                                                          |   |
| INDEX TO EXHIBITS                                                                                             | 33     |

----

Financial

CONSOLIDATED STATEMENTS OF OPERATIONS 

|                                                                                                           |   | For      the Three Months Ended September      30, |                                      |   | For      the Nine Months Ended September      30, |   |
|----------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|-------------------------------------------|--------|---------------------------------------------------|--------|
|                                                                                                           |   |         2008                        |                                      |   |         2007                       |   |   |         2008   |   |   |         2007    |   |
|                                                                                                           |   |                                               |                                      |   |                                              |   |   |   |   |   |   |   |
| Revenues                                                                                                       |   |                                               | $        137,877                |   |                                              |   | $        125,640 |   |   |   | $        399,390 |   |   |   | $        365,591 |   |
| Cost      of revenues                                                                                          |   |                                               | 105,655                                   |   |                                              |   | 100,000 |   |   |   | 309,152 |   |   |   | 291,519 |   |
| Gross      profit                                                                                              |   |                                               | 32,222                                    |   |                                              |   | 25,640 |   |   |   | 90,238 |   |   |   | 74,072 |   |
| Operating      expenses                                                                                        |   |                                               | 21,948                                    |   |                                              |   | 21,638 |   |   |   | 70,494 |   |   |   | 69,846 |   |
| Operating      income                                                                                          |   |                                               | 10,274                                    |   |                                              |   | 4,002 |   |   |   | 19,744 |   |   |   | 4,226 |   |
| Other      income (expense):                                                                                   |   |                                               |                                      |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                                                                                           |   |                                               | 823                                       |   |                                              |   | 689 |   |   |   | 2,410 |   |   |   | 2,348 |   |
| Interest      expense                                                                                          |   |                                               | (1,161                                    | )      |                                              |   | (1,331 | ) |   |   | (3,546 | ) |   |   | (4,139 | ) |
| Other                                                                                                          |   |                                               | (68                                       | )      |                                              |   | 475 |   |   |   | 937 |   |   |   | 1,043 |   |
| Total      other expense                                                                                       |   |                                               | (406                                      | )      |                                              |   | (167 | ) |   |   | (199 | ) |   |   | (748 | ) |
| Income      before taxes on income                                                                             |   |                                               | 9,868                                     |   |                                              |   | 3,835 |   |   |   | 19,545 |   |   |   | 3,478 |   |
| Taxes      on income (tax benefits)                                                                            |   |                                               | 2,035                                     |   |                                              |   | (654 | ) |   |   | 4,842 |   |   |   | (604 | ) |
| Income      before minority interests and equity in   earnings (losses)      of affiliated companies |   |                                               | 7,833                                     |   |                                              |   | 4,489 |   |   |   | 14,703 |   |   |   | 4,082 |   |
| Minority      interests                                                                                        |   |                                               | (393                                      | )      |                                              |   | (120 | ) |   |   | (726 | ) |   |   | (252 | ) |
| Equity      in earnings (losses) of affiliated companies                                                       |   |                                               | 351                                       |   |                                              |   | 311 |   |   |   | (243 | ) |   |   | (8 | ) |
| Income      from continuing operations                                                                         |   |                                               | 7,791                                     |   |                                              |   | 4,680 |   |   |   | 13,734 |   |   |   | 3,822 |   |
| Loss      from discontinued operations, net of tax                                                             |   |                                               | (1,139                                    | )      |                                              |   | (198 | ) |   |   | (1,744 | ) |   |   | (11,421 | ) |
| Net      income (loss)                                                                                         |   |                                               | $          6,652      |   |                                              |   | $          4,482 |   |   |   | $         11,990 |   |   |   | $          (7,599 | ) |
|                                                                                                           |   |                                               |                                      |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per share:                                                                                |   |                                               |                                      |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Basic:                                                                                                         |   |                                               |                                      |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Income      from continuing operations                                                                         |   |                                               | $           0.28      |   |                                              |   | $            0.17 |   |   |   | $            0.50 |   |   |   | $            0.14 |   |
| Loss      from discontinued operations                                                                         |   |                                               | (0.04                                     | )      |                                              |   | (0.01 | ) |   |   | (0.06 | ) |   |   | (0.42 | ) |
| Net      income (loss)                                                                                         |   |                                               | 0.24                                      |   |                                              |   | 0.16 |   |   |   | 0.44 |   |   |   | (0.28 | ) |
| Diluted:                                                                                                       |   |                                               |                                      |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Income      from continuing operations                                                                         |   |                                               | $           0.28 |   |                                              |   | $           0.17 |   |   |   | $            0.49 |   |   |   | $            0.14 |   |
| Loss      from discontinued operations                                                                         |   |                                               | (0.04                                     | )      |                                              |   | (0.01 | ) |   |   | (0.06 | ) |   |   | (0.42 | ) |
| Net      income (loss)                                                                                         |   |                                               | $           0.24 |   |                                              |   | $           0.16 |   |   |   | $            0.43 |   |   |   | $          (0.28 | ) |

----

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                  |   | September      30,2008              |                                       |   | December      31,2007             |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------------------------------------------|--------|-----------------------------------------------------------------|--------|
| Assets                                                                                                                                                |   |                                                              |                                       |   |                                                            |   |
|  Current      assets                                                                                                                             |   |                                                              |                                       |   |                                                            |   |
|      Cash      and cash equivalents                                                                                          |   |                                                              | $          90,062      |   |                                                            |   | $          78,961 |   |
|      Restricted      cash                                                                                                    |   |                                                              | 2,058                                      |   |                                                            |   | 2,487 |   |
|  Receivables,      net                                                                                                                           |   |                                                              | 96,893                                     |   |                                                            |   | 85,774 |   |
|  Retainage                                                                                                                                       |   |                                                              | 22,858                                     |   |                                                            |   | 23,444 |   |
|  Costs      and estimated earnings in excess of billings                                                                                         |   |                                                              | 43,737                                     |   |                                                            |   | 40,590 |   |
|  Inventories                                                                                                                                     |   |                                                              | 17,436                                     |   |                                                            |   | 17,789 |   |
|  Prepaid      expenses and other assets                                                                                                          |   |                                                              | 31,615                                     |   |                                                            |   | 28,975 |   |
|  Current      assets of discontinued operations                                                                                                  |   |                                                              | 17,093                                     |   |                                                            |   | 31,269 |   |
|  Total      current assets                                                                                                                       |   |                                                              | 321,752                                    |   |                                                            |   | 309,289 |   |
|  Property, plant and      equipment, less accumulated depreciation                                                                               |   |                                                              | 71,977                                     |   |                                                            |   | 73,368 |   |
|  Other      assets                                                                                                                               |   |                                                              |                                       |   |                                                            |   |   |   |
|  Goodwill                                                                                                                                        |   |                                                              | 122,437                                    |   |                                                            |   | 122,560 |   |
|  Other      assets                                                                                                                               |   |                                                              | 24,457                                     |   |                                                            |   | 26,532 |   |
|  Total      other assets                                                                                                                         |   |                                                              | 146,894                                    |   |                                                            |   | 149,092 |   |
|  Non-current      assets of discontinued operations                                                                                              |   |                                                              | 7,157                                      |   |                                                            |   | 9,391 |   |
|                                                                                                                                                  |   |                                                              |                                       |   |                                                            |   |   |   |
| Total      Assets                                                                                                                                     |   |                                                              | $        547,780                 |   |                                                            |   | $        541,140 |   |
|                                                                                                                                                  |   |                                                              |                                       |   |                                                            |   |   |   |
| Liabilities and      Stockholders’ Equity                                                                                                       |   |                                                              |                                       |   |                                                            |   |   |   |
|  Current      liabilities                                                                                                                        |   |                                                              |                                       |   |                                                            |   |   |   |
|  Current      maturities of long-term debt and line of credit                                                                                    |   |                                                              | $           1,523 |   |                                                            |   | $           1,097 |   |
|  Accounts      payable and accrued expenses                                                                                                      |   |                                                              | 99,430                                     |   |                                                            |   | 87,935 |   |
|  Billings      in excess of costs and estimated earnings                                                                                         |   |                                                              | 8,244                                      |   |                                                            |   | 8,602 |   |
|  Current      liabilities of discontinued operations                                                                                             |   |                                                              | 4,361                                      |   |                                                            |   | 14,830 |   |
|  Total      current liabilities                                                                                                                  |   |                                                              | 113,558                                    |   |                                                            |   | 112,464 |   |
|  Long-term debt,      less current maturities                                                                                                    |   |                                                              | 65,000                                     |   |                                                            |   | 65,000 |   |
|  Other      liabilities                                                                                                                          |   |                                                              | 4,372                                      |   |                                                            |   | 7,465 |   |
|  Non-current      liabilities of discontinued operations                                                                                         |   |                                                              | 874                                        |   |                                                            |   | 953 |   |
|  Total      liabilities                                                                                                                          |   |                                                              | 183,804                                    |   |                                                            |   | 185,882 |   |
|  Minority      interests                                                                                                                         |   |                                                              | 3,222                                      |   |                                                            |   | 2,717 |   |
|                                                                                                                                                  |   |                                                              |                                       |   |                                                            |   |   |   |
|  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 and      outstanding   27,929,533 and      27,420,623 |   |                                                              | 279                                        |   |                                                            |   | 275 |   |
|  Additional      paid-in capital                                                                                                                 |   |                                                              | 107,901                                    |   |                                                            |   | 104,332 |   |
|  Retained      earnings                                                                                                                          |   |                                                              | 250,966                                    |   |                                                            |   | 238,976 |   |
|  Accumulated      other comprehensive income                                                                                                     |   |                                                              | 1,608                                      |   |                                                            |   | 8,958 |   |
|  Total      stockholders’ equity                                                                                                           |   |                                                              | 360,754                                    |   |                                                            |   | 352,541 |   |
|                                                                                                                                                  |   |                                                              |                                       |   |                                                            |   |   |   |
| Total      Liabilities and Stockholders’ Equity                                                                                                 |   |                                                              | $         547,780           |   |                                                            |   | $        541,140 |   |

----

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                |   | For      the Nine MonthsEnded      September 30, |                            |
|-----------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|---------------------------------|
|                                                                                                |   | 2008                                   |                            |   | 2007   |   |
|                                                                                                |   |                                             |                            |   |   |   |
| Cash flows from operating      activities:                                                          |   |                                             |                            |   |   |   |
| Net      income (loss)                                                                              |   |                                             | $         11,990 |   |   |   | $          (7,599 | ) |
| Loss      from discontinued operations                                                              |   |                                             | 1,744                           |   |   |   | 11,421 |   |
| Income      from continuing operations                                                              |   |                                             | 13,734                          |   |   |   | 3,822 |   |
| Adjustments      to reconcile to net cash provided by (used in) operating      activities:          |   |                                             |                            |   |   |   |   |   |
| Depreciation      and amortization                                                                  |   |                                             | 12,973                          |   |   |   | 11,950 |   |
| Gain      on sale of fixed assets                                                                   |   |                                             | (1,452                          | ) |   |   | (2,401 | ) |
| Equity-based      compensation expense                                                              |   |                                             | 3,555                           |   |   |   | 3,005 |   |
| Deferred      income taxes                                                                          |   |                                             | 710                             |   |   |   | (5,114 | ) |
| Other                                                                                               |   |                                             | (138                            | ) |   |   | (1,692 | ) |
| Changes      in operating assets and liabilities:                                                   |   |                                             |                            |   |   |   |   |   |
| Restricted      cash                                                                                |   |                                             | 327                             |   |   |   | (1,404 | ) |
| Receivables      net, retainage and costs and estimated earnings in excess of      billings         |   |                                             | (20,510                         | ) |   |   | (2,556 | ) |
| Inventories                                                                                         |   |                                             | (55                             | ) |   |   | (371 | ) |
| Prepaid      expenses and other assets                                                              |   |                                             | (4,457                          | ) |   |   | (7,470 | ) |
| Accounts      payable and accrued expenses                                                          |   |                                             | 8,883                           |   |   |   | (7,984 | ) |
| Net      cash provided by (used in) operating activities of continuing      operations              |   |                                             | 13,570                          |   |   |   | (10,215 | ) |
| Net      cash provided by operating activities of discontinued      operations                      |   |                                             | 466                             |   |   |   | 4,360 |   |
| Net      cash provided by (used in) operating activities                                            |   |                                             | 14,036                          |   |   |   | (5,855 | ) |
|                                                                                                |   |                                             |                            |   |   |   |   |   |
| Cash flows from investing      activities:                                                          |   |                                             |                            |   |   |   |   |   |
| Capital      expenditures                                                                           |   |                                             | (11,085                         | ) |   |   | (12,462 | ) |
| Proceeds      from sale of fixed assets                                                             |   |                                             | 1,521                           |   |   |   | 2,182 |   |
| Net      cash used in investing activities of continuing operations                                 |   |                                             | (9,564                          | ) |   |   | (10,280 | ) |
| Net      cash provided by (used in) investing activities of discontinued      operations            |   |                                             | 1,339                           |   |   |   | (4,175 | ) |
| Net      cash used in investing activities                                                          |   |                                             | (8,225                          | ) |   |   | (14,455 | ) |
|                                                                                                |   |                                             |                            |   |   |   |   |   |
| Cash flows from financing      activities:                                                          |   |                                             |                            |   |   |   |   |   |
| Proceeds      from issuance of common stock                                                         |   |                                             | 256                             |   |   |   | 2,496 |   |
| Additional      tax benefit from stock option exercises recorded in additional paid-in      capital |   |                                             | –                         |   |   |   | 148 |   |
| Proceeds      from notes payable                                                                    |   |                                             | 2,580                           |   |   |   | 2,648 |   |
| Principal      payments on notes payable                                                            |   |                                             | (2,154                          | ) |   |   | (1,921 | ) |
| Net      proceeds from line of credit                                                               |   |                                             | –                         |   |   |   | 5,000 |   |
| Principal      payments on long-term debt                                                           |   |                                             | –                         |   |   |   | (15,768 | ) |
| Net      cash provided by (used in) financing activities                                            |   |                                             | 682                             |   |   |   | (7,397 | ) |
| Effect      of exchange rate changes on cash                                                        |   |                                             | 4,608                           |   |   |   | 9,326 |   |
| Net      increase (decrease) in cash and cash equivalents for the      period                       |   |                                             | 11,101                          |   |   |   | (18,381 | ) |
| Cash      and cash equivalents, beginning of period                                                 |   |                                             | 78,961                          |   |   |   | 96,393 |   |
| Cash      and cash equivalents, end of period                                                       |   |                                             | $         90,062 |   |   |   | $         78,012 |   |

----

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

----

|                                                                                                                               |   | Three      Months Ended      |       |   | Nine      Months Ended       |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|--------|------------------------------|--------|
|                                                                                                                               |   | September      30,           |       |   | September      30,           |   |
|                                                                                                                               |   | 2008          |       |   | 2007          |   |   | 2008          |   |   | 2007          |   |
| Weighted      average number of common shares used for basic EPS                                                                   |   |                         | 27,490,413 |   |                         |   | 27,316,092 |   |   |   | 27,559,721 |   |   |   | 27,284,067 |   |
| Effect      of dilutive stock options and restricted stock                                                                         |   |                         | 705,532    |   |                         |   | 203,507 |   |   |   | 633,784 |   |   |   | – |   |
| Weighted      average number of common shares and dilutive    potential common      stock used in dilutive EPS |   |                         | 28,195,945 |   |                         |   | 27,519,599 |   |   |   | 28,193,505 |   |   |   | 27,284,067 |   |

|                                                   |   | Three      Months Ended     September      30,          |                          |   | Nine      Months Ended       September      30,           |   |
|--------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|-------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                   |   |                2008                                               |                          |   |            2007                                                                                        |   |   |             2008   |   |   |          2007   |   |
| Revenues                                               |   |                                                                                                                     | $         (584 | )      |                                                                                                                                      |   | $        13,458 |   |   |   | $        6,987 |   |   |   | $        49,163 |   |
| Gross      profit (loss)                               |   |                                                                                                                     | (995                          | )      |                                                                                                                                      |   | 692 |   |   |   | (1,729 | ) |   |   | 2,724 |   |
| Operating      expenses                                |   |                                                                                                                     | 1,260                         |   |                                                                                                                                      |   | 411 |   |   |   | 2,321 |   |   |   | 2,072 |   |
| Closure      charges (reversals) of tunneling business |   |                                                                                                                     | (300                          | )      |                                                                                                                                      |   | 940 |   |   |   | (777 | ) |   |   | 17,783 |   |
| Operating      loss                                    |   |                                                                                                                     | (1,955                        | )      |                                                                                                                                      |   | (659 | ) |   |   | (3,273 | ) |   |   | (17,131 | ) |
| Loss      before tax benefits                          |   |                                                                                                                     | (1,955                        | )      |                                                                                                                                      |   | (344 | ) |   |   | (2,902 | ) |   |   | (16,730 | ) |
| Tax      benefits                                      |   |                                                                                                                     | 816                           |   |                                                                                                                                      |   | 146 |   |   |   | 1,158 |   |   |   | 5,309 |   |
| Net      loss                                          |   |                                                                                                                     | $        (1,139     | )      |                                                                                                                                      |   | $        (198 | ) |   |   | $        (1,744 | ) |   |   | $       (11,421 | ) |

----

|                                                              |   | September      30, 2008             |                                             |   | December      31, 2007             |   |
|-------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------------------------------------------------|--------|------------------------------------------------------------------|--------|
|                                                              |   |                                                              |                                             |   |                                                             |   |
| Receivables,      net                                             |   |                                                              | $            4,618 |   |                                                             |   | $             9,001 |   |
| Retainage                                                         |   |                                                              | 7,169                                            |   |                                                             |   | 9,122 |   |
| Costs      and estimated earnings in excess of billings           |   |                                                              | 4,687                                            |   |                                                             |   | 9,063 |   |
| Prepaid      expenses and other current assets                    |   |                                                              | 619                                              |   |                                                             |   | 4,083 |   |
| Property,      plant and equipment, less accumulated depreciation |   |                                                              | 4,483                                            |   |                                                             |   | 6,434 |   |
| Other      assets                                                 |   |                                                              | 2,674                                            |   |                                                             |   | 2,957 |   |
| Total      assets                                                 |   |                                                              | $         24,250                  |   |                                                             |   | $           40,660 |   |
|                                                              |   |                                                              |                                             |   |                                                             |   |   |   |
| Accounts      payable and accrued expenses                        |   |                                                              | 4,240                                            |   |                                                             |   | 12,062 |   |
| Billings      in excess of costs and estimated earnings           |   |                                                              | 121                                              |   |                                                             |   | 2,768 |   |
| Other      liabilities                                            |   |                                                              | 874                                              |   |                                                             |   | 953 |   |
| Total      liabilities                                            |   |                                                              | $           5,235       |   |                                                             |   | $          15,783 |   |

|                        |   |                                                      |   |   |     As of      September 30, 2008 |   |                            | As      of December 31, 2007 |   |
|-----------------------------|--------|-----------------------------------------------------------|--------|--------|-------------------------------------------------------|--------|---------------------------------|------------------------------|--------|
|                        |   | Weighted      Average      Useful      Lives      (Years) |   |   | Gross      Carrying Amount                       |   |                            | AccumulatedAmortization      |   |   | Net      CarryingAmount |   |   | Gross      CarryingAmount |   |   | AccumulatedAmortization |   |   | Net      CarryingAmount |   |
|                        |   |                                                      |   |   |                                                  |   |                            |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| License      agreements     |   |                                                      | 20     |   |                                                  |   | $          3,840 |                         |   |   | $         (2,044 | ) |   |   | $         1,796 |   |   |   | $          3,894 |   |   |   | $          (1,976 | ) |   |   | $          1,918 |   |
| Customer      relationships |   |                                                      | 15     |   |                                                  |   | 1,797                           |                         |   |   | (602 | ) |   |   | 1,195 |   |   |   | 1,797 |   |   |   | (512 | ) |   |   | 1,285 |   |
| Patents      and trademarks |   |                                                      | 16     |   |                                                  |   | 20,206                          |                         |   |   | (13,867 | ) |   |   | 6,339 |   |   |   | 17,942 |   |   |   | (13,613 | ) |   |   | 4,329 |   |
| Total                       |   |                                                      |   |   |                                                  |   | $         25,843 |                         |   |   | $        (16,513 | ) |   |   | $         9,330 |   |   |   | $        23,633 |   |   |   | $        (16,101 | ) |   |   | $         7,532 |   |

|                                          |   | 2008   |                                      |   |        2007   |   |
|-----------------------------------------------|--------|------------------|-------------------------------------------|--------|------------------------------|--------|
| Aggregate      amortization expense:          |   |             |                                      |   |                         |   |
| For      the three months ended September 30: |   |             | $            282 |   |                         |   | $            68 |   |
| For      the nine months ended September 30:  |   |             | 863                                       |   |                         |   | 185 |   |
|                                          |   |             |                                      |   |                         |   |   |   |
| Estimated      amortization expense:          |   |             |                                      |   |                         |   |   |   |
| For year ending December 31,      2008        |   |             | $        1,026                  |   |                         |   |   |   |
| For year ending December 31,      2009        |   |             | 652                                       |   |                         |   |   |   |
| For year ending December 31,      2010        |   |             | 597                                       |   |                         |   |   |   |
| For year ending December 31,      2011        |   |             | 541                                       |   |                         |   |   |   |
| For year ending December 31,      2012        |   |             | 497                                       |   |                         |   |   |   |

----

|                                   |   | Stock       Awards  |    |   | Weighted         Average         Award      DateFair      Value  |   |
|----------------------------------------|--------|-------------------------------|---------|--------|-------------------------------------------------------------------------------------------|--------|
| Outstanding      at January 1, 2008    |   |                          | 102,089 |   |                                                                                      |   | $        19.31 |   |
| Awarded                                |   |                          | 442,553 |   |                                                                                      |   | 13.56 |   |
| Shares      distributed                |   |                          | (37,763 | )      |                                                                                      |   | 16.91 |   |
| Forfeited                              |   |                          | (50,284 | )      |                                                                                      |   | 14.93 |   |
| Outstanding      at September 30, 2008 |   |                          | 456,595 |   |                                                                                      |   | $        14.41 |   |

----

|                                   |   | DeferredStock        Units    |    |   | WeightedAverageAward      DateFair      Value |   |
|----------------------------------------|--------|--------------------------------------------------------|---------|--------|-----------------------------------------------|--------|
| Outstanding      at January 1, 2008    |   |                                                   | 155,098 |   |                                          |   | $        18.51 |   |
| Awarded                                |   |                                                   | 51,364  | (1)    |                                          |   | 15.61 |   |
| Shares      distributed                |   |                                                   | (27,382 | )      |                                          |   | 20.69 |   |
| Forfeited                              |   |                                                   | (23,816 | )(1)   |                                          |   | 14.01 |   |
| Outstanding      at September 30, 2008 |   |                                                   | 155,264 |   |                                          |   | $        17.85 |   |

|   | (1) | Mr.      Woods was awarded 26,236 deferred stock units on March 3, 2008 as      compensation for his service as Interim Chief Executive Officer for the      period from February 13, 2008 through August 12, 2008. Pursuant to the      terms of the award agreement, however, on April 14, 2008, the amount of      deferred stock units was adjusted downward to 8,745 deferred stock units      to reflect his actual period ofservice. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | Shares    |      |   | Weighted         Average          Exercise         Price       |   |
|----------------------------------------|--------|--------------------------|-----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Outstanding      at January 1, 2008    |   |                     | 909,987   |   |                                                                                                                                           |   | $        21.27 |   |
| Granted                                |   |                     | 424,021   |   |                                                                                                                                           |   | 13.42 |   |
| Exercised                              |   |                     | (14,200   | )      |                                                                                                                                           |   | 14.17 |   |
| Forfeited                              |   |                     | (149,871  | )      |                                                                                                                                           |   | 17.02 |   |
| Expired                                |   |                     | (30,371   | )      |                                                                                                                                           |   | 21.07 |   |
| Outstanding      at September 30, 2008 |   |                     | 1,139,566 |   |                                                                                                                                           |   | $        18.99 |   |
| Exercisable      at September 30, 2008 |   |                     | 695,793   |   |                                                                                                                                           |   | $        21.46 |   |

----

|                       |   | For      the Nine Months Ended September 30, |                    |
|----------------------------|--------|----------------------------------------------|-------------------------|
|                       |   | 2008                                         |                    |   | 2007 |   |
|                       |   | Range                    |                    |   | WeightedAverage |   |   | Range           |   |   | WeightedAverage |   |
| Volatility                 |   |                                         | 37.3%      – 41.9 | % |   |   | 40.6 | % |   |   | 44.9%      – 46.4 | % |   |   | 45.0 | % |
| Expected      term (years) |   |                                         | 4.5                     |   |   |   | 4.5 |   |   |   | 4.5-4.8 |   |   |   | 4.6 |   |
| Dividend      yield        |   |                                         | 0.0                     | % |   |   | 0.0 | % |   |   | 0.0 | % |   |   | 0.0 | % |
| Risk-free      rate        |   |                                         | 4.0                     | % |   |   | 4.0 | % |   |   | 4.4%-4.6 | % |   |   | 4.4 | % |

----

----

|                                                |   | DocumentedRemediationCosts       |                     |   | Interest   |   |                                            | Total  |   |
|-----------------------------------------------------|--------|----------------------------------------------------------------|--------------------------|--------|----------------------|--------|-------------------------------------------------|--------|--------|
|                                                |   | (in      thousands)                                            |                     |
| Claim      recorded June 30, 2005                   |   |                                                           | $        5,872 |   |                 |   | $             275 |   |   |   | $                6,147 |   |
| Adjustment      based on subsequent developments(1) |   |                                                           | 183                      |   |                 |   | –                                         |   |   |   | 183 |   |
| Interest      recorded(2)                           |   |                                                           | –                  |   |                 |   | 1,546                                           |   |   |   | 1,546 |   |
| Claim      receivable balance, September 30, 2008   |   |                                                           | $        6,055 |   |                 |   | $         1,821                  |   |   |   | $         7,876 |   |

|   | (1) | During      the second quarter of 2006, the claim was adjusted up by $0.5 million, as      a result of documented remediation costs. During the second quarter of      2007, the claim was adjusted down by $0.3 million, as a result of      subsequent developments in the matter. Interest was adjusted      accordingly. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | During the third quarter of 2008,      the Company recorded interest income of $0.1 million for post-judgment      interest. During the first nine months of 2008, the Company recorded      interest income of $0.3 million ($0.1 million in pre-judgment interest and      $0.2 million in post-judgment interest). In the third quarter of 2007, no      interest was recorded for this claim. For the nine months ended September      30, 2007, the Company recorded $0.1 million in pre-judgment interest      income. In total, the Company has recorded $1.6 million in pre-judgment      interest and $0.2 million in post-judgment  interest. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                 |     |   |                             |       |   | Weighted       |   |   |     |   |
|----------------------|----------|--------|----------------------------------|------------|--------|----------------|--------|--------|----------|--------|
|                 |     |   |                             |       |   | Average        |   |   |     |   |
|                 |     |   |                             |       |   | Remaining      |   |   | Average  |   |
|                 |     |   | Notional          |       |   | Maturity       |   |   | Exchange |   |
|                 | Position |   | Amount       |       |   | in      Months |   |   | Rate     |   |
| Canadian      Dollar | Sell     |   | $                                | 13,500,000 |   |           |   | 3.2    |     |   |   | 1.012 |   |
| Euro                 | Sell     |   | €                          | 13,500,000 |   |           |   | 3.2    |     |   |   | 1.543 |   |
| Pound      Sterling  | Sell     |   | £                           | 5,000,000  |   |           |   | 3.2    |     |   |   | 1.964 |   |

|                                             |   | Derivatives,      net |                                                        |
|--------------------------------------------------|--------|-----------------------|-------------------------------------------------------------|
| Beginning      balance, January 1, 2008          |   |                  | $               (55 | ) |
| Gain      included in other comprehensive income |   |                  | 3,362                                                       |   |
| Ending      balance, September 30, 2008          |   |                  | $           3,307                  |   |

----

|                                           |   | Three      Months EndedSeptember      30, |                                       |   | Nine      Months EndedSeptember      30, |   |
|------------------------------------------------|--------|-------------------------------------------|--------------------------------------------|--------|------------------------------------------|--------|
|                                           |   | 2008                            |                                       |   | 2007                           |   |   | 2008          |   |   | 2007          |   |
|                                           |   |                                      |                                       |   |                                     |   |   |   |   |   |   |   |
| Revenues:                                      |   |                                      |                                       |   |                                     |   |   |   |   |   |   |   |
|  North      American Sewer Rehabilitation |   |                                      | $         89,346            |   |                                     |   | $          88,258 |   |   |   | $        257,495 |   |   |   | $        261,455 |   |
|  European      Sewer Rehabilitation       |   |                                      | 27,055                                     |   |                                     |   | 25,057 |   |   |   | 79,313 |   |   |   | 68,216 |   |
|  Asia-Pacific      Sewer Rehabilitation   |   |                                      | 1,768                                      |   |                                     |   | 670 |   |   |   | 5,459 |   |   |   | 783 |   |
|  Water      Rehabilitation                |   |                                      | 5,917                                      |   |                                     |   | 1,108 |   |   |   | 9,738 |   |   |   | 2,241 |   |
|  Energy      and Mining                   |   |                                      | 13,791                                     |   |                                     |   | 10,547 |   |   |   | 47,385 |   |   |   | 32,896 |   |
| Total      revenues                            |   |                                      | $        137,877                 |   |                                     |   | $        125,640 |   |   |   | $       399,390 |   |   |   | $        365,591 |   |
|                                           |   |                                      |                                       |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit:                             |   |                                      |                                       |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
|  North      American Sewer Rehabilitation |   |                                      | $          20,184      |   |                                     |   | $          15,226 |   |   |   | $          56,405 |   |   |   | $          45,188 |   |
|  European      Sewer Rehabilitation       |   |                                      | 5,941                                      |   |                                     |   | 6,320 |   |   |   | 15,936 |   |   |   | 15,130 |   |
|  Asia-Pacific      Sewer Rehabilitation   |   |                                      | 614                                        |   |                                     |   | 394 |   |   |   | 1,699 |   |   |   | 444 |   |
|  Water      Rehabilitation                |   |                                      | 1,263                                      |   |                                     |   | 189 |   |   |   | 1,692 |   |   |   | 320 |   |
|  Energy      and Mining                   |   |                                      | 4,220                                      |   |                                     |   | 3,511 |   |   |   | 14,506 |   |   |   | 12,990 |   |
| Total      gross profit                        |   |                                      | $          32,222      |   |                                     |   | $          25,640 |   |   |   | $          90,238 |   |   |   | $          74,072 |   |
|                                           |   |                                      |                                       |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss):                  |   |                                      |                                       |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
|  North      American Sewer Rehabilitation |   |                                      | $           6,757 |   |                                     |   | $            1,444 |   |   |   | $          11,910 |   |   |   | $          (2,586 | ) |
|  European      Sewer Rehabilitation       |   |                                      | 347                                        |   |                                     |   | 1,113 |   |   |   | (1,084 | ) |   |   | 324 |   |
|  Asia-Pacific      Sewer Rehabilitation   |   |                                      | 368                                        |   |                                     |   | (11 | ) |   |   | 722 |   |   |   | (214 | ) |
|  Water      Rehabilitation                |   |                                      | 482                                        |   |                                     |   | (322 | ) |   |   | (780 | ) |   |   | (1,099 | ) |
|  Energy      and Mining                   |   |                                      | 2,320                                      |   |                                     |   | 1,778 |   |   |   | 8,976 |   |   |   | 7,801 |   |
| Total      operating income                    |   |                                      | $    10,274            |   |                                     |   | $          4,002 |   |   |   | $          19,744 |   |   |   | $          4,226 |   |

----

|                          |   | Three      Months Ended September      30, |                                  |   | Nine      Months EndedSeptember      30, |   |
|-------------------------------|--------|-------------------------------------------------|---------------------------------------|--------|------------------------------------------|--------|
|                          |   | 2008                             |                                  |   | 2007                           |   |   | 2008         |   |   |   | 2007    |   |
|                          |   |                                            |                                  |   |                                     |   |   |   |   |   |   |   |   |
| Revenues:                     |   |                                            |                                  |   |                                     |   |   |   |   |   |   |   |   |
|  United      States      |   |                                            | $        90,842             |   |                                     |   | $        84,038 |   |   |   | $        252,789 |   |   |   | $        249,839 |   |
|  Canada                  |   |                                            | 12,649                                |   |                                     |   | 11,916 |   |   |   | 38,557 |   |   |   | 35,905 |   |
|  Europe                  |   |                                            | 28,327                                |   |                                     |   | 25,549 |   |   |   | 82,322 |   |   |   | 69,443 |   |
|  Other      foreign      |   |                                            | 6,059                                 |   |                                     |   | 4,137 |   |   |   | 25,722 |   |   |   | 10,404 |   |
| Total      revenues           |   |                                            | $       137,877                  |   |                                     |   | $       125,640 |   |   |   | $        399,390 |   |   |   | $        365,591 |   |
|                          |   |                                            |                                  |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit:            |   |                                            |                                  |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
|  United      States      |   |                                            | $         20,181       |   |                                     |   | $         14,121 |   |   |   | $         54,635 |   |   |   | $         43,126 |   |
|  Canada                  |   |                                            | 4,281                                 |   |                                     |   | 3,741 |   |   |   | 13,149 |   |   |   | 11,862 |   |
|  Europe                  |   |                                            | 6,211                                 |   |                                     |   | 6,478 |   |   |   | 16,380 |   |   |   | 15,393 |   |
|  Other      foreign      |   |                                            | 1,549                                 |   |                                     |   | 1,300 |   |   |   | 6,074 |   |   |   | 3,691 |   |
| Total      gross profit       |   |                                            | $         32,222       |   |                                     |   | $         25,640 |   |   |   | $         90,238 |   |   |   | $         74,072 |   |
|                          |   |                                            |                                  |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss): |   |                                            |                                  |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
|  United      States      |   |                                            | $           6,587 |   |                                     |   | $            (251 | ) |   |   | $           8,845 |   |   |   | $          (4,288 | ) |
|  Canada                  |   |                                            | 2,549                                 |   |                                     |   | 2,441 |   |   |   | 7,941 |   |   |   | 6,708 |   |
|  Europe                  |   |                                            | 391                                   |   |                                     |   | 1,330 |   |   |   | (630 | ) |   |   | (68 | ) |
|  Other      foreign      |   |                                            | 747                                   |   |                                     |   | 482 |   |   |   | 3,588 |   |   |   | 1,874 |   |
| Total      operating income   |   |                                            | $         10,274       |   |                                     |   | $           4,002 |   |   |   | $         19,744 |   |   |   | $           4,226 |   |

----

Item 2.  Management’s Discussion and Analysis of FinancialCondition and Results of Operations

----

|                                             |   | 2008     |                       |   | 2007          |   |                       |    Increase               (Decrease)   |   |
|--------------------------------------------------|--------|------------------------------|----------------------------|--------|------------------------------|--------|----------------------------|----------------------------------------------------------------------------------------------------|--------|
| Three      Months Ended September 30,            |   |                         |                       |   |                         |   |                       |                                                                                               |   |   |   |   |
|  Revenues                                   |   |                         | $        137,877 |   |                         |   | $        125,640 |                                                                                               |   |   | $         12,237 |   |   |   | 9.7 | % |
|  Gross      profit                          |   |                         | 32,222                     |   |                         |   | 25,640                     |                                                                                               |   |   | 6,582 |   |   |   | 25.7 |   |
|  Gross      margin                          |   |                         | 23.4                       | %      |                         |   | 20.4                       | %                                                                                                  |   |   | 3.0 | % |   |   |   |   |
|  Operating      expenses                    |   |                         | 21,948                     |   |                         |   | 21,638                     |                                                                                               |   |   | 310 |   |   |   | 1.4 |   |
|  Operating      income                      |   |                         | 10,274                     |   |                         |   | 4,002                      |                                                                                               |   |   | 6,272 |   |   |   | 156.7 |   |
|  Operating      margin                      |   |                         | 7.5                        | %      |                         |   | 3.2                        | %                                                                                                  |   |   | 4.3 | % |   |   |   |   |
|  Net      income from continuing operations |   |                         | 7,791                      |   |                         |   | 4,680                      |                                                                                               |   |   | 3,111 |   |   |   | 66.5 |   |
|                                             |   |                         |                       |   |                         |   |                       |                                                                                               |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30,             |   |                         |                       |   |                         |   |                       |                                                                                               |   |   |   |   |   |   |   |   |
|  Revenues                                   |   |                         | 399,390                    |   |                         |   | 365,591                    |                                                                                               |   |   | 33,799 |   |   |   | 9.2 |   |
|  Gross      profit                          |   |                         | 90,238                     |   |                         |   | 74,072                     |                                                                                               |   |   | 16,166 |   |   |   | 21.8 |   |
|  Gross      margin                          |   |                         | 22.6                       | %      |                         |   | 20.3                       | %                                                                                                  |   |   | 2.3 | % |   |   |   |   |
|  Operating      expenses                    |   |                         | 70,494                     |   |                         |   | 69,846                     |                                                                                               |   |   | 647 |   |   |   | 0.9 |   |
|  Operating      income                      |   |                         | 19,744                     |   |                         |   | 4,226                      |                                                                                               |   |   | 15,518 |   |   |   | 367.2 |   |
|  Operating      margin                      |   |                         | 4.9                        | %      |                         |   | 1.2                        | %                                                                                                  |   |   | 3.8 | % |   |   |   |   |
|  Net      income from continuing operations |   |                         | 13,734                     |   |                         |   | 3,822                      |                                                                                               |   |   | 9,912 |   |   |   | 259.3 |   |

----

|                                  |   | 2008    |                      |   | 2007    |   |                      |   Increase             (Decrease)  |   |
|---------------------------------------|--------|------------------------|---------------------------|--------|------------------------|--------|---------------------------|--------------------------------------------------------------------------------------|--------|
| Three      Months Ended September 30, |   |                   |                      |   |                   |   |                      |                                                                                 |   |   |   |   |
|  Revenues                        |   |                   | $        89,346 |   |                   |   | $        88,258 |                                                                                 |   |   | $         1,088 |   |   |   | 1.2 | % |
|  Gross      profit               |   |                   | 20,184                    |   |                   |   | 15,226                    |                                                                                 |   |   | 4,958 |   |   |   | 32.6 |   |
|  Gross      margin               |   |                   | 22.6                      | %      |                   |   | 17.3                      | %                                                                                    |   |   | 5.3 | % |   |   |   |   |
|  Operating      expenses         |   |                   | 13,427                    |   |                   |   | 13,782                    |                                                                                 |   |   | (355 | ) |   |   | (2.6 | ) |
|  Operating      income           |   |                   | 6,757                     |   |                   |   | 1,444                     |                                                                                 |   |   | 5,313 |   |   |   | 368.0 |   |
|  Operating      margin           |   |                   | 7.6                       | %      |                   |   | 1.6                       | %                                                                                    |   |   | 6.0 | % |   |   |   |   |
|                                  |   |                   |                      |   |                   |   |                      |                                                                                 |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30,  |   |                   |                      |   |                   |   |                      |                                                                                 |   |   |   |   |   |   |   |   |
|  Revenues                        |   |                   | $       257,495      |   |                   |   | $       261,455      |                                                                                 |   |   | $        (3,960 | ) |   |   | (1.5 | ) |
|  Gross      profit               |   |                   | 56,403                    |   |                   |   | 45,188                    |                                                                                 |   |   | 11,216 |   |   |   | 24.8 |   |
|  Gross      margin               |   |                   | 21.9                      | %      |                   |   | 17.3                      | %                                                                                    |   |   | 4.6 | % |   |   |   |   |
|  Operating      expenses         |   |                   | 44,494                    |   |                   |   | 47,774                    |                                                                                 |   |   | (3,280 | ) |   |   | (6.9 | ) |
|  Operating      income (loss)    |   |                   | 11,911                    |   |                   |   | (2,586                    | )                                                                                    |   |   | 14,497 |   |   |   | 560.7 |   |
|  Operating      margin           |   |                   | 4.6                       | %      |                   |   | (1.0                      | )%                                                                                   |   |   | 5.6 | % |   |   |   |   |

----

----

|                                  |   | 2008    |                      |   | 2007    |   |                      |        Increase                 (Decrease)  |   |
|---------------------------------------|--------|------------------------|---------------------------|--------|------------------------|--------|---------------------------|---------------------------------------------------------------------------------------------------------|--------|
| Three      Months Ended September 30, |   |                   |                      |   |                   |   |                      |                                                                                                    |   |   |   |   |
|  Revenues                        |   |                   | $        27,055 |   |                   |   | $        25,057 |                                                                                                    |   |   | $        1,998 |   |   |   | 8.0 | % |
|  Gross      profit               |   |                   | 5,941                     |   |                   |   | 6,320                     |                                                                                                    |   |   | (379 | ) |   |   | (6.0 | ) |
|  Gross      margin               |   |                   | 22.0                      | %      |                   |   | 25.2                      | %                                                                                                       |   |   | (3.2 | )% |   |   |   |   |
|  Operating      expenses         |   |                   | 5,594                     |   |                   |   | 5,207                     |                                                                                                    |   |   | 387 |   |   |   | 7.4 |   |
|  Operating      income           |   |                   | 347                       |   |                   |   | 1,113                     |                                                                                                    |   |   | (766 | ) |   |   | (68.8 | ) |
|  Operating      margin           |   |                   | 1.3                       | %      |                   |   | 4.4                       | %                                                                                                       |   |   | (3.3 | )% |   |   |   |   |
|                                  |   |                   |                      |   |                   |   |                      |                                                                                                    |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30,  |   |                   |                      |   |                   |   |                      |                                                                                                    |   |   |   |   |   |   |   |   |
|  Revenues                        |   |                   | $        79,313 |   |                   |   | $        68,216 |                                                                                                    |   |   | $        11,097 |   |   |   | 16.3 |   |
|  Gross      profit               |   |                   | 15,936                    |   |                   |   | 15,130                    |                                                                                                    |   |   | 806 |   |   |   | 5.3 |   |
|  Gross      margin               |   |                   | 20.1                      | %      |                   |   | 22.2                      | %                                                                                                       |   |   | (2.1 | )% |   |   |   |   |
|  Operating      expenses         |   |                   | 17,020                    |   |                   |   | 14,806                    |                                                                                                    |   |   | 2,214 |   |   |   | 15.0 |   |
|  Operating      income (loss)    |   |                   | (1,084                    | )      |                   |   | 324                       |                                                                                                    |   |   | (1,408 | ) |   |   | (434.6 | ) |
|  Operating      margin           |   |                   | (1.4                      | )%     |                   |   | 0.5                       | %                                                                                                       |   |   | (1.9 | )% |   |   |   |   |

----

|                                  |   | 2008   |               |   | 2007   |   |                   | Increase              (Decrease) |   |
|---------------------------------------|--------|------------------|--------------------|--------|------------------|--------|------------------------|--------------------------------------------------------------------------|--------|
| Three      Months Ended September 30, |   |             |               |   |             |   |                   |                                                                     |   |   |   |   |
|  Revenues                        |   |             | $       1,768 |   |             |   | $        670 |                                                                     |   |   | $       1,098 |   |   |   | 163.9 | % |
|  Gross      profit               |   |             | 614                |   |             |   | 394                    |                                                                     |   |   | 220 |   |   |   | 55.7 |   |
|  Gross      margin               |   |             | 34.7               | %      |             |   | 58.8                   | %                                                                        |   |   | (24.1 | )% |   |   |   |   |
|  Operating      expenses         |   |             | 246                |   |             |   | 405                    |                                                                     |   |   | (159 | ) |   |   | (39.4 | ) |
|  Operating      income (loss)    |   |             | 368                |   |             |   | (11                    | )                                                                        |   |   | 379 |   |   |   | 3,355.1 |   |
|  Operating      margin           |   |             | 20.8               | %      |             |   | (1.7                   | )%                                                                       |   |   | 22.5 | % |   |   |   |   |
|                                  |   |             |               |   |             |   |                   |                                                                     |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30,  |   |             |               |   |             |   |                   |                                                                     |   |   |   |   |   |   |   |   |
|  Revenues                        |   |             | $       5,459 |   |             |   | $        783 |                                                                     |   |   | $       4,676 |   |   |   | 597.4 |   |
|  Gross      profit               |   |             | 1,699              |   |             |   | 444                    |                                                                     |   |   | 1,255 |   |   |   | 282.4 |   |
|  Gross      margin               |   |             | 31.1               | %      |             |   | 56.7                   | %                                                                        |   |   | (25.6 | )% |   |   |   |   |
|  Operating      expenses         |   |             | 977                |   |             |   | 658                    |                                                                     |   |   | 319 |   |   |   | 48.4 |   |
|  Operating      income (loss)    |   |             | 722                |   |             |   | (214                   | )                                                                        |   |   | 936 |   |   |   | 437.0 |   |
|  Operating      margin           |   |             | 13.2               | %      |             |   | (27.4                  | )%                                                                       |   |   | 40.6 | % |   |   |   |   |

----

|                                  |   | 2008   |               |   | 2007   |   |               | Increase           (Decrease)  |   |
|---------------------------------------|--------|------------------|--------------------|--------|------------------|--------|--------------------|--------------------------------------------------------------|--------|
| Three      Months Ended September 30, |   |             |               |   |             |   |               |                                                         |   |   |   |   |
|  Revenues                        |   |             | $       5,917 |   |             |   | $       1,108 |                                                         |   |   | $       4,809 |   |   |   | 434.0 | % |
|  Gross      profit               |   |             | 1,263              |   |             |   | 189                |                                                         |   |   | 1,074 |   |   |   | 568.1 |   |
|  Gross      margin               |   |             | 21.3               | %      |             |   | 17.1               | %                                                            |   |   | 4.2 | % |   |   |   |   |
|  Operating      expenses         |   |             | 781                |   |             |   | 511                |                                                         |   |   | 270 |   |   |   | 52.8 |   |
|  Operating      income (loss)    |   |             | 482                |   |             |   | (322               | )                                                            |   |   | 804 |   |   |   | 250.0 |   |
|  Operating      margin           |   |             | 8.2                | %      |             |   | (29.0              | )%                                                           |   |   | 37.2 | % |   |   |   |   |
|                                  |   |             |               |   |             |   |               |                                                         |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30,  |   |             |               |   |             |   |               |                                                         |   |   |   |   |   |   |   |   |
|  Revenues                        |   |             | $       9,738 |   |             |   | $       2,241 |                                                         |   |   | $       7,497 |   |   |   | 334.5 |   |
|  Gross      profit               |   |             | 1,692              |   |             |   | 320                |                                                         |   |   | 1,372 |   |   |   | 429.4 |   |
|  Gross      margin               |   |             | 17.4               | %      |             |   | 14.3               | %                                                            |   |   | 3.1 | % |   |   |   |   |
|  Operating      expenses         |   |             | 2,472              |   |             |   | 1,419              |                                                         |   |   | 1,053 |   |   |   | 74.2 |   |
|  Operating      loss             |   |             | (780               | )      |             |   | (1,099             | )                                                            |   |   | 319 |   |   |   | 29.1 |   |
|  Operating      margin           |   |             | (8.0               | )%     |             |   | (49.1              | )%                                                           |   |   | 41.1 | % |   |   |   |   |

----

|                                  |   | 2008   |                |   | 2007   |   |                | Increase             (Decrease)  |   |
|---------------------------------------|--------|------------------|---------------------|--------|------------------|--------|---------------------|---------------------------------------------------------------------|--------|
| Three      Months Ended September 30, |   |             |                |   |             |   |                |                                                                |   |   |   |   |
|  Revenues                        |   |             | $       13,791 |   |             |   | $       10,547 |                                                                |   |   | $        3,244 |   |   |   | 30.8 | % |
|  Gross      profit               |   |             | 4,220               |   |             |   | 3,511               |                                                                |   |   | 709 |   |   |   | 20.2 |   |
|  Gross      margin               |   |             | 30.6                | %      |             |   | 33.3                | %                                                                   |   |   | (2.7 | )% |   |   |   |   |
|  Operating      expenses         |   |             | 1,900               |   |             |   | 1,733               |                                                                |   |   | 167 |   |   |   | 9.6 |   |
|  Operating      income           |   |             | 2,320               |   |             |   | 1,778               |                                                                |   |   | 542 |   |   |   | 30.5 |   |
|  Operating      margin           |   |             | 16.8                | %      |             |   | 16.9                | %                                                                   |   |   | (0.1 | )% |   |   |   |   |
|                                  |   |             |                |   |             |   |                |                                                                |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30,  |   |             |                |   |             |   |                |                                                                |   |   |   |   |   |   |   |   |
|  Revenues                        |   |             | $       47,385 |   |             |   | $       32,896 |                                                                |   |   | $       14,489 |   |   |   | 44.0 |   |
|  Gross      profit               |   |             | 14,506              |   |             |   | 12,990              |                                                                |   |   | 1,516 |   |   |   | 11.7 |   |
|  Gross      margin               |   |             | 30.6                | %      |             |   | 39.5                | %                                                                   |   |   | (8.9 | )% |   |   |   |   |
|  Operating      expenses         |   |             | 5,530               |   |             |   | 5,189               |                                                                |   |   | 341 |   |   |   | 6.6 |   |
|  Operating      income           |   |             | 8,976               |   |             |   | 7,801               |                                                                |   |   | 1,175 |   |   |   | 15.1 |   |
|  Operating      margin           |   |             | 18.9                | %      |             |   | 23.7                | %                                                                   |   |   | (4.8 | )% |   |   |   |   |

----

----

| Backlog                                                                                                            |   | September      30,       2008 |               |   | June      30,           2008 |   |               | March      31,         2008 |   |   | December      31, 2007 |   |   | September      30, 2007 |               |
|--------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------------------|--------|-------------------------------------------------------|--------|--------------------|--------------------------------------------|--------|--------|-----------------------------|--------|--------|------------------------------|--------------------|
|                 (in      millions) |   |
| North      American sewer rehabilitation                                                                           |   |                               | $       178.5 |   |                                                  |   | $       185.4 |                                       |   |   | $       174.2          |   |   |                         | $       160.0 |   |   |   | $       164.7 |   |
| European      sewer rehabilitation                                                                                 |   |                               | 30.7               |   |                                                  |   | 34.9               |                                       |   |   | 39.0                        |   |   |                         | 35.6               |   |   |   | 41.6 |   |
| Asia-Pacific      sewer rehabilitation                                                                             |   |                               | 53.6               |   |                                                  |   | 33.2               |                                       |   |   | 34.4                        |   |   |                         | 35.1               |   |   |   | 0.0 |   |
| Water      rehabilitation                                                                                          |   |                               | 6.7                |   |                                                  |   | 11.6               |                                       |   |   | 5.8                         |   |   |                         | 2.1                |   |   |   | 2.0 |   |
| Energy      and mining                                                                                             |   |                               | 23.4               |   |                                                  |   | 24.7               |                                       |   |   | 32.2                        |   |   |                         | 26.2               |   |   |   | 16.3 |   |
| Total                                                                                                              |   |                               | $       292.9 |   |                                                  |   | $       289.8 |                                       |   |   | $       285.6          |   |   |                         | $       259.0 |   |   |   | $       224.6 |   |

----

|                           |   | September      30,         2008 |                |   | December      31,        2007 |   |
|--------------------------------|--------|------------------------------------------------|---------------------|--------|-----------------------------------------|--------|
|                           |   | (in      thousands)                            |                |
| Cash      and cash equivalents |   |                                           | $       90,062 |   |                                    |   | $       78,961 |   |
| Restricted      cash           |   |                                           | 2,058               |   |                                    |   | 2,487 |   |

----

| Payments      Due by Period             |   |
|-----------------------------------------|--------|
| Cash      Obligations(1)(2)(3)(4)       |   | Total         |   |   | 2008  |   |   | 2009  |   |   | 2010  |   |   | 2011        |   |   | 2012  |   |   | Thereafter |   |
| Long-term      debt                     |   |   | $         65,000 |   |   |   |  $                - |   |   |   | $                - |   |   |   | $               - |   |   |   | $               - |   |   |   | $              - |   |   |   | $       65,000 |   |
| Interest      on long-term debt         |   |   | 17,929 |   |   |   | 262 |   |   |   | 3,926 |   |   |   | 3,926 |   |   |   | 3,926 |   |   |   | 3,926 |   |   |   | 1,963 |   |
| Operating      leases                   |   |   | 22,574 |   |   |   | 3,773 |   |   |   | 7,065 |   |   |   | 4,544 |   |   |   | 2,982 |   |   |   | 2,016 |   |   |   | 2,194 |   |
| Total      contractual cash obligations |   |   | $       105,503 |   |   |   | $        4,035 |   |   |   | $       10,991 |   |   |   | $       8,470 |   |   |   | $       6,908 |   |   |   | $       5,942 |   |   |   | $       69,157 |   |

| (1) | Cash      obligations are not discounted. See Notes 6 and 9 to the consolidated      financial statements contained in this report regarding our long-term debt      and credit facility and commitments and contingencies,      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, 2008, we had no outstanding borrowings on our $35.0      million credit facility. The available balance was $19.1 million and the      commitment fee was 0.175%. The remaining $15.9 million was used for      non-interest bearing letters of credit, $14.5 million of which was      collateral for insurance and $1.4 million of which was collateral for work      performance. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Liabilities      related to Interpretation No. 48, Accounting for Uncertainty in      Income Taxes, an Interpretation of FASB Statement No. 109, have not      been included in the table above because we are uncertain as to if or when      such amounts may be settled. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Disclosures

----

Item 4.  Controls and Procedures

----

Item 1.  Legal Proceedings

Item 1A.   Risk Factors

Item 6.  Exhibits 

----

SIGNATURE

|                        | INSITUFORM      TECHNOLOGIES, INC                                                                                                                                                                                                                                                                                                                                                                                        |
|-----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                                                                                                                                                                                                           |
| Date:      October 31, 2008 | /s/ David A.      Martin                                                                 |
|                        | David      A. Martin                                                                                                                                                                                                                                                                                                                                                                                                     |
|                        | Vice      President and Chief Financial Officer(Principal      Financial Officer)                                                                                                                                                                                                                                                                                                                                        |

----

INDEX TO EXHIBITS

| 31.1 | Certification      of J. Joseph Burgess 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 J. Joseph Burgess 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. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|