UNITED STATES
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 October 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 December 1, 2002, 2,380,754 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 I - FINANCIAL INFORMATION
-----------------------------
ITEM 1. Financial Statements
Ecology and Environment, Inc.
Consolidated Balance Sheet
October 26, July 31,
2002 2002
(unaudited)
------------ ------------
Assets
- ------
Current assets:
Cash and cash equivalents $ 4,269,161 $ 8,229,034
Investment securities available for sale 3,940,500 3,904,799
Contract receivables, net 32,388,396 29,268,949
Deferred income taxes 2,296,833 2,325,370
Income taxes receivable --- 312,977
Other current assets 5,543,139 5,144,428
------------ ------------
Total current assets 48,438,029 49,185,557
Property, building and equipment, net 16,859,756 16,961,544
Deferred income taxes 237,495 237,495
Other assets 2,286,075 4,635,298
------------ ------------
Total assets $67,821,355 $71,019,894
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 4,695,182 $ 5,923,996
Accrued payroll costs 4,698,163 4,359,302
Income taxes payable 240,438 266,411
Deferred revenue 5,733,226 3,822,069
Other accrued liabilities 2,842,661 4,545,708
------------ ------------
Total current liabilities 18,209,670 18,917,486
Deferred revenue 5,889,583 9,088,740
Minority interest 2,042,090 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 17,376,064 17,372,444
Retained earnings 27,103,389 26,570,576
Accumulated other comprehensive income (1,877,298) (1,661,265)
Unearned compensation, net of tax (157,554) (222,921)
Treasury stock - Class A Common, 87,570 and
82,717 shares; Class B common, 26,259
and 26,259 shares, at cost (806,401) (806,401)
------------ ------------
Total shareholders' equity 41,680,012 41,294,240
------------ ------------
Total liabilities and shareholders' equity $67,821,355 $71,019,894
============ ============
The accompanying notes are an integral part of these financial statements.
Ecology and Environment, Inc.
Consolidate Statement of Income
(Unaudited)
Three months ended
---------------------------
October 26, October 27,
2002 2001
------------ ------------
Gross revenues $22,370,085 $19,995,656
Less: direct subcontract costs 2,832,261 3,427,962
------------ ------------
Net revenues 19,537,824 16,567,694
Operating costs and expenses:
Cost of professional services and
other direct operating expenses 10,704,538 8,321,323
Administrative and indirect operating
expenses 5,626,002 5,160,959
Marketing and related costs 1,625,355 1,875,214
Depreciation 348,102 329,138
------------ ------------
Total operating costs & expenses 18,303,997 15,686,634
------------ ------------
Income from operations 1,233,827 881,060
Interest expense (15,285) (1,885)
Interest income 57,793 82,454
Other expense (66,819) (129,325)
------------ ------------
Income before income taxes and minority interest 1,209,516 832,304
Total income tax provision 314,041 354,840
------------ ------------
Net income before minority interest 895,475 477,464
Minority interest (342,622) (85,012)
============ ============
Net income $ 552,853 $ 392,452
============ ============
Net income per common share: Basic and Diluted $ 0.14 $ 0.10
============ ============
Weighted average common shares outstanding:
Basic 4,069,060 4,064,555
============ ============
Diluted 4,071,404 4,066,849
============ ============
The accompanying notes are an integral part of these financial statements.
Ecology and Environment, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
------------------------------
October 26, October 27,
2002 2001
------------ ------------
Cash flows from operating activities:
Net income $ 552,853 $ 392,452
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 348,102 329,138
Amortization 65,367 80,796
Gain on disposition of property and equipment 1,500 ---
Minority interest 322,662 85,012
Provision for contract adjustments 239,934 115,400
(Increase) decrease in:
- contracts receivable, net (3,359,381) 1,932,880
- other current assets (398,711) (200,191)
- income taxes receivable 312,977 (143,692)
- deferred income taxes 28,537 107,366
- other non-current assets 2,349,223 (8,688)
Increase (decrease) in:
- accounts payable (1,228,814) (2,268,357)
- accrued payroll costs 338,861 195,658
- income taxes payable (25,973) (1,131,603)
- deferred revenue (1,288,000) ---
- other accrued liabilities (1,703,047) (8,372)
----------- -----------
Net cash used in operating activities (3,443,910) (522,201)
----------- -----------
Cash flows used in investing activities:
Purchase of property, building and equipment, net (249,314) (321,848)
Proceeds from sale of assets 1,500 ---
Payment for the purchase of bond (35,701) (37,456)
----------- -----------
Net cash used in investing activities (283,515) (359,304)
----------- -----------
Cash flows used in financing activities:
Dividends paid (20,040) ---
Repayment of long-term debt --- (34,498)
Net proceeds from issuance of common stock 3,625 ---
Purchase of treasury stock --- (22,187)
Foreign currency translation reserve (216,033) ---
----------- -----------
Net cash used in financing activities (232,448) (56,685)
----------- -----------
Net decrease in cash and cash equivalents (3,959,873) (938,190)
Cash and cash equivalents at beginning of period 8,229,034 7,831,972
----------- -----------
Cash and cash equivalents at end of period $4,269,161 $6,893,782
=========== ===========
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
------------------ ------------------- Excess of
Shares Amount Shares Amount Par Value
------------------ ------------------- ------------
Balance at July 31, 2001 2,414,009 $24,140 1,756,280 $17,563 $17,274,654
========= ======= ========== ======== ============
Net income --- $ --- --- $ --- $ ---
Foreign currency
translation reserve --- --- --- --- ---
Cash dividends paid
($.32 per share) --- --- --- --- ---
Unrealized investment
gain, net --- --- --- --- ---
Conversion common
stock - B to A 44,212 442 (44,212) (442) ---
Repurchase of Class A
common stock --- --- --- --- ---
Stock options 10,350 104 --- --- 75,634
Issuance of stock under
stock award plan, net --- --- --- --- ---
Amortization --- --- --- --- ---
Forfeitures --- --- --- --- 22,156
--------- ------- ---------- -------- -----------
Balance at July 31, 2002 2,468,571 $24,686 1,712,068 $17,121 $17,372,444
========= ======= ========== ======== ============
Net income --- $ --- --- $ --- $ ---
Foreign currency
translation reserve --- --- --- --- ---
Cash dividends paid
($.32 per share) --- --- --- --- ---
Unrealized investment
gain, net --- --- --- --- ---
GAC Dividends --- --- --- --- ---
Conversion of common
stock - B to A --- --- --- --- ---
Repurchase of Class A
common stock --- --- --- --- ---
Stock options 500 5 --- --- 3,620
Amortization --- --- --- --- ---
--------- ------- ---------- -------- ------------
Balance at October 26, 2002 2,469,071 $24,691 1,712,068 $17,121 $17,376,064
========= ======= ========== ======== ============
-----------------------------------------------------------------
Accumulated
Other Treasury Stock
Retained Comprehensive Unearned ----------------------
Earnings Income Compensation Shares Amount
------------ ------------- ------------ --------- ------------
Balance at July 31, 2001 $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 common
stock - B to A --- --- --- --- ---
Repurchase of Class A
common stock --- --- --- 57,515 (425,739)
Stock options --- --- --- --- ---
Issuance of stock under
stock award plan, net --- --- (324,456) (50,242) 308,988
Amortization --- --- 261,468 --- ---
Forfeitures --- --- 22,030 --- (64,227)
----------- ------------ ----------- -------- -----------
Balance at July 31, 2002 26,570,576 $(1,661,265) $ (222,921) $108,976 $ (806,401)
=========== ============ =========== ========= ===========
Net income $ 552,853 $ --- --- $ --- $ ---
Foreign currency
translation reserve --- (216,033) --- --- ---
Cash dividends paid
($.32 per share) --- --- --- --- ---
Unrealized investment
gain, net --- --- --- --- ---
GAC Dividends (20,040) --- --- --- ---
Conversion of common
stock - B to A --- --- --- --- ---
Repurchase of Class A
common stock --- --- --- --- ---
Stock options --- --- --- --- ---
Amortization --- --- 65,367 --- ---
------------ ------------- ----------- --------- -----------
Balance at October 26, 2002 27,103,389 $ (1,877,298) $ (157,554) 108,976 $ (806,401)
============ ============= =========== ========= ===========
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 percent 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 October 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, 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 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 2001. However, final
rates have not been negotiated under these audits since 1989l. The
majority of the balance in the allowance for contract adjustments
accounts represents a reserve against possible adjustments for
fiscal years 1992 through 2002.
Deferred revenue balances at October 26, 2002 and July 31, 2002
represent net advances received under the Saudi and Kuwait contracts.
The Company has received approximately $10.0 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 $910,575 at October 26, 2002 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. There were no impairment charges recognized in
2003 or 2002.
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:
October 26, July 31,
2002 2002
------------ ------------
United States government
Billed $ 3,417,085 $ 4,271,382
Unbilled 1,612,826 1,119,391
------------ ------------
5,029,911 5,390,773
------------ ------------
Industrial customers and state
and municipal governments
Billed 22,745,776 19,748,261
Unbilled 7,153,985 6,635,038
------------ ------------
29,899,761 26,383,299
------------ ------------
Less allowance for contract
adjustments (2,541,276) (2,505,123)
------------ ------------
$32,388,396 $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 October 26, 2002
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 $709,000 at
October 26, 2002 and $684,000 at July 31, 2002. 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 approximately
$2,332,000 at October 26, 2002 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 estimatable.
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 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 for the three months ended October 26, 2002 are as
follows:
Consulting Analytical Aquaculture Elimination Total
----------- ----------- ------------ ------------- ------------
Net revenues from external customers $17,732,134 $1,319,038 $ 486,652 $ --- $19,537,824
Intersegment net revenues 688,889 --- --- (688,889) ---
----------- ----------- ------------ ------------ ------------
Total consolidated net revenues $18,421,023 $1,319,038 $ 486,652 $ (688,889) $19,537,824
=========== =========== ============ ============ ============
Depreciation expense $ 192,558 $ 97,867 $ 57,677 $ --- $ 348,102
Segment profit (loss) 1,920,394 44,743 (755,621) --- 1,209,516
Segment assets 54,832,355 6,854,000 6,135,000 --- 67,821,355
Expenditures for long-lived assets 753,621 96,592 (579,809) --- 270,404
Geographic Information:
Net Long-lived
Revenues (1) Assets
------------- ------------
United States $13,459,824 $23,810,088
Foreign countries 6,078,000 6,117,000
(1) Net revenues are attributed to countries based on the location of the
customers.
Reportable segment data for the three months ended October 27, 2001 are as
follows:
Consulting Analytical Aquaculture Elimination Total
----------- ----------- ----------- ------------ -----------
Net revenues from external customers $15,238,858 $1,034,487 $ 294,349 $ --- $16,567,694
Intersegment revenues 742,739 --- --- (742,739) ---
----------- ----------- ----------- ------------ -----------
Total consolidated net revenues $15,981,597 $1,034,487 $ 294,349 $ (742,739) $16,567,694
=========== =========== =========== ============ ===========
Depreciation expense $ 216,990 $ 66,342 $ 45,806 $ --- $ 329,138
Segment profit (loss) 1,530,187 (185,700) (512,183) --- 832,304
Segment Assets 40,806,465 6,082,000 8,105,000 --- 54,993,465
Expenditures for long-lived assets 248,389 67,681 191,972 --- 508,042
Geographic Information:
Net Long-lived
Revenues (1) Assets
------------ ------------
United States $14,471,694 $22,629,128
Foreign countries 2,096,000 6,585,000
(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 employement 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 39,769 shares at an average fair value of $7.40 per
share in November of 2002. The Company issued 50,242 shares at an
average fair value of $6.15 per share during the second quarter of fiscal
year 2002. In the first quarter of fiscal year 2001, the Company issued
92,339 shares at an average fair value of $6.19 per share. In fiscal year
2000 no shares were issued. 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 of $20 million with a bank at 1/2 percent
below the prevailling prime rate. A second line of credit has been
established at another bank for up to $12 million exclusively for letters
of credit. At October 26, 2002 and July 31, 2002, the Company had letters
of credit outstanding totaling $16,743,000 and $13,823,000, respectively.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
- -------------------
At October 26, 2002 the Company had a working capital balance of $30.2
million, nearly equal to the $30.3 million balance reported at July 31, 2002.
Cash and cash equivalents decreased $4.0 million as a result of a $3.1
million increase in contracts receivable and a $1.2 million decrease 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.
The Company maintains an unsecured line of credit of $20.0 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 $12.3 million, exclusively for
letters of credit. There are no borrowings outstanding under these lines of
credit at October 26, 2002 and none were required during the first quarter of
fiscal year 2003. The Company has outstanding letters of credit (LOC's) at
October 26, 2002 in the amount of $16.7 million. These LOC's were obtained to
secure advance payments and performance guarantees for contracts in the Middle
East. 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 additional
working capital requirements pending at October 26, 2002.
Results of Operations
Net Revenue
Net revenues for the first quarter of fiscal year 2003 were $19.5 million, up
17 percent from the $16.6 million reported in the first quarter of fiscal
year 2002. The increase is mainly attributable to the Company's Saudi
Arabia and Kuwait contracts. During the first quarter these contracts
reported increased net revenues of $5.2 million. The Company's Analytical
Services Center (ASC) reported an increase in net revenues of 28 percent
for the first quarter of fiscal year 2003, mainly attributable to work
received from these contracts.
The Shrimp Farm operation, based in Costa Rica, reported net revenues of
$487,000 for the first quarter of fiscal year 2003. Harvests were completed
during the first quarter, however the results were disappointing due to the
effect of the white spot syndrome virus which infested the farm during the
fourth quarter of fiscal year 2002.
Walsh Environmental, a majority owned subsidiary, reported net revenues of
$1.5 million for the first quarter of fiscal year 2002, a decrease of
$347,000 from the $1.8 million reported for the first quarter of fiscal
year 2002.
Net revenues for the first quarter of fiscal year 2002 were $16.6 million,
down 16.9 percent from the $19.9 million reported in fiscal year 2001. This
decrease was primarily due to the completion of five major contracts with the
USEPA. Offsetting this decrease in work from the USEPA was a 16 percent
increase in other company net revenue, lead by a $1.2 million, or 60 percent,
increase in revenues from State clients. The Company experienced a 9 percent
increase in net revenues from various United States Department of Defense
clients. Walsh Environmental reported an increase of $400,000, or 27.5
percent, in net revenues from the first quarter of fiscal year 2001.
Income Before Income Taxes and Minority Interest
The Company's income before income taxes and minority interest for the first
quarter of fiscal year 2003 was $1.2 million, up 44 percent from the $832,000
reported in the first quarter of fiscal year 2002. The increase in income
before taxes and minority interest was attributable to the overall increased
net revenues and the performance of the Company's Analytical Services Center.
The ASC reported an operating income of $45,000 for the first quarter of
fiscal year 2003, compared to an operating loss of $186,000 reported during
the first quarter of fiscal year 2002. This increase in the ASC profits was
due to both increased production efficiencies and an increased sales volume.
The Company's subsidiaries, excluding the Shrimp Farm, reported a 600 percent
increase in operating income during the first quarter of fiscal year 2003.
The new contracts in Saudi Arabia and Kuwait were the main reason for this
increase.
Excluding the Shrimp Farm operation, the company earned $.26 per share for
the first quarter, compared to $.18 per share in the first quarter of fiscal
year 2002. The Shrimp Farm operation reported an operating loss of $756,000
for the first quarter of fiscal year 2003, an increased loss of $244,000
from the prior year. The farm was nearing full production when it was once
again infested with the white spot syndrome virus during the fourth quarter
of fiscal year 2002. Management has reduced production levels by 50 percent to
minimize further loses.
The Company's income before income taxes and minority interest for the first
quarter of fiscal year 2002 was $832,000, down 26 percent from the $1.1 million
reported in the first quarter of fiscal year 2001. The Company has continued
to reduce operating costs, increase staff utilization throughout the entire
company and aggressively market higher margin work, specifically in the
commercial and international markets. The Shrimp Farm operation reported a
net loss of $512,000 for the first quarter of fiscal year 2002. Walsh
Environmental has continued to have a positive impact on income, adding
$268,000 to net income before taxes and minority interest. Due to a drop
in sales, E&E do Brasil and the Analytical Services Center reported a
decrease in net income before taxes and minority interest for the quarter
of $143,000 and $165,000, respectively.
PART II - OTHER INFORMATION
---------------------------
None.
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:
December 10, 2002 By: 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 lthe 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.
Dated: December 10, 2002 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 lthe 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.
Dated: December 10, 2002 RONALD L. FRANK
-----------------------------------------
RONALD L. FRANK
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer-
Principal Financial Officer