Three and Six Months Ended December 26, 2008 and December 28, 2007

Beginning with the quarter ended September 28, 2007, we changed our quarter end to the last Friday of the quarter from the last day of the calendar quarter. With the centralization of our businesses, we believe the last Friday of the quarter period reporting is more consistent with our operating cycle, as well as the reporting periods of our industry peers. The quarter ended December 26, 2008 is comparable to the same period in the prior year, however the six months ended December 26, 2008 contains two less calendar days than the same period in the prior year.

You should read the following discussion of our results of operations and financial condition in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q and with our Annual Report on Form 10-K for the fiscal year ended June 30, 2008. This discussion contains forward-looking statements that are based upon current expectations and assumptions, and, by their nature, such forward-looking statements are subject to risks and uncertainties. We have attempted to identify such statements using words such as "may", "expects", "plans", "anticipates", "believes", "estimates", or other words of similar import. We caution the reader that there may be events in the future that management is not able to accurately predict or control which may cause actual results to differ materially from the expectations described in the forward-looking statements. The factors in the sections captioned "Critical Accounting Policies" and "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008 and below in this Form 10-Q provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in the forward-looking statements.

OVERVIEW

We are an engineering, consulting, and construction management firm that provides integrated services to the environmental, energy and infrastructure markets. Our multidisciplinary project teams provide services to help our clients implement complex projects from initial concept to delivery and operation. A broad range of commercial, industrial, and government clients depend on us for customized and complete solutions to their toughest business challenges. We provide our services to commercial organizations and governmental agencies almost entirely in the United States of America.

We derive our revenue from fees for professional and technical services. As a service company, we are more labor-intensive than capital-intensive. Our revenue is driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding service to our clients and execute projects successfully. Our income or loss from operations is derived from our ability to generate revenue and collect cash under our contracts in excess of our direct costs, subcontractor costs, other contract costs, and general and administrative ("G&A") expenses.

In the course of providing our services, we routinely subcontract services. Generally, these subcontractor costs are passed through to our clients and, in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and consistent with industry practice, are included in gross revenue. Because subcontractor services can change significantly from project to project, changes in gross revenue may not be indicative of business trends. Accordingly, we also report net service revenue ("NSR"), which is gross revenue less the cost of subcontractor services and other direct reimbursable costs, and our discussion and analysis of financial condition and results of operations uses NSR as a point of reference.

Our cost of services ("COS") includes professional compensation and related benefits together with certain direct and indirect overhead costs such as rents, utilities and travel. Professional compensation represents the majority of these costs. Our G&A expenses are comprised primarily of our corporate headquarters costs related to corporate executive management, finance, accounting, administration and legal. These costs are generally unrelated to specific client projects and can vary as expenses are incurred to support corporate activities and initiatives.

Our revenue, expenses and operating results may fluctuate significantly from year to year as a result of numerous factors, including:

† Unanticipated changes in contract performance that may affect profitability, particularly with contracts that are fixed-price or have funding limits;

† Seasonality of the spending cycle of our public sector clients, notably state and local government entities, and the spending patterns of our commercial sector clients;

† Budget constraints experienced by our federal, state and local government clients;

†          Divestitures or discontinuance of operating units;

†          Employee hiring, utilization and turnover rates;

†          The number and significance of client contracts commenced and
completed during the period;

†          Creditworthiness and solvency of clients;

†          The ability of our clients to terminate contracts without penalties;

†          Delays incurred in connection with contracts;

†          The size, scope and payment terms of contracts;

†          Contract negotiations on change orders and collection of related
accounts receivable;

†          The timing of expenses incurred for corporate initiatives;

†          Competition;

†          Litigation;

†          Changes in accounting rules;

†          The credit markets and their effects on our customers; and

†          General economic or political conditions.

Critical Accounting Policies

Our financial statements have been prepared in accordance with U.S. GAAP. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Actual results could differ from these estimates and assumptions. We use our best judgment in the assumptions used to value these estimates which are based on current facts and circumstances, prior experience and other assumptions that are believed to be reasonable. Our accounting policies are described in Note 2 to the consolidated financial statements contained in Item 8 of the Annual Report on Form 10-K as of and for the year ended June 30, 2008.

Reporting Unit Change

Prior to December 26, 2008, our business consisted of one reportable unit. Due to the current year reorganization of management reporting, our newly identified reporting units that carry goodwill include energy, environmental and infrastructure. We have allocated goodwill to these reporting units using the relative fair value allocation approach.

Results of Operations

We incurred a net loss of $19.3 million for the six months ended December 26, 2008 as well as significant net losses for the fiscal years ended June 30, 2008, 2007 and 2006. The net loss for the six months ended December 26, 2008 was primarily attributable to a goodwill impairment charge of $19.3 million and an intangible asset impairment charge of $2.1 million. During the six months ended December 26, 2008, we began to realize the benefits from the turnaround and restructuring efforts undertaken in prior fiscal years as evidenced by the improved financial results. We continue to take actions aimed at improving profitability and cash flows from operations. Specifically, we are enhancing controls over project acceptance, which we believe will reduce the level of contract losses; we are increasing the level of experience of our accounting personnel in order to improve internal controls and reduce compliance costs; and we continue to improve the timeliness of customer invoicing and enhance our collection efforts. We believe this will result in fewer write-offs of project revenue and reduce our reliance on our revolving credit agreement. We also continue to improve project management, which we believe will improve project profitability. We believe that existing cash resources, cash forecasted to be generated from operations and availability under our credit facility are adequate to meet our requirements for the foreseeable future.

A summary assessment of the three primary markets for our services follows:

Energy: The utilities in the United States are in the process of a multi-year build-out of the electric transmission grid. Years of underinvestment coupled with an increasingly favorable regulatory environment has provided a good business opportunity for those serving this market. According to a Department of Energy study, $50 billion to $100 billion of investment is needed to modernize the grid. These needs and increased returns on large investments in energy assets provide opportunities to sell services including: permitting, engineering and construction for the electric transmission system and development of renewable energy projects. We are well established in the Northeast and are actively growing our presence in other geographic regions where demand for services is the highest.

Environmental: Market demand for environmental services remains active, driven by a combination of regulatory requirements, economic factors and renewed focus on sustainability and climate change. Regulatory focus on emissions of concern (e.g. mercury, small particulates) is increasing demand for air quality consulting and air measurement services. Climate change initiatives should sustain market growth for air and other services. Remediation services remain strong in spite of much lower demand in the real estate market, but regulatory requirements and previously funded multi-year capital projects will sustain the market in the next several years. Real estate developers and owners are also increasing their demand for building science services (e.g. mold, indoor air quality). Real estate redevelopment and investment project opportunities have fallen off due to economic conditions, and we have adjusted our marketing and service offerings accordingly.

Infrastructure: Demand for services is expected to be flat in fiscal 2009 due to general economic conditions and the lack of increased public funding. The long-term outlook should be stronger due to alternative funding mechanisms (e.g., private/public partnerships), potential economic stimulus initiatives and the continued need to upgrade, replace or repair aging transportation infrastructure.

Consolidated Results



The following table presents the dollar and percentage changes in certain items
in the condensed consolidated statements of operations for the three and six
months ended December 26, 2008 and December 28, 2007:



                           Three Months Ended                             Six Months Ended
                          Dec. 26,    Dec. 28,          Change          Dec. 26,    Dec. 28,          Change
(Dollars in thousands)      2008        2007         $          %         2008        2007         $          %
Gross revenue            $  113,869   $ 110,932   $  2,937        2.6 % $ 228,862   $ 234,586   $ (5,724 )    (2.4 )%
Less subcontractor
costs and other direct
reimbursable charges         52,312      44,675      7,637       17.1     101,381      97,006      4,375       4.5
Net service revenue          61,557      66,257     (4,700 )     (7.1 )   127,481     137,580    (10,099 )    (7.3 )
Interest income from
contractual
arrangements                    612       1,007       (395 )    (39.2 )     1,390       2,078       (688 )   (33.1 )
Insurance recoverables
and other income             13,273          17     13,256   77,976.5      13,562       1,545     12,017     777.8
Cost of services             62,763      56,137      6,626       11.8     116,300     116,058        242       0.2
General and
administrative
expenses                      8,895       7,830      1,065       13.6      17,516      16,651        865       5.2
Provision for doubtful
accounts                        874         695        179       25.8       1,674       1,505        169      11.2
Goodwill and
intangible asset
write-offs                   21,438           -     21,438          -      21,438      76,678    (55,240 )   (72.0 )
Depreciation and
amortization                  1,859       2,024       (165 )     (8.2 )     3,768       4,126       (358 )    (8.7 )
Operating (loss)
income                      (20,387 )       595    (20,982 ) (3,526.4 )   (18,263 )   (73,815 )   55,552     (75.3 )
Interest expense                846         971       (125 )    (12.9 )     1,733       1,994       (261 )   (13.1 )
Federal and state
income tax (benefit)
provision                      (850 )       101       (951 )   (941.6 )      (668 )    12,338    (13,006 )  (105.4 )
Minority interest                 -          30        (30 )   (100.0 )         -          57        (57 )  (100.0 )
Equity in losses from
unconsolidated
affiliates                        -           -          -          -           -         (12 )       12     100.0
Net loss                    (20,383 )      (447 )  (19,936 ) (4,460.0 )   (19,328 )   (88,102 )   68,774      78.1

The following table presents the percentage relationships of items in the condensed consolidated statements of operations to NSR:

                                               Three Months Ended               Six Months Ended
                                          December 26,    December 28,    December 26,    December 28,
                                              2008            2007            2008            2007
Net service revenue                              100.0 %         100.0 %         100.0 %         100.0 %

Interest income from contractual
arrangements                                       1.0             1.5             1.1             1.5
Insurance recoverables and other
income                                            21.6               -            10.6             1.1

Operating costs and expenses:
Cost of services                                 102.0            84.7            91.2            84.4
General and administrative expenses               14.5            11.8            13.7            12.1
Provision for doubtful accounts                    1.4             1.0             1.3             1.1
Goodwill and intangible asset
write-offs                                        34.8               -            16.8            55.7
Depreciation and amortization                      3.0             3.1             3.0             3.0
                                                 155.7           100.6           126.0           156.3
Operating (loss) income                          (33.1 )           0.9           (14.3 )         (53.7 )
Interest expense                                   1.4             1.5             1.4             1.4
Loss from operations before taxes,
minority interest and equity in losses           (34.5 )          (0.6 )         (15.7 )         (55.1 )
Federal and state income tax (benefit)
provision                                         (1.4 )           0.2            (0.5 )           9.0
Minority interest                                    -            (0.1 )             -            (0.1 )
Loss from operations before equity in
losses                                           (33.1 )          (0.7 )         (15.2 )         (64.0 )
Equity in losses from unconsolidated
affiliates                                           -               -               -               -
Net loss                                         (33.1 )%         (0.7 )%        (15.2 )%        (64.0 )%

Gross revenue increased $3.0 million, or 2.6%, to $113.9 million for the three months ended December 26, 2008 from $110.9 million for the same period of the prior year. The increase was primarily due to revenue growth from our Exit Strategy contracts, particularly work associated with a new commercial development site in New York, which increased current quarter gross revenue by $7.0 million. This increase was partially offset by our investment in the Rochester Power Delivery Joint Venture ("RPD JV"). In fiscal 2006, we formed the RPD JV with two other companies to design and construct a $100.0 million electrical transmission and distribution system for Rochester Gas and Electric. The project was nearing completion and therefore generated $4.2 million less revenue when compared to the same period last year.

Gross revenue decreased $5.7 million, or 2.4%, to $228.9 million for the six months ended December 26, 2008 from $234.6 million for the same period of the prior year. In the six months ended December 28, 2007 we received a change order for approximately $5.1 million for several outstanding claims related to a design-build infrastructure project on which we were a subcontractor.

NSR decreased $4.7 million, or 7.1%, to $61.6 million for the three months ended December 26, 2008 compared to $66.3 million for the same period of the prior year. The decrease was primarily related to adjustments to the estimates at completion on certain Exit Strategy contracts which reduced NSR by approximately $2.7 million during the three months ended December 26, 2008. Current quarter NSR also showed the effect of personnel departures resulting from the restructuring plan that was implemented in the second half of fiscal 2008.

NSR decreased $10.1 million, or 7.3%, to $127.5 million for the six months ended December 26, 2008 compared to $137.6 million for the same period of the prior year. The decrease was primarily attributable to the $5.1 million decrease in NSR due to the aforementioned design-build change order which was received in the first quarter of fiscal 2007. Current quarter NSR also showed the effect of personnel departures resulting from the restructuring plan that was implemented in the second half of fiscal 2008 and adjustments to the estimates at completion on certain Exit Strategy contracts which reduced NSR by approximately $1.9 million during the six months ended December 26, 2008.

Interest income from contractual arrangements decreased $0.4 million, or 39.2%, to $0.6 million for the three months ended December 26, 2008 from $1.0 million for the same period of the prior year primarily due to lower one-year constant maturity T-Bill rates in fiscal 2009 compared to fiscal 2008.

Interest income from contractual arrangements decreased $0.7 million, or 33.1%, to $1.4 million for the six months ended December 26, 2008 from $2.1 million for the same period of the prior year primarily due to lower one-year constant maturity T-Bill rates in fiscal 2009 compared to fiscal 2008.

Insurance recoverables and other income was $13.3 million for the three months ended December 26, 2008 versus $17 thousand for the same period of the prior year. The increase primarily relates to three Exit Strategy projects that had estimated cost increases which are not expected to be funded by the project specific restricted investments and will be funded by the project specific insurance policy procured at project inception to cover, among other things, cost overruns.

Insurance recoverables and other income increased $12.0 million to $13.6 million for the six months ended December 26, 2008 compared to $1.6 million for the same period of the prior year. The increase primarily relates to three Exit Strategy projects that had estimated cost increases which are not expected to be funded by the project specific restricted investments and will be funded by the project specific insurance policy as discussed above.

COS increased $6.6 million, or 11.8%, to $62.7 million for the three months ended December 26, 2008 from $56.1 million for the same period of the prior year. The increase was primarily attributable to a $9.7 million increase in contract loss reserves for the three Exit Strategy contracts as discussed above. This increase was partially offset by a $1.9 million decrease in payroll and fringe benefit costs due to headcount reductions, a $0.5 million decrease in marketing and travel expenses and a $0.4 million decrease in restructuring costs. As a percentage of NSR, COS was 102.0% and 84.7% for the three months ended December 26, 2008 and December 28, 2007, respectively, primarily due to the three Exit Strategy projects that had estimated cost increases.

COS increased $0.2 million, or 0.2%, to $116.3 million for the six months ended December 26, 2008 from $116.1 million for the same period of the prior year. The increase was primarily attributable to a $9.4 million increase in contract loss reserves for the three Exit Strategy contracts as discussed above. This increase was partially offset by a $6.6 million decrease in payroll and fringe benefit costs due to headcount reductions, a $1.3 million decrease in marketing and travel expenses, a $0.8 million decrease in facility/occupancy costs due to prior restructuring initiatives, and a $0.7 million decrease in restructuring costs. As a percentage of NSR, COS was 91.2% and 84.4% for the six months ended December 26, 2008 and December 28, 2007, respectively, primarily due to the three Exit Strategy projects that had estimated cost increases.

G&A expenses increased $1.1 million, or 13.6%, to $8.9 million for the three months ended December 26, 2008 from $7.8 million for the same period of the prior year. The increase was primarily attributable to a $2.4 million increase in legal defense costs and settlement reserves. The increase was partially offset by a $0.6 million decrease in costs for health and general liability insurance, a $0.4 million decrease in bonus expense, and a $0.3 million decrease in corporate payroll expense due to headcount reductions.

G&A expenses increased $0.9 million, or 5.2%, to $17.5 million for the six months ended December 26, 2008 compared to $16.6 million for the same period of the prior year. The increase was primarily attributable to a $2.6 million increase in legal defense costs and settlement reserves. The increase was partially offset by a $0.8 million decrease in costs for health and general liability insurance, and a $0.7 million decrease in corporate labor costs due to headcount reductions.

The provision for doubtful accounts increased $0.2 million, or 25.8% to $0.9 million for the three months ended December 26, 2008 from $0.7 million for the same period of the prior year. The increase was primarily due to the slowing economy.

The provision for doubtful accounts increased $0.2 million, or 11.2%, to $1.7 million for the six months ended December 26, 2008 from $1.5 million for the same period of the prior year. The increase was primarily due to the slowing economy.

An impairment charge of $19.3 million was recorded to write down the carrying value of goodwill and $2.1 million was recorded to impair certain customer relationships intangible assets in the three and six months ended December 26, 2008. We assessed the recoverability of goodwill as of December 26, 2008, which is the annual impairment date. In performing the goodwill assessment, we utilized valuation methods, including the discounted cash flow method, the guideline company approach and the guideline transaction approach as the best evidence of fair value. The weighting of the valuation methods used by us was 40% discounted cash flows, 40% guideline company approach and 20% guideline

transaction approach. Less weight was given to the guideline transaction approach due to the limited number of recent transactions within the Company's industry. The aggregate fair value of our reporting units declined from the June 30, 2008 valuation to the December 26, 2008 valuation primarily due to a decline in the estimated future cash flows of the reporting units and declines in market multiples of comparable companies and resulted in non-cash goodwill impairment charges in the environmental and infrastructure reporting units of $19.3 million during the quarter ended December 26, 2008. Indefinite-lived intangible assets are also subject to an annual impairment test. On an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired, the fair value of the indefinite-lived intangible assets are evaluated by us to determine if an impairment charge is required. Fair value for intangible assets is based on discounted cash flows. During the quarter ended December 26, 2008, we recorded a $2.1 million impairment charge based on the results of our impairment review of intangible assets. The review concluded that intangible assets relating to certain customer relationships within the infrastructure reporting unit were not fully recoverable.

An impairment charge of $76.7 million was recorded in the six months ended December 28, 2007 to write down the carrying value of goodwill. Given the significant decline in our stock price coupled with a slower than anticipated operational turnaround, we assessed the recovery of goodwill as of September 28, 2007 through an analysis based on market capitalization, discounted cash flows and other factors and concluded that there was an impairment as of September 28, 2007.

Depreciation and amortization decreased $0.2 million, or 8.2%, to $1.9 million for the three months ended December 26, 2008 from $2.0 million for the same period of the prior year, because in the fourth quarter of fiscal 2008 we consolidated or closed 14 offices and impaired certain assets associated with these offices.

Depreciation and amortization decreased $0.3 million, or 8.7%, to $3.8 million for the six months ended December 26, 2008 from $4.1 million for the same period of the prior year. The decrease in depreciation and amortization expense for the first six months of fiscal 2009 is primarily due to the fact that we consolidated or closed 14 offices and impaired certain assets associated with these offices in the fourth quarter of fiscal 2008.

Interest expense decreased $0.1 million, or 12.9%, to $0.9 million for the three months ended December 26, 2008 from $1.0 million for the same period of the prior year. The decrease was primarily due to a decrease in the average outstanding balance on our credit facility from $28.0 million in the second quarter of fiscal 2008 to $24.5 million in fiscal 2009 along with lower average quarterly interest rates being charged on the line of credit in fiscal 2009 of 8.4% versus 8.6% in fiscal 2008.

Interest expense decreased $0.3 million, or 13.1%, to $1.7 million for the six months ended December 26, 2008 from $2.0 million for the same period in the prior year. The decrease was primarily due to a decrease in the average outstanding balance on our credit facility from $29.0 million for the six months ended December 28, 2007 to $25.3 million in the same period in fiscal 2008 along with lower average year-to-date interest rates being charged on our credit facility in fiscal 2008 of 8.4% versus 8.8% for the same period in the prior year.

Federal and state income tax benefit increased $1.0 million to $0.9 million for the three months ended December 26, 2008 from a tax provision of $0.1 million for the same period of the prior year primarily attributable to a $1.0 million income tax refund related to a prior year amended federal tax return.

Federal and state income tax benefit increased $13.0 million to $0.7 million for . . .