SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act in 1934
For Quarter Ended January 26, 2002 Commission File #1-9065
ECOLOGY AND ENVIRONMENT, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 16-0971022
---------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
organization)
368 Pleasant View Drive
Lancaster, New York 14086
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 716-684-8060
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 March 2, 2002, 2,386,216 shares of Registrant's Class A Common Stock
(par value $.01) and 1,693,109 shares of Class B Common Stock (par value
$.01 were outstanding.
Ecology and Environment, Inc.
Consolidated Balance Sheet
January 26, July 31,
2002 2001
(Unaudited)
------------ ------------
Assets
- ------
Current assets:
Cash and cash equivalents $ 3,797,991 $ 7,831,972
Investment securities available for sale 3,780,508 3,705,115
Contract receivables, net 25,642,138 22,686,467
Deferred income taxes 2,017,504 2,178,782
Income taxes receivable 937,273 540,952
Other current assets 1,732,110 1,514,960
------------ -----------
Total current assets 37,907,524 38,458,248
Property, building and equipment, net 17,898,322 17,490,485
Deferred income taxes 515,815 515,815
Other assets 1,614,413 1,700,475
------------- ------------
Total assets $57,936,074 $58,165,023
============= ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 4,029,340 $ 5,035,475
Accrued payroll costs 2,907,659 4,040,299
Income taxes payable 550,227 1,187,309
Other accrued liabilities 5,903,438 3,943,063
------------ ------------
Total current liabilities 13,390,664 14,206,146
Long-term debt 3,097 39,516
Minority interest 1,648,010 869,499
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 - 2,458,321 and 2,414,009 shares 24,582 24,140
Class B common stock, par value $.01 per
share; authorized - 10,000,000 shares
issued - 1,719,368 and 1,756,280 shares 17,195 17,563
Capital in excess of par value 17,583,428 17,436,204
Retained earnings 26,431,700 26,540,891
Unearned compensation (481,956) (343,513)
Treasury stock - Class A Common, 69,613 and
75,444 shares; Class B common, 26,259
and 26,259 shares, at cost (680,646) (625,423)
------------ ------------
Total shareholders' equity 42,894,303 43,049,862
------------ ------------
Total liabilities and shareholders' equity $57,936,074 $58,165,023
============ ============
The accompanying notes are an integral part of these financial statements.
Ecology and Environment, Inc.
Consolidate Statement of Income
(Unaudited)
Three months ended Six months ended
-------------------------- ---------------------------
January 26, January 27, January 26, January 27,
2002 2001 2002 2001
------------ ------------- ------------ ------------
Gross revenues $22,143,038 $21,914,841 $42,138,694 $46,208,917
Less: direct subcontract costs 3,933,328 3,489,045 7,361,290 7,838,804
------------ ------------ ------------ ------------
Net revenues 18,209,710 18,425,796 34,777,404 38,370,113
Operating costs and expenses:
Cost of professional services and
other direct operating expenses 9,956,462 9,883,854 18,277,785 21,121,355
Administrative and indirect operating
expenses 5,448,357 5,712,792 10,609,316 10,998,284
Marketing and related costs 2,111,512 1,708,827 3,986,726 3,732,879
Depreciation 382,281 277,604 711,419 642,465
------------ ------------ ------------ ------------
Total operating costs & expenses 17,898,612 17,583,077 33,585,246 36,494,983
------------ ------------ ------------ ------------
Income from operations 311,098 842,719 1,192,158 1,875,130
Interest expense (3,437) (62,411) (5,322) (84,016)
Interest income 90,446 168,586 172,900 291,250
Other income (expense) (19,151) --- (148,476) ---
Net foreign currency exchange loss --- (1,007) --- (3,937)
------------ ------------ ------------ ------------
Income before income taxes and minority interest 378,956 947,887 1,211,260 2,078,427
Total income tax provision 191,816 336,914 546,656 804,976
------------ ------------ ------------ ------------
Net income before minority interest 187,140 610,973 664,604 1,273,451
Minority interest (25,841) (155,241) (110,853) (227,006)
============ ============ ============ ============
Net income $ 161,299 $ 455,732 $ 553,751 $ 1,046,445
============ ============ ============ ============
Net income per common share: Basic and Diluted $ 0.04 $ 0.11 $ 0.14 $ 0.25
============ ============ ============ ============
Weighted average common shares outstanding:
Basic 4,071,600 4,106,271 4,064,794 4,106,615
============ ============ ============ ============
Diluted 4,073,812 4,106,271 4,067,006 4,106,615
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
Ecology and Environment, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
------------------------------
January 26, January 27,
2002 2001
------------ ------------
Cash flows from operating activities:
Net income $ 553,751 $ 1,046,445
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 711,419 642,465
Amortization 130,734 95,224
Minority interest 1,238,970 687,465
Provision for contract adjustments 207,853 395,352
(Increase) decrease in:
- contracts receivable, net (3,163,524) 4,302,200
- other current assets (217,150) 414,284
- income taxes receivable (235,043) (363,333)
- other non-current assets (158,397) (342,753)
Increase (decrease) in:
- accounts payable (1,006,135) (897,763)
- accrued payroll costs (1,132,640) (260,708)
- other accrued liabilities 1,960,375 (762,117)
- income taxes payable (637,082) 157,052
----------- -----------
Net cash provided by (used in) operating activities (1,746,869) 5,113,813
----------- -----------
Cash flows used in investing activities:
Acquisitions (216,000) ---
Purchase of property, building and equipment, net (986,496) (240,976)
Proceeds from sale of assets --- (898,258)
Payment for the purchase of bond (75,393) (73,117)
----------- -----------
Net cash used in investing activities (1,264,649) (1,212,351)
----------- -----------
Cash flows used in financing activities:
Dividends paid (662,942) (657,111)
Repayment of long-term debt (36,419) 14,911
Net proceeds from issuance of common stock 54,350 ---
Purchase of treasury stock (364,212) ---
----------- -----------
Net cash used in financing activities (1,009,223) (642,200)
----------- ------------
Net increase (decrease) in cash and cash equivalents (4,033,981) 3,259,262
Cash and cash equivalents at beginning of period 7,831,972 4,997,771
----------- -----------
Cash and cash equivalents at end of period $3,797,991 $8,257,033
=========== ===========
The accompanying notes are an integral part of these financial statements.
Ecology and Environment, Inc.
Consolidated Statement of Changes in Shareholders' Equity
Common Stock
---------------------------------------
Class A Class B Capital in Treasury stock
------------------ ------------------- Excess of Retained Unearned ---------------------
Shares Amount Shares Amount Par Value Earnings Compensation Shares Amount
------------------ ------------------- ------------ ------------ ------------ --------- ------------
Balance at July 31, 2000 2,392,709 $23,927 1,777,580 $17,772 $17,466,436 $25,906,540 --- $155,669 $(1,079,079)
Net income --- $ --- --- $ --- $ --- $ 1,895,291 --- $ --- $ ---
Cash dividends paid
($.32 per share) --- --- --- --- --- (1,312,759) --- --- ---
Unrealized investment
loss, net --- --- --- --- --- 71,779 --- --- ---
GAC Dividends --- --- --- --- --- (19,960) --- --- ---
Conversion of Class B
common stock to Class A
common stock 21,300 213 (21,300) (209) --- --- --- --- ---
Repurchase of Class A
common stock --- --- --- --- --- --- --- 28,366 (216,391)
Issuance of stock under
stock award plan --- --- --- --- (51,063) --- (570,333) (82,332) 746,941
Amortization --- --- --- --- --- --- 190,000 --- ---
Forfeitures --- --- --- --- 20,831 --- 36,820 --- (76,894)
--------- ------- ---------- -------- ------------ ------------ ------------ --------- ------------
Balance at July 31, 2001 2,414,009 $24,140 1,756,280 $17,563 $17,436,204 $26,540,891 $ (343,513) 101,703 $ (625,423)
========= ======= ========== ======== ============ ============ ============ ========= ============
Net income --- $ --- --- $ --- $ --- $ 553,751 --- $ --- $ ---
Cash dividends paid
($.32 per share) --- --- --- --- --- (662,942) --- --- ---
Conversion of Class B
common stock to Class A
common stock 36,912 368 (36,912) (368) --- --- --- --- ---
Repurchase of Class A
common stock --- --- --- --- --- --- --- 44,411 (364,211)
Stock options 7,400 74 --- --- 54,276 --- --- --- ---
Issuance of stock under
award plan --- --- --- --- 92,948 --- (269,177) (50,242) 308,988
Amortization --- --- --- --- --- --- 130,734 --- ---
--------- ------- ---------- -------- ------------ ------------ ------------ --------- ------------
Balance at Jan. 26, 2002 2,458,321 $24,582 1,719,368 $17,195 $17,583,428 $26,431,700 $ (481,956) 95,872 $ (680,646)
========= ======= ========== ======== ============ ============ ============ ========= ============
The accompanying notes are an integral part of these financial statements.
ECOLOGY AND ENVIRONMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Certain amounts in the prior years' consolidated
financial statements and notes have been reclassified to conform with
the current year presentation. The consolidated balance sheet at
January 26, 2002 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, 2001 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
-------------------
Substantial 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. 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 goverment 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 1995. The
majority of the balance in the allowance for contract adjustments
accounts represents a reserve against possible adjustments for
fiscal years 1992 through 2001.
The Company adopted Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB101") in the fourth quarter
of fiscal year 2001. The adoption of SAB101 did not have a material
impact on the Company's operating results or financial position.
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. Reclassification
----------------
Certain prior year balances have been reclassified to conform to
the current quarter presentation.
2. Contract Receivables, Net
-------------------------
Contract receivables are comprised of:
January 26, July 31,
2002 2001
------------ ------------
United States government
Billed $ 4,767,393 $ 5,011,673
Unbilled 1,229,739 1,187,218
------------ ------------
5,997,132 6,198,891
------------ ------------
Industrial customers and state
and municipal governments
Billed 18,852,056 13,991,415
Unbilled 3,327,204 4,732,568
------------ ------------
22,179,260 18,723,983
------------ ------------
Less allowance for contract
adjustments (2,534,254) (2,236,407)
------------ ------------
$25,642,138 $22,686,467
============ ============
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. The above unbilled balances are comprised of
incurred costs plus fees not yet processed and billed; and
differences between year-to-date provisional billings and
year-to-date actual contract costs incurred and fees earned of
approximately ($36,566) at January 26, 2002 and $325,000 at
July 31, 2001. Unbilled contracts receivable are reduced by billings
in excess of costs incurred of $3,285,708 at January 26, 2002 and
$2,548,000 at July 31, 2001. Within the above billed balances are
contractual retainages in the amount of approximately $746,000 at
January 26, 2002 and $773,000 at July 31, 2001. Included in other
accrued liabilities is an additional allowance for contract adjust-
ments relating to potential cost disallowances on amounts billed and
collected in current and prior years' projects of aproximately
$2,254,000 at January 26, 2002 and $2,031,000 at July 31, 2001. An
allowance for contract adjustments is recorded for contract disputes
and government audits when the amounts are determinable.
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 infrastruc-
ture 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 is not currently in production as improvements
are made to the farm's infrastructure.
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 for the six months ended January 26, 2002 are as
follows:
Consulting Analytical Aquaculture Elimination Total
----------- ----------- ------------ ------------- ------------
Net revenues from external customers $32,233,706 $2,052,255 $ 491,443 $ --- $34,777,404
Intersegment net revenues 1,184,518 --- --- (1,184,518) ---
----------- ----------- ------------ ------------ ------------
Total consolidated net revenues $33,418,224 $2,052,255 $ 491,443 $(1,184,518) $34,777,404
=========== =========== ============ ============ ============
Depreciation expense $ 409,787 $ 208,122 $ 93,510 $ --- $ 711,419
Segment profit (loss) 2,644,691 (392,933) (1,040,498) --- 1,211,260
Segment assets 42,832,074 6,542,000 8,562,000 --- 57,936,074
Expenditures for long-lived assets 119 475,653 826,901 --- 1,302,673
Geographic Information:
Net Long-lived
Revenues (1) Assets
------------- ------------
United States $27,520,404 $23,268,759
Foreign countries 7,257,000 6,740,000
(1) Net revenues are attributed to countries based on the location of the
customers.
Reportable segment data for the six months ended January 27, 2001 are as
follows:
Consulting Analytical Aquaculture Elimination Total
----------- ----------- ----------- ------------ -----------
Net revenues from external customers $36,393,632 $1,965,481 $ 11,000 $ --- $38,370,113
Intersegment revenues 924,253 --- --- (924,253) ---
----------- ---------- ----------- ------------ -----------
Total consolidated net revenues $37,317,885 $1,965,481 $ 11,000 $ (924,253) $38,370,113
=========== =========== =========== ============ ===========
Depreciation expense $ 426,883 $ 176,574 $ 39,008 $ --- $ 642,465
Segment profit (loss) 2,900,363 (298,071) (523,865) --- 2,078,427
Segment Assets 40,477,412 6,948,000 4,986,391 --- 52,411,803
Expenditures for long-lived assets 394,240 67,000 724,000 --- 1,185,240
Geographic Information:
Net Long-lived
Revenues (1) Assets
------------ ------------
United States $34,207,113 $35,478,630
Foreign countries $4,163,000 $4,989,000
(1) Net revenues are attributed to countries based on the location of the
customers.
5. Acquisitions
------------
On July 26, 2001, the Company purchased an interest in a fish farm
located in Jordan. The farm currently maintains five different species
as brood stock, including tilapia and carp. The assets were purchased
for approximately $513,000 by a newly formed entity, AMARACO, of which
EEI owns 51%. The farm is located on the banks of the Jordan river, 120
kilometers north of Amman. The farm was not operating at the time of the
asset purchase. The Company anticipates additional investments will be
required to upgrade the farm's infrastructure, production methods, and
species selection.
This acquisition has been accounted for under the purchase method
with the results of its operations consolidated with the Company's
results of operations from the acquisition date.
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 and
certain purchased intangibles 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, as presented below:
For the quarter ended
-----------------------------------
January 26, 2002 January 27, 2001
---------------- ----------------
Reported net income $161,299 $455,732
Add back: goodwill amortization --- 10,770
-------- --------
Adjusted net income $161,299 $466,502
Basic and diluted earnings per share:
Reported earnings per share $.04 $.111
Goodwill amortization --- .003
-------- --------
Adjusted earning per share $.04 $.114
For six months ended
-----------------------------------
January 26, 2002 January 27, 2001
---------------- ----------------
Reported net income $553,751 $1,046,445
Add back: goodwill amortization --- 21,540
-------- ----------
Adjusted net income $553,751 $1,067,985
Basic and diluted earnings per share:
Reported earnings per share $.14 $.255
Goodwill amortization --- .005
-------- --------
Adjusted earning per share $.14 $.260
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.
In the first quarter of fiscal year 2001, the Company issued 92,339
shares at an average fair value of $6.19 per share. The Company issued
50,242 shares at an average fair value of $6.15 per share during the
second quarter of fiscal year 2002.
The Company estimates that if they elected to measure compensation
cost for employee stock based compensation arrangements under SFAS
No. 123 it would not have caused net income and earnings per share
for the second quarters of fiscal years 2002 and 2001 to be materially
different from their reported amounts.
PART 1 - ITEM 2
- ----------------------
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
- -------------------
At January 26, 2002 the Company had a working capital balance of $24.9
million, a $.6 million increase from the balance at July 31, 2001. Cash
and cash equivalents decreased $4.0 million as a result of a $3.0 million
increase in contracts receivable, a $1.0 million decrease in accounts payable,
and a $2.0 million increase in other accrued liabilities. The increase in
accounts receivable was mainly attributable to a new $24.4 million contract
with the Meteorology and Environmental Protection Administration (MEPA),
which the Company signed on October 30, 2001 through its' majority owned
subsidiary in Saudi Arabia. This contract covers a thirty-month period.
The Company maintains an unsecured line of credit of $10.0 million with a
bank at 1/2 percent below the prevailing prime rate. A second line of credit
has been established at another bank for up to $10.0 million, exclusively for
letters of credit. There are no borrowings outstanding under these lines of
credit at January 26, 2002 and none were required during the second quarter
of fiscal year 2002. However, the Company has outstanding letters of credit
(LOC's) at January 26, 2002 in the amount of $19.5 million. These LOC's
were obtained to secure bid bonds, advance payments, and performance
guarantees for contracts in the Middle East. Bid bonds included therein,
amounting to $5.8 million, expired in early February 2002. The Company has
historically financed its activities through cash flows from operations.
Internally generated funds have been adequate to support the demands for
working capital, the purchase of new fixed assets and investment securities
and the payment of dividends. There are no significant working capital
requirements pending at January 27, 2002. The Company's is currently
exploring options to expand its credit facilities to meet the Company's
needs for the foreseeable future.
Results of Operations
- ---------------------
Net Revenue
- -----------
Net revenues for the second quarter of fiscal year 2002 were $18.2 million,
nearly equal to the $18.4 million reported in fiscal year 2001. Net revenues
from U.S. Environmental Protection Agency (USEPA) contracts decreased by
$4.0 million due to the completion of five major contracts with the U.S.
Environmental Protection Agency (USEPA). Offsetting this decrease was an
increase in other company net revenue including a $2.3 million increase in
revenues from the Company's new Saudi Arabia contract signed at the end of
the first quarter and a $1.0 million increase in revenues from state clients.
Walsh Environmental, a majority owned subsidiary, was affected by a decrease
in work during the second quarter of 2002 and reported net revenues of $1.2
million, down from the $1.8 million reported in the first quarter of 2002.
Net revenues for the second quarter of fiscal year 2001 were $1.4 million.
Net revenues for the second quarter of fiscal year 2001 were $18.4 million,
up $2.0 million or 12% from the $16.4 million reported for the second quarter
of fiscal year 2000. The increase in net revenue was attributable to an 89%
increase in net revenues from various international clients, a 34% increase
from DOD clients and a 28% increase from commercial clients. The Company has
continued to aggressively market new work under DOD task order contracts and
private clients. Walsh Environmental contributed $1.4 million in net
revenues during the second quarter of fiscal year 2001.
Income Before Income Taxes and Minority Interest
- ------------------------------------------------
The Company's income before income taxes and minority interest for the second
quarter of fiscal year 2002 was $379,000, down 60% from the $948,000 reported
in the second quarter of fiscal year 2001. The shrimp farm operation, based
in Costa Rica, reported a net loss of $528,000 for the second quarter of
fiscal year 2002, an increased loss of $305,000 from the prior year. Over
the past year, the shrimp farm has implemented significant changes to counter
an infestation of white spot syndrome virus. Consequently, the ponds were
stocked at minimal levels during this period. Limited harvests have recently
been successful and the ponds are aggressively being stocked for routine
monthly harvests in the third quarter.
Operating income derived from consulting work in the parent company,
Ecology and Environment, Inc., increased 14 percent during the quarter while
Walsh Environmental and E&E do Brasil, both majority owned subsidiaries, were
affected by decreased levels of work. Over the quarter, net income before
taxes and minority interest decreased $222,000 and $150,000, respectively, in
those subsidiaries compared to the prior year.
During the quarter, the Company incurred additional costs of approximately
$300,000 for bidding and negotiation of the $75 million Kuwait project
($50 million net) awarded in January 2002. This is a one-time cost that will
be recouped as the contract begins in the third quarter.
The Company's income before income taxes and minority interest for the second
quarter of fiscal year 2001 was $948,000, up 279% from the $250,000 reported
in the second quarter of fiscal year 2000. Company-wide cost reduction
measures increased both margins and efficiencies throughout the Company.
There was an increase in both commercial and international sector high margin
work which lead to an increase in staff utilization and a decrease in the
Company's indirect expenses. The ASC's losses decreased from $449,000 for
the first six months of fiscal year 2000 to a loss of $298,000 for fiscal year
2001. Although ASC revenues were flat, this improvement was possible due to
continued efforts to reduce costs and improve efficiencies in the their sample
tracking and reporting systems. The shrimp farm subsidiary, located in Costa
Rica, experienced a net loss of $341,000 in the first six months of fiscal
year 2001.
PART II - 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, 2001 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 17, 2002.
(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, Gerald A. Strobel,
Gerard A. Gallagher, Jr. and Harvey J. Gross.
(c) A proposal appointing the accounting firm of Pricewaterhouse-
Coopers LLP as the Registrant's independent public accountant for its fiscal
year ending July 31, 2002 was approved by the Registrant's shareholders in
the following manner: (i) the holders of Class A Common Stock voted as
follows: 213,717 votes were cast in favor, 457 votes were cast against this
proposal and 279 votes abstained (representing 2,137,165 shares, 4,568 shares
and 2,788 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: 1,572,213 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 l934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ECOLOGY AND ENVIRONMENT, INC.
Date: March 12, 2002 By: RONALD L. FRANK
----------------------------
RONALD L. FRANK
EXECUTIVE VICE PRESIDENT -
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL
ACCOUNTING OFFICER)