þ
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended April 30, 2011
|
o
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
|
New York
|
16-0971022
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification Number)
|
|
368 Pleasant View Drive
|
||
Lancaster, New York
|
14086
|
|
(Address of principal executive offices)
|
(Zip code)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
|
Non-accelerated filer
(Do not check if a smaller reporting company)
|
o
|
Smaller reporting company
|
þ
|
Item 1.
|
Financial Statements.
|
Consolidated Balance Sheets
|
||||||||
April 30,
|
July 31,
|
|||||||
2011
|
2010
|
|||||||
Assets
|
(Unaudited)
|
(Audited)
|
||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 12,814,944 | $ | 14,347,194 | ||||
Investment securities, available for sale
|
1,513,232 | 1,305,739 | ||||||
Contract receivables, net
|
56,987,590 | 47,096,456 | ||||||
Deferred income taxes
|
3,971,800 | 3,557,156 | ||||||
Other current assets
|
2,242,268 | 2,025,001 | ||||||
Total current assets
|
77,529,834 | 68,331,546 | ||||||
Property, building and equipment, net of accumulated
|
||||||||
depreciation, $22,418,772 and $21,040,900
|
8,952,486 | 8,664,453 | ||||||
Deferred income taxes
|
1,274,033 | 1,291,297 | ||||||
Other assets
|
2,048,220 | 1,671,636 | ||||||
Total assets
|
$ | 89,804,573 | $ | 79,958,932 | ||||
Liabilities and Shareholders' Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 8,007,211 | $ | 10,863,390 | ||||
Accrued payroll costs
|
10,249,213 | 7,451,310 | ||||||
Income taxes payable
|
1,122,599 | 1,083,911 | ||||||
Current portion of long-term debt and capital lease obligations
|
1,429,293 | 928,027 | ||||||
Billings in excess of revenue
|
7,944,003 | 4,128,118 | ||||||
Other accrued liabilities
|
6,056,738 | 4,926,798 | ||||||
Total current liabilities
|
34,809,057 | 29,381,554 | ||||||
Income taxes payable
|
322,706 | 286,523 | ||||||
Deferred income taxes
|
289,531 | 289,531 | ||||||
Long-term debt and capital lease obligations
|
487,811 | 767,302 | ||||||
Commitments and contingencies (see note #12)
|
- | - | ||||||
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 - 2,685,151 and 2,685,072 shares
|
26,851 | 26,850 | ||||||
Class B common stock, par value $.01 per
|
||||||||
share; authorized - 10,000,000 shares;
|
||||||||
issued - 1,708,574 and 1,708,653 shares
|
17,087 | 17,088 | ||||||
Capital in excess of par value
|
19,846,272 | 20,059,200 | ||||||
Retained earnings
|
29,912,352 | 25,800,803 | ||||||
Accumulated other comprehensive income
|
1,289,191 | 815,906 | ||||||
Treasury stock - Class A common, 88,617 and 136,461
|
||||||||
shares; Class B common, 64,801 shares, at cost
|
(1,662,917 | ) | (1,855,466 | ) | ||||
Total Ecology and Environment, Inc. shareholders' equity
|
49,428,836 | 44,864,381 | ||||||
Noncontrolling interests
|
4,466,632 | 4,369,641 | ||||||
Total shareholders' equity
|
53,895,468 | 49,234,022 | ||||||
Total liabilities and shareholders' equity
|
$ | 89,804,573 | $ | 79,958,932 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
|
Consolidated Statements of Income
|
||||||||||||||||
Unaudited
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
April 30,
|
May 1,
|
April 30,
|
May 1,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenue
|
$ | 41,355,534 | $ | 33,349,736 | $ | 125,560,118 | $ | 103,886,886 | ||||||||
Cost of professional services and other direct operating expenses
|
15,624,627 | 11,460,818 | 48,766,310 | 35,076,531 | ||||||||||||
Subcontract costs
|
7,834,196 | 6,478,668 | 23,003,558 | 22,887,420 | ||||||||||||
Administrative and indirect operating expenses
|
11,173,563 | 9,537,563 | 31,821,627 | 28,022,714 | ||||||||||||
Marketing and related costs
|
4,095,808 | 3,620,120 | 11,268,955 | 10,917,214 | ||||||||||||
Depreciation and amortization
|
428,312 | 405,959 | 1,288,410 | 1,242,000 | ||||||||||||
Income from operations
|
2,199,028 | 1,846,608 | 9,411,258 | 5,741,007 | ||||||||||||
Interest expense
|
(81,497 | ) | (62,236 | ) | (253,369 | ) | (173,123 | ) | ||||||||
Interest income
|
18,154 | 24,395 | 93,351 | 87,764 | ||||||||||||
Other income (expense)
|
47,682 | (1,523 | ) | 39,499 | (91,955 | ) | ||||||||||
Gain on sale of assets
|
232,194 | - | 290,526 | 809,200 | ||||||||||||
Net foreign exchange gain (loss)
|
171,475 | (26,316 | ) | 184,489 | (66,827 | ) | ||||||||||
Income before income tax provision
|
2,587,036 | 1,780,928 | 9,765,754 | 6,306,066 | ||||||||||||
Income tax provision
|
933,279 | 663,112 | 3,513,231 | 2,185,831 | ||||||||||||
Net income
|
$ | 1,653,757 | $ | 1,117,816 | $ | 6,252,523 | $ | 4,120,235 | ||||||||
Net income attributable to noncontrolling interests
|
(224,373 | ) | (370,473 | ) | (1,206,552 | ) | (1,738,187 | ) | ||||||||
Net income attributable to Ecology and Environment, Inc.
|
$ | 1,429,384 | $ | 747,343 | $ | 5,045,971 | $ | 2,382,048 | ||||||||
Net income per common share: basic and diluted
|
$ | 0.34 | $ | 0.18 | $ | 1.19 | $ | 0.57 | ||||||||
Weighted average common shares outstanding: basic and diluted
|
4,236,993 | 4,193,010 | 4,222,759 | 4,150,193 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
Consolidated Statements of Cash Flows
|
||||||||
Unaudited
|
||||||||
Nine months ended
|
||||||||
April 30,
|
May 1,
|
|||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 6,252,523 | $ | 4,120,235 | ||||
Adjustments to reconcile net income to net cash
|
||||||||
provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
1,288,410 | 1,242,000 | ||||||
Provision for deferred income taxes
|
(397,380 | ) | (353,250 | ) | ||||
Share-based compensation expense
|
405,881 | 350,475 | ||||||
Tax impact of share-based compensation
|
- | 102,737 | ||||||
Gain on sale of assets
|
(290,526 | ) | (809,200 | ) | ||||
Provision for contract adjustments
|
598,259 | 583,835 | ||||||
Bad debt expense
|
450,000 | - | ||||||
(Increase) decrease in:
|
||||||||
- contract receivables
|
(9,355,472 | ) | 3,703,257 | |||||
- other current assets
|
(123,997 | ) | 253,550 | |||||
- income tax receivable
|
- | 650,090 | ||||||
- other non-current assets
|
(125,135 | ) | (50,461 | ) | ||||
Increase (decrease) in:
|
||||||||
- accounts payable
|
(2,220,679 | ) | (5,395,638 | ) | ||||
- accrued payroll costs
|
2,677,237 | (370,673 | ) | |||||
- income taxes payable
|
74,726 | 536,477 | ||||||
- billings in excess of revenue
|
3,815,885 | (52,059 | ) | |||||
- other accrued liabilities
|
866,138 | (146,168 | ) | |||||
Net cash provided by operating activities
|
3,915,870 | 4,365,207 | ||||||
Cash flows provided by (used in) investing activities:
|
||||||||
Acquistion of noncontrolling interest of subsidiaries
|
(590,284 | ) | (1,000,000 | ) | ||||
Purchase of Lowham Engineering LLC
|
- | (200,000 | ) | |||||
Purchase of Engineering Consulting Services, Inc., net of cash equivalents of $309,487
|
(790,513 | ) | - | |||||
Purchase of property, building and equipment
|
(1,049,772 | ) | (1,416,272 | ) | ||||
Proceeds from sale of property and equipment
|
322,807 | 959,200 | ||||||
Purchase of investment securities
|
(227,092 | ) | (46,941 | ) | ||||
Cash used in investing activities
|
(2,334,854 | ) | (1,704,013 | ) | ||||
Cash flows provided by (used in) financing activities:
|
||||||||
Dividends paid
|
(1,814,839 | ) | (1,684,482 | ) | ||||
Proceeds from debt
|
484,197 | 480,936 | ||||||
Repayment of debt and capital lease obligations
|
(813,093 | ) | (352,436 | ) | ||||
Distributions to noncontrolling interests
|
(615,366 | ) | (755,338 | ) | ||||
Proceeds from sale of subsidiary shares to noncontrolling interests
|
90,368 | 143,112 | ||||||
Purchase of treasury stock
|
(635,046 | ) | - | |||||
Net cash used in financing activities
|
(3,303,779 | ) | (2,168,208 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents
|
190,513 | 196,997 | ||||||
Net increase (decrease) in cash and cash equivalents
|
(1,532,250 | ) | 689,983 | |||||
Cash and cash equivalents at beginning of period
|
14,347,194 | 16,571,186 | ||||||
Cash and cash equivalents at end of period
|
$ | 12,814,944 | $ | 17,261,169 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
|
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income
|
||||||||||||
Unaudited
|
||||||||||||
Accumulated
|
||||||||||||
Common Stock
|
Capital in
|
Other
|
||||||||||
Class A
|
Class B
|
Excess of
|
Retained
|
Comprehensive
|
Treasury Stock
|
Noncontolling
|
Comprehensive
|
|||||
Shares
|
Amount
|
Shares
|
Amount
|
Par Value
|
earnings
|
Income (loss)
|
Shares
|
Amount
|
Interest
|
Income
|
||
Balance at July 31, 2009
|
2,677,651
|
$ 26,776
|
1,716,074
|
$ 17,162
|
$ 20,093,952
|
$ 23,290,768
|
$ 441,965
|
307,091
|
$ (2,819,138)
|
$ 5,273,455
|
$ 6,517,228
|
|
Net income
|
-
|
-
|
-
|
-
|
-
|
4,257,607
|
-
|
-
|
-
|
2,299,060
|
6,556,667
|
|
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
423,493
|
-
|
-
|
(59,236)
|
291,546
|
|
Cash dividends paid ($.42 per share)
|
-
|
-
|
-
|
-
|
-
|
(1,747,572)
|
-
|
-
|
-
|
-
|
-
|
|
Unrealized investment gain, net
|
-
|
-
|
-
|
-
|
-
|
-
|
23,159
|
-
|
-
|
-
|
23,159
|
|
Conversion of common stock - B to A
|
7,421
|
74
|
(7,421)
|
(74)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Issuance of stock under stock award plan
|
-
|
-
|
-
|
-
|
(372,172)
|
-
|
-
|
(42,675)
|
372,172
|
-
|
-
|
|
Share-based compensation expense
|
-
|
-
|
-
|
-
|
485,945
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Tax impact of share based compensation
|
-
|
-
|
-
|
-
|
102,737
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Sale of subsidiary shares to noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
227,562
|
-
|
|
Distributions to noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(845,106)
|
-
|
|
Purchase of additional noncontrolling interests
|
-
|
-
|
-
|
-
|
(254,181)
|
-
|
(72,711)
|
(66,667)
|
616,670
|
(2,526,094)
|
-
|
|
Other
|
-
|
-
|
-
|
-
|
2,919
|
-
|
-
|
3,513
|
(25,170)
|
-
|
-
|
|
Balance at July 31, 2010
|
2,685,072
|
$ 26,850
|
1,708,653
|
$ 17,088
|
$ 20,059,200
|
$ 25,800,803
|
$ 815,906
|
201,262
|
$ (1,855,466)
|
$ 4,369,641
|
$ 6,871,372
|
|
Net income
|
-
|
-
|
-
|
-
|
-
|
5,045,971
|
-
|
-
|
-
|
1,206,552
|
6,252,523
|
|
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
459,809
|
-
|
-
|
41,024
|
500,833
|
|
Cash dividends paid ($.22 per share)
|
-
|
-
|
-
|
-
|
-
|
(934,422)
|
-
|
-
|
-
|
-
|
-
|
|
Unrealized investment gain, net
|
-
|
-
|
-
|
-
|
-
|
-
|
(18,325)
|
-
|
-
|
-
|
(18,325)
|
|
Conversion of common stock - B to A
|
79
|
1
|
(79)
|
(1)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Repurchase of Class A common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
42,423
|
(635,046)
|
-
|
-
|
|
Issuance of stock under stock award plan
|
-
|
-
|
-
|
-
|
(482,061)
|
-
|
-
|
(54,645)
|
482,061
|
-
|
-
|
|
Share-based compensation expense
|
-
|
-
|
-
|
-
|
405,881
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Sale of subsidiary shares to noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
90,368
|
-
|
|
Issuance of shares to noncontrolling interests
|
667,000
|
-
|
||||||||||
Distributions to noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(615,366)
|
-
|
|
Purchase of additional noncontrolling interests
|
-
|
-
|
-
|
-
|
(136,748)
|
-
|
31,801
|
(35,622)
|
345,534
|
(1,292,587)
|
31,801
|
|
Balance at April 30, 2011
|
2,685,151
|
$ 26,851
|
1,708,574
|
$ 17,087
|
$ 19,846,272
|
$ 29,912,352
|
$ 1,289,191
|
153,418
|
$ (1,662,917)
|
$ 4,466,632
|
$ 6,766,832
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
1.
|
Summary of Significant Accounting Policies
|
|
a.
|
Consolidation
|
|
The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. Also reflected in the financial statements 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.
|
|
b.
|
Use of Estimates
|
|
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions as of the date of the financial statements, which affect the reported values of assets and liabilities and revenues and expenses and disclosures of contingent assets and liabilities. Actual results may differ from those estimates.
|
|
c.
|
Reclassifications
|
|
Certain prior year amounts were reclassified to conform to the fiscal year 2011 consolidated financial statement presentation.
|
|
d.
|
Revenue Recognition
|
|
Substantially all of the Company's revenue is derived from environmental consulting work. 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
|
||
Time and Materials
|
Consulting
|
As incurred at contract rates.
|
||
Fixed Price
|
Consulting
|
Percentage of completion, approximating the ratio of either total costs or Level of Effort (LOE) hours incurred to date to total estimated costs or LOE hours.
|
||
Cost-Type
|
Consulting
|
Costs as incurred. Fixed fee portion is recognized using percentage of completion determined by the percentage of LOE hours incurred to total LOE hours in the respective contracts.
|
|
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 a quarterly basis and based on past audit settlement history. Government audits have been completed and final rates have been negotiated through fiscal year 2001. The Company records an allowance for contract adjustments which principally represents a reserve for contract adjustments for the fiscal years 1996-2011.
|
|
We reduce our accounts receivable and costs and estimated 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 and profit are recognized on change orders 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. Sales and cost of sales at the Company’s South American subsidiaries exclude tax assessments by governmental authorities, which are collected by the Company from its customers and then remitted to governmental authorities.
|
|
e.
|
Investment securities
|
|
Investment securities have been classified as available for sale and are stated at 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 sheets and statements 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 $17,000 and $36,000 at April 30, 2011 and July 31, 2010, respectively.
|
|
f.
|
Fair value of financial instruments
|
|
The Company records and discloses certain financial assets and liabilities at their fair value. The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company has not elected a fair value option on any assets or liabilities.
|
|
Level 1 Inputs – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Generally this includes debt and equity securities and derivative contracts that are traded on an active exchange market (e.g., New York Stock Exchange) as well as certain U.S. Treasury and U.S. Government and agency mortgage-backed securities that are highly liquid and are actively traded in over-the-counter markets. The Company’s investment securities classified as Level 1 are comprised of corporate bonds.
|
|
Level 2 Inputs – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, credit risks, etc.) or can be corroborated by observable market data. The Company’s investment securities classified as Level 2 are comprised of municipal bonds.
|
|
Level 3 Inputs – Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use.
|
|
The following table presents the level within the fair value hierarchy at which the Company’s financial assets are measured on a recurring basis.
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets
|
||||||||||||||||
Investment securities available for sale
|
56,194
|
1,457,038
|
---
|
1,513,232
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets
|
||||||||||||||||
Investment securities available for sale
|
50,895
|
1,254,844
|
---
|
1,305,739
|
|
The carrying amount of cash and cash equivalents, contract receivables and accounts payable at April 30, 2011 and July 31, 2010 approximate 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 April 30, 2011 and July 31, 2010 approximates fair value. There were no financial instruments classified as level 3.
|
|
The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. We evaluated the significance of transfers between levels based upon the nature of the financial instrument. For the period ended April 30, 2011, there were no transfers in or out of levels 1, 2 or 3.
|
|
g.
|
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 the nine months ended April 30, 2011 and the fiscal year ended July 31, 2010.
|
|
h.
|
Income Taxes
|
|
The Company follows the asset and liabilities approach to account for income taxes. This approach requires the recognition of deferred tax assets and liabilities 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 change 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.
|
|
Income tax expense includes U.S. and international income taxes, determined using an estimate of the Company’s annual effective tax rate. A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences and net operating loss carryforwards.
|
|
The Company has significant deferred tax assets, resulting principally from contract reserves, accrued compensation and fixed assets. The Company periodically evaluates the likelihood of realization of deferred tax assets, and has determined that no valuation allowance is necessary.
|
|
Additionally, the FASB ASC Topic Income Taxes, prescribes a recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
|
|
|
|
A tax position is a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions shall be recognized only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position will be sustained. Tax positions that meet the more likely than not threshold should be measured using a probability weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Whether the more-likely-than-not recognition threshold is met for a tax position, is a matter of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in administrative and indirect operating expenses. As of April 30, 2011 and July 31, 2010 the Company has not recognized any material positions in the consolidated financial statements.
|
|
Basic and diluted EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. 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 shares are equal amounts. See Note 10 to Consolidated Financial Statements for additional information.
|
|
j.
|
Impairment of Long-Lived Assets
|
|
The Company assesses recoverability of the carrying value of long-lived assets 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. The Company identified no events or changes in circumstances that necessitated an evaluation for an impairment of long lived assets.
|
|
k.
|
Goodwill
|
|
The total goodwill of approximately $1.2 million is subject to an annual assessment for impairment. The Company’s most recent annual impairment assessment for goodwill was completed during the fourth quarter of fiscal year 2010. The results of this assessment showed that the fair values of the reporting units, using a discounted cash flow method, to which goodwill is assigned was in excess of the book values of the respective reporting units, resulting in no goodwill impairment. Goodwill is also assessed for impairment between annual assessments whenever events or circumstances make it more likely than not that an impairment may have occurred. The Company identified no events or changes in circumstances that necessitated an evaluation for an impairment of goodwill. The Company recorded additional goodwill of $.2 million during the first six months of fiscal year 2011 related to the acquisition of Engineering Consulting Services Inc., LLC (ECSI). See Note 14 to Consolidated Financial Statements for additional information.
|
2.
|
Contract Receivables, net
|
April 30,
2011
|
July 31,
2010
|
|||||||
United States government -
|
||||||||
Billed
|
$
|
2,648,805
|
$
|
2,445,658
|
||||
Unbilled
|
2,532,910
|
3,528,728
|
||||||
5,181,715
|
5,974,386
|
|||||||
Industrial customers and state and municipal governments -
|
||||||||
Billed
|
33,947,078
|
22,772,335
|
||||||
Unbilled
|
22,280,729
|
21,723,408
|
||||||
56,227,807
|
44,495,743
|
|||||||
Allowance for doubtful accounts and contract adjustments
|
(4,421,932
|
)
|
(3,373,673
|
)
|
||||
$
|
56,987,590
|
$
|
47,096,456
|
3.
|
Line of Credit
|
|
The Company maintains an unsecured line of credit available for working capital and letters of credit of $20.5 million at interest rates ranging from 3% to 5% at April 30, 2011. Other lines are available solely for letters of credit in the amount of $13.5 million. The Company guarantees the line of credit of Walsh. Its lenders have reaffirmed the Company’s lines of credit within the past twelve months. At April 30, 2011 and July 31, 2010 the Company had letters of credit outstanding totaling approximately $4.1 million and $4.9 million, respectively. After letters of credit and loans, there was $29.9 million of availability under the lines of credit at April 30, 2011.
|
4.
|
Debt and Capital Lease Obligations
|
|
Debt inclusive of capital lease obligations consists of the following:
|
April 30,
2011
|
July 31,
2010
|
|||||||
Various bank loans and advances at interest rates ranging from 5% to 14%
|
$
|
1,675,659
|
$
|
1,450,247
|
||||
Capital lease obligations at varying interest rates averaging 11%
|
241,445
|
245,082
|
||||||
1,917,104
|
1,695,329
|
|||||||
Current portion of long-term debt and capital lease obligations
|
(1,429,293
|
)
|
(928,027
|
)
|
||||
Long-term debt and capital lease obligations
|
$
|
487,811
|
$
|
767,302
|
|
|
Amount
|
||||
May 2011 – April 2012
|
$
|
1,429,293
|
||
May 2012 – April 2013
|
342,111
|
|||
May 2013 – April 2014
|
94,638
|
|||
May 2014 – April 2015
|
35,776
|
|||
May 2015 – April 2016
|
15,286
|
|||
Thereafter
|
---
|
|||
$
|
1,917,104
|
5.
|
Income Taxes
|
6.
|
Other Accrued Liabilities
|
April 30,
2011
|
July 31,
2010
|
|||||||
Allowance for contract adjustments
|
$
|
3,805,225
|
$
|
3,483,876
|
||||
Other
|
2,251,513
|
1,442,922
|
||||||
|
$
|
6,056,738
|
$
|
4,926,798
|
7.
|
Stock Award Plan
|
8.
|
Shareholders' Equity
|
|
Class A and Class B common stock
|
|
Noncontrolling Interest
|
Nine months
ended
April 30,
2011
|
Fiscal year
ended
July 31,
2010
|
|||||||
Transfers to noncontrolling interest:
|
||||||||
Sale of 160 Walsh common shares
|
$
|
---
|
$
|
40,850
|
||||
Sale of 196 Walsh common shares
|
---
|
50,040
|
||||||
Sale of 200 Lowham – Walsh common shares
|
---
|
52,222
|
||||||
Sale of 15,000 Walsh Peru common shares
|
---
|
84,450
|
||||||
Sale of 900 Gustavson common shares
|
62,451
|
---
|
||||||
Issuance of 667 ECSI common shares
|
667,000
|
---
|
||||||
Sale of 75 Lowham – Walsh common shares
|
27,917
|
---
|
||||||
Total transfers to noncontrolling interest
|
757,368
|
227,562
|
||||||
Transfers from noncontrolling interest:
|
||||||||
Purchase of 182 Walsh common shares
|
---
|
(59,486
|
)
|
|||||
Purchase of 7,343 Walsh common shares
|
---
|
(2,289,778
|
)
|
|||||
Purchase of 11,000 Walsh Peru common shares
|
---
|
(126,830
|
)
|
|||||
Purchase of 50 Gestion Ambiental Consultores common shares
|
---
|
(50,000
|
)
|
|||||
Purchase of 20 Walsh common shares
|
(7,776
|
)
|
---
|
|||||
Purchase of 496 Walsh common shares
|
(208,156
|
)
|
---
|
|||||
Purchase of 2,205 Walsh common shares
|
(974,750
|
)
|
---
|
|||||
Purchase of 243 Walsh common shares
|
(101,905
|
)
|
---
|
|||||
Total transfers from noncontrolling interest
|
(1,292,587
|
)
|
(2,526,094
|
)
|
||||
Net transfers from noncontrolling interest
|
$
|
(535,219
|
)
|
$
|
(2,298,532
|
)
|
9.
|
Shareholders' Equity - Restrictive Agreement
|
10.
|
Earnings Per Share
|
|
The computation of basic earnings per share reconciled to diluted earnings per share follows:
|
Three months ended
|
Nine months ended
|
|||||||||||||||
April 30,
2011
|
May 1,
2010
|
April 30,
2011
|
May 1,
2010
|
|||||||||||||
Total income available to common stockholders
|
$
|
1,429,384
|
$
|
747,343
|
$
|
5,045,971
|
$
|
2,382,048
|
||||||||
Dividend declared
|
---
|
---
|
934,422
|
867,155
|
||||||||||||
Undistributed earnings
|
1,429,384
|
747,343
|
4,111,549
|
1,514,893
|
||||||||||||
Weighted-average common shares outstanding (basic)
|
4,236,993
|
4,193,010
|
4,222,759
|
4,150,193
|
||||||||||||
Distributed earnings per share
|
$
|
.34
|
$
|
.18
|
$
|
.22
|
$
|
.21
|
||||||||
Undistributed earnings per share
|
---
|
---
|
.97
|
.36
|
||||||||||||
Total earnings per share
|
.34
|
.18
|
1.19
|
.57
|
11.
|
Segment Reporting
|
Revenue (1)
|
Gross Long-
Lived Assets
|
|||||||
United States
|
$
|
83,476,000
|
$
|
26,542,000
|
||||
Foreign countries
|
42,084,000
|
4,829,000
|
Revenue (1)
|
Gross Long-
Lived Assets
|
|||||||
United States
|
$
|
73,773,000
|
$
|
25,787,000
|
||||
Foreign countries
|
30,113,000
|
3,156,000
|
12.
|
Commitments and Contingencies
|
13.
|
Supplemental Cash Flow Information Disclosure
|
14.
|
Transactions
|
15.
|
Recent Accounting Pronouncements
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
Item 1.
|
Legal Proceedings
|
Item 2.
|
Changes in Securities and Use of Proceeds
|
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, 2010 –
April 30, 2011
|
42,423
|
$15.08
|
42,423
|
157,577
|
Item 3.
|
Defaults Upon Senior Securities
|
|
The Registrant has no information for Item 3 that is required to be presented.
|
Item 4.
|
Submission of Matters to a Vote of Security Holders
|
|
The Registrant has no information for Item 4 that is required to be presented.
|
Item 5.
|
Other Information
|
|
The Registrant has no information for Item 5 that is required to be presented.
|
|
(a)
|
- 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
- 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
- 32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
- 32.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
(b)
|
Registrant filed a Form 8-K report on October 29, 2010 to announce the issuance of a press release setting forth its results of operations and financial condition for the year ending July 31, 2010.
|
Ecology and Environment, Inc.
|
||
Date: June 14, 2011
|
By:
|
/s/ H. John Mye III
|
H. John Mye III
|
||
Vice President, Treasurer and Chief Financial Officer –
Principal Financial and Accounting Officer
|