Ecology & Environment (EEI) 10-Q 2003 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q

[X]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended April 26, 2003
	OR
[   ]	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from__________ to__________

Commission File Number 1-9065

Ecology and Environment, Inc.
(Exact name of registrant as specified in its charter)

New York (State or other jurisdiction of incorporation or organization)	16-0971022 (IRS Employer Identification Number)
368 Pleasant View Drive Lancaster, New York (Address of principal executive offices)	14086-1397 (Zip code)

(716) 684-8060
(Registrant's telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

             Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   [X] No   [  ]

             At June 1, 2003, 2,393,432 shares of Registrant's Class A Common Stock (par value $.01) and 1,685,809 shares of Class B Common Stock (par value $.01) were outstanding.

  PART 1
FINANCIAL INFORMATION

Item 1.   Financial Statements

Ecology and Environment, Inc
Consolidated Balance Sheet
				April 26,			July 31,
				2003			2002
Assets				(Unaudited)			(Audited)
Current assets:
	Cash and cash equivalents		$	2,232,065		$	8,229,034
	Investment securities available for sale			4,035,760			3,904,799
	Contract receivables, net			46,755,221			29,268,949
	Deferred income taxes			2,580,576			2,325,370
	Income taxes receivable			---			312,977
	Other current assets			3,571,547			5,144,428
	Total current assets			59,175,169			49,185,557
Property, building and equipment, net				16,983,637			16,961,544
Deferred income taxes				335,205			237,495
Other assets				2,265,342			4,635,298
	Total assets		$	78,759,353		$	71,019,894
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	7,829,493		$	5,923,996
	Demand loan payable			5,800,000			---
	Accrued payroll costs			4,579,072			4,359,302
	Income taxes payable			764,596			266,411
	Deferred revenue			7,397,463			3,822,069
	Other accrued liabilities			4,752,356			4,545,708
	Total current liabilities			31,122,980			18,917,486
Deferred revenue				3,449,544			9,088,740
Long-term debt				102,428			---
Minority interest				2,290,802			1,719,428
Shareholders' equity:
	Preferred stock, par value $.01 per share;
		authorized - 2,000,000 shares; no shares
		issued		---			---
	Class A common stock, par value $.01 per
		share; authorized – 6,000,000 shares;
		issued - 2,469,071 and 2,468,571 shares		24,691			24,686
	Class B common stock, par value $.01 per
		share; authorized - 10,000,000 shares;
		issued - 1,712,068 and 1,712,068 shares		17,121			17,121
	Capital in excess of par value			17,462,362			17,372,444
	Retained earnings			27,439,028			26,570,576
	Accumulated other comprehensive income			(2,221,946	)		(1,661,265	)
	Unearned compensation			(171,875	)		(222,921	)
	Treasury stock - Class A common, 74,138 and 82,717
		shares; Class B common, 26,259 and 26,259 shares, at cost		(755,782	)		(806,401	)
	Total shareholders' equity			41,793,599			41,294,240
	Total liabilities and shareholders' equity		$	78,759,353		$	71,019,894
		The accompanying notes are an integral part of these financial statements.

Ecology and Environment, Inc.
Consolidated Statement of Income
(Unaudited)
			Three months ended						Nine months ended
				April 26,			April 27,			April 26,			April 27,
				2003			2002			2003			2002
Gross revenues			$	33,513,340		$	21,852,146		$	85,922,156		$	63,990,840
Less: direct subcontract costs				9,140,887			3,557,228			20,277,094			10,918,518
Net revenues				24,372,453			18,294,918			65,645,062			53,072,322
Operating costs and expenses:
	Cost of professional services and
		other direct operating expenses		14,759,981			9,814,567			37,995,196			28,092,352
	Administrative and indirect operating
		expenses		5,606,395			5,274,194			17,198,509			15,883,510
	Marketing and related costs			2,318,082			2,149,379			5,813,157			6,136,105
	Depreciation			383,128			318,661			1,133,090			1,030,080
Total operating costs & expenses				23,067,586			17,556,801			62,139,952			51,142,047
Income from operations				1,304,867			738,117			3,505,110			1,930,275
Interest expense				(34,227	)		(20,893	)		(53,909	)		(26,215	)
Interest income				68,904			70,545			168,015			243,445
Other expense				(114,761	)		(7,551	)		(201,025	)		(156,027	)
Income before income taxes and minority interest				1,224,783			780,218			3,418,191			1,991,478
Total income tax provision				322,314			284,856			1,227,974			831,512
Net income before minority interest				902,469			495,362			2,190,217			1,159,966
Minority interest				(314,388	)		(95,516	)		(618,584	)		(206,369	)
Net income			$	588,081		$	399,846		$	1,571,633		$	953,597
Net income per common share: Basic and Diluted			$	0.14		$	0.10		$	0.39		$	0.23
Weighted average common shares outstanding: Basic				4,083,582			4,076,849			4,079,767			4,068,712
Weighted average common shares outstanding: Diluted				4,084,241			4,079,383			4,081,134			4,071,246
The accompanying notes are an integral part of these financial statements.

Ecology and Environment, Inc
Consolidated Statement of Cash Flows
			Nine months ended,
			(Unaudited)
				April 26,			April 27,
				2003			2002
Cash flows from operating activities:
	Net income		$	1,571,633		$	953,597
	Adjustments to reconcile net income to net cash
		provided by (used in) operating activities:
	Depreciation			1,133,090			1,030,080
	Amortization			196,101			196,101
	Gain on disposition of property and equipment			1,935			1,250
	Minority interest			571,374			1,192,923
	Provision for contract adjustments			1,094,787			381,530
	(Increase) decrease in:
		- contracts receivable, net		(18,581,059	)		(1,910,058	)
		- other current assets		1,572,881			(530,029	)
		- income taxes receivable		(39,939	)		(406,524	)
		- other non-current assets		2,369,956			(163,653	)
	Increase (decrease) in:
		- accounts payable		1,905,497			(1,284,214	)
		- accrued payroll costs		219,770			(261,304	)
		- income taxes payable		498,185			(134,713	)
		- deferred revenue		(2,063,802	)		7,309,000
		- other accrued liabilities		206,648			(1,626,092	)
Net cash provided by (used in) operating activities				(9,342,943	)		4,747,894
Cash flows used in investing activities:
	Acquisitions			---			(216,000	)
	Purchase of property, building and equipment, net			(978,450	)		(1,362,031	)
	Purchase of investments			(108,357	)		(113,565	)
Net cash used in investing activities				(1,086,807	)		(1,691,596	)
Cash flows used in financing activities:
	Dividends paid			(703,181	)		(662,942	)
	Proceeds from demand loan payable			5,800,000			---
	Proceeds from long-term debt			102,428			(38,383	)
	Net proceeds from issuance of common stock			3,625			70,300
	Purchase of treasury stock			(186,541	)		(416,004	)
	Foreign currency translation reserve			(583,550	)		---
Net cash provided by (used in) financing activities				4,432,781			(1,047,029	)
Net increase (decrease) in cash and cash equivalents				(5,996,969	)		2,009,269
Cash and cash equivalents at beginning of period				8,229,034			7,831,972
Cash and cash equivalents at end of period			$	2,232,065		$	9,841,241
	The accompanying notes are an integral part of these financial statements.

Ecology and Environment, Inc
Consolidated Statement of Changes in Shareholders' Equity
															Accumulated
		Common Stock									Capital in				Other
		Class A			Class B						Excess of		Retained		Comprehensive			Unearned			Treasury Stock
		Shares		Amount	Shares			Amount			Par Value		earnings		Income			Compensation			Shares			Amount
Balance at July 31, 2001		2,414,009	$	24,140	1,756,280		$	17,563		$	17,274,654	$	26,477,138		$	(647,719	)	$	(181,963	)	101,703		$	(625,423	)
	Net income	---		---	---			---			---		1,408,853			---			---		---			---
	Foreign currency translation reserve	---		---	---			---			---		---			(1,043,365	)		---		---			---
	Cash dividends paid ($.32 per share)	---		---	---			---			---		(1,315,415	)		---			---		---			---
	Unrealized investment gain, net	---		---	---			---			---		---			29,819			---		---			---
	Conversion of common stock - B to A	44,212		442	(44,212	)		(442	)		---		---			---			---		---			---
	Repurchase of Class A common stock	---		---	---			---			---		---			---			---		57,515			(425,739	)
	Stock options	10,350		104	---			---			75,634		---			---			---		---			---
	Issuance of stock under stock award plan	---		---	---			---			---		---			---			(324,456	)	(50,242	)		308,988
	Amortization	---		---	---			---			---		---			---			261,468		---			---
	Forfeitures	---		---	---			---			22,156		---			---			22,030		---			(64,227	)
Balance at July 31, 2002		2,468,571	$	24,686	1,712,068		$	17,121		$	17,372,444	$	26,570,576		$	(1,661,265	)	$	(222,921	)	108,976		$	(806,401	)
	Net income	---		---	---			---			---		1,571,633			---			---		---			---
	Foreign currency translation reserve	---		---	---			---			---		---			(583,550	)		---		---			---
	Cash dividends paid ($.16 per share)	---		---	---			---			---		(658,291	)		---			---		---			---
	Unrealized investment gain, net	---		---	---			---			---		---			22,869			---		---			---
	GAC dividends	---		---	---			---			---		(44,890	)		---			---		---			---
	Repurchase of Class A common stock	---		---	---			---			---		---			---			---		30,133			(186,541	)
	Stock options	500		5	---			---			3,620		---			---			---		---			---
	Issuance of stock under stock award plan	---		---	---			---			60,003		---			---			(157,474	)	(38,712	)		286,469
	Amortization	---		---	---			---			---		---			---			196,101		---			---
	Forfeitures	---		---	---			---			26,295		---			---			12,419		---			(49,309	)
Balance at April 26, 2003		2,469,071	$	24,691	1,712,068		$	17,121		$	17,462,362	$	27,439,028		$	(2,221,946	)	$	(171,875	)	100,397		$	(755,782	)

Ecology and Environment, Inc.
Notes To Consolidated Financial Statements

(Unaudited)

1.       Summary of significant accounting principles

          a.   Consolidation

          The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries.  Also reflected in the financial statements are the 50% ownership in two Chinese operating joint ventures, Beijing Yi Yi Ecology and Engineering Co. Ltd. and The Tianjin Green Engineering Company.  These joint ventures are accounted for under the equity method.  All significant intercompany transactions and balances have been eliminated.  The consolidated balance sheet at April 26, 2003 and the accompanying consolidated statements of income, cash flows, and of changes in shareholders' equity are unaudited.  In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included.  Such adjustments consisted only of normal recurring items.  The accompanying financial statements should be reviewed in conjunction with the Company's fiscal year ended July 31, 2002 audited financial statements.

          b.   Use of Estimates

          The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  Actual results could differ from those estimates.

          c.   Revenue Recognition

          Certain amounts of the Company's revenues are derived from cost-plus-fixed fee contracts using the percentage of completion method based on costs incurred plus the fee earned. The fees under certain government contracts are determined in accordance with performance.  Such awards are recognized at the time the amounts can be reasonably determined.  Fixed price contracts are also accounted for on the percentage of completion method.  Provisions for estimated contract adjustments relating to cost based contracts have been deducted from gross revenues in the accompanying consolidated statement of income.  These provisions are estimated and accrued annually based on government sales volume.  Such adjustments typically arise as a result of interpretations of cost allowability under cost based contracts. 

          Revenues related to long-term government contracts are subject to audit by an agency of the United States government.  Government audits have been completed through fiscal year 1993 and are currently in process for fiscal years 1994 through 2001.  However, final rates have not been negotiated under these audits since 199l.  The majority of the balance in the allowance for contract adjustments account represents a reserve against possible adjustments for fiscal years 1992 through 2002.

          Deferred revenue balances at April 26, 2003 and July 31, 2002 represent net advances received under the Saudi and Kuwait contracts.  The Company has received approximately $12.0 million of net advances under these contracts.  Those advances are amortized against future progress billings over the respective contract periods.

          d.   Income Taxes

         The Company follows the asset and liability approach to account for income taxes.  This approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.  Although realization is not assured, management believes it is more likely than not that the recorded net deferred tax assets will be realized.  Since in some cases management has utilized estimates, the amount of the net deferred tax asset considered realizable could be reduced in the near term.  No provision has been made for United States income taxes applicable to undistributed earnings of foreign subsidiaries as it is the intention of the Company to indefinitely reinvest those earnings in the operations of those entities.

          e.   Inventories

         Inventories consist of shrimp, feed and chemicals and are stated at the lower of cost or market and are included in other current assets in the amount of $664,670 at April 26, 2003 and $1,098,967 at July 31, 2002.

          f.   Impairment of Long Lived Assets

          The Company reviews the carrying value of its long-lived assets, whenever events or changes in circumstances indicate that the historical carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition.  If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.  The current situation at the shrimp farm is disappointing.  After consulting with aquaculture experts earlier in the year and as discussed at the annual shareholders' meeting, it was determined that higher temperatures, while not preventing the white spot virus, have been shown to substantially lower, if not eliminate, the mortality.  Subsequent to the end of the third quarter, the farm incurred unusually heavy rains and substantial cloud cover.  During the period of May 13 through May 17, there was approximately 8.5 inches of rain.  This rainfall, combined with the cloud cover, caused the pond temperatures to decline significantly.  Animal sampling of ponds in active production showed sustained reduction in biomass from the third week of May to date.  This reduction casts in doubt the viability of the current crop and necessitates a re-evaluation of the Company's business plan for the Shrimp Farm operation as it is predicated on temperature control.  As a result the Company has put the farm in a phase-down mode until all options can be evaluated.  Management anticipates it is likely an impairment charge of up to $4.5 million net of tax will occur in the fourth quarter.

          g.   Reclassification

          Certain prior year balances have been reclassified to conform to the current quarter presentation.


2.       Contract Receivables, Net

Contract receivables are comprised of:
		April 26, 2003			July 31, 2002
		Unaudited			Audited
United States Government
Billed	$	3,884,196		$	4,271,382
Unbilled		1,226,813			1,119,391
		5,111,009			5,390,773
Industrial customers and state
and municipal governments
Billed		39,575,947			19,748,261
Unbilled		5,166,069			6,635,038
		44,742,016			26,383,299
Less allowance for contract
adjustments		(3,097,804	)		(2,505,123	)
	$	46,755,221		$	29,268,949

          United States government receivables arise from long-term U.S. government prime contracts and subcontracts.  Unbilled receivables result from revenues which have been earned, but are not billed as of period-end. Management anticipates that the April 26, 2003 unbilled receivables will be substantially billed and collected in fiscal year 2003.  Within the above-billed balances are contractual retainages in the amount of approximately $656,000 at April 26, 2003 and $684,000 at July 31, 2002.  Included in other accrued liabilities is an additional allowance for contract adjustments relating to potential cost disallowances on amounts billed and collected in current and prior years' projects of approximately $2,332,000 at April 26, 2003 and $2,332,000 at July 31, 2002.  An allowance for contract adjustments is recorded for contract disputes and government audits when the amounts are estimable.

3.       Earnings Per Share

          Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

4.       Segment Reporting

          Ecology and Environment, Inc. has three reportable segments: consulting services, analytical laboratory services, and aquaculture.  The consulting services segment provides broad based environmental services encompassing audits and impact assessments, surveys, air and water quality management, environmental engineering, environmental infrastructure planning, and industrial hygiene and occupational health studies to a world wide base of customers.  The analytical laboratory provides analytical testing services to industrial and governmental clients for the analysis of waste, soil and sediment samples.  The shrimp aquaculture facility located in Costa Rica, produces shrimp grown in a controlled environment for markets worldwide.  The fish farm located in Jordan was purchased in July 2001 and ponds are currently being stocked and awaiting the first harvests.

          The Company evaluates segment performance and allocates resources based on operating profit before interest income/expense and income taxes.  The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.  Intercompany sales from the analytical services segment to the consulting segment are recorded at market selling price, intercompany profits are eliminated.  The Company's reportable segments are separate and distinct business units that offer different products.  Consulting services are sold on the basis of time charges while analytical services and aquaculture products are sold on the basis of product unit prices.

Reportable segment data (unaudited) for the nine months ended April 26, 2003 are as follows:
		Consulting		Analytical			Aquaculture			Elimination			Total
Net revenues from external customers	$	60,694,345	$	3,942,968		$	1,007,749		$	---		$	65,645,062
Intersegment net revenues		1,355,287		---			---			(1,355,287	)		---
Total consolidated net revenues	$	62,049,632	$	3,942,968		$	1,007,749		$	(1,355,287	)	$	65,645,062
Depreciation expense	$	638,478	$	316,002		$	178,610		$	---		$	1,133,090
Segment profit (loss)		5,655,544		(164,855	)		(2,072,498	)		---			3,418,191
Segment assets		65,069,353		8,151,000			5,539,000			---			78,759,353
Expenditures for long-lived assets		591,311		565,331			247,086			---			1,403,728
Geographic Information:
		Net		Long-lived
		Revenues (1)		Assets
United States	$	45,392,062	$	24,708,724
Foreign countries		20,253,000		5,962,000
(1)      Net revenues are attributed to countries based on the location of the customers.

Reportable segment data (unaudited) for the nine months ended April 27, 2002 are as follows:
		Consulting		Analytical			Aquaculture			Elimination			Total
Net revenues from external customers	$	49,038,965	$	3,141,819		$	891,538		$	---		$	53,072,322
Intersegment net revenues		1,901,975		---			---			(1,901,975	)		---
Total consolidated net revenues	$	50,940,940	$	3,141,819		$	891,538		$	(1,901,975	)	$	53,072,322
Depreciation expense	$	579,179	$	312,939		$	137,962		$	---		$	1,030,080
Segment profit (loss)		4,208,911		(694,981	)		(1,522,452	)		---			1,991,478
Segment assets		47,798,706		6,865,000			8,445,000			---			63,108,706
Expenditures for long-lived assets		650,795		483,286			533,118			---			1,667,199
Geographic Information
		Net		Long-lived
		Revenues (1)		Assets
United States	$	41,414,322	$	23,391,285
Foreign countries		11,658,000		6,982,000
(1)      Net revenues are attributed to countries based on the location of the customers.

5.       Goodwill

          In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.  Statement No. 141 requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method of accounting.  Statement No. 142 discusses how intangible assets that are acquired should be accounted for in financial statements upon their acquisition and also how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements.  Beginning on August 1, 2001 with the adoption of Statement No. 142, goodwill existing on July 31, 2001, is no longer being amortized.  Rather the goodwill is subject to an annual assessment for impairment.  The adoption of SFAS No. 142 did not have a material impact on the Company's financial statements.

6.       Stock Award Plan

          Effective March 16, 1998, the Company adopted the Ecology and Environment, Inc. 1998 Stock Award Plan (the "Award Plan") under which key employees (including officers) of the Company or any of its present or future subsidiaries may be designated to receive awards of Class A Common stock of the Company as a bonus for services  rendered to the Company or its subsidiaries, without payment therefore,  based upon the fair market value of the common stock at the time of the award.  The plan requires a three-year vesting period.  The 1998 plan agreement provides that the stock cannot be sold, assigned, or transferred before a three-year vesting period is completed and that the shares are forfeited if an individual's employment is terminated before the vesting period is completed.  Accordingly, the Company is amortizing the expense associated with the issuance of the shares ratably over the vesting period.

          The Company issued 38,712 shares in November of 2002, 50,242 shares in fiscal year 2002, and 92,339 shares in fiscal year 2001.  Unearned compensation is recorded at the time of issuance and is being amortized over the vesting period.

7.       Line of Credit

          The Company maintains an unsecured line of credit available for working capital and letters of credit (LOCs) of $20 million with a bank at ½% below the prevailing prime rate.  A second line of credit has been established at another bank for up to $13.5 million exclusively for LOCs.  Demand loans outstanding at April 26, 2003 under these lines of credit amounted to $5,800,000.  At April 26, 2003 and July 31, 2002, the Company had LOCs outstanding totaling $16,780,734 and $13,823,000, respectively.  The LOCs were obtained to secure cash advances and performance guarantees under the Saudi and Kuwait contracts.

          If the Company incurs an impairment loss in the fourth quarter, it will violate one of the covenants of the secondary line of credit.  Under this covenant the Company is required to maintain a minimum net worth of $43,000,000.   The Company believes it will be able to negotiate covenant changes to its existing credit line or secure alternate financing before the LOCs require renewal.  LOCs outstanding under the secondary line will require renewal at various stages from September 2003 to January 2004.  In the event the covenant is not waived or the credit line is not re-negotiated, the Company could borrow additional funds under its primary line of credit or seek financing elsewhere.

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

Financial Condition

          At April 26, 2003 the Company had a working capital balance of  $28.1 million, down $2.2 million from the $30.3 million balance reported at July 31, 2002.  Cash and cash equivalents decreased $6.0 million as a result of a $17.5 million increase in contracts receivable and a $1.9 million increase in accounts payable.  The increase in contracts receivable was mainly attributable to the Saudi Arabia and Kuwait Contracts entered into by the Company’s subsidiaries during fiscal year 2002.  As of April 26, 2003 the Company has receivables outstanding on the Saudi and Kuwait contracts of $8.4 and $10.4 million respectively.  Net advances on these contracts are $12.0 million, which is backed by LOCs.  Subsequent to April 26, 2003, the Company collected $5.4 million on the Saudi and Kuwait contracts.  Due to the reduction in cash and cash equivalents, the Company had a demand loan payable in the amount of $5.8 million at April 2003.

          The Company maintains an unsecured line of credit of $20.0 million with a bank at ½% below the prevailing prime rate.  A second line of credit is available at another bank for up to $13.5 million, exclusively for LOCs.  The Company has outstanding LOC’s at April 26, 2003 in the amount of $16.8 million.  These LOC’s were obtained to secure advance payments and performance guarantees for contracts in the Middle East.  There are no significant additional working capital requirements pending at April 26, 2003.

          If the Company incurs an impairment loss in the fourth quarter, it will violate one of the covenants of the secondary line of credit.  Under this covenant the Company is required to maintain a minimum net worth of $43,000,000.  The Company believes it will be able to negotiate covenant changes to its existing credit line or secure alternate financing before the LOCs require renewal.  LOCs outstanding under the secondary line will require renewal at various stages from September 2003 to January 2004.  In the event the covenant is not waived or the credit line is not re-negotiated, the Company could borrow additional funds under its primary line of credit or seek financing elsewhere.

Results of Operations

Net Revenue

          Net revenues for the third quarter of fiscal year 2003 were $24.4 million, up 33% from the $18.3 million reported in third quarter of fiscal year 2002.  The increase in net revenues was achieved across a broad range of customers.  The Company’s contracts in Saudi Arabia and Kuwait together with increases in net revenues from various commercial and US Department of Defense (DOD) clients accounted for the majority of the increase.  The Saudi and Kuwait contracts reported increased net revenues for the third quarter of fiscal year 2003 of $1.1 million and $1.0 million respectively.  The Company reported commercial net revenues for the third quarter of fiscal year 2003 of $4.6 million, up 156% from the $1.8 million reported in the third quarter of fiscal year 2002.  This increase is mainly attributable to the increase in work on pipeline projects.  Net revenues reported for DOD clients were $4.4 million for the third quarter of fiscal year 2003, up 52% from the $2.9 million reported in the third quarter of fiscal year 2002.  The increase in DOD net revenues is due primarily to projects with the Navy Atlantic Division, USACE Kansas City, USACE Albuquerque and a new contract at the Mountain Home AFB

          Walsh Environmental, a majority owned subsidiary, reported net revenues of  $1.9 million for the third quarter of fiscal year 2003, an increase of $690,000 from the $1.2 million reported for the third quarter of fiscal year 2002.

          Net revenues for the third quarter of fiscal year 2002 were $18.3 million, up $1.3 million from the $17.0 million reported in fiscal year 2001.  During the third quarter the contracts in Saudi Arabia and Kuwait reported net revenues of $3.1 million and $1.0 million respectively.  The company also reported an increase in net revenues from various state clients for the seventh quarter in a row.  Compared to the prior year, net revenues for the third quarter increased by $1.5 million for these state clients.  Net revenues from U.S. Environmental Protection Agency  (USEPA) contracts decreased by $1.3 million due to the completion of five major contracts with the U.S. Environmental Protection Agency (USEPA).  The Shrimp Farm operation had reported net revenues of $400,000 for the third quarter of fiscal year 2002 and $892,000 year to date.  Limited harvests had been successful as the operation continued its efforts to completely restock the ponds and fully recover from the white spot syndrome virus.

Income Before Income Taxes and Minority Interest

          The Company’s income before income taxes and minority interest for the third quarter of fiscal year 2003 was $1.3 million, up 61% from the $780,000 reported in the third quarter of fiscal year 2002.  The increase in income before taxes and minority interest was mainly attributable to continued success at increasing efficiencies and obtaining higher margin work.  The Company’s Analytical Services Center (ASC) reported operating income of $42,000 for the third quarter of fiscal year 2003 compared to an operating loss of $302,000 for the third quarter of fiscal year 2002.  The ASC has benefited from additional sales revenue or approximately $900,000 under the Kuwait contract and improved production efficiencies due to utilization of new equipment and testing methods.  The Company’s subsidiaries, excluding the Shrimp Farm, reported an increase in income before income taxes and minority interest of $136,000 for the third quarter of fiscal year 2003. 

          The Company’s Shrimp Farm operation, based in Costa Rica, reported a loss before income taxes and minority interest for the third quarter of fiscal year 2003 of $643,000 compared to a loss of $482,000 reported in the third quarter of fiscal year 2002.  The current situation at the shrimp farm in Costa Rica is disappointing.  After consulting with aquaculture experts earlier in the year and as discussed at the annual shareholders' meeting, it was determined that higher temperatures, while not preventing the white spot virus, have been shown to substantially lower, if not eliminate, the mortality.  Subsequent to the end of the third quarter, the farm incurred unusually heavy rains and substantial cloud cover.  During the period of May 13 through May 17, there was approximately 8.5 inches of rain.  This rainfall, combined with the cloud cover, caused the pond temperatures to decline significantly.  Animal sampling of ponds in active production showed sustained reduction in biomass from the third week of May to date.  This reduction casts in doubt the viability of the current crop and necessitates a re-evaluation of the Company's business plan for the Shrimp Farm operation as it is predicated on temperature control.  As a result the Company has put the farm in a phase-down mode until all options can be evaluated.  Management anticipates it is likely an impairment charge of up to $4.5 million net of tax will occur in the fourth quarter.
          The Company’s income before income taxes and minority interest for the third quarter of fiscal year 2002 was $780,000, up 8% from the $722,000 reported in the third quarter of fiscal year 2001.  The shrimp farm operation, based in Costa Rica, had reported an operating loss of $481,000 for the third quarter of fiscal year 2002, an increased loss of $226,000 from the prior year.  The Company’s subsidiaries had reported an increase in international work during the third quarter of fiscal year 2002.  The new contracts in Saudi Arabia and Kuwait were the main reason for this increase.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

          The Company may have exposure to market risk for change in interest rates, primarily related to its investments and debt instruments.  The Company does not have any derivative financial instruments included in its investments.  The Company invests only in instruments that meet high credit quality standards.  The Company is averse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk.  As of April 26, 2003, the Company's investments consisted of short-term commercial paper and mutual funds.  The Company does not expect any material loss with respect to its investments.

Item 4.   Controls and Procedures

          (a)   Evaluation of disclosure controls and procedures. 

           The Company's chief executive officer and chief financial officer have concluded that the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-14(c)) are sufficiently effective to ensure that the information required to be disclosed by the Company in the reports it files under the Exchange Act is gathered, analyzed and disclosed with adequate timeliness, accuracy and completeness, based on an evaluation of such controls and procedures conducted within 90 days prior to the date hereof.

          (b)   Changes in internal controls.

          There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above.

PART 2

OTHER INFORMATION

Item 1.   Legal Proceedings
          The Registrant has previously reported information for Item 1 that is required to be presented in item 3 of its Annual Report on Form 10-K for its fiscal year ended July 31, 2002 which is incorporated herein by reference.

Item 2.   Changes in Securities

          (a)   Not Applicable.

          (b)   Not Applicable.

Item 3.   Defaults Upon Senior Securities

          The Registrant has no information for Item 3 that is required to be presented.

Item 4.   Submission of Matters to a Vote of Security Holders

          (a)   The Annual Meeting of Shareholders of the Registrant was held on January 1, 2003.

          (b)   At such meeting, the following persons were elected as directors by the holders of Class A Common Stock:  Brent D. Baird and Ross M. Cellino; and the following directors by the holders of Class B Common Stock:  Gerhard J. Neumaier, Ronald L. Frank, Frank B. Silvestro, Gerard A. Strobel, Gerard A. Gallagher, Jr. and Harvey J. Gross.

          (c)   A proposal appointing the accounting firm of PricewaterhouseCoopers LLP as the Registrant's independent public accountant for its fiscal year ending July 31, 2003 was approved by the Registrant's shareholders in the following manner:  (I) the holders of Class A Common Stock voted as follows:  211,130 votes were cast in favor, 902 votes were cast against this proposal and 420 votes abstained (representing 2,111,300 shares, 9,020 shares and 4,020 shares voted respectively, each share of Class A Common Stock being entitled to 1/10 of 1 vote per share for this proposal); and (ii) the holders of Class B Common Stock voted as follows:  1,574,634 votes were cast in favor, -0- votes cast against this proposal and -0- votes abstained (each share of Class B Common Stock being entitled to one vote per share for this proposal).

          (d)   Not Applicable.

Item 5.   Other Information

          The Registrant has no information for Item 5 required to be presented.

Item 6.   Exhibits and Reports on Form 8-K

          (a)   Not Applicable

          (b)   Not Applicable

SIGNATURE

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

Ecology and Environment, Inc.

Date:  June 16, 2003                                                   
/s/  RONALD L. FRANK                                                  
RONALD L. FRANK
EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL ACCOUNTING OFFICER)

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, GERHARD J. NEUMAIER, certify that:

1.          I have reviewed this Quarterly Report on Form 10-Q of Ecology and Environment, Inc.;

2.          Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report.

3.          Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, result of operation and cash flows of the Registrant as of, and for, the periods presented in this Quarterly Report.

4.          The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

             a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

             b)  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report (the "Evaluation Date"); and

             c)  presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.          The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):  a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.          The registrant's other certifying officers and I have indicated in this Quarterly Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  June 16, 2003                                                    /s/  GERHARD J. NEUMAIER                                  
GERHARD J. NEUMAIER
PRESIDENT
PRINCIPAL EXECUTIVE OFFICER

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, RONALD L. FRANK, certify that:

1.          I have reviewed this Quarterly Report on Form 10-Q of Ecology and Environment, Inc.;

2.          Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report.

3.          Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, result of operation and cash flows of the Registrant as of, and for, the periods presented in this Quarterly Report.

4.          The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

             a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

             b)  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report (the "Evaluation Date"); and

             c)  presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.          The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):  a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.          The registrant's other certifying officers and I have indicated in this Quarterly Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  June 16, 2003                                                    /s/  RONALD L. FRANK                                                      
RONALD L. FRANK
EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL ACCOUNTING OFFICER)

	EXHIBIT INDEX
Exhibit No.	Description
99.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002