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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2004

Commission File Number 0-30911

THE PBSJ CORPORATION

(Exact name of Registrant as specified in its charter)

2001 N.W. 107th AVENUE

MIAMI, FLORIDA 33172-2507

(Address of principal executive offices)

(305) 592-7275

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock ($.00067 Par Value)

(Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.  ¨

The number of shares of Common Stock outstanding as of December 17, 2004 was 7,904,244. The aggregate market value of the voting stock held by non-affiliates of the registrant based on the $27.00 price for the registrant’s Common Stock on November 30, 2004 was approximately $213,498,909. Directors, executive officers and 10% or greater shareholders are considered affiliates for purposes of this calculation but should not necessarily be deemed affiliates for any other purpose.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Report on Form 10-K incorporates information by reference from the registrant’s definitive Proxy Statement to be used in conjunction with its 2005 Annual Meeting of Shareholders.

Table of Contents

THE PBSJ CORPORATION

FORM 10-K

FOR THE YEAR ENDED SEPTEMBER 30, 2004

TABLE OF CONTENTS

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and the information incorporated by reference in it include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that impact such forward looking statements include, among others, our ability to attract additional business, the timing of projects and the potential for contract cancellation by our customers, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, changes in general economic conditions and interest rates, the risk that the Internal Revenue Service or the courts may not accept the amount or nature of one or more items of deduction, loss, income or gain as reported by the Company for tax purposes and the possible outcome of pending litigation and our actions in connection with such litigation. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS

General

The PBSJ Corporation, together with its subsidiaries, is an employee-owned professional services organization that provides a broad range of planning, design and construction services to a variety of public and private sector clients. Our four major business segments are transportation, environmental, civil engineering and construction management, representing 40%, 25%, 18%, and 17%, respectively, of our fiscal 2004 revenues. We utilize our expertise in engineering, planning, management, environmental, architectural and surveying disciplines to address complex problems in each of these basic service areas. We provide these services through our staff of approximately 3,800 professional, technical and support personnel. We believe our multi-disciplinary approach to problems facilitates our ability to effectively meet the needs of our clients.

Since our founding in 1960, we have grown from a small civil engineering practice with operations only in South Florida to a national design firm offering a full range of engineering, architectural and planning services throughout the United States. Evidencing this, in 2004, Engineering News-Record ranked Post, Buckley, Schuh & Jernigan, Inc. 5^th on its list of the top 100 pure design firms (traditional design firms with no construction capability) in the United States, based on design revenue. During fiscal 2004, we provided services to approximately 3,000 clients in the public and private sectors. Approximately 90% of our clients had previously used our services. In fiscal 2004, 79% of our net earned revenues were derived from the public sector and 21% from the private sector.

We have built an organization composed of highly skilled professionals and top-level technical and administrative personnel with a wide variety of scientific, engineering, architectural and management resources. These resources enable us to develop and implement innovative long-term solutions to the complex problems of our clients, many of which are the subject of public concern and extensive governmental regulation. We assist our clients in responding to these concerns, in obtaining governmental permits and approvals and in complying with applicable laws and regulations.

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We began operations on February 29, 1960. Our holding company, The PBSJ Corporation, was incorporated in 1973. We engage in business primarily through two wholly-owned subsidiaries: Post, Buckley, Schuh & Jernigan, Inc., a Florida corporation (through which we provide the majority of our engineering, architectural and planning services) and PBS&J Construction Services, Inc. (through which we have certain large contracts for our construction management services). In addition, we have three other active subsidiaries: Seminole Development Corporation (through which we hold title to certain of our real property); PBS&J Caribe Engineering, C.S.P. (through which we perform certain work in Puerto Rico); and Post, Buckley International, Inc. (through which we provide services to our international clients). During the fiscal year ended September 30, 2004, Post Buckley International, Inc. did not generate any revenues. In this Form 10-K, all references to “PBSJ” or “our” operations refer to The PBSJ Corporation and its wholly-owned subsidiaries and the activities of these entities on a consolidated basis. Our executive offices are located at 2001 N.W. 107th Avenue, Miami, Florida.

Acquisitions

Throughout our history, PBSJ has made strategic acquisitions to increase our geographic presence in the West and Central regions, to enhance our technical capabilities firm-wide and to solidify our operations in the Eastern region. Once we acquire a firm, it is integrated and consolidated into our existing operations and ceases to exist as a separate operating entity. We completed the following acquisitions during the last three years. The results of operations are included in the consolidated financial statements from the date of acquisition.

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based on their fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $3.8 million, including $1.1million of goodwill, $700,000 of identifiable intangibles and liabilities of $ 1.1 million. WKA specializes in infrastructure improvements for public, municipal, transit, port authorities and private sector projects with a primary focus on transportation structures in California.

Business Segments

The following table sets forth our revenues, in thousands, from each of our four business segments for each of the three years ended September 30, 2004, 2003, and 2002, and the approximate percentage of our total revenues attributable to each business segment:

Additional information concerning segment profit and loss and assets is set forth in Item 7 under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Item 8, Note 13 of “Notes to Consolidated Financial Statements” which are included herein.

Transportation

Industry Overview

This year many factors throughout the country altered upgrading the United States’ transportation infrastructure. A sluggish economy in numerous states and municipalities prevented recently executed transportation design contracts from receiving notices to proceed. The cost of implementing federally required heightened airport security measures negatively impacted aviation planning and design projects.

Our Services

Our consulting services in this area include planning, traffic engineering, intelligent transportation systems (ITS), corridor planning, highway design, structural design, program management, toll facility design, aviation services, multi-modal/transit systems and right-of-way. We currently serve transportation departments in 14 states (Florida, Pennsylvania, North Carolina, South Carolina, Georgia, Alabama, Mississippi, Tennessee, Texas, Colorado, California, Arizona, Utah, Ohio).

During fiscal 2004, projects in Transportation included:

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Environmental

Industry Overview

Over the past thirty years, significant environmental laws at the federal, state and local levels have been enacted in response to public concern over the health of the nation’s air, water, and natural resources. Those laws and their implementation through regulation affect numerous industrial and governmental actions and form a key market driver for the services of our Environmental business segment.

Two federal environmental laws, The Safe Drinking Water Act of 1974 and the Clean Water Act of 1972, continue to drive this segment of our business. Pursuant to these laws, Congress has authorized significant monies to assist state and local governments. According to the Environmental Protection Agency (“EPA”), as much as $23 billion a year will be needed for construction and upgrade of water and wastewater treatment facilities over the next 20 years.

Our Services

Our Environmental business segment focuses on the delivery of planning, design and construction management services for private and public sector clients related to:

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During fiscal 2004, some significant projects in our Environmental business segment included:

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Civil Engineering

Industry Overview

During fiscal 2004 the economy entered a period of slow recovery with improving private sector corporate profitability while investment in residential housing development continued at high rates. Federal spending remained strong, especially in the area of national defense, which increased opportunity and fortified our strategy for greater balance between the public and private sectors. The state and local government markets remained weak but the market for our specialized services in the area of risk and emergency management strengthened due in part to the frequency of hurricanes and wild fires.

Near term expectations are for the Federal Department of Defense and Homeland Security sectors to remain strong. As the economic recovery expands, the private sector will strengthen. State and local governments markets will remain weak but will improve as increased tax revenue from private sector recovery trickles into the government sector.

Our civil engineering business will continue to focus its portfolio strategy to balance the public and private sectors with emphasis on the specialized Federal National Defense and Homeland Security markets and the disaster mitigation, response and emergency management markets for state and local governments. We will continue our commitment to customers in the private sector corporate real estate development and residential housing markets. We will rely on advanced technologies for competitive advantages and to distinguish us from our competition. These technologies include Geodata/Geographic Information Systems, database design and development, Global Positioning Systems (GPS), High Definition Survey technology and advanced data collection systems including Laser based imaging and measurement, 3D imaging, and application of web collaboration tools.

Our Services

Our civil engineering business provides general civil engineering as well as specialized services to public and private clients. Included in these services are: site engineering and surveys, infrastructure engineering, master planning, disaster mitigation planning and response, asset management, emergency management and architectural and landscape architecture design.

During fiscal 2004 our projects included:

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Construction Management

Industry Overview

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

The role of the construction manager has become increasingly important to the success of these projects, requiring a new level of versatility and a wide range of skills. Both public and private sector entities are under pressure to complete these projects at accelerated schedules, resulting in a myriad of project delivery systems. With limited in-house staff, these entities must rely on experienced construction managers to complete projects on time and within budget.

Our Services

In the area of construction management, we provide a wide range of services as an agent for our clients, including contract administration, inspection, field-testing, scheduling/estimating, instituting project controls and quality assessment. Although we do not construct or build any projects, we may act as the program director of a project whereby on behalf of the owner of the project, we provide scheduling, cost estimating and construction observation services for the project, or our services may be limited to providing construction consulting.

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During fiscal 2004, projects in our Construction Management Division included:

Other Services

Among our four national business segments, we have a National Information Solutions Division to address the digital infrastructure needs of our clients. These services include: needs analysis, training, database design and development, desktop and web-based application development, system integration, and geographic information systems. Recent projects, which have allowed our information solutions to address client needs include:

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Clients

Through our four national business segments, we provide our services to a broad range of clients, including state, local and municipal agencies, the Federal government and private sector businesses. Our state and local government clients include approximately 22 state departments of transportation, water utilities, local power generators, waste water treatment agencies, environmental protection agencies, schools and colleges, law enforcement, judiciary, hospitals and healthcare providers. During fiscal year 2004, we provided services to Federal agencies, including the Army Corps of Engineers, EPA, Navy, Air Force, Coast Guard, United States Postal Service, FEMA, National Parks Service, and Department of Energy, and local entities. Our contracts with federal, state and local entities are subject to various methods of determining fees and costs. See “Contract Pricing and Terms of Engagement” for further discussion of our pricing arrangements with governmental clients.

Our private sector clients include retail and commercial, entertainment, railroad, petro-chemical, food, telecommunications, oil and gas, power, semi-conductor, transportation, technology, public utility, mining and forest products entities. The table below indicates the revenue generated, by client type, for each of the three years ended September 30, 2004, 2003 and 2002.

In fiscal 2004, we derived approximately 18% of our engineering fees from various districts and departments of the Florida Department of Transportation (“FDOT”) under numerous contracts. While we believe

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the loss of any individual contract would not have a material adverse effect on our results of operations and would not adversely impact our ability to continue work under our other contracts with the FDOT, the loss of all the FDOT contracts would have a material adverse effect on our results of operations by causing a material decrease in our revenues and profits.

International Business

During fiscal 2004 and 2003, we did not have any revenues from international operations. Prior to fiscal 2003, these revenues had been declining since we were not entering into new international contracts. We do not currently have any plans to expand or grow our international operations.

Marketing

Marketing activities are conducted by key operating and executive personnel, including specifically assigned business development personnel, as well as through professional personnel who develop and maintain new and existing client relationships. Our continued ability to compete successfully in the areas in which we do business is largely dependent upon aggressive marketing, the development of information regarding client requirements, the submission of responsive cost-effective proposals and the successful completion of contracts. Information concerning private and governmental requirements is obtained, during the course of contract performance, from formal and informal briefings, from participation in activities of professional organizations, and from literature published by the government and other organizations.

Contract Pricing and Terms of Engagement

We earn our revenues for the various types of services we provide through cost-plus, time-and-materials, fixed price contracts, and contracts, which combine any of these methods.

Cost-Plus Contracts. Under our cost-plus contracts, we charge clients negotiated rates based on our direct and indirect costs. Labor costs and sub-contractor services are the principal components of our direct costs. Federal Acquisition Regulations, which are applicable to all Federal government contracts and which are partially incorporated in many local and state agency contracts, limit the recovery of certain specified indirect costs or contracts subject to such regulations. In negotiating a cost-plus contract, we estimate all recoverable direct and indirect costs and then add a profit component, which is either a percentage of total recoverable costs or a fixed negotiated fee, to arrive at a total dollar estimate for the project. We receive payment based on the total actual number of labor hours expended. If the actual labor hours are fewer than estimated, the revenues from that project will be less than estimated. If the actual labor hours expended exceed the initial negotiated amount, we must obtain a contract modification to receive payment for such overage. For fiscal 2004 and 2003, approximately 22% and 18%, respectively, of our contracts were cost-plus contracts, primarily with state and local government agencies.

Cost-plus contracts covered by Federal Acquisition Regulations and certain state and local agencies require an audit of actual costs and provide for upward or downward adjustments if actual recoverable costs differ from billed recoverable costs. There are no open or pending audits by federal or state authorities as of September 30, 2004. The result of our last audit for the year ended September 30, 2003 resulted in no adjustments. Our contracts with governmental entities, once executed, are not subject to renegotiation of profits at the election of the government, however, they are subject to continued funding. Our contracts generally provide that we receive our profit on a periodic basis through the course of the project. Therefore, if a governmental agency fails to fund for a successive year, our profit will have been proportionally received as recognized.

Time-and-Materials Contracts. Under our time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on actual time expended. In addition, clients reimburse us for our actual out-of-pocket

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costs of materials and other direct incidental expenditures incurred in connection with performing the contract. Our profit margins on time-and-materials contracts fluctuate based on actual labor and overhead costs directly charged or allocated to contracts compared with negotiated billing rates. During fiscal 2004 and 2003, approximately 53% and 59%, respectively, of our contracts were time-and-materials contracts, primarily with federal, state and local agencies, as well as some private sector clients.

Fixed-Price Contracts. Under our fixed-price contracts, clients pay us an agreed sum negotiated in advance for the specified scope of work. Under fixed-price contracts, there are no payment adjustments if we over-estimate or under-estimate the number of labor hours required to complete the project, unless there is a change of scope in the work to be performed. Accordingly, our profit margin will increase to the extent the labor hours and other costs are below the contracted amounts. The profit margin will decrease and we may realize a loss on a project if the number of labor hours required or other costs exceed the estimate. During fiscal 2004 and 2003, approximately 25% and 23%, respectively, of our contracts were fixed-price contracts, primarily with private sector clients.

Competition

We face active competition in all areas of our business. As we provide a wide array of engineering, architectural, planning and construction management services to companies in various industries throughout the United States, we encounter a different group of competitors in each of our markets. Our competitors include (1) national and regional design firms like PBSJ that provide a wide range of design services to clients in all industries, including CH2M Hill and Parsons Brickerhoff, (2) industry specific firms that provide design as well as other services to customers in a specific industry, for example environmental firms such as Montgomery Watson, Camp Dresser and McKee, Inc., and (3) local firms that provide some or all of our services in one of our markets. Some of our competitors are larger, more diversified firms having substantially greater financial resources and larger professional and technical staffs than ours. Competition for major contracts is frequently intense and may entail public submittals and multiple presentations by numerous firms seeking to be awarded the contract. The extent of competition we will encounter in the future will vary depending on changing customer requirements in terms of types of projects and technological developments. It has been our experience that the principal competitive factors for the type of service business in which we engage are a firm’s demonstrated ability to perform certain types of projects, the client’s own previous experience with competing firms, the firm’s size and financial condition and the cost of the particular proposal.

No one firm currently dominates a significant portion of the sectors in which we compete. Given the expanding demand for some of the services provided by PBSJ, it is likely that additional competitors will emerge. At the same time, consolidation continues to occur in certain of the sub-segments of the industry in the United States, including the environmental-focused firms.

We believe that we will retain the ability to compete effectively with other firms that provide similar services by continuing to offer a broad range of high-quality consulting and environmental, transportation, and engineering and construction management services through our network of offices. Among other things, the wide range of expertise, which we possess, permits us to remain competitive in obtaining government contracts despite shifts in governmental spending emphasis. Our multi-disciplinary capabilities enable us to compete more effectively for clients whose projects require that the expertise of professionals in a number of different disciplines be utilized in the problem solving effort. We believe that our ability to offer our services over a large part of the United States is a positive factor in enabling us to attract and retain clients who have a need for our services in different parts of the country.

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Backlog

Our backlog for services was estimated to be approximately $400.6 million and $331.8 million as of September 30, 2004 and 2003, respectively. We define backlog as contracted task orders less previously recognized revenue on such task orders. U.S. government agencies, and many state and local governmental agencies, operate under annual fiscal appropriations and fund various contracts only on an incremental basis. Our ability to realize revenues from our backlog depends on the availability of funding for various federal, state and local government agencies.

A majority of our customer orders or contract awards and additions to contracts previously awarded are received or occur at random during the year and may have varying periods of performance. The comparison of backlog amounts on the same date in successive years is not necessarily indicative of trends in our business or future revenues.

The major components of our operating costs are payroll and payroll-related costs. Since our business is dependent upon the reputation and experience of our personnel and adequate staffing, a reasonable backlog is important for the scheduling of operations and for the maintenance of a fully-staffed level of operations.

Regulation

Compliance with federal, state and local regulations, which have been enacted or adopted relating to the protection of the environment is not expected to have any material effect upon our capital expenditures, earnings and competitive position.

Personnel

As of September 30, 2004, we employed approximately 3,800 persons, of which approximately 19% were part time employees. Most of our employees are professional or technical personnel having specialized training and skills, including engineers, architects, analysts, scientists, management specialists, technical writers and skilled technicians. Although many of our personnel are highly specialized in certain areas and while there is a nationwide shortage of certain qualified technical personnel, we are not currently experiencing any material difficulty in obtaining the personnel we require to perform under our contracts. We believe that our future growth and success will depend, in large part, upon our continued ability to attract and retain highly qualified personnel. We believe our employee relations to be good.

Liabilities and Insurance

When we perform services for our clients, we can become liable for breach of contract, personal injury, property damage and negligence. Such claims could include improper or negligent performance or design, failure to meet specifications and breaches of express or implied warranties. Our clients often require us to contractually assume liabilities for damage or personal injury to the client, third parties and their property and for fines and penalties. Because our projects are typically large enough to affect the lives of many people, the damages available to a client or third parties are potentially large and could include punitive and consequential damages. For example, our transportation projects involve services that affect not only our client, but also many end users of those services.

We seek to protect PBSJ from potential liabilities by obtaining indemnification, where possible, from our public and private sector clients. However, even when we obtain such indemnification, it is generally not available if we fail to satisfy specified standards of care in performing our services or if the indemnifying person has insufficient assets to cover the liability. Therefore, we also seek to protect PBSJ by maintaining a full range of insurance coverage, including worker’s compensation, general and professional liability (including pollution liability) and property coverage. Our professional liability coverage is on a claims made basis (which means that

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the policy provides liability coverage for all claims made during the policy period, regardless of when the action occurred), while the rest of our insurance coverage is on an occurrence basis (which means that the policy provides liability coverage only for injury or damage arising from an action that occurs during the policy period, regardless of when the claim is actually made). Our professional liability insurance provides for annual coverage of up to $40.0 million with an annual deductible of $3.0 million. Based upon our previous experience with such claims and lawsuits, we believe our insurance coverage is adequate for all of our present operational activities, although such coverage may not prove to be adequate in all cases. A successful claim or claims in excess of our insurance coverage could have a material adverse effect on our financial position and results of operation.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available without charge on our web site, www.pbsj.com, as soon as reasonably practicable after they are filed electronically with the SEC. We are providing the address to our internet site solely for the information of investors. We do not intend the address to be an active link or to otherwise incorporate the contents of the web site into this report.

ITEM 2. PROPERTIES

We own our executive offices located at 2001 N.W. 107th Avenue, Miami, Florida 33172, which consist of approximately 100,000 square feet of office space. We own our Orlando office located at 482 South Keller Road, Orlando, Florida 32810, which consists of approximately 90,000 square feet of office space. The Orlando office building is pledged as collateral under our mortgage note. We own two additional office buildings in Homestead, Florida and Hollywood, Florida through our wholly-owned subsidiary, Seminole Development Corporation. The Homestead property is currently being leased to a third party. The Hollywood office is used to provide professional services to clients.

We lease an additional 68 offices in 19 states in the United States and Puerto Rico, all of which are used for our four major business segments. Aggregate lease payments during fiscal year 2004 were approximately $11.8 million.

We believe that substantially all of our property and equipment are, in general, well maintained and in good operating condition. They are considered adequate for present needs, and as supplemented by planned construction, are expected to remain adequate for the near future.

We believe that we, or our subsidiaries, have clear title to the properties owned and used in our business, subject to liens for current taxes and easements, restrictions and other liens, which do not materially detract from the value of the properties or our interest in the properties or the use of those properties in our business.

ITEM 3. LEGAL PROCEEDINGS

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

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We seek to protect PBSJ by maintaining a full range of insurance coverages, including workers’ compensation, commercial general liability (which includes property coverage), commercial automobile, and professional liability (which includes pollution coverage). Our professional liability coverage is on a claims made basis meaning the coverage applies to claims made during a policy year regardless of when the causative action took place. All other coverages are occurrence basis meaning that the policy in place when the injury or damage occurred is the policy that responds regardless of when the claim is made. Our professional liability limits per policy year are $40 million with a per claim deductible of $125,000 and an annual aggregate of $3 million. Based on our experience with claims and lawsuits we believe that the current levels of coverage are adequate for all of our present operational activities although there can be no assurances that such coverages will prove to be adequate in all cases. A successful catastrophic claim or aggregate of several large claims in amounts in excess of our insurance coverages in any policy year could have a material adverse effect on our financial position and results of operation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

There is no established public trading market for our common stock.

As of November 30, 2004 there were no shares of common stock that were subject to outstanding warrants or options to purchase, or securities convertible into, our common stock, and no shares of our common stock could be sold pursuant to Rule 144 under the Securities Act. No shares of our common stock are being, or have been, publicly offered.

As of November 30, 2004, there were 7,907,367 shares of common stock outstanding and held of record by 1,417 shareholders.

The by-laws of the Company require that common stock held by shareholders who terminate employment with the Company be offered for sale at fair market value to the Company, which has right of first refusal. Should the Company decline to purchase the shares, the shares must next be offered to the Company’s profit sharing and employee stock ownership plans at fair market value, and then ultimately to full-time employees of the Company. The by-laws of the Company provide that the fair market value be determined by an appraisal. Other than agreements with certain retired Directors, as of September 30, 2004 and 2003, there is no outstanding common stock held by individuals no longer employed by the Company.

Dividends

Each share of our common stock is entitled to share equally in any dividends declared by our board of directors. Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income. We have not paid cash dividends on our common stock in the past and have no present intention of paying cash dividends on our common stock in the foreseeable future. All earnings are retained for investment in our business.

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Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

The following table discloses issuer’s purchases of equity securities for the year ended September 30, 2004:

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected historical financial data as of and for the years ended September 30, 2004, 2003, 2002, 2001 and 2000. The financial data for each of the fiscal years has been derived from, and is qualified by reference to, our audited financial statements. You should read the information set forth below in conjunction with our consolidated financial statements, including the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.

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ITEM. 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The following table sets forth the percentage of net earned revenue represented by the items in our consolidated statements of income for the years ended September 30:

A summary of operating results is as follows for each of the years ended September 30, (dollars in thousands):

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Overview

Business Overview

We provide services to both private and public sector clients, with the public sector comprising 79% of our revenues. Our business is divided in four segments, consisting of transportation, civil engineering, construction management and environmental. During fiscal 2004, the civil Engineering and construction management segments experienced significant growth. The growth in the civil engineering segment was fueled by large disaster response projects as a result of the hurricanes that hit Florida in August and September, in addition to wild fires in Southern California and growth in the segment’s homeland security program. The growth in the construction management segment was due primarily to several large projects with existing clients, including several state departments of transportation. All four segments of our business experienced increased volumes in backlog at September 30, 2004, as compared to September 30, 2003.

We earn revenue for time spent on projects, in addition to certain direct costs of our projects, such as blueprints and sub-contractor expenses. The fluctuation in direct costs, specifically sub-contractor costs, will influence the fluctuation of our net earned revenue. For instance, our environmental segment experienced a decrease in direct costs in fiscal 2004, as compared to 2003, as a result of a reduced need for a sub-consultant with a special skill for a project in California. As a result, environmental’s net earned revenue grew at a greater rate than its engineering fees, since more work was being performed by our in-house technical professionals. During fiscal 2004, there was an increase in the number of our employees who were primarily technical professionals, whose billable labor gets charged back to our clients, thereby increasing the amount of fees we earned. As chargeability of our technical professionals’ time increases, direct labor costs increase along with it, while indirect labor costs decrease, as more of the technical staff’s time worked is being charged back to our clients.

Business Environment

The need to modernize and upgrade the transportation infrastructure in the United States has been a source of continued business for us through the last ten years. Fueling the initial growth in this market was the Intermodal Surface Transportation Efficiency Act of 1991 (“ISTEA”). In 1998, ISTEA was reauthorized as the Transportation Equity Act for the 21st Century (“TEA-21”), earmarking $218 billion for highway and transit projects through 2003. Prior to the expiration of TEA-21 on September 30, 2003, the U.S. Congress and President Bush signed a five-month extension of the program. Since then, a series of additional extensions have been granted, the most recent of which occurred on September 30, 2004 and lasts through the end of May 2005. Since state agencies depend largely on federal transportation funding, the reauthorization of TEA-21 is critical to the continued improvements of transportation infrastructure.

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

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During fiscal 2004, the economy entered a period of slow recovery with improving private sector corporate profitability, while investment in residential housing development continued at high rates. Federal spending remained strong especially in the area of national defense, which increased opportunity and fortified our strategy for greater balance between the public and private sectors. The state and local government markets remained weak but the market for our specialized services in the area of risk and emergency management strengthened due in part to hurricanes and wild fires. Near term expectations are for the Federal Department of Defense and Homeland Security sectors to remain strong. As the economy expands its recovery, the private sector will strengthen. State and local government markets will remain weak but will improve as increased tax revenue from private sector recovery trickles into the government sector.

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

Segment Results of Operations

Our businesses are reported as four segments, reflecting our management methodology and structure. The accounting policies of the segments are the same as those described in the footnotes to the accompanying consolidated financial statements. We evaluate performance based on operating income (loss) of the respective segments. The discussion that follows is a summary analysis of the primary changes in operating results by segment for fiscal 2004 as compared to fiscal 2003 and fiscal 2003 as compared to fiscal 2002.

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2004 compared to 2003

Engineering fees for the year ended September 30, 2004, were $451 million compared to $389 million in 2003, representing a 15.9% increase. The majority of the increase was in the transportation, civil engineering and construction management segments. In the transportation segment, engineering fees increased 14.0% to $181 million from $159 million due to higher volumes from new and existing projects with several state departments of transportation and aviation projects around the country. Growth was greatest in Texas, Arizona, Nevada, Colorado and California. The growth in Texas was due to increased funding as a result of the passage of the HB 3588 bill by the Texas legislature. In addition, more money is being generated through bonding and new tax initiatives. The transportation segment’s growth in the western states was due to increased marketing efforts and the WKA acquisition. Our aviation programs grew due to natural escalation of salaries, as well as, new military clients. Engineering fees from civil engineering services increased 26.5% to $82 million from $65 million. Civil engineering’s increases are due primarily to large disaster response projects related to the 2004 hurricanes in Florida and wild fires in Southern California and growth in our homeland security program. Engineering fees from our construction management segment increased to $78 million from $59 million, an increase of 33.1%. The increase in our construction management fees relates primarily to several large projects with existing clients including several state departments of transportation. The biggest growth arose out of an acceleration of Texas

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Turnpike Authority (“TTA”) projects and projects with Arkansas Department of Transportation (“DOT”). TTA work required the addition of more than 100 full time technical employees. The program to manage $800 million in turnpike construction management was won by us in 2001, but plans had to be developed before our work could begin. Due to extraordinary efforts by our Right of Way and Utility teams, the projects began six months early, resulting in the construction management staff growth over previous years. At the same time, our construction management segment was at its staffing peak on a project with the Arkansas DOT. This project was also won in 2001, but did not achieve full staffing until 2002, and is nearing its end in 2004. The later stages of construction management work typically require a full technical staff, plus temporary technical help, as well as a significant amount of overtime. This resulted in a continued growth in the year over year revenues for this segment’s operations in Arizona. This project is essentially complete and will demobilize in 2005. Lastly, our construction management segment benefited from the disaster response projects that resulted from the hurricanes that hit Florida in 2004. Engineering fees have remained stable in our environmental services market with revenue increasing 2.9% to $110 million from $107 million. The minimal growth is primarily related to the FEMA project, which began to wind down in early fiscal 2004. In addition, more time was spent during fiscal 2004 on business development for future projects.

Net earned revenue was $355 million during the year ended September 30, 2004 as compared to $306 million for the same period in 2003, representing an increase of 15.8%. This increase was directly related to the increase in engineering fees. In addition, the change in our net earned revenue is affected by the fluctuation in our direct expenses. Direct expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, travel and sub-consultant expenses. Direct expenses for our transportation segment increased as a percentage of net earned revenue to 32.7% from 28.9%. The increase primarily resulted from increased use of sub consultants due to contract requirements. In our construction management segment, direct expenses as a percentage of net earned revenue decreased slightly to 32.6% from 34.7% due to decreased use of sub-consultants on several projects and changes in our reimbursement structure for a large project. Our environmental services segment also showed a decrease in direct expenses as a percentage of net earned revenue to 23.1% from 27.1%. The decrease was due primarily to a return to normal direct expense spending in fiscal 2004, as compared to 2003. In 2003, direct expenses were larger than normal due to a video inspection sub-consultant that we utilized to assist us with the beginning stages of a job in California. Since then, the volume of video work has decreased, thereby reducing direct our expenses in this segment. Direct expenses for civil engineering services as a percentage of net earned revenue remained constant compared to the prior year.

Operating income was $33.1 million for the year ended September 30, 2004 as compared to $26.2 million for the same period in 2003, representing an increase of 26.3%. Operating income, as a percentage of net earned revenue, increased slightly to 9.3% in fiscal 2004 from 8.6% in fiscal 2003. All the segments except transportation experienced an increase in operating income compared to the prior year and increases in operating income as a percentage of net earned revenue. These were driven by improvements in revenue and chargeability, due largely to the large disaster response projects and significant increases in work volume with DOTs as a result of increased funding sources available to the states. In addition, all three segments had a reduction in costs and expenses, as a percentage of net earned revenue, as a result of the improvements in chargeability, which allowed for less growth in the indirect labor costs. As explained previously, as chargeability improves or increases, we are able to bill more of our labor costs to clients, called direct labor, thereby improving our profit margin. These increases were partially offset by decreases in operating income as a percentage of net earned revenue experienced by transportation due to decreased chargeability and increases in other costs and expenses, primarily indirect labor, as a percentage of net earned revenue.

Costs and expenses consist of direct salaries that are chargeable to clients and general and administrative expenses. Direct salaries were $129 million for the year ended September 30, 2004, as compared to $111 million for the same period in 2003, representing an increase of 16.3%. This increase is directly related to the increase in engineering fees and chargeability. As a percentage of net earned revenue, direct salaries increased slightly, to

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36.2% in 2004 from 36.1% in 2003. Direct salaries in the construction management segment increased 37.5%, and as a percentage of revenue, increased to 40.8% from 40.1%. This increase is due to significant growth in Texas and Arkansas as a result of new projects with existing clients, such as TTA and Arkansas DOT. The increase as a percentage of revenue in the construction management segment was offset by slight decreases in civil engineering and transportation due to additional professionals being hired during the year to enable further growth in the segments in the future and a focus on marketing. For our environmental services segment, direct salaries, as a percentage of net earned revenue, increased slightly to 33.3% in 2004 from 33.2% in 2003.

The other component of costs and expenses is general and administrative expenses, which consists of indirect labor and other overhead costs incurred in operations. Indirect labor increased 12.6%, to $46.8 million during the year ended September 31, 2004 from $41.6 million for the same period in fiscal 2003. As a result of higher chargeability in fiscal 2004, indirect labor as a percentage of net earned revenue was 13.2% for the year ended September 30, 2004 as compared to 13.6% for the same period in 2003. Transportation experienced an increase in indirect labor as a percentage of net earned revenue as a result of the decrease in chargeability due to the focus on marketing and an increase use of sub-consultants on certain projects. Construction, civil engineering and environmental experienced a decrease in indirect labor as a percentage of net earned revenue as a result of improved chargeability from new projects including the hurricane relief efforts. As chargeability increases, and as more of the technical staff’s time worked is being charged back to clients, direct labor increases and indirect labor decreases.

Other overhead costs increased 14.3%, to $146.4 million for the year ended September 30, 2004 from $128 million during the year ended September 30, 2003. The majority of the increase is related to the growth in engineering fees, as explained above. For the year ended September 30, 2004, other overhead costs, as a percentage of net earned revenue, was 41.1% compared to 41.8% in 2003. This improvement is primarily related to slower growth in overhead costs within our civil engineering segment, as compared to the growth in the net earned revenue within this segment. The slower growth in overhead costs is because the disaster response projects require the use of several hundred part time temporary technical professionals who do not receive fringe benefits, such as health benefits and paid time off. Our transportation segment experienced an increase in overhead costs as a percentage of net earned revenue due to increased benefits costs and higher than normal increases in employee relocation expenses and travel costs. Health benefits in the transportation segment increased $1.0 million or 23% to $5.4 million in 2004 from $4.4 million in 2003. Relocation expenses in the transportation segment increased $474,000 or 151% to $0.8 million in 2004 from $0.3 million in 2003. In the transportation segment, and the other segments as well, we have relocated several key employees to offices experiencing growth in an effort to provide leadership for the office during the time of growth. Other overhead costs as a percentage of net earned revenue remained stable compared to the prior year for our construction management and environmental segments.

2003 compared to 2002

Engineering fees for the year ended September 30, 2003, were $389 million compared to $344 million in 2002, presenting a 13.0% increase. The majority of the increase was in our transportation, environmental and construction management segments. In our transportation segment, engineering fees increased 10.5% due to higher volumes from continued strength in the transportation services market and engineering fees from new projects. Legislation over the last few years has increased federal funding for transportation and aviation projects to expand existing infrastructures. Some of the projects contributing to transportation’s increase involve a runway extension project at George Bush International Airport in Houston, Texas, toll road development projects for Florida’s Turnpike enterprise, Texas Turnpike Authority, the Orlando Orange County Expressway Authority and the Miami-Dade Expressway Authority. Engineering fees from our environmental segment increased 17.2% due to engineering fees from new projects and from the acquisition of Welker. Two of the larger new projects were with

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the City of San Diego and The Army Corps of Engineers. The City of San Diego retained us to conduct a series of condition assessment investigations for their sewer system, with the express purpose of reducing overflows and beach closures in San Diego County. The Army Corps of Engineers project is for the Comprehensive Everglades Restoration Project in South Florida, where we provide program management support activities with a joint venture partner. This project is budgeted for up to $6 million a year for a three year period. Engineering fees from our construction management segment increased 31.5%, partially fueled by the legislation and industry trends, such as ISTEA and TEA-21, thereby supporting significant projects with departments of transportation in Florida, Arkansas, Colorado, Nevada and Texas. Another contributing factor to construction’s increase is fees from new projects related to emergency response efforts involving ice storm clean up in the Eastern United States. Engineering fees have remained stable in our civil engineering services segment. Although engineering fees remained consistent from 2002 to 2003, increases in chargeability and reduction in costs allowed our civil engineering services segment to improve its earnings in 2003. Another factor that helped us recover from a sluggish economy was the acquisition of DTI, a firm specializing in risk and emergency management services for public sector clients.

Net earned revenue was $306 million during the year ended September 30, 2003 as compared to $266 million for the same period in 2002, representing an increase of 15.1%. This increase is directly related to the increase in our engineering fees. In addition, the change in our net earned revenue is affected by the fluctuation in our direct expenses. Our direct expenses decreased slightly as a percentage of revenue to 27.0% in 2003 from 29.3% in 2002. This decrease was driven by our transportation and civil engineering segments, offset by increases in direct expenses as a percentage of revenue in our construction management and civil engineering segments. Direct expenses for our transportation segment decreased as a percentage of net earned revenue to 28.9% from 32.6%. The decrease primarily resulted from decreased use of sub-consultants as a result of additional hiring and reduced employee turnover. For our civil engineering segment, direct expenses as a percentage of revenue decreased significantly to 16.6% from 23.9% due to a decreased use of sub-consultants as a result of the slowdown in the economy and the increase in chargeability internally. In our construction management segment, direct expenses as a percentage of net earned revenue increased slightly to 34.7% from 33.9% due to an increased use of sub-consultants. Our environmental services segment also showed an increase in direct expenses as a percentage of net earned revenue to 27.1% from 26.3%. The increase was due primarily the hiring of a video inspection sub-consultant to assist us with a large project in California, combined with increased use of sub-consultants in other states to accommodate our internal growth in engineering fees and a return to normal direct expense spending in fiscal 2004, as compared to 2003.

Our operating income was $26.2 million for the year ended September 30, 2003 as compared to $19.6 million in 2002, representing an increase of 33.7%. Operating income, as a percentage of net earned revenue, increased to 8.6% in 2003 from 7.4% in 2002. All four of our segments experienced an increase in operating income compared to the prior year. Construction and civil engineering both had increases in operating income as a percentage of net earned revenue which were driven by improved chargeability and a decrease in costs and expenses as a percentage of net earned revenue. As chargeability increases, we are able to bill out more of our costs to clients, thereby improving our profit margin. These increases were partially offset by slight decreases in operating income as a percentage of net earned revenue experienced by our transportation and environmental services segments due to increases in other costs and expenses as a percentage of net earned revenue.

Costs and expenses consist of direct salaries that are chargeable to our clients and general and administrative expenses. Direct salaries were $111 million for the year ended September 30, 2003, as compared to $96.7 million for the same period in 2002, representing an increase of 14.5%. This increase is directly related to the increase in our engineering fees for the year and the increase in our chargeability. As a percentage of net earned revenue, direct salaries decreased slightly to 36.1% from 36.3%. Direct salaries in our construction management segment as a percentage of revenue, decreased to 40.1% from 40.7%. This decrease is due to the increased use of sub-consultants. In our environmental segment, direct salaries as a percentage of revenue

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decreased to 33.2% in 2003 from 34.4% in 2002 due to decreased chargeability. Our civil engineering segment also showed a slight decrease in direct salaries as a percentage of net earned revenue, to 36.2% in 2003 from 36.7% in 2002. The decreases as a percentage of revenue in our construction, environmental and civil engineering segments were offset by a slight increase in our transportation segment due to decreased use of sub-consultants, increased chargeability and reduced employee turnover.

The other component of costs and expenses is our general and administrative expenses, which consists of indirect labor and other overhead costs incurred in operations. Indirect labor increased 11.9%, to $41.6 million during the year ended September 30, 2003 to $37.2 million for the same period in 2002. Indirect labor as a percentage of net earned revenue decreased to 13.6% in 2003 from 14.0% in 2002. All of our segments except for environmental experienced a decrease in indirect labor as a percentage of net earned revenue due to our increased chargeability. As our chargeability increases, our direct labor increases and our indirect labor decreases, as more of our technical staff’s time worked is charged back to our clients. Our environmental segment showed a decrease in indirect labor as a percentage or net earned revenue due to a decrease in its chargeability.

Other overhead costs increased 13.4%, to $128 million for the year ended September 30, 2003 from $113 million during the year ended September 30, 2002. The increase is primarily related to the growth in engineering fees. As a percentage of net earned revenue, other overhead costs decreased slightly to 41.8% from 42.4%. Our civil engineering segment experienced a decrease in other overhead costs as a percentage of revenue to 46.3% in 2003 from 49.7% in 2002 due to cut-backs made in our direct labor personnel which allowed for additional savings in fringe benefit costs. Transportation also experienced a slight decrease in other overhead costs as a percentage of net earned revenue to 40.3% in 2003 from 40.5% in 2002. The decreases in our civil engineering and transportation segments were partially offset by increases in other overhead costs as a percentage of revenue for our environmental and construction management segments. Environmental increased to 43.9% from 43.4% and construction management increased to 36.1% from 34.7%. The increases in both segments were due primarily to increased insurance costs.

Consolidated Results

Net Income:

Net income was $18.3 million, $17.2 million and $13.4 million for fiscal years 2004, 2003 and 2002, respectively. The percentage of net income to net earned revenue was 5.1%, 5.6% and 5.0% for fiscal years 2004, 2003 and 2002. The 6.2% increase in net income in fiscal 2004, as compared to 2003, was a result of increased chargeability and improved cost control, offset by an increased effective tax rate in fiscal 2004 as compared to 2003. The effective tax rate was 45.3% in fiscal 2004, as compared to 35.9% in fiscal 2003 as a result of an increase of $1.6 million in the valuation allowance for the deferred tax assets related to research and development tax credit carry-forwards and a tax contingency accrual in connection with the credits previously deducted on our tax returns. As a result of improved cost control and improved profitability, indirect labor and general and administrative expenses increased at a smaller percentage than net earned revenue. In addition, as a percentage of net earned revenue, general and administrative costs decreased from 55.3% in 2003 to 54.4% in fiscal 2004. As mentioned previously, the disaster recovery projects within our civil engineering segment, which involved several hundred part time temporary technical professionals incurring direct labor costs that were charged back to our clients, but who did not receive fringe benefits such as health insurance and paid time off. The increases in our general and administrative costs were due to annual increases in pay rates for our employees, a charge of $2.5 million for a legal contingency and increases in accrual of insurance expenses related to our medical plan. In addition, our employment turnover rate has been decreasing, allowing for additional general and administrative cost savings.

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Income Taxes:

The income tax provision was $15.1 million and $9.6 million, or an effective tax rate of 45.3% and 35.9%, for the years ended September 30, 2004 and 2003, respectively. The increase in the effective tax rate in fiscal 2004 was due to the increase in the valuation allowance for the deferred tax asset related to research and development tax credit carry-forwards and the accrual in connection with the credits previously deducted on our tax returns. These research and development tax credit carry-forwards, which expire beginning 2017 through 2022, were approximately $4.6 million and $7.1 million as of September 30, 2004 and September 30, 2003, respectively.

For the past several years, we have generated research and development tax credits related to certain qualifying costs. The qualifying costs relate primarily to our project costs which involved technical uncertainty. These research and development costs were incurred in the course of providing services under generally long-term client projects, thereby creating costs associated with recognizable revenue under the projects. Because we have been unable to utilize the entire amount of research and development tax credits generated each year, the balance sheet reflects a deferred tax asset of $4.7 million and $7.2 million at September 30, 2004 and September 30, 2003, respectively, for the unused credit carryforwards. In addition, because of the uncertainty of our ability to utilize these credits in the future, a valuation allowance of $4.2 million and $2.6 million at September 30, 2004 and 2003, respectively, was provided for against this deferred tax asset.

Our effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required to determine our effective tax rate and to evaluate our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit or current developments in tax law. For that matter, with respect to certain credits for increasing research activities that have been utilized to reduce our income taxes payable reported on previous tax returns open for examination, we have recorded an accrual of approximately $4.6 million as of September 30, 2004.

A number of years may elapse before a particular matter, for which we have established an accrual, is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. We are unaware of any current audit by the Internal Revenue Service or any other jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our accruals reflect the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require use of our cash. Favorable resolution would be recognized as a reduction to our effective tax rate in the year of resolution. Our tax accruals are presented in the consolidated balance sheet within accounts payable and accrued expenses.

Liquidity and Capital Resources

Cash Flows From Operating Activities

Net cash provided by operating activities totaled $29.2 million for fiscal 2004 as compared to $24.4 million for 2003. The primary sources of net cash provided by operating activities was from income generated from projects. Cash flows from income were partially offset by increases in accounts receivable and unbilled fees, accounts payable and other liabilities. The increases in unbilled fees and accounts receivable are attributable primarily to the increase in revenue during September 2004 compared to September 2003 due to the hurricane debris removal projects. Fluctuations in accounts payable are related to direct expenses, where the timing of payment to subcontractors is directly related to the collection of related receivables. Additionally, increases in accounts payable and other liabilities contributed to an increase in cash provided by operating activities.

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In fiscal year 2003, net cash provided by operating activities totaled $24.4 million as compared to $15.0 million in 2002. The increase was primarily a result of the increase in accounts payable, and net income, as well as an increase in the deferred tax provision, offset by the increase in unbilled fees and accounts receivable. Fluctuations in accounts payable are related to direct expenses, where the timing of payment to sub-contractors is directly related to the collection of related receivables.

Approximately 90% of our revenues are billed on a monthly basis. The remaining amounts are billed when we reach certain stages of completion as specified in the contract. Payment terms for accounts receivable and unbilled fees, when billed, are net 30 days. During fiscal 2004, unbilled fees increased 22% from $43.8 million at September 30, 2003 to $53.2 million at September 30, 2004. The increase in unbilled fees during fiscal 2004 is related to the increase in engineering fees in September 2004 as compared to September 2003 due to several large debris removal projects related to the Florida hurricanes. During 2003, unbilled fees and billings in excess of cost increased by $4.4 million. The increase in 2003 resulted from the increase in engineering fees and new electronic billing procedures implemented by FDOT on new contracts, which temporarily delayed some of our FDOT billings by one to two months. The number of days outstanding for unbilled fees was 41 days, 37 days and 32 days at September 30, 2004, 2003 and 2002, respectively. By comparison, according to PSMJ Resources, Inc., the average days outstanding for unbilled fees for design firms of comparable size was 27.8 days in fiscal 2004 and 27.9 days in 2003.

Accounts receivable increased 23%, from $52.5 million at September 30, 2003 to $64.5 million at September 30, 2004, primarily due to the growth in engineering fees. The allowance for doubtful accounts remained constant at $1.1 million at September 30, 2003 and September 30, 2004. The allowance for doubtful accounts decreased during 2003, from $1.4 million at September 30, 2002 to $1.1 million at September 30, 2003. The decrease in the allowance during 2003 was due to improved collections of our accounts receivable. The number of days sales outstanding for accounts receivable was approximately 47 days, 46 days and 49 days at September 30, 2004, 2003 and 2002, respectively. By comparison, according to PSMJ Resources, Inc. the average days sales in accounts receivable for design firms of comparable size was 68.7 days in fiscal 2004 and 75.1 days in 2003.

Cash Flows from Investing Activities

Net cash used in investing activities was $15.4 million, $12.7 million and $5.8 million in fiscal years 2004, 2003 and 2002, respectively. Investing activity typically consists of fixed asset purchases, such as survey equipment, computer equipment, furniture and leasehold improvements. However during fiscal 2004 and fiscal 2003 approximately $5.4 million and $5.5 million, respectively, was used in acquisitions and an earnout payment on a previous acquisition.

In fiscal 2004, we completed two acquisitions. On June 1, 2004 we acquired 100% of the stock of TriLine Associates, Inc. for $3.7 million in cash. On July 1, 2004 we acquired 100% of the stock of W. Koo and Associates for $413,000 in cash and 71,429 shares of our common stock, for a total purchase price of $2.3 million. Additionally in fiscal 2004, we paid an earn-out payment related to the Welker acquisition in the amount of $1.2 million.

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In fiscal 2003, we also completed two acquisitions. On December 1, 2002, we acquired 100% of the stock of Durham Technologies, Inc. for $1.5 million, net of cash acquired. On March 19, 2003, we acquired 100% of the stock of Welker & Associates, Inc. for $4.0 million in cash and $400,000 in restricted stock, totaling a purchase price of $4.4 million.

Cash Flows from Financing Activities

Net cash used in financing activities for fiscal year 2004 was $14.3 million, as compared to $11.4 million for fiscal year 2003. The change in net cash used is primarily attributable to the increase in net payments under our line of credit offset by a decrease in the net purchases of common stock. Net cash used in financing activities for fiscal year 2003 was $11.4 million, as compared to net cash used in financing activities of $6.2 million in fiscal year 2002. The increase in net cash used is primarily attributable to the decrease in net borrowings under our line of credit and the decrease in principal payments under notes payable, offset by the decreased net amount of common stock repurchased.

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

Capital Resources

As of September 30, 2004, we had a $58 million revolving line of credit agreement, inclusive of $3 million in letters of credit, with a bank. On May 6, 2003, this agreement was amended to increase the maximum aggregate principal amount from $37 million to $55 million. All other terms of the agreement remain the same. The revolving line of credit expires June 30, 2005. Pending the lender’s consent, we plan on amending our line of credit agreement to extend the expiration date to October 1, 2007, for the same amount. Although our most significant source of cash is historically from operations, in the event that cash flows from operations are insufficient to cover our working capital needs, we would access our revolving line of credit facility. Future cash sources are anticipated to fund operations, general corporate purposes and small acquisitions. Based upon our cash flow from operations and our revolving line of credit discussed above, we believe that we have access to adequate financial resources to fund our contractual obligations and fund our operations in 2005 and beyond, including working capital requirements, capital expenditures and potential future acquisitions.

The interest rate (2.34% and 1.62% at September 30, 2004 and September 30, 2003, respectively) on the revolving line of credit ranges from LIBOR plus 50 basis points to prime minus 125 basis points if our funded debt average ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 and 3.0. As of September 30, 2004, the fair value of the debt is consistent with the outstanding principal balance. The line of credit requires us to, among other things, maintain minimum levels of net worth, a minimum coverage ratio of certain fixed charges, and a minimum leverage ratio of earnings before interest, taxes, depreciation and amortization to funded debt (all as defined in the agreement). The line of credit is collateralized by substantially all of our assets. We were in compliance with all debt covenants at September 30, 2004.

As of September 30, 2004, we had no outstanding balance under the line of credit. By comparison, on September 30, 2003, we had $9.2 million outstanding under the line of credit, which accrued interest at an effective rate of 1.62%. We used cash flow from operating activities to repay amounts outstanding under our line of credit.

On March 19, 2001, we entered into a mortgage note of $9.0 million due in monthly installments starting on April 16, 2001, with interest. Interest on the note is LIBOR plus the floating rate margin of not less than 65

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basis points and not greater than 90 basis points. A balloon payment is due on the note on March 16, 2011. The effective interest rate on the mortgage note was 2.49% and 1.77% for the fiscal years ended September 30, 2004 and 2003, respectively. The mortgage note is collateralized by our office building located in Orlando, Florida. We use an interest rate swap to manage risks associated with interest rate fluctuations on its long term debt. The interest rate swap converts the floating interest rate on the note payable to a fixed rate of 6.28%.

Our capital expenditures are generally for purchases of property and equipment. We spent $9.6 million, $7.6 million and $6.3 million on such expenditures in fiscal years 2004, 2003 and 2002, respectively. The capital expenditures in fiscal year 2004 and 2003 consisted of equipment, furniture and leasehold improvement purchases, while the capital expenditures in fiscal year 2002 were a result of these expenditures plus construction costs for the Orlando office building.

We believe that our existing financial resources, together with our cash flow from operations and availability under our line of credit, will provide sufficient capital to fund our operations for fiscal year 2005 and beyond.

Inflation

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

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The objective of this Issue is to provide guidance for identifying impaired investments. EITF 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. The accounting provisions of EITF 03-1 are effective for all reporting periods beginning after June 15, 2004, while the disclosure requirements are effective only for annual periods ending after June 15, 2004. The company has evaluated the impact of the adoption of EITF 03-1 and does not believe that impact will be significant to the Company’s overall results of operations, financial position or cash flows.

In December 2003, the FASB issued Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46R”), which replaced FIN 46. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights. This interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns or both. The interpretation also requires disclosures about variable interest entities that the Company is not required to consolidate but in which it has a significant variable interest. The Company is required to adopt FIN 46R immediately for entities created after December 31, 2003 and at the beginning of Fiscal 2006 for all other entities. Although the Company has not completed its initial evaluation of FIN 46R, the adoption is not expected to have a material impact on the Company’s results of operations, financial condition or cash flows.

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In December 2003, the Securities and Exchange Commission staff (“SEC”) issued Staff Accounting Bulletin No. 104 (“SAB 104”), Revenue Recognition, which supercedes Staff Accounting Bulletin No. 101 (“SAB 101”), Revenue Recognition in Financial Statements. The primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements and to reflect the accounting guidance issued in Emerging Issues Task Force 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104 rescinds the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” (the “FAQ”) issued with SAB 101. Selected portions of the FAQ have been incorporated into SAB 104. The adoption of SAB 104 did not have an effect on our revenue recognition policy or revenues recorded.

In November 2002, the Emerging Issues Task Force (EITF) of the FASB reached a consensus on Issue No. 00-21, “Multiple-Deliverable Revenue Arrangements”. EITF No. 00-21 addresses how to account for revenue arrangements with multiple deliverables and provides guidance relating to when such arrangements should be divided into components for revenue recognition purposes. The consensus is effective for revenue agreements entered into in fiscal periods beginning after June 15, 2003 with early adoption permitted. We adopted the provisions of EITF No. 00-21 in the quarter ended September 30, 2003, and the effect of adoption was immaterial.

Critical Accounting Policies

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

Revenue Recognition

We earn our revenues for the various types of services we provide through cost-plus, time-and-materials, fixed price contracts, and contracts, which combine any of these methods. In the course of providing its services, the Company routinely incurs direct expenses such as sub-contracts for services. In addition, the Company also includes pass-through costs on cost-plus contracts, which are customer-reimbursable materials, equipment and sub-contractor costs when the Company determines that it is responsible for engineering specification, procurement and management of such cost components on behalf of the customer. These direct expenses are principally passed through to the Company’s clients with minimal or no mark-up and are included in the Company’s gross revenues. Accordingly, the Company also reports net earned revenue, which is gross revenue less direct expenses. For cost-plus and time and material contracts, the Company reports fees earned based on actual labor multiplied by contractual rates or multipliers. For fixed-price contracts, the Company reports fees earned on the percentage of completion basis where progress toward completion is measured by relating the actual cost of work performed to date to the current estimated total cost of the respective contract. In making such estimates, judgements are required to evaluate potential variances in schedule, cost of materials and labor, productivity, contract disputes, or achievement of contract performance standards. Anticipated losses, if any, are recognized for fixed priced contracts in total in the period in which they become determinable.

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

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Income Taxes

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

For the past several years, the Company has generated research and development tax credits related to certain qualifying costs. The qualifying costs relate primarily to the Company’s project costs which involved technical uncertainty. These research and development costs were incurred by the Company in the course of providing services under generally long-term client projects, thereby creating costs associated with recognizable revenue under the project. Because the Company has been unable to utilize the entire amount of research and development tax credits it has generated each year, the balance sheet reflects a deferred tax asset of $4.7 million and $7.2 million at September 30, 2004 and 2003, respectively, for the unused credit carryforward. In addition, because of the uncertainty associated to the ability of the Company to utilize these credits in the future, a valuation allowance of $4.2 million and $2.6 million at September 30, 2004 and 2003, respectively, has been provided for against this deferred tax asset.

Our effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit or current developments in tax law. For that matter, with respect to certain credits for increasing research activities that have been utilized to reduce our income taxes payable reported on tax returns open for examination, we have recorded a reserve of approximately $4.6 million as of September 30, 2004.

Contingencies

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

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Contractual Obligations

A summary of the Company’s contractual obligations as of September 30, 2004 is as follows:

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

The Company had no outstanding purchase obligations at September 30, 2004.

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Quantitative and Qualitative Disclosures

about Market Risk

We believe that our exposure to market risks is minimal. We do not hold market-risk sensitive instruments for trading purposes. We entered into one derivative financial instrument, a swap agreement, to hedge cash flows related to the LIBOR interest rate risk. Both at inception of the hedge and on an ongoing basis, we believe there is no ineffectiveness in the hedging relationship of interest rate risk involving interest-bearing debt and the interest-rate swap. Based on a hypothetical 1% point increase in the period ending market interest rate as of September 30, 2004, the change in the fair value of this liability would be approximately $200,000. We believe this instrument will be highly effective in the hedging of cash flows. We hold no other financial instruments or derivative commodity instruments to hedge any market risk, nor do we currently plan to employ them in the near future.

The interest rate (2.34% and 1.62% at September 30, 2004 and September 30, 2003, respectively) on our revolving line of credit and term loan ranges from LIBOR plus 50 basis points to prime minus 125 basis points if our funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 to 3.0. The Company mitigates interest rate risk by continually monitoring interest rates and electing the lower of the LIBOR or prime rate option available under the line of credit or term loan. As of September 30, 2004, the fair value of the debt is consistent with the outstanding principal balance.

The interest rates under our revolving line of credit and term loan are variable. To the extent that we have borrowings outstanding, there may be market risk relating to the amount of such borrowings, however, our exposure is minimal due to the short-term nature of these borrowings.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

The PBSJ Corporation:

We have audited the accompanying consolidated balance sheet of The PBSJ Corporation and subsidiaries (the “Company”) as of September 30, 2004, and the related consolidated statements of operations, of stockholders’ equity and comprehensive income, and of cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The PBSJ Corporation and subsidiaries as of September 30, 2004, and the results of their operations and their cash flows for the year ended September 30, 2004, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

December 22, 2004

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Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and

Stockholders of The PBSJ Corporation:

In our opinion, the consolidated financial statements listed in the accompanying index appearing under Item 15(a)(1), present fairly, in all material respects, the financial position of The PBSJ Corporation and its subsidiaries at September 30, 2003 and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, pursuant to the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, the Company changed its method of accounting for goodwill.

/s/ PricewaterhouseCoopers LLP

Miami, Florida

December 12, 2003

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THE PBSJ CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

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

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THE PBSJ CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)