PART
II
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(a)
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Principal
Market or Markets. The Company's Class A Common Stock was previously
traded on the AMEX prior to September 8, 2008. Beginning on
September 8, 2008, the Company’s Class A Common Stock is listed on NASDAQ.
There is no separate market for the Company's Class B Common
Stock.
|
The
following table represents the range of high and low prices of the Company's
Class A Common Stock as reported by the American Stock Exchange for the periods
indicated.
FISCAL 2008
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High
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Low
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|
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|
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First
Quarter (commencing August 1, 2007 - October 27,
2007)
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Second
Quarter (commencing October 28, 2007 - January 26, 2008)
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12.25
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10.20
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Third
Quarter (commencing January 27, 2008 - April 26,
2008)
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|
|
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|
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Fourth
Quarter (commencing April 27, 2008 - July 31, 2008)
|
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11.85
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|
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|
10.35
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|
FISCAL 2007
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High
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Low
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|
|
|
|
|
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First
Quarter (commencing August 1, 2006 - October 28,
2006)
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|
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Second
Quarter (commencing October 29, 2006 - January 27, 2007)
|
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11.81
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|
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9.96
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|
Third
Quarter (commencing January 28, 2007 - April 28,
2007)
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|
|
|
|
|
|
|
Fourth
Quarter (commencing April 29, 2007 - July 31, 2007)
|
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13.45
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|
|
|
12.05
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Approximate Number of
Holders of Class A Common Stock
As of
September 30, 2008, 2,586,906 shares of the Company's Class A Common Stock were
outstanding and the number of holders of record of the Company's Class A Common
Stock at that date was 378. The Company estimates that it has a significantly
greater number of Class A Common Stock shareholders because a substantial number
of the Company's shares are held in street name. As of the same date, there were
1,667,426 shares of the Company's Class B Common Stock outstanding and the
number of holders of record of the Class B Common Stock at that date was
59.
Dividends
In the
fiscal years ended July 31, 2008 and 2007 the Company declared and paid two cash
dividends totaling $.36 and $.34 per year respectively, per share of common
stock. The amount, if any, of future dividends remains within the discretion of
the Company's Board of Directors and will depend upon the Company's future
earnings, financial condition and requirements and other factors as determined
by the Board of Directors. The dividend for July 31, 2007
was adjusted to reflect the impact of a 5% stock dividend declared by
the Company in July 2007.
The
Company's Certificate of Incorporation provides that any cash or property
dividend paid on Class A Common Stock must be at least equal to the cash or
property dividend paid on Class B Common Stock on a per share
basis.
Equity
Compensation Plan Information as of July 31, 2008:
|
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights.
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|
Weighted
average exercise price of outstanding options, warrants and
rights
|
|
Number
of securities remaining available for
future
issuance
|
|
|
|
|
|
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Equity
compensation plans approved by securities holders:
|
|
|
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|
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|
-
1986 Incentive Stock Option Plan
|
|
---
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|
---
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|
----
|
-
2003 Stock Award Plan
|
|
---
|
|
---
|
|
61,054
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by securities
holders:
|
|
|
|
|
|
|
-
1998 Stock Award Plan
|
|
---
|
|
---
|
|
---
|
|
|
|
|
|
|
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Total
|
|
---
|
|
---
|
|
61,054
|
Refer to
Note 9 to Consolidated Financial Statements set forth in Part IV of this
Annual Report on Form 10-K for more information on the Equity Compensation
Plans.
(c)
|
Purchased
Equity Securities. The following table summarizes the Company's purchases
of its common stock during the fiscal year ended July 31,
2008.
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price
Paid
Per
Share
|
|
Total
Number of
Shares
Purchased
as
Part of Publicly
Announced
Plans
or
Programs (1)
|
|
Maximum
Number
of
Shares that May
Yet
Be Purchased
Under
the
Plans
or Programs
|
|
|
|
|
|
|
|
|
|
|
August
1, 2007 - July 31, 2008
|
|
536
|
|
$10.44
|
|
536
|
|
208,104
|
(1)
|
The
Company purchased 536 shares of its Class A common stock during the fiscal
year ended July 31, 2008 pursuant to a 200,000 share repurchase program
approved at the Board of Directors meeting held in January 2004. The
purchases were made in open-market transactions. In February 2006, the
Board of Directors authorized the repurchase of an additional 200,000
shares. In October of 2008, the Company repurchased 197,594 shares of
Class A common stock at $8.75 per
share.
|
The
financial statements presented below have been restated to give retroactive
effect to the fiscal year 2008 discontinuance of the Company’s Venezuelan
subsidiary. See Note 9 to Consolidated Financial
Statements for additional information.
|
|
Year
ended July 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
5,593
|
|
|
|
5,310
|
|
|
|
5,833
|
|
|
|
(1,839
|
)
|
|
|
6,399
|
|
Income
(loss) from continuing operations before income taxes and minority
interest
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Net
income (loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from discontinued operations
|
|
|
1
|
|
|
|
359
|
|
|
|
(399
|
)
|
|
|
(197
|
)
|
|
|
(282
|
)
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|
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|
|
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Net
income (loss) per common share: basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.44
|
|
|
$
|
0.65
|
|
|
$
|
0.71
|
|
|
$
|
(0.33
|
)
|
|
$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: basic
|
|
$
|
0.44
|
|
|
$
|
0.73
|
|
|
$
|
0.62
|
|
|
$
|
(0.38
|
)
|
|
$
|
0.57
|
|
Net
income (loss) per common share: diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.43
|
|
|
$
|
0.64
|
|
|
$
|
0.71
|
|
|
$
|
(0.33
|
)
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: diluted
|
|
$
|
0.43
|
|
|
$
|
0.72
|
|
|
$
|
0.62
|
|
|
$
|
(0.38
|
)
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash
dividends declared per common share:
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
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|
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|
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|
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|
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,164,186
|
|
|
|
4,194,673
|
|
|
|
4,180,287
|
|
|
|
4,160,834
|
|
|
|
4,185,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended July 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
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|
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|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
9.43
|
|
|
$
|
9.75
|
|
|
$
|
9.00
|
|
|
$
|
8.72
|
|
|
$
|
9.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Liquidity and Capital
Resources
Operating
activities provided $2.5 million of cash during fiscal year 2008 mainly due to
income from continuing operations for fiscal year 2008, an increase in other
accrued liabilities and a decrease income tax receivable. Other
accrued liabilities increased $1.1 million during fiscal year 2008 mainly due to
an increase in billings in excess of revenue. Income tax receivable
decreased $1.3 million during fiscal year 2008. Minority interest
expense was $1.6 million during fiscal year 2008. Offsetting these
were uses of cash from contracts receivable, accounts payable and other current
assets. Contracts receivable increased $5.1 million during fiscal
year 2008. Accounts payable decreased $.7 million during fiscal year
2008. Other current assets increased $.6 million during fiscal year
2008.
Financing
activities consumed $1.5 million of cash during fiscal year 2008. The Company paid
dividends in the amount of $1.5 million or $.36 per share and $.8 million in
distributions to minority partners during fiscal year 2008. The net cash
inflow on long-term debt and capital lease obligations was $.8 million
during fiscal year 2008, mainly attributable to proceeds received from a $1.0
million short-term loan held by E&E do Brasil.
The
Company maintains unsecured lines of credit available for working capital and
letters of credit of $20 million with various banks at one-half percent below
the prevailing prime rate. Other lines are available solely for
letters of credit in the amount of $18.5 million. The Brazilian
subsidiary in July 2008 borrowed $1 million under a four month term note at
5.19% annualized interest rate. The Company guarantees both the
Brazilian term note and the Walsh Environmental line of credit. The
banks have recently reaffirmed the Company’s lines of credit. At July
31, 2008 and 2007 the Company had letters of credit outstanding totaling
approximately $1.2 million and $1.3 million, respectively. At July
31, 2008 there was only the $1 million borrowing from the Brazilian subsidiary
for working capital. After letters of credit and loans, there is
there is $37.0 million of line still available at July 31,
2008. At July 31, 2008 there were no borrowings for working
capital against the lines of credit. The Company believes that cash
flows from operations and borrowings against the line of credit will be
sufficient to cover all working capital requirements for at least the next
twelve months and the foreseeable future.
Results
of Operations
Revenue
Fiscal
Year 2008 vs 2007
Revenue
for fiscal year 2008 was $110.5 million, an increase of $8.0 million or 8% from
the $102.5 million reported in fiscal year 2007. The increase in
revenue was due mainly to increases in revenue at the parent company (Ecology
and Environement, Inc) and by EEI’s majority owned subsidiaries Walsh
Environmental and E&E do Brasil. EEI’s revenue increased $2.5
million during the fiscal year 2008 from work on contracts in the Company’s
energy and state sectors offset by decreases in work for the federal government
sectors. Revenues from Walsh Environmental were $27.0 million for
fiscal year 2008, an increase of 11% from the $24.4 million reported in fiscal
year 2007. The increase in Walsh Environmental revenues was mainly
attributable to increased activity in the environmental remediation and asbestos
markets. Revenues from E&E do Brasil were $7.2 million for fiscal
year 2008, an increase of $2.2 million or 44% over the prior year due mainly to
increased
work in the public and private power industries. Revenue from
commercial clients of the parent company was $21.2 million
for
fiscal
year 2008, an increase of $2.8 million from the $18.4 million reported in the
prior year. The increase in commercial revenue was attributable to an
increase in activity in the domestic energy market. Revenue from
state clients of the parent company was $27.1 million for fiscal year 2008, an
increase of $3.1 million from the $24.0 million reported in fiscal year 2007 due
mainly to increases in work in Washington, New York and
Texas. Revenue from federal government clients of the parent company
was $21.4 million during fiscal year 2008, a decrease of 13% from the $24.7
million reported in the prior year. The decrease in federal
government revenue was mainly due to decreased activity on United States
Department of Defense contracts.
Revenues
for the fourth quarter of fiscal year 2008 increased $5.0 million mainly
attributable to increases in revenue at the parent company and by EEI’s majority
owned subsidiaries Walsh Environmental and E&E do
Brasil. Revenues of the parent company E&E, Inc increased $3.3
million during the fourth quarter of fiscal year 2008 mainly attributable to
increased work on contracts in the Company’s energy sector. Walsh
Environmental reported revenues of $7.6 million for the fourth
quarter of fiscal year 2008, an increase of 12% from the $6.8 million reported
in the fourth quarter of fiscal year 2007. Revenues from E&E do
Brasil were $2.2 million for the fourth quarter of fiscal year 2008, an increase
of 38% from the $1.7 million reported in the fourth quarter of the prior
year. Revenue from commercial clients of the parent company was $7.9
million for the fourth quarter of fiscal year 2008, an increase of $3.6 million
from the $4.3 million reported in the fourth quarter of fiscal year
2007.
Fiscal
Year 2007 vs 2006
Revenue
for fiscal year 2007 was $102.5 million, an increase of 6% over the revenue
reported in fiscal year 2006. The increase was mainly attributable to
increases in work performed by EEI’s majority owned subsidiaries Walsh
Environmental and E&E do Brasil. Revenues from Walsh
Environmental were $24.4 million for fiscal year 2007, an increase of 36% from
the $17.9 million reported in fiscal year 2006. The increase in Walsh
Environmental revenues was mainly attributable to increased activity in its
energy and mining sectors. Revenues from E&E do Brasil were $5.0
million for fiscal year 2007, an increase of $2.3 million or 85% over the prior
year due mainly to increased work in the public and private power
industries. The Company’s Chilean subsidiary, Gestion Ambiental
Consultores (GAC), reported revenues of $2.9 million during fiscal year 2007, an
increase of $.9 million from the $2.0 million reported in fiscal year
2006. The increase in GAC revenues was due to increased activity in
its gas and mining sectors. During fiscal year 2007, revenues from
state clients of the parent company increased $.9 million from the $23.1 million
reported during the prior year. The increase in state revenue was
mainly attributable to an increase in work levels on contracts in New York and
Washington. Offsetting these increases for fiscal year 2007 were
reduced revenues from work performed on contracts in the Middle East and from
various United States Federal government agencies, primarily the United States
Department of Defense clients (DOD). Revenue from DOD clients of the
parent company decreased $3.7 million during fiscal year 2007 due to a $10.6
million decrease in work performed on contracts associated with the relief
efforts for the Gulf Coast hurricanes.
The
Company reported an increase of $5.3 million in revenue during the fourth
quarter of fiscal year 2007 attributable to increases in revenue from state
clients of the parent company, Walsh Environmental and E&E do
Brasil. Revenues from state clients were $7.1 million, a 37% increase
from the $5.2 million reported in the fourth quarter of fiscal year
2006. The increase in state revenue was mainly attributable to an
increase in work performed on contracts in New York. Walsh Environmental
reported revenues of $6.8 million for the fourth quarter of fiscal year 2007, an
increase of $2.0 million over the fourth quarter of the prior
year. E&E do Brasil reported revenues of $1.6 million for the
fourth quarter of fiscal year 2007, a 129% increase from the $.7 million
reported in the fourth quarter of fiscal year 2006.
Income From Continuing
Operations Before Income Taxes and Minority Interest
Fiscal
Year 2008 vs 2007
The
Company’s income from continuing operations before income taxes and minority
interest was $5.6 million for fiscal year 2008, slightly less than the $5.7
million reported in fiscal year 2007. Gross profits
increased $4.6 million during fiscal year 2008 as a result of the increased
revenue reported at the parent company E&E, Inc, Walsh Environmental and
E&E do Brasil in addition to a decrease in corporate wide subcontract
costs. The increased gross profits were offset by higher indirect
costs in fiscal year 2008. Due to increased staffing levels and
business development and proposal costs worldwide, consolidated indirect costs
increased $4.2 million in fiscal year 2008. The increase in
business development and proposal costs was due to the Company’s commitment to
invest in significant future opportunities in the alternative and clean
technology energy sectors. The Company continues to increase business
development costs worldwide to capitalize on the global demands for energy and
environmental infrastructure improvements in concert with heightened concerns
over global warming. Staffing levels throughout the company
increased 12% during fiscal year 2008 as a result of increased manpower needs
necessary to accommodate the increase in corporate revenue. During
fiscal year 2008, E&E recorded an additional accrual related
to Financial Accounting Standards Board (FASB) Interpretation No. 48
“Uncertainty in Income Taxes” (FIN 48) of approximately $740,000 or $.15
per share after tax. This accrual included additional interest and
penalties of approximately $590,000 ($.12 per share after tax) as well as a
foreign exchange loss of $144,000 ($.02 per share after tax) to adjust the FIN
48 Kuwait tax reserve to current exchange rates. This expense is
related to the contested Kuwait taxes. The Company has continued its
assertion of a contractual obligation for reimbursement from the Public
Authority for Assessment of Compensation for Damages Resulting from Iraqi
Aggression (PAAC) should any tax liability be agreed to with the Kuwait Ministry
of Finance, however the assessment of this reimbursement in not permitted under
FIN 48.
The
Company’s income from continuing operations before income taxes and minority
interest was $2.8 million for the fourth quarter of fiscal year 2008, up $1.9
million from the $.9 million reported in the fourth quarter of fiscal year
2007. The increased gross profits were offset by higher indirect
costs in the fourth quarter. Consolidated indirect costs increased
$1.0 million mainly attributable to the increased revenue at E&E, Inc and
E&E do Brasil as well as increased staffing levels and operational expenses
related to the overall business growth throughout the Company. The
increase of income from continuing operations before income taxes and minority
interest in the fourth quarter of fiscal year 2008 was mainly due to increased
revenues at the parent company and E&E do Brasil. Gross profits increased
$2.8 million during the fourth quarter of fiscal year 2008 as a result of the
increase in revenue.
Fiscal
Year 2007 vs 2006
The
Company’s income from continuing operations before income taxes and minority
interest was $5.7 million for fiscal year 2007, down 5% from the $6.0 million
reported in fiscal year 2006. Gross margins increased during fiscal
year 2007 due to an increase in higher margin work at the parent company and
increased revenue at Walsh Environmental. Consolidated indirect costs
increased $5.2 million during fiscal year 2007 as a result of revenue growth in
subsidiaries, increased marketing and bid and proposal costs, and a more
normalized staff utilization subsequent to the completion of the hurricane work
in fiscal year 2006. Marketing and bid and proposal costs were $10.7
million for fiscal year 2007, an increase of $1.4 million from the $9.3 million
reported in the prior year. The increase in marketing and bid and
proposal work was due to an investment in significant future opportunities in
the alternative and clean technology energy sectors. Interest income
was $540,000 for fiscal year 2007, up 154% from the $213,000 reported during the
prior year. The increase in interest income was consistent with the
increased cash generated by the Company from the completion of major projects
and the sale of the shrimp farm.
The
Company’s income from continuing operations before income taxes and minority
interest was $.9 million for the fourth quarter of fiscal year 2007, down $.7
million from the $1.6 million income reported in the fourth quarter of fiscal
year 2006. Interest income increased $62,000 from the $81,000
reported during the fourth quarter of fiscal year 2006. Consolidated indirect
costs increased $2.1 million during the fourth quarter of fiscal year 2007 as a
result of a decrease in staff utilization at the parent company, an increase in
marketing and bid and proposal costs, and costs associated with the continued
revenue growth of Walsh Environmental and E&E do
Brasil. Marketing and bid and proposal costs were $2.9 million for
the fourth quarter of fiscal year 2007, up 26% from the $2.3 million reported in
the fourth quarter of fiscal year 2006.
Discontinued
Operations
During
the fourth quarter of 2007, due to a continuing deterioration in business
and political conditions in Venezuela and the likelihood that E&E's
Venezuelan subsidiary would no longer be able to compete for contracts within
the country, the Company evaluated its investment in its Venezuelan
subsidiary and recognized a write-off of $1.1 million ($146,000 after tax
or $.03 per share) to reflect the estimated reduction in the value of the net
assets of the Company's Venezuela subsidiary. During the first quarter of
2008, the Company decided to close its subsidiary in Venezuela effective as
soon as possible and, accordingly, has reclassified its operations as
discontinued. The cessation of business in Venezuela has resulted in
termination benefits for employees according to in-country regulations and
other charges which have not been significant.
On
January 9, 2007 the Company sold its interest in the shrimp farm in Costa Rica
to the Roozen Group for $2,500,000 in cash. When the farm was closed in
fiscal year 2003, the Company recorded an impairment charge. The previously
unrecognized foreign translation loss in the amount of approximately $1.5
million has been accounted for in the computation of the current year gain on
sale. There was a pretax gain on the sale of the farm of approximately $960,000
after deducting costs of the sale. This gain was included in the
accompanying financial statements under discontinued operations.
Income
Taxes
Effective
August 1, 2007, the Company was required to adopt FIN 48. FIN 48
applies to all income tax positions and clarifies the recognition of tax
benefits in the financial statements by providing a two-step approach to
recognition and measurement. The first step involves assessing
whether the tax position is more likely than not to be sustained upon
examination based on the technical merits. The second step involves
measurement of the amount to recognize. Tax positions that meet the
more likely then not threshold are measured at the largest amount of tax benefit
greater than 50% likely of being realized upon ultimate finalization with tax
authorities.
Upon
adoption, the Company recorded a decrease to retained earnings as of August 1,
2007 of $2,845,845 as a cumulative effect of a change in accounting principle
for the adoption of FIN 48 with corresponding increases to the liability for
uncertain tax positions of $2,502,108, the non-current deferred tax asset of
$1,116,079, and the liability for interest and penalties associated with
uncertain tax positions of $1,447,955. The Company also decreased the current
deferred tax assets of $67,869 and minority interest liability of
$56,008. At August 1, 2007 E & E had approximately
$2,523,443 of gross unrecognized tax benefits that if recognized, would
favorably affect the effective income tax rate in future
periods.
The
Company’s majority owned subsidiary, the Consortium of International Contracts
LLC (CIC) entered into three Environmental Services Agreements (ESA’s) with a
public authority of the State of Kuwait which were funded by the United Nations
Compensation Commission (UNCC). CIC’s work connected with the ESA’s
began in fiscal 2002 and extended into fiscal year 2007. The ESA’s
between the client, the Public Authority for Assessment of Compensation for
Damages Resulting from Iraqi Aggression (PAAC), and CIC were signed in January
of 2002. These ESAs contemplated the receipt of a tax exemption order
from Kuwait’s Ministry of Finance declaring that the income generated by CIC,
and in turn the Company, to the extent that the Company performed work for CIC
under the ESA’s would be exempt from Kuwait income tax. The ESAs also
provide that CIC would be entitled to be reimbursed by PAAC for Kuwait income
tax costs, if any, as finally determined. CIC was given written
notice in May 2002 by PAAC that the tax exemption order contemplated in the ESAs
had officially been granted by the Ministry of Finance and that CIC would not be
required to obtain a tax clearance certificate. In fiscal year 2007,
CIC received notification from PAAC that it should file Kuwait income tax
returns, notwithstanding the earlier May 2002 notification letter to the
contrary, with the Ministry of Finance in order to facilitate the closure and
final payments under the ESAs. Upon notification from PAAC in fiscal
year 2007, the Company evaluated their position under the related guidance of
FAS 5 “Accounting for Contingencies” and concluded a reasonable estimate could
not be identified. While the Company evaluated the likelihood of the
probability of success of its tax exempt status, a reasonable estimate of the
tax liability of the contracts could not be made due to the subjective nature of
the Kuwait tax system on foreign companies. In addition, the Company
considered, and still maintains that any additional tax liability would be
offset by an obligation for reimbursement from its client PAAC for any income
taxes, penalties and interest.
Under the
new guidance for uncertain tax positions, the Company does not believe that the
tax exempt order claimed by PAAC to have been received, will meet the more
likely than not threshold to obtain benefit, and has therefore accrued a
cumulative impact of adoption related to the Kuwait income taxes. The
Company has continued its assertion of a contractual obligation for
reimbursement from PAAC should any tax liability be agreed to with the Kuwait
Ministry of Finance, however the assessment of this reimbursement is not
permitted under FIN 48. E & E’s management believes
that, given the ESA’s provisions, providing for reimbursement of any Kuwait
income taxes, this liability recorded for estimated income taxes in Kuwait, may
lead to volatility in the Company’s future reported earnings when the Company’s
actual exposure is settled.
The
Company files numerous consolidated and separate income tax returns in the U.S.
federal jurisdiction and in many state and foreign jurisdictions. The Company
has substantially concluded all U.S. federal income tax matters for years
through fiscal 2006. The Company’s tax matters for the fiscal years 2007 and
2008 remain subject to examination by the Internal Revenue Service. The
Company’s New York State tax matters have been concluded for years through
fiscal 2005. The Company’s tax matters in other material jurisdictions remain
subject to examination by the respective state, local, and foreign tax
jurisdiction authorities. No waivers have been executed that would extend the
period subject to examination beyond the period prescribed by
statute.
The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in administrative and indirect operating
expenses. For the year ended July 31, 2008, E&E
recognized interest and penalties of approximately $576,000. For the
year ended July 31, 2008, E&E incurred a foreign exchange loss of
$144,000 to adjust the FIN 48 Kuwait tax reserve, penalties and interest and
related federal tax benefit to current exchange rates.
It is
reasonably possible that the liability associated with our unrecognized tax
benefits will increase or decrease within the next twelve months. These changes
will most likely be the result of the Kuwait tax matter described above. At this
time, an estimate of the range of the reasonably possible outcomes cannot be
made.
At July
31, 2008, E&E had approximately $2,746,504 of gross unrecognized
tax benefits that if recognized, would favorably affect the effective income tax
rate in future periods. At July 31, 2008, the liability for uncertain
tax positions and associated interest and penalties are classified as noncurrent
liabilities.
The
estimated effective tax rate for fiscal year 2008 is 38.0%, up from the 18.2%
reported for fiscal year 2007. The effective rate for fiscal year
2007 was lower due to a reduction in the Company’s estimated tax
liabilities as a result of the completion of audits in fiscal year
2007.
Recent Accounting
Pronouncements
In
September 2006, the FASB issued Statement No. 157, “Fair Value Measurement”
(SFAS 157), which established a framework for measuring fair value under
generally accepted accounting principles and expands disclosure about fair value
measurements. SFAS 157 is effective for financial statements issued with
fiscal years beginning after November 15, 2007. The Company is
assessing the impact that the adoption of SFAS 157 may have on its
financial statements.
In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS 159). The fair value option
established by SFAS 159 permits entities to choose to measure eligible items at
fair value at specified election dates. Unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings at each
subsequent reporting date.
SFAS 159 is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007. The Company is assessing the impact
that the adoption of SFAS 159 may have on its financial
statements.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
in Consolidated Financial Statements - An amendment of ARB No. 51."
This statement amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary, which is sometimes referred to as minority interest, is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Among other requirements, this
statement requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the consolidated income
statement, of the amounts of consolidated net income attributable to the parent
and to the noncontrolling interest. This Statement is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008 (that is, for the fiscal year ending July 31, 2010 for
the Company). Earlier adoption is prohibited. The Company is currently assessing
the effect SFAS No. 160 will have on its financial
statements.
In
December 2007, the FASB issued SFAS No. 141 R (revised 2007), “Business
Combinations “ (SFAS 141R). SFAS 141R establishes principles
and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill acquired. SFAS 141R
also establishes disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. This statement is effective
for the Company beginning August 1, 2009 and will change the accounting for
business combinations on a prospective basis. The Company is
assessing the impact that the adoption of SFAS 141R may have on its financial
statements.
In June
2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities”. This FSP provides that unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in
the computation of earnings per share pursuant to the two-class method. The
Company is assessing the impact that the adoption of EITF 03-6-1 may have on its
financial statements.
Critical Accounting Policies
and Use of Estimates
Management's
discussion and analysis of financial condition and results of operations discuss
the Company's consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, management evaluates its estimates
and judgments, including those related to revenue recognition, allowance for
doubtful accounts, income taxes, impairment of long-lived assets and
contingencies. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
Revenue
Recognition
The
Company’s revenues are derived primarily from the professional and technical
services performed by its employees or, in certain cases, by subcontractors
engaged to perform on under contracts we enter into with our clients. The
revenues recognized, therefore, are derived from our ability to charge clients
for those services under the contracts.
The
Company employs three major types of contracts: “cost-plus contracts,”
“fixed-price contracts” and “time-and-materials contracts.” Within each of the
major contract types are variations on the basic contract mechanism. Fixed-price
contracts generally present the highest level of financial and performance risk,
but often also provide the highest potential financial returns. Cost-plus
contracts present a lower risk, but generally provide lower returns and often
include more onerous terms and conditions. Time-and-materials contracts
generally represent the time spent by our professional staff at stated or
negotiated billing rates.
Fixed
price contracts are accounted for on the “percentage-of-completion” method,
wherein revenue is recognized as project progress occurs. Time and material
contracts are accounted for over the period of performance, in proportion to the
costs of performance, predominately based on labor hours incurred. If
an estimate of costs at completion on any contract indicates that a loss will be
incurred, the entire estimated loss is charged to operations in the period the
loss becomes evident.
The use
of the percentage of completion revenue recognition method requires the use of
estimates and judgment regarding the project’s expected revenues, costs and the
extent of progress towards completion. The Company has a history of making
reasonably dependable estimates of the extent of progress towards
completion, contract revenue and contract completion costs. However, due to
uncertainties inherent in the estimation process, it is possible that completion
costs may vary from estimates.
Most of
our percentage-of-completion projects follow a method which approximates the
“cost-to-cost” method of determining the percentage of completion. Under the
cost-to-cost method, we make periodic estimates of our progress towards project
completion by analyzing costs incurred to date, plus an estimate of the amount
of costs that we expect to incur until the completion of the project. Revenue is
then calculated on a cumulative basis (project-to-date) as the total contract
value multiplied by the current percentage-of-completion. The revenue for the
current period is calculated as cumulative revenues less project revenues
already recognized. The recognition of revenues and profit is dependent upon the
accuracy of a variety of estimates. Such estimates are based on
various judgments we make with respect to those factors and are difficult to
accurately determine until the project is significantly underway.
For some
contracts, using the cost-to-cost method in estimating percentage-of-completion
may overstate the progress on the project. For projects where the cost-to-cost
method does not appropriately reflect the progress on the projects, we use
alternative methods such as actual labor hours, for measuring progress on the
project and recognize revenue accordingly. For instance, in a project where a
large amount of equipment is purchased or an extensive amount of mobilization is
involved, including these costs in calculating the percentage-of-completion may
overstate the actual progress on the project. For these types of projects,
actual labor hours spent on the project may be a more appropriate measure of the
progress on the project.
The
Company’s contracts with the U.S. government contain provisions requiring
compliance with the Federal Acquisition Regulation (FAR), and the Cost
Accounting Standards (CAS). These regulations are generally applicable to all of
the Company’s federal government contracts and are partially or fully
incorporated in many local and state agency contracts. They limit the recovery
of certain specified indirect costs on contracts subject to the FAR. Cost-plus
contracts covered by the FAR provide for upward or downward adjustments if
actual recoverable costs differ from the estimate billed. Most of our federal
government contracts are subject to termination at the convenience of the
client. Contracts typically provide for reimbursement of costs incurred and
payment of fees earned through the date of such termination.
Federal
government contracts are subject to the FAR and some state and local
governmental agencies require audits, which are performed for the most part by
either the EPA Office of Inspector General (EPAOIG) or the Defense Contract
Audit Agency (DCAA). The EPAOIG and DCAA audit overhead rates, cost proposals,
incurred government contract costs, and internal control systems. During the
course of its audits, the EPAOIG or DCAA may question incurred costs if it
believes we have accounted for such costs in a manner inconsistent with the
requirements of the FAR or CAS and recommend that our U.S. government financial
administrative contracting officer disallow such costs. Historically, we have
not experienced significant disallowed costs as a result of such audits.
However, we can provide no assurance that such audits will not result
in material disallowances of incurred costs in the future.
The
Company maintains reserves for cost disallowances on its cost based contracts as
a result of government audits. Government audits have been completed and
final rates have been negotiated through fiscal year 2001. The Company has
estimated its exposure based on completed audits, historical experience and
discussions with the government auditors. If these estimates or their
related assumptions change, the Company may be required to record additional
charges for disallowed costs on its government contracts.
Allowance for Doubtful
Accounts and Contract Adjustments
We reduce
our accounts receivable and costs and accrued earnings in excess of billings on
contracts in process by establishing an allowance for amounts that, in the
future, may become uncollectible or unrealizable, respectively. We determine our
estimated allowance for uncollectible amounts based on management’s judgments
regarding our operating performance related to the adequacy of the services
performed, the status of change orders and claims, our experience settling
change orders and claims and the financial condition of our clients, which may
be dependent on the type of client and current economic conditions that the
client may be subject to.
Deferred Income
Taxes
We use
the asset and liability approach for financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances based on
our judgments and estimates are established when necessary to reduce deferred
tax assets to the amount expected to be realized in future operating results.
Management believes that realization of deferred tax assets in excess of the
valuation allowance is more likely than not. Our estimates are based on facts
and circumstances in existence as well as interpretations of existing tax
regulations and laws applied to the facts and circumstances, with the help of
professional tax advisors. Therefore, we estimate and provide for amounts of
additional income taxes that may be assessed by the various taxing
authorities.
In July
of 2006, the FASB issued FIN 48, an interpretation of SFAS 109. FIN
48 clarifies the accounting for uncertainty in income taxes and reduces the
diversity in current practice associated with the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return by defining a “more-likely-than-not” threshold regarding the
sustainability of the position. The Company adopted FIN 48 beginning
August 1, 2007. See Note 18 to Consolidated Financial Statements for
additional information.
Changes in Corporate
Entities
On
September 1, 2007 Gustavson Associates LLC purchased from minority unit holder,
Prospect Resources, their remaining 50 ownership units. Prospect was paid
$466,708 for its units with 25% of the amount paid in cash, and
the assumption of a three year note with a six percent annualized interest
rate. The purchase price that was paid was at a premium over the capital
value of the units. This excess created additional goodwill of $255,578
which was recorded in the first quarter of fiscal year 2008.
On May
15, 2007 one of the Walsh Peruvian minority shareholders sold 14% of their
shares in that subsidiary for $332,000. Half of the shares were
repurchased by the Peruvian company, and the other half was purchased by Walsh
Environmental Scientists and Engineers, LLC (the majority
shareholder). Both of the transactions were completed for the same
terms and conditions. Half of the purchase price was paid in cash and
the remainder was taken as loans to be repaid over a two and a half year
period. The purchase price that was paid was at a premium over the
book value of the stock. This has created additional goodwill of
approximately $147,000 that was recorded in the fourth quarter of fiscal
year 2007.
On
January 9, 2007 the Company sold its interest in the shrimp farm in Costa Rica
to the Roozen Group for $2,500,000 in cash. There was a pretax gain on the sale
of the farm of approximately $960,000 after deducting costs of the sale. This
gain is included in the accompanying financial statements under discontinued
operations.
On
December 29, 2006 a capital infusion of $500,000 was made to E & E
do Brasil, Ltda. order to fund working capital requirements resulting from the
subsidiary’s significant growth. On the same date the Company entered into a
loan agreement for $120,000 each with its two Brazilian partners. The
loans were granted to allow them to maintain their ownership percentage in
E & E do Brasil, Ltda. (a limited partnership). The loans made to
the partners are payable to Ecology and Environment, Inc., and are five year
loans with annual principal repayments, and twelve per cent interest costs due
on the outstanding balance. The loans are secured by the partners'
shares.
Inflation
Inflation
has not had a material impact on the Company’s business because a significant
amount of the Company’s contracts are either cost based or contain commercial
rates for services that are adjusted annually.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board
of Directors and Stockholders of
Ecology
and Environment, Inc.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rules 13a-15(f) under the Securities Exchange
Act of 1934). Our internal control over financial reporting is
designed to provide reasonable assurance to management and board of directors
regarding the preparation and fair presentation of published financial
statements. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
Under the
supervision and with the participation of our management, including our chief
executive officer and chief financial officer, we conducted an evaluation to
assess the effectiveness of our internal control over financial reporting as of
July 31, 2008. In making this evaluation, management used the
criteria set forth by the Committee of Sponsoring Organization of the Treadway
Commission (COSO) in Internal Control – Integrated Framework. Based
on our evaluation, we concluded that, as of July 31, 2008, our internal control
over financial reporting is effective based on those
criteria. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
By:
|
/s/
Kevin S. Neumaier
|
|
By:
|
/s/
H. John Mye
|
|
Chief
Executive Officer
|
|
|
Chief
Financial Officer
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
of
Ecology and Environment, Inc.
We have
audited the accompanying consolidated balance sheets of Ecology and Environment,
Inc. and its subsidiaries (Company) as of July 31, 2008 and 2007, and the
related consolidated statements of income, changes in shareholders’ equity, and
cash flows for each of the three years in the period ended July 31,
2008. In addition, our audits included the financial statement
schedule listed in the index at Item 15(a)(2). These consolidated
financial statements and the financial statement schedule are the responsibility
of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial
statement schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Ecology and Environment,
Inc. and its subsidiaries as of July 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in the period ended
July 31, 2008 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements as a whole, presents fairly, in all material respects, the
information set forth therein.
As
discussed in Note 18 to the consolidated financial statements, the Company
adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,”
effective August 1, 2007.
/s/
Schneider Downs & Co., Inc.
Pittsburgh,
Pennsylvania
October
28, 2008
|
|
Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
31,
|
|
|
July
31,
|
|
Assets
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
14,178,094 |
|
|
$ |
15,554,523 |
|
Investment
securities available for sale
|
|
|
1,173,195 |
|
|
|
101,009 |
|
Contract
receivables, net
|
|
|
41,545,935 |
|
|
|
36,742,288 |
|
Deferred
income taxes
|
|
|
4,450,693 |
|
|
|
5,196,728 |
|
Income
tax receivable
|
|
|
15,556 |
|
|
|
1,357,213 |
|
Other
current assets
|
|
|
2,357,307 |
|
|
|
1,686,588 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
63,720,780 |
|
|
|
60,638,349 |
|
|
|
|
|
|
|
|
|
|
Property,
building and equipment, net
|
|
|
7,873,248 |
|
|
|
7,725,535 |
|
Deferred
income taxes
|
|
|
2,386,424 |
|
|
|
1,404,232 |
|
Other
assets
|
|
|
1,621,144 |
|
|
|
1,438,329 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
75,601,596 |
|
|
$ |
71,206,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
9,509,351 |
|
|
$ |
10,178,873 |
|
Accrued
payroll costs
|
|
|
5,901,980 |
|
|
|
6,191,434 |
|
Income
taxes payable
|
|
|
- |
|
|
|
664,085 |
|
Deferred
revenue
|
|
|
91,822 |
|
|
|
90,791 |
|
Current
portion of long-term debt and capital lease obligations
|
|
|
1,377,827 |
|
|
|
333,229 |
|
Other
accrued liabilities
|
|
|
9,968,490 |
|
|
|
8,866,707 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
26,849,470 |
|
|
|
26,325,119 |
|
|
|
|
|
|
|
|
|
|
Income
taxes payable
|
|
|
2,734,788 |
|
|
|
- |
|
Accrued
interest and penalties
|
|
|
2,111,988 |
|
|
|
- |
|
Long-term
debt and capital lease obligations
|
|
|
481,757 |
|
|
|
385,270 |
|
Minority
interest
|
|
|
4,169,247 |
|
|
|
3,582,968 |
|
Commitments
and contingencies (see note #10)
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
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
- 2,661,498 shares
|
|
|
26,615 |
|
|
|
26,615 |
|
Class
B common stock, par value $.01 per
|
|
|
|
|
|
|
|
|
share;
authorized - 10,000,000 shares;
|
|
|
|
|
|
|
|
|
issued
- 1,732,227 shares
|
|
|
17,323 |
|
|
|
17,323 |
|
Capital
in excess of par value
|
|
|
20,014,257 |
|
|
|
20,051,446 |
|
Retained
earnings
|
|
|
19,664,147 |
|
|
|
22,211,098 |
|
Accumulated
other comprehensive income
|
|
|
834,667 |
|
|
|
299,102 |
|
Treasury
stock - Class A common, 65,340 and 104,020
|
|
|
|
|
|
|
|
|
shares;
Class B common, 64,801 and 64,801 shares, at cost
|
|
|
(1,302,663 |
) |
|
|
(1,692,496 |
) |
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
39,254,346 |
|
|
|
40,913,088 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$ |
75,601,596 |
|
|
$ |
71,206,445 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
|
|
|
|
|
Consolidated
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended July 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
110,532,816 |
|
|
$ |
102,496,123 |
|
|
$ |
97,080,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of professional services and
|
|
|
|
|
|
|
|
|
|
|
|
|
other
direct operating expenses
|
|
|
44,658,180 |
|
|
|
39,889,286 |
|
|
|
40,335,429 |
|
Subcontract
costs
|
|
|
15,833,829 |
|
|
|
17,215,450 |
|
|
|
16,219,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
50,040,807 |
|
|
|
45,391,387 |
|
|
|
40,525,721 |
|
Administrative
and indirect operating
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
|
|
|
31,013,505 |
|
|
|
28,044,431 |
|
|
|
24,221,389 |
|
Marketing
and related costs
|
|
|
11,950,306 |
|
|
|
10,689,698 |
|
|
|
9,335,050 |
|
Depreciation
|
|
|
1,483,931 |
|
|
|
1,347,723 |
|
|
|
1,136,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
5,593,065 |
|
|
|
5,309,535 |
|
|
|
5,832,564 |
|
Interest
expense
|
|
|
(431,287 |
) |
|
|
(162,442 |
) |
|
|
(95,907 |
) |
Interest
income
|
|
|
441,190 |
|
|
|
539,668 |
|
|
|
213,112 |
|
Other
income (expense)
|
|
|
(184,354 |
) |
|
|
9,752 |
|
|
|
6,130 |
|
Net
foreign currency exchange gain
|
|
|
134,009 |
|
|
|
23,382 |
|
|
|
12,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
and
minority interest
|
|
|
5,552,623 |
|
|
|
5,719,895 |
|
|
|
5,968,111 |
|
Income
tax provision
|
|
|
2,112,675 |
|
|
|
1,039,375 |
|
|
|
2,147,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
minority
interest
|
|
|
3,439,948 |
|
|
|
4,680,520 |
|
|
|
3,820,668 |
|
Minority
interest
|
|
|
(1,606,338 |
) |
|
|
(1,965,099 |
) |
|
|
(838,995 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations
|
|
|
1,833,610 |
|
|
|
2,715,421 |
|
|
|
2,981,673 |
|
Income
(loss) from discontinued operations
|
|
|
1,108 |
|
|
|
(156,280 |
) |
|
|
(484,909 |
) |
Income
tax benefit (provision) on gain (loss) from discontinued
operations
|
|
|
(332 |
) |
|
|
515,330 |
|
|
|
85,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
1,834,386 |
|
|
$ |
3,074,471 |
|
|
$ |
2,582,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
0.44 |
|
|
$ |
0.65 |
|
|
$ |
0.71 |
|
Discontinued
operations
|
|
|
- |
|
|
|
0.08 |
|
|
|
(0.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share: basic
|
|
$ |
0.44 |
|
|
$ |
0.73 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
0.43 |
|
|
$ |
0.64 |
|
|
$ |
0.71 |
|
Discontinued
operations
|
|
|
- |
|
|
|
0.08 |
|
|
|
(0.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share: diluted
|
|
$ |
0.43 |
|
|
$ |
0.72 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding: basic
|
|
|
4,164,186 |
|
|
|
4,194,673 |
|
|
|
4,180,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding: diluted
|
|
|
4,228,292 |
|
|
|
4,261,623 |
|
|
|
4,188,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended July 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
1,834,386 |
|
|
$ |
3,074,471 |
|
|
$ |
2,582,587 |
|
Net
income (loss) from discontinued operations, net of tax
|
|
|
776 |
|
|
|
359,050 |
|
|
|
(399,086 |
) |
Income
from continuing operations
|
|
|
1,833,610 |
|
|
|
2,715,421 |
|
|
|
2,981,673 |
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,483,931 |
|
|
|
1,347,723 |
|
|
|
1,136,718 |
|
Deferred
income taxes
|
|
|
814,534 |
|
|
|
(61,568 |
) |
|
|
(885,440 |
) |
Share-based
compensation expense
|
|
|
339,625 |
|
|
|
121,396 |
|
|
|
212,506 |
|
Tax
impact of share based compensation
|
|
|
33,457 |
|
|
|
- |
|
|
|
- |
|
Gain
on disposition of property and equipment
|
|
|
(1,506 |
) |
|
|
(1,045 |
) |
|
|
(12,879 |
) |
Minority
interest
|
|
|
1,606,338 |
|
|
|
1,965,099 |
|
|
|
838,995 |
|
Provision
(Benefit) for contract adjustments
|
|
|
316,050 |
|
|
|
1,054,204 |
|
|
|
1,524,049 |
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
-
contracts receivable, net
|
|
|
(5,119,697 |
) |
|
|
(785,115 |
) |
|
|
(6,988,714 |
) |
-
other current assets
|
|
|
(634,636 |
) |
|
|
(457,894 |
) |
|
|
995,373 |
|
-
income tax receivable
|
|
|
1,341,657 |
|
|
|
(1,357,213 |
) |
|
|
- |
|
-
other non-current assets
|
|
|
109,666 |
|
|
|
2,049,412 |
|
|
|
(1,070,554 |
) |
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
-
accounts payable
|
|
|
(716,518 |
) |
|
|
872,240 |
|
|
|
3,139,863 |
|
-
accrued payroll costs
|
|
|
(289,454 |
) |
|
|
(188,290 |
) |
|
|
2,476,876 |
|
-
income taxes payable
|
|
|
(397,948 |
) |
|
|
(835,207 |
) |
|
|
1,463,170 |
|
-
deferred revenue
|
|
|
1,031 |
|
|
|
(70,434 |
) |
|
|
(70,386 |
) |
-
other accrued liabilities
|
|
|
1,101,783 |
|
|
|
(1,669,663 |
) |
|
|
3,254,813 |
|
-
accrued interest and penalties
|
|
|
664,033 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
2,485,956 |
|
|
|
4,699,066 |
|
|
|
8,996,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquistion
of minority interest of subsidiary
|
|
|
(116,677 |
) |
|
|
(166,000 |
) |
|
|
- |
|
Purchase
of property, building and equipment
|
|
|
(1,630,137 |
) |
|
|
(1,295,981 |
) |
|
|
(958,966 |
) |
Proceeds
from maturity of investments
|
|
|
- |
|
|
|
- |
|
|
|
24,750 |
|
Payment
for the purchase of bond
|
|
|
(1,072,186 |
) |
|
|
(3,408 |
) |
|
|
(3,279 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in investing activities
|
|
|
(2,819,000 |
) |
|
|
(1,465,389 |
) |
|
|
(937,495 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(1,535,492 |
) |
|
|
(1,464,921 |
) |
|
|
(1,420,930 |
) |
Proceeds
from debt
|
|
|
1,160,814 |
|
|
|
298,519 |
|
|
|
549,925 |
|
Repayment
of debt and capital lease obligations
|
|
|
(369,760 |
) |
|
|
(490,866 |
) |
|
|
(457,203 |
) |
Distributions
to minority partners
|
|
|
(752,882 |
) |
|
|
(768,596 |
) |
|
|
(1,103,996 |
) |
Net
proceeds from the issuance of common stock
|
|
|
- |
|
|
|
- |
|
|
|
8,700 |
|
Purchase
of treasury stock
|
|
|
(5,636 |
) |
|
|
(1,085,901 |
) |
|
|
(25,077 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(1,502,956 |
) |
|
|
(3,511,765 |
) |
|
|
(2,448,581 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
458,795 |
|
|
|
(224,485 |
) |
|
|
2,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) discontinued operating
activities
|
|
|
776 |
|
|
|
462,597 |
|
|
|
(409,644 |
) |
Net
cash provided by discontinued investing activities - sale of
assets
|
|
|
- |
|
|
|
2,500,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) discontinued operations
|
|
|
776 |
|
|
|
2,962,597 |
|
|
|
(409,644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(1,376,429 |
) |
|
|
2,460,024 |
|
|
|
5,202,707 |
|
Cash
and cash equivalents at beginning of period
|
|
|
15,554,523 |
|
|
|
13,094,499 |
|
|
|
7,596,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$ |
14,178,094 |
|
|
$ |
15,554,523 |
|
|
$ |
12,798,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Changes in Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Capital
in
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A
|
|
|
Class
B
|
|
|
Excess
of
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
Stock
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Par
Value
|
|
|
earnings
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 31, 2005
|
|
|
2,514,235 |
|
|
$ |
25,143 |
|
|
|
1,669,304 |
|
|
$ |
16,693 |
|
|
$ |
17,622,172 |
|
|
$ |
22,002,059 |
|
|
$ |
(2,236,051 |
) |
|
|
120,494 |
|
|
$ |
(987,199 |
) |
|
$ |
(1,485,868 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,582,587 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,582,587 |
|
Reclassification
due to adoption of FAS 123R
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(158,993 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Foreign
currency translation reserve
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28,122 |
|
|
|
- |
|
|
|
- |
|
|
|
28,122 |
|
Cash
dividends paid ($.33 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,420,930 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Unrealized
investment gain, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(901 |
) |
|
|
- |
|
|
|
- |
|
|
|
(901 |
) |
Conversion
of common stock - B to A
|
|
|
19,131 |
|
|
|
191 |
|
|
|
(19,131 |
) |
|
|
(191 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Repurchase
of Class A common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,595 |
|
|
|
(25,077 |
) |
|
|
- |
|
Stock
options exercised
|
|
|
1,200 |
|
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
8,688 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance
of stock under stock award plan
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Share-based
compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
130,277 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
82,229 |
|
|
|
- |
|
|
|
- |
|
|
|
5,374 |
|
|
|
(41,372 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 31, 2006
|
|
|
2,534,566 |
|
|
$ |
25,346 |
|
|
|
1,650,173 |
|
|
$ |
16,502 |
|
|
$ |
17,684,373 |
|
|
$ |
23,163,716 |
|
|
$ |
(2,208,830 |
) |
|
|
128,463 |
|
|
$ |
(1,053,648 |
) |
|
$ |
2,609,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,074,471 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,074,471 |
|
Reclassification
adjustment for realized foreign currency translation loss in net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,110,431 |
|
|
|
- |
|
|
|
- |
|
|
|
2,110,431 |
|
Foreign
currency translation reserve
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
397,476 |
|
|
|
- |
|
|
|
- |
|
|
|
397,476 |
|
Cash
dividends paid ($.34 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,464,921 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
5%
Stock Dividend
|
|
|
126,522.00 |
|
|
|
1,265 |
|
|
|
82,464.00 |
|
|
|
825 |
|
|
|
2,560,078 |
|
|
|
(2,562,168 |
) |
|
|
- |
|
|
|
8,040 |
|
|
|
- |
|
|
|
- |
|
Unrealized
investment gain, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25 |
|
|
|
- |
|
|
|
- |
|
|
|
25 |
|
Conversion
of common stock - B to A
|
|
|
410 |
|
|
|
4 |
|
|
|
(410 |
) |
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Repurchase
of Class A common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
86,806 |
|
|
|
(1,085,901 |
) |
|
|
- |
|
Issuance
of stock under stock award plan
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(325,985 |
) |
|
|
- |
|
|
|
- |
|
|
|
(57,620 |
) |
|
|
472,484 |
|
|
|
- |
|
Share-based
compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
121,396 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Tax
impact of share based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,860 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,724 |
|
|
|
- |
|
|
|
- |
|
|
|
3,132 |
|
|
|
(25,431 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 31, 2007
|
|
|
2,661,498 |
|
|
|
26,615 |
|
|
|
1,732,227 |
|
|
|
17,323 |
|
|
|
20,051,446 |
|
|
|
22,211,098 |
|
|
|
299,102 |
|
|
|
168,821 |
|
|
|
(1,692,496 |
) |
|
|
5,582,403 |
|
Cumulative
effect of adopting FIN 48
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,845,845 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Balance at July 31, 2007
|
|
|
2,661,498 |
|
|
$ |
26,615 |
|
|
|
1,732,227 |
|
|
$ |
17,323 |
|
|
$ |
20,051,446 |
|
|
$ |
19,365,253 |
|
|
$ |
299,102 |
|
|
|
168,821 |
|
|
$ |
(1,692,496 |
) |
|
$ |
5,582,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,834,386 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,834,386 |
|
Foreign
currency translation reserve
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
536,446 |
|
|
|
- |
|
|
|
- |
|
|
|
536,446 |
|
Cash
dividends paid ($.36 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,535,492 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Unrealized
investment gain, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(881 |
) |
|
|
- |
|
|
|
- |
|
|
|
(881 |
) |
Repurchase
of Class A common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
536 |
|
|
|
(5,636 |
) |
|
|
- |
|
Issuance
of stock under stock award plan
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(412,173 |
) |
|
|
- |
|
|
|
- |
|
|
|
(41,094 |
) |
|
|
412,173 |
|
|
|
- |
|
Share-based
compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
339,625 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Tax
impact of share based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33,457 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,902 |
|
|
|
- |
|
|
|
- |
|
|
|
1,878 |
|
|
|
(16,704 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 31, 2008
|
|
|
2,661,498 |
|
|
$ |
26,615 |
|
|
|
1,732,227 |
|
|
$ |
17,323 |
|
|
$ |
20,014,257 |
|
|
$ |
19,664,147 |
|
|
$ |
834,667 |
|
|
|
130,141 |
|
|
$ |
(1,302,663 |
) |
|
$ |
2,369,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ecology
and Environment, Inc.
Notes
to Consolidated Financial Statements
1.
|
Summary of Operations
and Basis of Presentation
|
Ecology
and Environment, Inc. (the Company) is an environmental consulting and testing
firm whose underlying philosophy is to provide a broad range of environmental
consulting services worldwide so that sustainable economic and human development
may proceed with minimum negative impact on the environment. These services
include environmental audits and impact assessments, hazardous material site
evaluations and response programs, water and groundwater monitoring, laboratory
analyses, environmental infrastructure planning and many other projects provided
by the Company's multidisciplinary professional staff. Revenues reflected in the
Company's consolidated statement of income represent services rendered for which
the Company maintains a primary contractual relationship with its customers.
Included in revenues are certain services outside the Company's normal
operations which the Company has elected to subcontract to other
contractors.
During fiscal years ended July 31, 2008, 2007 and 2006, the
percentages of total revenues derived from contracts exclusively with the United
States Department of Defense (DOD) were 11%, 9% and 18%.
2.
|
Summary of Significant
Accounting Policies
|
The
consolidated financial statements include the accounts of the Company and its
wholly owned and majority owned subsidiaries. Also reflected in the financial
statements is the 50% ownership in the Chinese operating joint venture, The
Tianjin Green Engineering Company. This joint venture is accounted for under the
equity method. All significant intercompany transactions and balances have been
eliminated.
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results may differ from those estimates.
Certain
prior year amounts were reclassified to conform to the 2008 financial statement
presentation.
d. Revenue
recognition
Substantially
all of the Company's revenue is derived from environmental consulting work, with
the balance derived from aquaculture. The consulting revenue is principally
derived from the sale of labor hours. The consulting work is performed under a
mix of fixed price, cost-type, and time and material contracts. Contracts are
required from all customers. Revenue is recognized as follows:
Contract
Type
|
|
Work
Type
|
|
Revenue
Recognition Policy
|
|
|
|
|
|
Fixed
Price
|
|
Consulting
|
|
Percentage
of completion, approximating the ratio of total
Costs
incurred to date to total estimated costs.
|
|
|
|
|
|
Cost-Type
|
|
Consulting
|
|
Costs
as incurred. Fixed fee portion is recognized using percentage
of completion determined by the percentage of level of effort (LOE) hours
incurred to total LOE hours in the respective
contracts.
|
|
|
|
|
|
Time
and Materials
|
|
Consulting
|
|
As
incurred at contract rates.
|
|
|
|
|
|
Substantially
all of the Company's cost-type work is with federal governmental agencies and,
as such, is subject to audits after contract completion. Under these cost-type
contracts, provisions for adjustments to accrued revenue are recognized on an
annual basis and based on past audit settlement history. Government audits have
been completed and final rates have been negotiated through fiscal year 2001.
The balance in the allowance for contract adjustments accounts principally
represents a reserve for contract adjustments for the fiscal years
1996-2008.
We reduce
our accounts receivable and costs and accrued earnings in excess of billings on
contracts in process by establishing an allowance for amounts that, in the
future, may become uncollectible or unrealizable, respectively. We determine our
estimated allowance for uncollectible amounts based on management’s judgments
regarding our operating performance related to the adequacy of the services
performed, the status of change orders and claims, our experience settling
change orders and claims and the financial condition of our clients, which may
be dependent on the type of client and current economic conditions that the
client may be subject to.
Change
orders can occur when changes in scope are made after project work has begun,
and can be initiated by either the Company or its clients. Claims are amounts in
excess of the agreed contract price which the Company seeks to recover from a
client for customer delays and / or errors or unapproved change orders that are
in dispute. Costs related to change orders and claims are recognized as
incurred. Revenues are recognized on change orders (including profit) when it is
probable that the change order will be approved and the amount can be reasonably
estimated. Revenue on claims is not recognized until the claim is approved by
the customer.
All bid
and proposal and other pre-contract costs are expensed as incurred. Out of
pocket expenses such as travel, meals, field supplies, and other costs billed
direct to contracts are included in both revenues and cost of professional
services.
Investment
securities have been classified as available for sale and are stated at
estimated fair value. Unrealized gains or losses related to investment
securities available for sale are reflected in accumulated other comprehensive
income, net of applicable income taxes in the consolidated balance sheet and
statement of changes in shareholders' equity. The cost of securities sold is
based on the specific identification method. The Company had gross unrealized
gains of approximately $5,000 in fiscal year 2008 and 2007.
|
f.
|
Property, building and
equipment, depreciation and
amortization
|
Property,
building and equipment are stated at cost. Office furniture and all equipment
are depreciated on the straight-line method for book purposes, excluding
computer equipment which is depreciated on the accelerated method for book
purposes, and on accelerated methods for tax purposes over the estimated useful
lives of the assets (three to seven years). The headquarters building is
depreciated on the straight-line method for both book and tax purposes over an
estimated useful life of 32 years. Its components are depreciated over their
estimated useful lives ranging from 7 to 15 years. The analytical services
center building and warehouse is depreciated on the straight-line method over an
estimated useful life of 40 years for both book and tax purposes. Leasehold
improvements are amortized for book purposes over the terms of the leases or the
estimated useful lives of the assets, whichever is shorter. Expenditures for
maintenance and repairs are charged to expense as incurred. Expenditures for
improvements are capitalized. When property or equipment is retired or sold, any
gain or loss on the transaction is reflected in the current year's
earnings.
|
g.
|
Fair value of
financial instruments
|
The
carrying amount of cash and cash equivalents, contracts receivable and accounts
payable at July 31, 2008 and 2007 approximate fair value. Investment
securities available for sale are carried at estimated fair value.
Long-term debt consists of bank loans and capitalized equipment leases. Based on
the Company's assessment of the current financial market and corresponding risks
associated with the debt, management believes that the carrying amount of
long-term debt at July 31, 2008 and July 31, 2007 approximates fair
value.
|
h.
|
Translation of foreign
currencies
|
The
financial statements of foreign subsidiaries where the local currency is the
functional currency are translated into U.S. dollars using exchange rates in
effect at period end for assets and liabilities and average exchange rates
during each reporting period for results of operations. Translation adjustments
are deferred in accumulated other comprehensive income.
The
financial statements of foreign subsidiaries located in highly inflationary
economies are remeasured as if the functional currency were the U.S. dollar. The
remeasurement of local currencies into U.S. dollars creates transaction
adjustments which are included in net income. There were no highly inflationary
economy translation adjustments for fiscal years 2006-2008.
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.
The
Company has significant deferred tax assets, resulting principally from contract
reserves, fixed assets and domestic net operating loss carryforwards
(“NOLs”). As required by the Financial Accounting Standards Board
(FASB) Statement No. 109, “Accounting for Income Taxes” (SFAS 109) the Company
periodically evaluates the likelihood of realization of deferred tax assets, and
has determined that no valuation allowance is presently necessary.
In July
of 2006, FASB issued Interpretation No. 48 (FIN 48), an interpretation of SFAS
109. FIN 48 clarifies the accounting for uncertainty in income taxes
and reduces the diversity in current practice associated with the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return by defining a “more-likely-than-not” threshold regarding
the sustainability of the position. The Company adopted FIN 48
beginning August 1, 2007. See Note 18 to Consolidated Financial
Statements for additional information.
The
Company has a non-contributory defined contribution plan providing deferred
benefits for substantially all of the Company's employees. The Company also had
a supplemental defined contribution plan (SERP) to provide deferred benefits for
senior executives of the Company. The annual expense of the Company's
supplemental defined contribution plan is based on a percentage of eligible
wages as authorized by the Company's Board of Directors. Benefits under this
plan are funded as accrued. The SERP was terminated effective July 31, 2006 and
balances totaling approximately $342,000 were paid in the first quarter of
fiscal year 2007.
The
Company does not offer any benefits that would result in a liability under
either FASB Statement No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106) or Statement No. 112 "Employers'
Accounting for Post Employment Benefits (SFAS 112)."
|
k.
|
Stock based
compensation
|
The
Company adopted SFAS 123(R), Share-Based Payment (SBP), effective August 1,
2005. The Statement requires companies to expense the value of employee stock
options and similar awards. Under SFAS 123(R), SBP awards result in a cost that
will be measured at fair value on the awards' grant date, based on the estimated
number of awards that are expected to vest. Compensation cost for awards that
vest would not be reversed if the awards expire without being
exercised.
|
l.
|
Earnings per
share
(EPS)
|
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.
See Note 13 to Consolidated Financial Statements for additional
information.
|
Comprehensive
income is defined as "the change in equity of a business enterprise during
a period from transactions and other events and circumstances from
non-owner sources." The term "comprehensive income" is used to describe
the total net earnings plus other comprehensive income. For the Company,
other comprehensive income includes currency translation adjustments on
foreign subsidiaries and unrealized gains or losses on available-for-sale
securities.
|
|
Ecology
and Environment Inc. formerly had two reportable segments which
differentiated by product line: consulting services and aquaculture. The
consulting services segment provides broad based environmental services
encompassing impact assessments, surveys, air and water quality
management, environmental engineering, environmental infrastructure
planning, and industrial hygiene and occupational health studies to a
worldwide base of customers. The aquaculture segment included the
operation of the Company’s shrimp farm in Costa Rica (closed in fiscal
year 2003, sold in fiscal year 2007 resulting in a pretax gain of
$960,131) and its current fish farm operation in Jordan. Effective
with fiscal year 2008, the Company has ceased its segment reporting due to
the immateriality of its remaining aquaculture business (approximately
$50,000 of revenues in fiscal year 2008) and the low probability of any
expansion of this activity in the
future.
|
|
o.
|
Impairment of
Long-Lived Assets
|
The
Company accounts for impairment of long-lived assets in accordance with
FASB No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets."( SFAS 144). SFAS 144 requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
book value of the asset may not be recoverable. The Company assesses
recoverability of the carrying value of the asset by estimating the future net
cash flows (undiscounted) 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.
|
During
the first quarter of fiscal year 2008, additional goodwill of $256,000 was
recorded as a result of the purchase of additional shares of Gustavson
Associates LLC. In accordance with SFAS 142, the total goodwill
of approximately $1.1 million is not amortized and is subject to an annual
assessment for impairment.
|
3.
|
Cash and Cash
Equivalents
|
The
Company's policy is to invest cash in excess of operating requirements in
income-producing short-term investments. At July 31, 2008 and 2007, short-term
investments consist of commercial paper and money market funds and are carried
at cost. Short-term investments amounted to approximately $2.7 million and $2.6
million at July 31, 2008 and 2007, respectively, and are reflected in cash and
cash equivalents in the accompanying consolidated balance sheet and statement of
cash flows.
For
purposes of the consolidated statement of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less to
be cash equivalents. Cash paid for interest amounted to approximately $125,000,
$162,000, and $96,000 in fiscal years 2008, 2007 and 2006, respectively. Cash
paid for income taxes amounted to approximately $1.1 million, $2.2 million, and
$1.3 million in fiscal years 2008, 2007 and 2006,
respectively. Additionally in the first quarter of fiscal year 2008,
Gustavson Associates LLC purchased from minority unit holder, Prospect
Resources, their remaining 50 ownership units. Prospect was paid
$466,708 for its units with 25% of the amount paid in cash, and the assumption
of a $350,000 three year note with a six percent annualized interest
rate.
4.
|
Contract Receivables,
net
|
|
|
July
31,
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
United
States government -
|
|
|
|
|
|
|
Billed
|
|
$
|
3,431,437
|
|
|
$
|
2,905,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,100,648
|
|
|
|
7,101,019
|
|
|
|
|
|
|
|
|
|
|
Industrial
customers and state and municipal governments -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unbilled
|
|
|
16,690,360
|
|
|
|
11,562,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
allowance for doubtful accounts and contract adjustments
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Management anticipates that the July 31, 2008 unbilled
receivables will be substantially billed and collected within one
year. Within the above billed balances are contractual retainages in
the amount of approximately $290,000 at July 31, 2008 and $409,000 at July 31,
2007. Management anticipates that the July 31, 2008 retainage balance will be
substantially collected within one year. Included in the balance of
receivables for industrial customers and state and municipal customers are
receivables, net of subcontract costs, due under the contracts in Saudi Arabia
and Kuwait of $3.5 million at July 31, 2008 and $3.9 million at July 31,
2007.
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 $4.0 million and $3.9 million
at July 31, 2008 and 2007, respectively. Also included in other accrued
liabilities is a reclassification of billings in excess of recognized revenues
of approximately $4.6 million at July 31, 2008 and $4.0 million at July 31,
2007. The allowance for contract adjustments is recorded for contract
disputes and government audits when the amounts are estimatable.
5.
|
Property, Building and
Equipment, net
|
|
|
July
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
11,180,516
|
|
|
|
11,154,672
|
|
Laboratory
and other equipment
|
|
|
|
|
|
|
|
|
Information
technology equipment
|
|
|
7,265,335
|
|
|
|
6,369,348
|
|
Office
furniture and equipment
|
|
|
|
|
|
|
|
|
Leasehold
improvements and other
|
|
|
1,727,927
|
|
|
|
1,590,222
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,653,584
|
|
|
$
|
25,147,666
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation and amortization
|
|
|
(18,780,336
|
)
|
|
|
(17,422,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,873,248
|
|
|
$
|
7,725,535
|
|
The
Company maintains unsecured lines of credit available for working capital and
letters of credit of $20 million with various banks at one-half percent below
the prevailing prime rate. Other lines are available solely for
letters of credit in the amount of $18.5 million. The Brazilian
subsidiary in July 2008 borrowed $1 million under a four month term note at
5.19% annualized interest rate. The Company guarantees both the
Brazilian term note and the Walsh Environmental line of credit. The
banks have recently reaffirmed the Company’s lines of credit. At July 31, 2008
and 2007 the company had letters of credit outstanding totaling approximately
$1.2 million and $1.3 million, respectively. At July 31, 2008 there
was only the $1 million borrowing from the Brazilian subsidiary for working
capital. After letters of credit and loans, there is there is $37.0
million of line still available at July 31, 2008. At July 31, 2007
there were no borrowings for working capital against the lines of
credit. The Company believes that cash flows from operations and
borrowings against the line of credit will be sufficient to cover all working
capital requirements for at least the next twelve months and the foreseeable
future.
7.
|
Debt and Capital Lease
Obligations
|
Debt
inclusive of capital lease obligations consists of the following:
|
|
July
31, 2008
|
|
|
July
31, 2007
|
|
|
|
|
|
|
|
|
Various
bank loans and advances at subsidiaries with interest rates ranging from
5% to 14%
|
|
|
|
|
|
|
|
|
Capital
lease obligations at subsidiaries with varying interest rates averaging
11%
|
|
|
157,192
|
|
|
|
241,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
current portion of debt and capital lease
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt and capital lease obligations
|
|
|
|
|
|
|
|
|
The aggregate maturities of
long-term debt and capital lease obligations at July 31, 2008 are as
follows:
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year 2010
|
|
|
212,962
|
|
|
|
|
|
|
Fiscal
Year 2012
|
|
|
30,770
|
|
|
|
|
|
|
Thereafter
|
|
|
28,757
|
|
|
|
|
|
|
|
|
$
|
1,859,584
|
|
The
provision (benefit) for income taxes was as follows:
|
|
Fiscal
Year
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
172,021
|
|
|
|
224,987
|
|
|
|
369,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,117,191
|
|
|
$
|
(214,280
|
)
|
|
$
|
(926,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
888,140
|
|
|
$
|
(298,887
|
)
|
|
$
|
(1,010,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,112,675
|
|
|
$
|
1,039,375
|
|
|
$
|
2,147,443
|
|
A
reconciliation of income tax expense (benefit) using the statutory U.S. income
tax rate compared with actual income tax expense (benefit) was as
follows:
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
U.S.
federal statutory income tax rate
|
|
|
|
|
|
Re-evaluation
of tax contingencies
|
---
|
|
(8.9%)
|
|
---
|
Income
from "pass-through" entities taxable to minority partners
|
(5.8%)
|
|
(7.9%)
|
|
(4.6%)
|
International
rate differences
|
|
|
|
|
|
Extraterritorial
income tax exclusion
|
---
|
|
(0.9%)
|
|
(1.4%)
|
State
taxes, net of federal benefit
|
|
|
|
|
|
Other
|
5.8%
|
|
2.3%
|
|
0.3%
|
|
|
|
|
|
|
Total
|
38.0%
|
|
18.2%
|
|
36.0%
|
The
significant components of deferred tax assets (liabilities) are as
follows:
|
|
Fiscal
Year
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Contract
and other reserves
|
|
|
|
|
|
|
|
|
Fixed
assets and intangibles
|
|
|
|
|
|
|
|
|
Accrued
compensation
|
|
|
672,134
|
|
|
|
625,289
|
|
Net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
Foreign
and state income taxes
|
|
|
910,683
|
|
|
|
---
|
|
Accrued
interest |
|
|
359,781 |
|
|
|
---
|
|
Other
|
|
|
547,524
|
|
|
|
178,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net
change in deferred tax assets and liabilities was due to an increase in deferred
tax assets related to the adoption of FIN 48.
The
Company has not recorded income taxes applicable to undistributed earnings of
all foreign subsidiaries that are indefinitely reinvested in those
operations. At July 31, 2008, these amounts related primarily to
operations in Saudi Arabia and Chile of approximately $ 1,880,000.
The
Company's tax benefit related to continuing operations for fiscal year ended
July 31, 2007 reflects an additional benefit of $510,000 as a result of a change
in its estimated contingent tax liabilities for income tax
audits. These contingent liabilities were re-evaluated and a downward
adjustment was made as a result of an appeals settlement that occurred in July
of 2007 relating to positions taken on the company's fiscal 2004 and fiscal 2005
tax returns. In September of 2007 the Internal Revenue Service concluded the
audits of fiscal 2004 through 2006.
As of
July 31, 2008, for federal income tax return purposes, the Company has
approximately $1,700,000 of U.S. federal net operating loss carryforwards
available to offset future taxable income. This loss carryforward
will expire in 2027. SFAS 109 specifies that deferred tax assets are
to be reduced by a valuation allowance if it is more likely then not that some
portion of the deferred tax asset will not be realized. Management
believes that future taxable income should be sufficient to realize all of our
deferred tax assets.
In July
of 2006, the FASB issued FIN 48, an interpretation of SFAS 109. FIN
48 clarifies the accounting for uncertainty in income taxes and reduces the
diversity in current practice associated with the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return by defining a “more-likely-than-not” threshold regarding the
sustainability of the position. The Company adopted FIN 48 beginning
August 1, 2007. See Note 18 to Consolidated Financial Statements for
additional information.
|
a.
|
Class A and Class B
common stock
|
The
relative rights, preferences and limitations of the Company's Class A and Class
B common stock can be summarized as follows: Holders of Class A shares are
entitled to elect 25% of the Board of Directors so long as the number of
outstanding Class A shares is at least 10% of the combined total number of
outstanding Class A and Class B common shares. Holders of Class A common shares
have one-tenth the voting power of Class B common shares with respect to most
other matters.
In
addition, Class A shares are eligible to receive dividends in excess of (and not
less than) those paid to holders of Class B shares. Holders of Class B shares
have the option to convert at any time, each share of Class B common stock into
one share of Class A common stock. Upon sale or transfer, shares of Class B
common stock will automatically convert into an equal number of shares of Class
A common stock, except that sales or transfers of Class B common stock to an
existing holder of Class B common stock or to an immediate family member
will not cause such shares to automatically convert into Class A common
stock.
Effective
March 16, 1998, the Company adopted the Ecology and Environment, Inc. 1998 Stock
Award Plan (the "1998 Plan"). To supplement the 1998 Plan, the 2003 Stock Award
Plan (the "2003 Plan") was approved by the shareholders at the annual meeting
held in January 2004 (the 1998 Plan and the 2003 Plan collectively referred to
as the "Award Plan"). The 2003 Plan was approved retroactive to October 16, 2003
and will terminate on October 15, 2008. Under the Award Plan key employees
(including officers) of the Company or any of its present or future subsidiaries
may be designated to received 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
Company stock at the time of the award. The Award Plan authorizes the Company's
board of directors to determine for what period of time and under what
circumstances awards can be forfeited.
The
Company issued 41,094 shares valued at $495,183 in October 2007 pursuant to
the Award Plan. These awards issued have a three year vesting
period. The "pool" of excess tax benefits accumulated in Capital in
Excess of Par Value at July 31, 2008 and July 31, 2007 was approximately
$122,000 and $88,000, respectively. Total gross compensation expense
is recognized over the vesting period. Unrecognized compensation
expense was approximately $496,000 and $349,000 at July 31, 2008 and
2007, respectively.
On July
19, 2007, the Board of Directors declared a 5% stock dividend on the Company’s
Class A and Class B common stock distributed on August 31, 2007 to shareholders
of record on August 1, 2007. As of July 31, 2007, an amount equal to the fair
value of the common stock distributed was transferred from retained earnings to
the common stock and capital in excess of par value
accounts.
All data with respect to net income per common share, weighted average common
shares outstanding, and dividends paid have been retroactively adjusted to
reflect the stock dividend.
|
In
October of 2008, the Company repurchased 197,594 shares of Class A common
stock at $8.75 per
share.
|
10.
|
Shareholders' Equity -
Restrictive Agreement
|
Messrs.
Gerhard J. Neumaier, Frank B. Silvestro, Ronald L. Frank and Gerald A. Strobel
entered into a Stockholders' Agreement in 1970 which governs the sale of certain
shares of common stock owned by them, the former spouse of one of the
individuals and some of their children. The agreement provides that prior to
accepting a bona fide offer to purchase all or any part of their shares, each
party must first allow the other members to the agreement the opportunity to
acquire on a pro rata basis, with right of over-allotment, all of such shares
covered by the offer on the same terms and conditions proposed by the
offer.
The
Company rents certain office facilities and equipment under non-cancelable
operating leases. The Company also rents certain facilities for servicing
project sites over the term of the related long-term government contracts. These
contracts provide for reimbursement of any remaining rental commitments under
such lease agreements in the event that the government terminates the
contract.
At July
31, 2008, future minimum rental commitments are as follows:
Fiscal
Year
|
|
Amount
|
|
|
|
|
|
|
|
$ |
2,624,870 |
|
2010
|
|
|
2,221,915 |
|
|
|
|
1,752,384 |
|
2012
|
|
|
1,272,833 |
|
|
|
|
1,058,575 |
|
Thereafter
|
|
|
2,146,674 |
|
Lease
agreements may contain step rent provisions and/or free rent
concessions. In such cases, any material leases are in compliance
with paragraph 15 of the FASB Statement No. 13 “Accounting for Leases (SFAS
13). Lease payments based on a price index have rent expense
recognized on a straight line or substantially equivalent basis, and they are
included in the calculation of minimum lease payments in accordance with the
FASB Statement No. 29 “Determining Contingent Rentals” (SFAS 29). Gross rental
expense under the above lease commitments for 2008, 2007, and 2006 was
approximately $2.6 million, $2.5 million and $2.7 million,
respectively.
12.
|
Defined Contribution
Plans
|
Contributions
to the defined contribution plan and supplemental retirement plan are
discretionary and determined annually by the Board of Directors. The total
expense under the plans for fiscal years 2008, 2007, and 2006 was approximately
$1.5 million, $1.5 million and $1.3 million, respectively.
The
computation of basic earnings per share reconciled to diluted earnings per share
follows:
|
|
Fiscal
Year
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations available to common
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from discontinued operations available to common
stockholders
|
|
|
776
|
|
|
|
359,050
|
|
|
|
(399,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common stockholders
|
|
$
|
1,834,386
|
|
|
$
|
3,074,471
|
|
|
$
|
2,582,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding (basic)
|
|
|
4,164,186
|
|
|
|
4,194,673
|
|
|
|
4,180,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
---
|
|
|
|
0.08
|
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.44
|
|
|
$
|
0.73
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental
shares from assumed conversions of restricted stock
awards
|
|
|
64,106
|
|
|
|
66,950
|
|
|
|
7,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
weighted-average common shares outstanding
|
|
|
4,228,292
|
|
|
|
4,261,623
|
|
|
|
4,188,278
|
|
Diluted
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued
operations
|
|
$
|
0.43
|
|
|
$
|
0.64
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
After
consideration of all the rights and privileges of the Class A and Class B
stockholders discussed in Note 9, in particular the right of the holders of the
Class B common stock to elect no less than 75% of the Board of Directors making
it highly unlikely that the Company will pay a dividend on Class A common stock
in excess of Class B common stock, the Company allocates undistributed earnings
between the classes on a one-to-one basis when computing earnings per share. As
a result, basic and fully diluted earnings per Class A and Class B share are
equal amounts.
14.
|
Commitments and
Contingencies
|
From time
to time, the Company is named defendant in legal actions arising out of the
normal course of business. The Company is not a party to any pending legal
proceeding the resolution of which the management of the Company believes will
have a material adverse effect on the Company’s results of operations, financial
condition, cash flows, or to any other pending legal proceedings other than
ordinary, routine litigation incidental to its business. The Company maintains
liability insurance against risks arising out of the normal course of
business.
Certain
contracts contain termination provisions under which the customer may, without
penalty, terminate the contracts upon written notice to the Company. In the
event of termination, the Company would be paid only termination costs in
accordance with the particular contract. Generally, termination costs include
unpaid costs incurred to date, earned fees and any additional costs directly
allocable to the termination.
15.
|
Recent
Accounting Pronouncements
|
In
September 2006, the FASB issued Statement No. 157, “Fair Value Measurement”
(SFAS 157), which established a framework for measuring fair value under
generally accepted accounting principles and expands disclosure about fair value
measurements. SFAS 157 is effective for the Company’s 2009 fiscal
year. The Company is assessing the impact that the adoption of SFAS
157 may have on its financial statements.
In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS 159). The fair value option
established by SFAS 159 permits entities to choose to measure eligible items at
fair value at specified election dates. Unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings at each
subsequent reporting date. SFAS 159 is effective for the Company’s 2009 fiscal
year. The Company is assessing the impact that the adoption of SFAS
159 may have on its financial statements.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
in Consolidated Financial Statements - An amendment of ARB No. 51."
This statement amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary, which is sometimes referred to as minority interest, is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Among other requirements, this
statement requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the consolidated income
statement, of the amounts of consolidated net income attributable to the parent
and to the noncontrolling interest. This Statement is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008 (that is, for the fiscal year ending July 31, 2010 for
the Company). Earlier adoption is prohibited. The Company is currently assessing
the effect SFAS 160 will have on its financial statements.
In
December 2007, the FASB issued SFAS No. 141 R (revised 2007), “Business
Combinations “ (SFAS 141R). SFAS 141R establishes principles
and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill acquired. SFAS 141R
also establishes disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. This statement is effective
for the Company beginning August 1, 2009 and will change the accounting for
business combinations on a prospective basis. The Company is
assessing the impact that the adoption of SFAS 141R may have on its financial
statements.
In June
2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities”. This FSP provides that unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in
the computation of earnings per share pursuant to the two-class method. The
Company is assessing the impact that the adoption of EITF 03-6-1 may have on its
financial statements.
16.
|
Other Accrued
Liabilities
|
|
|
July
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Allowance
for contract adjustments
|
|
|
|
|
|
|
|
|
Billings
in excess of revenue
|
|
|
4,642,578
|
|
|
|
3,995,645
|
|
Other
|
|
|
1,355,932
|
|
|
|
945,537
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,968,490
|
|
|
$
|
8,866,707
|
|
17. Transfer of
Ownership/Dispositions
On
September 1, 2007 Gustavson Associates LLC purchased from minority unit holder,
Prospect Resources, their remaining 50 ownership units. Prospect was paid
$466,708 for its units with 25% of the amount paid in cash, and
the assumption of a three year note with a six percent annualized interest
rate. The purchase price that was paid was at a premium over the capital
value of the units. This excess created additional goodwill of $255,578
which was recorded in the first quarter.
On May
15, 2007 one of the Walsh Peruvian minority shareholders sold 14% of their
shares in that subsidiary for $332,000. Half of the shares were
purchased back by the Peruvian company, and the other half was purchased by
Walsh Environmental Scientists and Engineers, LLC (the majority
shareholder). Both of the transactions were completed for the same
terms and conditions. Half of the purchase price was paid in cash and
the remainder were taken as loans to be repaid over a two and a half year
period. The purchase price that was paid was at a premium over the
book value of the stock. This has created additional goodwill of
approximately $147,000 that was booked in the fourth quarter.
On
January 9, 2007 the Company sold its interest in the shrimp farm in Costa Rica
to the Roozen Group for $2,500,000 in cash. When the farm was closed in
fiscal year 2003, the Company recorded an impairment charge. The previously
unrecognized foreign translation loss in the amount of approximately $1.5
million has been accounted for in the computation of the current year gain on
sale. There was a pretax gain on the sale of the farm of $960,131 after
deducting costs of the sale. This gain is included in the accompanying
financial statements under discontinued operations.
18.
|
Adoption of New
Accounting Principles – Accounting for Uncertainty in Income
Taxes
|
Effective
August 1, 2007, the Company was required to adopt FIN 48. FIN 48
applies to all income tax positions and clarifies the recognition of tax
benefits in the financial statements by providing a two-step approach to
recognition and measurement. The first step involves assessing
whether the tax position is more likely than not to be sustained upon
examination based on the technical merits. The second step involves
measurement of the amount to recognize. Tax positions that meet the
more likely then not threshold are measured at the largest amount of tax benefit
greater than 50% likely of being realized upon ultimate finalization with tax
authorities.
Upon
adoption, the Company recorded a decrease to retained earnings as of August 1,
2007 of $2,845,845 as a cumulative effect of a change in accounting principle
for the adoption of FIN 48 with corresponding increases to the liability for
uncertain tax positions of $2,502,108, the non-current deferred tax asset of
$1,116,079, and the liability for interest and penalties associated with
uncertain tax positions
of $1,447,955. The Company also decreased the current deferred tax assets of
$67,869 and minority interest liability of $56,008. At August 1, 2007
E & E had approximately $2,523,443 of gross unrecognized tax
benefits that if recognized, would favorably affect the effective income tax
rate in future periods.
The
Company’s majority owned subsidiary, the Consortium of International Contracts
LLC (CIC) entered into three Environmental Services Agreements (ESA’s) with a
public authority of the State of Kuwait which were funded by the United Nations
Compensation Commission (UNCC). CIC’s work connected with the ESA’s
began in fiscal 2002 and extended into fiscal year 2007. The ESA’s
between the client, the Public Authority for Assessment of Compensation for
Damages Resulting from Iraqi Aggression (PAAC), and CIC were signed in January
of 2002. These ESAs contemplated the receipt of a tax exemption order
from Kuwait’s Ministry of Finance declaring that the income generated by CIC,
and in turn the Company, to the extent that the Company performed work for CIC
under the ESA’s would be exempt from Kuwait income tax. The ESAs also
provide that CIC would be entitled to be reimbursed by PAAC for Kuwait income
tax costs, if any, as finally determined. CIC was given written
notice in May 2002 by PAAC that the tax exemption order contemplated in the ESAs
had officially been granted by the Ministry of Finance and that CIC would not be
required to obtain a tax clearance certificate. In fiscal year 2007,
CIC received notification from PAAC that it should file Kuwait income tax
returns, notwithstanding the earlier May 2002 notification letter to the
contrary, with the Ministry of Finance in order to facilitate the closure and
final payments under the ESAs. Upon notification from PAAC in fiscal
year 2007, the Company evaluated their position under the related guidance of
FAS 5 “Accounting for Contingencies” and concluded a reasonable estimate could
not be identified. While the Company evaluated the likelihood of the
probability of success of its tax exempt status, a reasonable estimate of the
tax liability of the contracts could not be made due to the subjective nature of
the Kuwait tax system on foreign companies. In addition, the Company
considered, and still maintains that any additional tax liability would be
offset by an obligation for reimbursement from its client PAAC for any income
taxes, penalties and interest.
Under the
new guidance for uncertain tax positions, the Company does not believe that the
tax exempt order claimed by PAAC to have been received, will meet the more
likely than not threshold to obtain benefit, and has therefore accrued a
cumulative impact of adoption related to the Kuwait income taxes. The
Company has continued its assertion of a contractual obligation for
reimbursement from PAAC should any tax liability be agreed to with the Kuwait
Ministry of Finance, however the assessment of this reimbursement is not
permitted under FIN 48. E & E’s management believes
that, given the ESA’s provisions, providing for reimbursement of any Kuwait
income taxes, this liability recorded for estimated income taxes in Kuwait, may
lead to volatility in the Company’s future reported earnings when the Company’s
actual exposure is settled.
The
Company files numerous consolidated and separate income tax returns in the U.S.
federal jurisdiction and in many state and foreign jurisdictions. The Company
has substantially concluded all U.S. federal income tax matters for years
through fiscal 2006. The Company’s tax matters for the fiscal years 2007 and
2008 remain subject to examination by the Internal Revenue Service. The
Company’s New York State tax matters have been concluded for years through
fiscal 2005. The Company’s tax matters in other material jurisdictions remain
subject to examination by the respective state, local, and foreign tax
jurisdiction authorities. No waivers have been executed that would extend the
period subject to examination beyond the period prescribed by
statute.
The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in administrative and indirect operating
expenses. For the year ended July 31, 2008, E & E
recognized interest and penalties of approximately $576,000. For the
year ended July 31, 2008, E & E incurred a foreign exchange loss of $144,000
to adjust the FIN 48 Kuwait tax reserve, penalties and interest and related
federal tax benefit to current exchange rates.
It is
reasonably possible that the liability associated with our unrecognized tax
benefits will increase or decrease within the next twelve months. These changes
will most likely be the result of the Kuwait tax matter described above. At this
time, an estimate of the range of the reasonably possible outcomes cannot be
made.
At July
31, 2008, E&E had approximately $2,746,504 of gross unrecognized tax
benefits that if recognized, would favorably affect the effective income tax
rate in future periods. At July 31, 2008, the liability for uncertain
tax positions and associated interest and penalties are classified as noncurrent
liabilities.
A
reconciliation of the beginning and ending amount of unrecognized tax
benefits is as follows:
|
|
|
|
|
|
Balance
at August 1, 2007 - adoption of FIN 48
|
|
$ |
2,523,443 |
|
New
current year tax positions
|
|
|
48,344 |
|
Adjustments
to prior year tax positions
|
|
|
47,765 |
|
Foreign
currency effect
|
|
|
126,952 |
|
|
|
|
|
|
Balance
at July 31, 2008
|
|
$ |
2,746,504 |
|
19.
|
Venezuela –
Discontinued Operations
|
During
the fourth quarter of 2007, due to a continuing deterioration in business
and political conditions in Venezuela and the likelihood that E&E's
Venezuelan subsidiary would no longer be able to compete for contracts within
the country, the Company evaluated its investment in its Venezuelan
subsidiary and recognized a write-off of $1.1 million ($146,000 after tax
or $.03 per share) to reflect the estimated reduction in the value of the net
assets of the Company's Venezuela subsidiary. During the first quarter of
2008 the Company decided to close its subsidiary in Venezuela effective as
soon as possible and, accordingly, has reclassified its operations as
discontinued. The cessation of business in Venezuela has resulted in
termination benefits for employees according to in-country regulations and
other charges which have not been significant.
20. Selected
Quarterly Financial Data (unaudited)
(In thousands, except per share
information)
2008
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
12,216
|
|
|
|
11,058
|
|
|
|
12,146
|
|
|
|
14,621
|
|
Income
(loss) from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before income taxes and minority
interest
|
|
|
1,511
|
|
|
|
651
|
|
|
|
609
|
|
|
|
2,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations
|
|
|
501
|
|
|
|
130
|
|
|
|
123
|
|
|
|
1,080
|
|
Net
income (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
501
|
|
|
$
|
130
|
|
|
$
|
123
|
|
|
$
|
1,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Net
income per common share: basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
.12
|
|
|
$
|
.03
|
|
|
$
|
.03
|
|
|
$
|
.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share: diluted
|
|
$
|
.12
|
|
|
$
|
.03
|
|
|
$
|
.03
|
|
|
$
|
.25
|
|
2007
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
11,124
|
|
|
|
10,503
|
|
|
|
11,940
|
|
|
|
11,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations before income taxes and minority
interest
|
|
|
1,838
|
|
|
|
1,506
|
|
|
|
1,460
|
|
|
|
916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations
|
|
|
779
|
|
|
|
591
|
|
|
|
478
|
|
|
|
1,388
|
|
Net
income (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
721
|
|
|
$
|
1,222
|
|
|
$
|
479
|
|
|
$
|
652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
(.01
|
)
|
|
|
.15
|
|
|
|
---
|
|
|
|
(.18
|
)
|
Net
income per common share: basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share: diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
.18
|
|
|
$
|
.14
|
|
|
$
|
.11
|
|
|
$
|
.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share: diluted
|
|
$
|
.17
|
|
|
$
|
.29
|
|
|
$
|
.11
|
|
|
$
|
.15
|
|
ECOLOGY
AND ENVIRONMENT, INC.
SCHEDULE
II
Valuation
and Qualifying Accounts
Years
Ended July 31, 2008, 2007, and 2006
|
|
Balance
at beginning of period
|
|
|
Increase
|
|
|
Decrease
|
|
|
Balance
at
end
of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts and contract adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
cost disallowances
|
|
|
3,925,525
|
|
|
|
44,455
|
|
|
|
---
|
|
|
|
3,969,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts and contract adjustments
|
|
$
|
3,300,011
|
|
|
$
|
1,054,204
|
|
|
$
|
2,613,692
|
|
|
$
|
1,740,523
|
|
General
cost disallowances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,696,272
|
|
|
$
|
1,583,468
|
|
|
$
|
2,613,692
|
|
|
$
|
5,666,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts and contract adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
cost disallowances
|
|
|
2,544,903
|
|
|
|
851,358
|
|
|
|
---
|
|
|
|
3,396,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
for 2007 reflect a reclassification of $813,000 to other accrued liabilities due
to the finalization of indirect rates through fiscal year 2001. Balances
for 2006 reflect a reclassification of $162,000 for a subsidiaries allowance for
doubtful accounts.
None to
report.
Company
management, with the participation of the chief executive officer and chief
financial officer, evaluated the effectiveness of its disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of July 31, 2008. In designing and evaluating the Company's disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving their objectives. Based on this evaluation, the Company's
chief executive officer and chief financial officer concluded that, as of July
31, 2008, the Company's disclosure controls and procedures were (1) designed to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to its chief executive officer and
chief financial officer by others within those entities, particularly during the
period in which this report was being prepared and (2) effective, to ensure that
information required to be disclosed by the Company in the reports that the
Company files or submits under the Exchange Act is accumulated and communicated
to Company’s management, including its principal executive and principal
financial officers, or persons providing similar functions, as appropriate to
allow timely decisions regarding required disclosure. There have been no
significant changes in internal controls over financial reporting during the
period covered by this report.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Exchange Act Rule
13a-15(f). Ecology and Environment, Inc. management, including Kevin
S. Neumaier, President and Chief Executive Officer and H. John Mye III, its
Chief Financial Officer, evaluated the effectiveness of Ecology and Environment,
Inc’s internal control over financial reporting using the framework in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, management
concluded that Ecology and Environment, Inc’s internal control over financial
reporting was effective as of July 31, 2008. This annual report does
not include an attestation report of the Company’s registered public accounting
firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
None to
report.
PART
III
The
following table sets forth the names, ages and positions of the Directors and
executive officers of the Company.
Name
|
Age
|
Position
|
|
|
|
Kevin
S. Neumaier
|
44
|
President
and Chief Executive Officer (Effective 8/1/08)
|
|
|
|
Gerhard
J. Neumaier
|
71
|
Chairman
of the Board and Director
|
|
|
|
Frank
B. Silvestro
|
71
|
Executive
Vice President and Director
|
|
|
|
Gerald
A. Strobel
|
68
|
Executive
Vice President of Technical Services and Director
|
|
|
|
Ronald
L. Frank
|
70
|
Executive
Vice President of Finance, Secretary, and Director
|
|
|
|
H.
John Mye III
|
56
|
Vice
President, Chief Financial Officer and Treasurer
|
|
|
|
Gerard
A. Gallagher, Jr.
|
77
|
Director
|
|
|
|
Roger
J. Gray
|
67
|
Senior
Vice President
|
|
|
|
Laurence
M. Brickman
|
64
|
Senior
Vice President
|
|
|
|
Harvey
J. Gross
|
80
|
Director
|
|
|
|
Ross
M. Cellino
|
76
|
Director
|
|
|
|
Timothy
Butler
|
67
|
Director
|
Each
Director is elected to hold office until the next annual meeting of shareholders
and until his successor is elected and qualified. Executive officers
are elected annually and serve at the discretion of the Board of
Directors.
Mr. Kevin
S. Neumaier became the President and Chief Executive Officer of the Company
effective August 1, 2008. Mr. Kevin S. Neumaier had been the
Company’s Senior Vice President of Environmental Sustainability and Chief
Information Officer. Mr. Kevin S. Neumaier has a B.S. in
Civil/Environmental Engineering, an M.S. in Natural Science and is a registered
professional engineer.
Mr.
Gerhard J. Neumaier is a founder of the Company and has served as the President
and a Director since its inception in 1970. On August 1, 2008, Mr
Kevin S. Neumaier became president. Mr. Gerhard J. Neumaier remains
as Chairman of the Board of Directors. Mr. Gerhard J. Neumaier has a
B.M.E. in engineering and a M.A. in physics.
Mr.
Silvestro is a founder of the Company and has served as a Vice President and a
Director since its inception in 1970. In August 1986, he became
Executive Vice President. Mr. Silvestro has a B.A. in physics and an
M.A. in biophysics.
Mr.
Strobel is a founder of the Company and has served as a Vice President and a
Director since its inception in 1970. In August 1986, he became
Executive Vice President of Technical Services. Mr. Strobel is a
registered Professional Engineer with a B.S. in civil engineering and a M.S. in
sanitary engineering.
Mr. Frank
is a founder of the Company and has served as Secretary, Treasurer, Vice
President of Finance and a Director since its inception in 1970. In
August 1986, he became Executive Vice President of Finance. On
January 18, 2008, Mr. Frank resigned his position as Chief Financial Officer and
Treasurer of the Company. Mr. Frank continues in his positions as
Executive Vice President, Secretary and Director of the Company. Mr.
Frank has a B.S. in engineering and a M.S. in biophysics.
Mr. Mye
was appointed Chief Financial Officer, a Vice President and Treasurer of the
Company on January 18, 2008. Mr. Mye has an MBA and is a registered
professional engineer in New York.
Mr.
Gallagher joined the Company in 1972. In March 1979, he became a Vice
President of Special Projects and in February, 1986 he became a
Director. Mr. Gallagher was in charge of quality assurance for
hazardous substance projects. In August 1986, he became a Senior Vice
President of Special Projects. Mr. Gallagher has a B.S. in
physics. Mr. Gallagher retired as an officer of the Company in
February 2001.
Mr. Gray
joined the Company in 1970 as an engineer. In 1980, he became Vice
President and in August 1986 he became a Senior Vice President. Mr. Gray holds a
B.S. in engineering.
Mr.
Brickman joined the Company in 1971. He became Vice President in
April 1988 and became a Senior Vice President in August, 1994. Mr.
Brickman has a B.S., M.S. and Ph.D. in biology.
Mr. Gross
has been a Director of the Company since its inception in 1970. Mr.
Gross is an independent insurance broker and a capital financing
consultant.
Mr.
Cellino has been a Director of the Company since its inception in
1970. Mr. Cellino is an attorney and counselor-at-law retired from
private practice.
Mr.
Butler was appointed as a Director representing Class A shareholders by the
remaining members of the Board of Directors of the Company on September 5, 2003
to fill a vacancy until the next annual meeting of shareholders. Mr.
Butler is a retired bank executive with 38 years of experience as a senior bank
officer concentrating in business lending and finance.
The Board
of Directors has designated that Mr. Butler is the audit committee financial
expert serving on its audit committee. Mr. Butler is independent, as
that term is used in Item 7(d)(3)(iv) of Schedule 14A of the Securities Exchange
Act Regulations.
The
Company has a separately-designated standing audit committee established in
accordance with section 3 (a) 58 (A) of the Securities Exchange Act of 1934 and
the requirements of the American Stock Exchange and NASDAQ. The
members of the audit committee are Timothy Butler, Ross M. Cellino, and Harvey
J. Gross.
The
Company has adopted a code of ethics that applies to its principal executive
officer, principal financial officer, principal accounting officer and
controller, as well as all other employees and the directors of the
Company. The code of ethics, which the Company calls its Code of
Business Conduct and Ethics, was filed as an exhibit to the Company’s annual
report on Form 10-K for the fiscal year ended July 31, 2004 and is posted on the
Company's website at www.ene.com. If
the Company makes any substantive amendments to, or grants a waiver (including
an implicit waiver) from, a provision of its code of ethics that applies to its
principal executive officer, principal financial officer, principal accounting
officer or controller, and that relates to any element of the code of ethics
definition enumerated in Item 406(b) of Regulation S-K, the Company will
disclose the nature of such amendment or waiver in a current report on Form
8-K.
The
Company's Board of Directors, acting as a Compensation Committee of the whole
(see item 1 Business - Corporate Governance/American Stock Exchange Rules), is
responsible for overseeing all of the executive compensation and equity plans
and programs to ensure that its officers and senior staff are compensated in a
manner that is consistent with its competitively based annual and long term
performance goals.
There is
shown below information concerning the annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended July 31,
2008, 2007 and 2006 of those persons who were at July 31, 2008 (i) the chief
executive officer and chief executive officer elect, and (ii) the two other most
highly compensated executive officers with annual salary and bonus for the
fiscal year ended July 31, 2008 in excess of $100,000. In this report, the four
persons named in the table below are referred to as the "Named
Executives."
SUMMARY
COMPENSATON TABLE
|
|
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation
|
|
|
Name
and
Principal
Position
|
|
Fiscal
Year
|
|
Salary
|
Bonus
(1)
|
Other
|
|
Stock
Incentive Options (Shares)
|
Restricted
Stock Awards (3)
|
Long-Term
Compensation Payouts
|
All
Other (2)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
and Director
|
|
2007
|
|
$301,163
|
$35,000
|
-0-
|
|
-0-
|
-0-
|
-0-
|
$11,540
|
|
$347,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Effective
August 1, 2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President and
|
|
2007
|
|
$277,531
|
$35,000
|
-0-
|
|
-0-
|
-0-
|
-0-
|
$11,108
|
|
$323,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald
A. Strobel
|
|
2008
|
|
$285,264
|
$36,000
|
-0-
|
|
-0-
|
-0-
|
-0-
|
$11,790
|
|
$333,054
|
Executive
Vice President of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical
Services and Director
|
|
2006
|
|
$264,573
|
$45,000
|
-0-
|
|
-0-
|
-0-
|
-0-
|
$16,864
|
|
$326,437
|
(1)
|
Amounts
earned for bonus compensation determined by the Board of
Directors.
|
(2)
|
Represents
group term life insurance premiums, contributions made by the Company to
its Defined Contribution Plan and Defined Contribution Plan SERP
(terminated in FY 2006) accruals on behalf of each of the Named
Executives.
|
(3)
|
As
of July 31, 2008, there were 2,313 shares of the Company's Class A Common
Stock which was restricted stock issued pursuant to the Company's Stock
Award Plan issued to Kevin S. Neumaier having a value of
$25,512.
|
Outstanding Equity Awards at
July 31, 2008
The
following table sets forth the information concerning the unvested restricted
stock grants awarded to the CEO and each of the Named Executive Officers as of
the end of fiscal year 2008:
|
|
Stock
Awards
|
Name
|
|
Number
of Shares that
have
not Vested (1)
|
Market
Value of Shares
that
have not Vested (2)
|
|
|
|
|
Kevin
S. Neumaier
|
|
2,313
|
$25,512
|
(1)
|
The
stock shares awarded have a three year vesting
period.
|
(2) Market
Value is calculated based on the fair market value of the Company’s stock at
July 31, 2008 ($11.03).
Stock Vested in Fiscal Year
2007
The
following table sets forth the information concerning the amount of stock grants
awarded to the CEO and each of the Named Executive Officers that had vested as
of the end of fiscal year 2008:
|
|
Stock
Awards
|
Name
|
|
Number
of Shares
Acquired
on Vesting (1)
|
Value
Realized on
Vesting
(1)
|
|
|
|
|
Kevin
S. Neumaier
|
|
-0-
|
-0-
|
(1)
|
Value
realized reflects the market value of the stock at July 31, 2008
($11.03).
|
Director
Compensation
The
following table shows the cash amounts earned by each non-employee director for
his services in fiscal year 2007.
Name
|
|
Board
Member Fees
|
Board
Meeting Fees
|
Other
(1)
|
Total
Amount Paid
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
A. Gallagher, Jr.
|
|
$31,375
|
$-0-
|
$34,755
|
$66,130
|
|
|
|
|
|
|
Timothy
Butler
|
|
$31,375
|
$-0-
|
$-0-
|
$31,375
|
(1)
|
Other
is the value paid under a consulting fee
arrangement.
|
During
fiscal year 2008, each non-employee director was compensated with a director fee
in an annual rate of $31,375. The Directors fees were paid
quarterly. Other than the directors fee the directors received no
other compensation from the Company as director or as serving as members or the
chairman of any committee of the Board of Directors.
Item
12.
|
Security Ownership of Certain Beneficial Owners
and Management and Related Stockholders
Matters
|
The
following table sets forth, as of September 30, 2008, the number of outstanding
shares of Class A Common Stock and Class B Common Stock of the Company
beneficially owned by each person known by the Company to be the beneficial
owner of more than 5 percent of the then outstanding shares of Common
Stock:
|
|
Class
A Common Stock
|
|
Class
B Common Stock
|
Name
and Address (1)
|
|
Nature
and Amount
of
Beneficial
Ownership
(2) (3)
|
|
Percent
of
Class
as
Adjusted
(3)
|
|
Nature
and Amount
of
Beneficial
Ownership
(2) (3)
|
|
Percent
Of
Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
B. Silvestro*
|
|
290,783
|
|
10.1%
|
|
|
290,783
|
|
17.4%
|
|
|
|
|
|
|
|
|
|
|
Gerald
A. Strobel*
|
|
218,652
|
|
7.8%
|
|
|
218,652
|
|
13.1%
|
|
|
|
|
|
|
|
|
|
|
Wedbush,
Inc. (4)
|
|
252,405
|
|
8.9%
|
|
|
---
|
|
---
|
AXA
Financial, Inc. (5)
|
|
159,080
|
|
5.8%
|
|
|
---
|
|
---
|
Franklin
Resources, Inc. (6)
|
|
212,100
|
|
7.6%
|
|
|
---
|
|
---
|
*See
Footnotes in next table.
(1)
|
The
address for Gerhard J. Neumaier, Frank B. Silvestro, Ronald L. Frank,
Gerald A. Strobel and Kevin S. Neumaier is c/o Ecology and Environment,
Inc., 368 Pleasant View Drive, Lancaster, New York 14086, unless otherwise
indicated. The address for Wedbush, Inc. is 1000 Wilshire
Blvd., Los Angeles, CA 90017-2459 and the address for
Edward W. Wedbush and Wedbush Morgan Securities is P.O. Box 30014, Los
Angeles, CA 90030-0014. The address for AXA Financial,
Inc. is 1290 Avenue of the Americas, New York, NY 10104. The
address for Franklin Resources, Inc. is One Franklin Parkway, San Mateo,
CA 94403-1906.
|
(2)
|
Each
named individual or corporation is deemed to be the beneficial owners of
securities that may be acquired within 60 days through the exercise of
exchange or conversion rights. The shares of Class A Common
Stock issuable upon conversion by any such shareholder are not included in
calculating the number of shares or percentage of Class A Common Stock
beneficially owned by any other
shareholder.
|
(3)
|
There
are 2,586,906 shares of Class A Common Stock issued and outstanding and
1,667,426 shares of Class B Common Stock issued and outstanding as of
September 30, 2008. The figures in the "as adjusted" columns
are based upon these totals and except as set forth in the preceding
sentence, upon the assumptions described in footnote 2
above.
|
(4)
|
Includes
shares owned by subsidiaries and affiliates of Wedbush, Inc. based upon a
Schedule 13G filed by Wedbush, Inc. on February 15,
2008.
|
(5)
|
Includes
shares owned by subsidiaries and affiliates of AXA Financial, Inc. based
upon a Schedule 13G filed by AXA Financial, Inc. on February 14,
2008.
|
(6)
|
Includes
shares owned by subsidiaries and affiliates of Franklin Resources, Inc.
based upon a Schedule 13G filed by Franklin Resources, Inc. on February 6,
2008.
|
Security Ownership of
Management
The
following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock and Class B Common Stock as of
September 30, 2008, by (i) each Director of the Company and (ii) all Directors
and officers of the Company as a group.
|
|
Class
A Common Stock
|
|
Class
B Common Stock
|
Name
(1)
|
|
Nature
and Amount
of
Beneficial
Ownership
(2) (3)
|
|
Percent
of
Class
as
Adjusted
(4)
|
|
Nature
and Amount
of
Beneficial
Ownership
(2) (3)
|
|
Percent
of
Class
|
|
|
|
|
|
|
|
|
|
Gerhard
J. Neumaier (5) (10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
B. Silvestro (10)
|
|
290,783
|
|
|
10.1%
|
|
|
290,783
|
|
|
17.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald
A. Strobel (7) (10)
|
|
218,652
|
|
|
7.8%
|
|
|
218,652
|
|
|
13.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
A. Gallagher, Jr.
|
|
62,606
|
|
|
2.4%
|
|
|
62,265
|
|
|
3.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
and Officers Group
(12
individuals)
|
|
1,427,505
|
|
|
36.6%
|
|
|
1,317,250
|
|
|
79.0%
|
|
* Less
than 0.1%
1.
|
The
address of each of the above shareholders is c/o Ecology and Environment,
Inc., 368 Pleasant View Drive, Lancaster, New York
14086.
|
2
|
Pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
beneficial ownership of a security consists of sole or shared voting power
(including the power to vote or direct the vote) or sole or shared
investment power (including the power to dispose or direct the
disposition) with respect to a security whether through any contract,
arrangement, understanding, relationship or otherwise. Unless
otherwise indicated, the shareholders identified in this table have sole
voting and investment power of the shares beneficially owned by
them.
|
3.
|
Each
named person and all Directors and officers as a group are deemed to be
the beneficial owners of securities that may be acquired within 60 days
through the exercise of exchange or conversion rights. The
shares of Class A Common Stock issuable upon conversion by any such
shareholder are not included in calculating the number of shares or
percentage of Class A Common Stock beneficially owned by any other
shareholder.
|
4.
|
There
are 2,586,906 shares of Class A Common Stock issued and outstanding and
1,667,426 shares of Class B Common Stock issued and outstanding as of
September 30, 2008. The figure in the "as adjusted" columns are
based upon these totals and except as set forth in the preceding sentence,
upon the assumptions described in footnotes 2 and 3
above.
|
5.
|
Includes
551 shares of Class A Common Stock owned by Mr. Neumaier's spouse, as to
which he disclaims beneficial ownership. Includes 18,201 shares
of Class A Common Stock owned by Mr. Gerhard J. Neumaier's Individual
Retirement Account. Does not include any shares of Class A
Common Stock or Class B Common Stock held by Mr. Gerhard J. Neumaier's
adult children. Includes 2,306 shares of Class A Common Stock
owned by a Partnership in which Mr. Gerhard J. Neumaier is a general
partner.
|
6.
|
Includes
3,806 Shares of Class B Common Stock owned by Mr. Frank's former spouse as
to which he disclaims beneficial ownership except for the right to vote
the shares which he retains pursuant to an agreement with his former
spouse. Includes 2,640 shares of Class A Common Stock owned by
Mr. Frank's individual retirement account and 9,870 shares of Class A
Common Stock owned by Mr. Frank’s 401(k) plan
account.
|
7.
|
Includes
704 shares of Class B Common Stock held in equal amounts by Mr. Strobel as
custodian for two of his children, as to which he disclaims beneficial
ownership. Does not include any shares of Class B Common Stock held by a
trust which one of his children created for which Mr. Strobel serves as
Trustee.
|
8.
|
Includes
an aggregate of 22,098 shares of Class B Common Stock owned by two trusts
created by Mr. Gross of which he and his spouse are the sole beneficiaries
during their lifetimes.
|
9.
|
Includes
10,915 shares of Class A Common Stock owned by Mr. Cellino's spouse, as to
which shares he disclaims beneficial ownership; also includes 4,782 shares
of Class A Common Stock owned by Mr. Cellino's Individual Retirement
Account. Includes 5 shares of Class A Common Stock owned by a
limited partnership in which Mr. Cellino is a general
partner.
|
10. Subject
to the terms of the Restrictive Agreement. See "Security Ownership of
Certain Beneficial Owners-Restrictive Agreement."
Restrictive
Agreement
Messrs.
Gerhard J. Neumaier, Silvestro, Frank and Strobel entered into a Stockholders'
Agreement in 1970 which governs the sale of certain shares of common stock owned
by them, the former spouse of one of the individuals and the children of those
individuals. The agreement provides that prior to accepting a bona fide
offer to purchase all or any part of their shares, each party must first allow
the other members to the agreement the opportunity to acquire on a pro rata
basis, with right of over-allotment, all of such shares covered by the offer on
the same terms and conditions proposed by the offer.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s Executive
Officers and Directors, and persons who beneficially own more than ten percent
(10%) of the Company’s stock, to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange
Commission. Executive Officers, Directors and greater than ten
percent (10%) beneficial owners are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based
solely on a review of the copies of such forms furnished to the Company and
written representations from the Company’s Executive Officers and Directors, the
Company believes that during the fiscal year ending July 31, 2008 all Section
16(a) filing requirements applicable to its Executive Officers, Directors and
greater than ten percent (10%) beneficial owners were complied with by such
persons, except for the filing of a Form 4 statement by Gerhard J. Neumaier for
the acquisition of 105 Class A shares of Common Stock by his IRA account that
occurred on February 5, 2008 but which statement was not filed until February
14, 2008 since Gerhard J. Neumaier was out of town.
Director
Gerard A. Gallagher, Jr.'s son Gerard A. Gallagher, III, serves as a Senior Vice
President with the company and received aggregate compensation of $137,154 for
his services during fiscal year 2008. The company believes that
compensation for him is commensurate with his peers and his relationships during
2008 were reasonable and in the best interest of the Company.
During
the fiscal years ended July 31, 2008 and 2007, Schneider Downs & Co., Inc.
(SD) provided audit and audit related services to the Company.
The Audit Committee meets with the Company’s independent registered accounting
firm to approve the annual scope of accounting services to be performed,
including all audit, audit-related, and non-audit services, and the related fee
estimates. The Audit Committee also meets with our independent registered
accounting firm, on a quarterly basis, following completion of their quarterly
reviews and annual audit before our earnings announcements, to review the
results of their work. As appropriate, management and our independent registered
accounting firm update the Audit Committee with material changes to any service
engagement and related fee estimates as compared to amounts previously approved.
Under its charter, the Audit Committee has the authority and responsibility to
review and approve, in advance, any audit and proposed permissible non-audit
services to be provided to the Company by its independent registered public
accounting firm. Set forth below are the aggregate fees billed for these
services for the last two fiscal years.
|
|
FY
2008
|
|
|
FY
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
Related Services
|
|
|
51,700
|
|
|
|
33,800
|
|
|
|
|
|
|
|
|
|
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Grand
Total
|
|
$
|
303,100
|
|
|
$
|
286,200
|
|
Audit Fees: The
aggregate fees accrued for professional services rendered for the audit of the
Company's financial statements for the fiscal years ended July 31, 2007 and 2007
and for the reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q for the fiscal years ended July 31, 2008 and 2007
were $251,400 and $252,400, respectively. Also included in this
number are expenses incurred related to accounting consultation services and S8
filings.
Audit Related Fees:
The aggregate fees billed by SD for services rendered to the Company for 401(k),
pension plan audits and indirect rate audits during the years ended July
31, 2008 and 2007 were $51,700 and $33,800, respectively.
PART
IV
Item
15. Exhibits, Financial
Statements, Schedules
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Page
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(a)
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1.
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Financial
Statements
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|
|
|
|
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|
|
Reports
of Independent Registered Public Accounting Firms
|
23
|
|
|
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Consolidated
Balance Sheets - July 31, 2008 and 2007
|
24
|
|
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Consolidated
Statements of Income for the fiscal years ended July 31, 2008, 2007 and
2006
|
25
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|
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|
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|
Consolidated
Statements of Cash Flows for the Fiscal years ended July 31, 2008, 2007
and 2006
|
26
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|
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|
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|
Consolidated
Statements of Changes in Shareholders Equity for the fiscal years ended
July 31, 2008, 2007 and 2006
|
27
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|
|
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|
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Notes
to Consolidated Financial Statements
|
28
|
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2.
|
Financial
Statement Schedule
|
|
|
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|
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Schedule
II - Allowance for Doubtful Accounts and Other Reserves
|
42
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|
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All
other schedules are omitted because they are not applicable, or the
required information is shown in the consolidated financial statements or
notes thereto.
|
|
|
3.
|
Exhibits
|
|
|
|
|
|
|
|
Exhibit
No.
|
Description
|
|
|
|
|
|
|
3.1
|
Certificate
of Incorporation (1)
|
|
|
|
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3.2
|
Certificate
of Amendment of Certificate of Incorporation filed on March 23, 1970
(1)
|
|
|
|
|
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3.3
|
Certificate
of Amendment of Certificate of Incorporation filed on January 19, 1982
(1)
|
|
|
|
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3.4
|
Certificate
of Amendment of Certificate of Incorporation filed on January 29, 1987
(1)
|
|
|
|
|
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3.5
|
Certificate
of Amendment of Certificate of Incorporation filed on February 10, 1987
(1)
|
|
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|
|
|
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3.6
|
Restated
By-Laws adopted on July 30, 1986 by Board of Directors
(1)
|
|
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|
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3.7
|
Certificate
of Change under Section 805-A of the Business Corporation Law filed August
18, 1988 (2)
|
|
|
|
|
|
|
4.1
|
Specimen
Class A Common Stock Certificate (1)
|
|
|
|
|
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4.2
|
Specimen
Class B Common Stock Certificates (1)
|
|
|
|
|
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10.1
|
Stockholders'
Agreement among Gerhard J. Neumaier, Ronald L. Frank, Frank B. Silvestro
and Gerald A. Strobel dated May 12, 1970 (1)
|
|
|
|
|
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|
10.4
|
Ecology
and Environment, Inc. Defined Contribution Plan Agreement dated July 25,
1980 as amended on April 28, 1981 and July 21, 1983 and restated effective
August 1, 1984 (1)
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|
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|
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10.5
|
Summary
of Ecology and Environment Discretionary Performance Plan
(3)
|
|
|
|
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10.6
|
1998
Ecology and Environment, Inc. Stock Award Plan and Amendments
(3) |
|
|
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10.7
|
2003
Ecology and Environment, Inc. Stock Award Plan (4)
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|
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14.1
|
Code
of Ethics (4)
|
|
|
|
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21.5
|
Schedule of Subsidiaries as of July 31, 2008 (5)
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|
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23.1
|
Consent of Independent Registered Public
Accounting Firm - Schneider Downs & Co., Inc.
(5)
|
|
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31.1
|
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(5)
|
|
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|
|
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|
31.2
|
Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(5)
|
|
|
|
|
|
|
32.1
|
Certification of Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(5)
|
|
|
|
|
|
|
32.2
|
Certification of Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(5)
|
|
Footnotes
|
|
|
|
(1)
|
Filed
as exhibits to the Company's Registration Statement on Form S-1, as
amended by Amendment Nos. 1 and 2, (Registration No. 33-11543), and
incorporated herein by reference.
|
|
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(2)
|
Filed
as exhibits to the Company's Form 10-K for Fiscal Year Ending July 31,
2002, and incorporated herein by reference.
|
|
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|
|
(3)
|
Filed
as exhibits to the Company's 10-K for the Fiscal Year Ended July 31, 2003,
and incorporated herein by reference.
|
|
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|
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(4)
|
Filed
as exhibits to the Company's 10-K for the Fiscal Year Ending July 31,
2004, and incorporated herein by reference.
|
|
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(5)
|
Filed
herewith.
|
Pursuant
to the requirements of Section 13 or 15(d) 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.
|
|
|
|
|
Dated: October
29, 2008
|
/s/
Kevin S. Neumaier
|
|
Kevin
S. Neumaier, President and Chief Executive
Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated:
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Kevin S. Neumaier
|
|
|
|
|
Kevin
S. Neumaier
|
|
President
and Chief Executive Officer
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Gerhard J. Neumaier
|
|
|
|
|
Gerhard
J. Neumaier
|
|
Chairman
of the Board and Director
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Frank B. Silvestro
|
|
|
|
|
Frank
B. Silvestro
|
|
Executive
Vice President and Director
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Gerald A. Strobel
|
|
|
|
|
Gerald
A. Strobel
|
|
Executive
Vice President of Technical Services and Director
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Ronald L. Frank
|
|
|
|
|
Ronald
L. Frank
|
|
Executive Vice
President of Finance, Secretary, and Director |
|
October
29, 2008
|
|
|
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated (Continued):
/s/
H. John Mye, III
|
|
|
|
|
H.
John Mye, III
|
|
Vice
President, Chief Financial Officer and Treasurer
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Gerard A. Gallagher, Jr.
|
|
|
|
|
Gerard
A. Gallagher, Jr.
|
|
Director
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Harvey J. Gross
|
|
|
|
|
Harvey
J. Gross
|
|
Director
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Ross M. Cellino
|
|
|
|
|
Ross
M. Cellino
|
|
Director
|
|
October
29, 2008
|
|
|
|
|
|
/s/
Timothy Butler
|
|
|
|
|
Timothy
Butler
|
|
Director
|
|
October
29, 2008
|
Ecology
and Environment, Inc. 10-K - FYE 7/31/08