Ecology and Environment, Inc.

Annual  Report 2012

ecology and
environment, inc.
Global Environmental Specialists

“In an industry where credibility is built one 
relationship and one project at a time, we work 
with integrity and invest in truly getting to know 
our clients.  We put ourselves in their shoes 
and strive to fully understand their business 
objectives.  In doing so, we are able to transcend 
the traditional client-consultant relationship and 
act as valued strategic advisors.  As markets pivot 
and grow, we are well positioned to help our 
clients stay ahead of the curve.”

– Kevin S. Neumaier, P.E.
President and Chief Executive Officer

Working Together,  
Finding Solutions
The fiscal year ended July 31, 2012 was not an easy one 
for Ecology and Environment, Inc., (E & E) (NASDAQ: 
EEI). Our revenues were down 8% to $155.4 million in 
Fiscal Year (FY) 2012, compared to the $169.2 million we 
reported for FY 2011.  Growth in our operations outside 
the U.S., particularly in South America, was overshadowed 
by declines in the U.S. market, where uncertainty in the 
elections and deadlock in Congress led to project delays.  
These project delays hurt revenue and profit margins, 
which were down considerably against our record-
breaking FY 2011.  

Viewed over the longer term, the downturn in U.S. 
markets that E & E experienced in FY 2012 was like 
a bump in the road from the growth we’ve been 
experiencing since FY 2005. The big bright spot is that 
growth in E & E’s work outside the U.S. has almost tripled 
since FY 2008 and now represents 37% of consolidated 
gross revenues.  The long-term global demand for our 
services is increasing.  Coupled with increasing internal 
efficiencies and a steadying or improvement of the U.S. 
market, we see tremendous opportunities for E & E  
going forward.

Financial Highlights 
(in thousands, except per share amounts)

2012

Fiscal year ending July 31
2010

2011

2009

2008

Revenue

$155,410

$169,173

$144,098

$146,081

$110,533

Revenue less subcontract costs

$123,095

$137,846

$113,806

$108,862

$  94,699

Net income attributable to 
Ecology and Environment, Inc.

Net income per common share: 
basic and diluted 

$       774

$    6,960

$    4,258

$     5,221

$    1,834

$      0.18

$      1.65

$      1.02

$      1.27

$      0.43

3

For the New York State Department of 
Transportation, E & E prepared a stream mitigation 
design to compensate for unavoidable stream 
impacts associated with the construction of a section 
of the U.S. Route 219 Expressway expansion project 
in Western New York.  E & E’s innovative restoration 
design approach focused on mimicking natural 
systems in form, function, and process.

Our Market Advantages
Since our founding in 1970, we have established our-
selves globally, proudly working on over 50,000 projects 
in 122 countries.  In doing so, we are well positioned 
to recognize global challenges, new opportunities, and 
emerging markets.  In FY 2012, we continued to build on 
existing relationships and have worked to establish new 
relationships in developing markets, particularly in Africa 
and Asia.  This forward-looking approach translates into 
in-country experience and operational knowledge that 
gives E & E a clear advantage. 

We have also been very successful in technical innovations 
in existing markets.  We are, for example, bringing 
our insight into how our clients work to develop new 
information technology/geographic information system 
(IT/GIS) tools to streamline the project development 
process.  For large-scale, complex initiatives, these 
proprietary tools empower our clients to manage 
information, improve transparency, build consensus, and 
ultimately strengthen projects.  

New Ways of Working
As a knowledge-based network organization, 
communicating effectively is critical to our work.  E & E’s 
ability to share knowledge and work collaboratively is 
one of our core strengths.  In FY 2012, we invested in 
an enterprise-wide information system, SAP, to strengthen 

our ability to collaborate globally and share information 
across our companies.  We expect this foundational 
investment to yield increased efficiencies, reductions in the 
growth of indirect costs, and improved reporting across 
our global operations for years to come.

5

For the Bureau of Ocean Energy Management (BOEM), E & E is 
preparing an environmental assessment (EA) addressing the potential 
impacts of leasing and approval of site assessment activities within the 
offshore Rhode Island and Massachusetts wind energy area.  The EA will 
summarize potential impacts including marine mammals, fisheries, water 
quality, benthic resources, avian species, geological resources, vessel 
traffic, aesthetics, and land use.  Using GIS technology and geospatial 
analysis techniques, team specialists have prepared over 40 figures 
displaying key environmental information and baseline conditions.  

We Bring Clarity to Complexity 

As the pace of global change accelerates, the world 
faces extraordinary economic, social, and environmental 
challenges – unprecedented in scope and complexity.  
At E & E, we excel at addressing these large-scale, 
multifaceted problems because we have the insight 
gained from being at the forefront of these issues for 
over four decades.  Our internal knowledge-sharing 
capability allows us to quickly understand complex issues 
and examine them in context and in their totality.  We help 
clients tackle these challenges by providing them with the 
clarity and guidance required to navigate the complex 
path forward and turn environmental and social risk into 
opportunity.  

In an industry where credibility is built one relationship 
and one project at a time, we work with integrity and 
invest in truly getting to know our clients.  We put 
ourselves in their shoes and strive to fully understand 
their business objectives.  In doing so, we are able to 
transcend the traditional client-consultant relationship 
and act as valued strategic advisors.   As markets pivot 
and grow, we are well positioned to help our clients stay 
ahead of the curve.  

7

In Uganda, E & E is working with Atacama to provide environmental technical review 
of and support for North Nile environmental and social impact assessments and 
develop project briefs for oil and gas exploration in Murchison Falls National Park.

Pioneering Project Work
In FY 2012, we continued our work on several exciting 
new high-profile, large-scale energy and sustainability 
projects in the U.S. and around the world that are 
pioneering examples of the kind of sustainable growth that 
leads to genuine long-term prosperity.

In North Africa, for example, E & E is providing 
sustainable design and planning services to support 
the design team and owner in the development of the 
Ville Verte Mohammed VI Green City and Technical 
University Campus, a more than 800-hectare real estate 
development project adjacent to Benguerir, Morocco.  
The project is setting new standards for sustainable urban 
design in Morocco and is the first LEED-Neighborhood 
Development (LEED-ND) project registered in North 
Africa and one of the largest LEED-ND projects registered 
worldwide.

As preparations continue for the 2014 World Cup 
and 2016 Olympic Games in Rio de Janeiro, E & E 
is supporting Alcatel-Lucent Submarine Networks as it 
addresses the global demand for social communication 
networks. E & E and its Brazilian subsidiary, E & E do 
Brasil, are obtaining all of the environmental licenses 
to install the fiber optic cable system required for the 
increased bandwidth for these events–covering Rio de 
Janeiro, Salvador, Bahia, and Fortaleza, Brazil. In addition 
to Brazil, the system will be landing in Colombia, Mexico, 
Dominican Republic, and Guatemala.  The $340-million 
Alcatel-Lucent project will complete 9,323 miles (17,000 

kilometers) of connectivity, with a proposed project route 
anticipated to traverse territorial waters in 11 countries.  

E & E is lead planning consultant for the development 
of regional sustainability plans for the Western New 
York, Mid-Hudson, Mohawk Valley, and North Country 
regions of New York State–which encompass 25 counties, 
33 cities, 457 towns, and 234 villages–as part of New 

9

E & E provided permitting support and is currently conducting construction 
monitoring for the 250MW California Valley Solar Ranch project which, when 
completed, will generate enough emission-free power for more than 100,000 
homes and help California achieve its renewable energy goals for 2020. 

York Governor Andrew Cuomo’s Cleaner, Greener 
Communities program. The plans are a cornerstone 
of economic development initiatives to build resilient 
communities across the state, and are one of the largest 
ongoing efforts of its kind in the nation.  The plans 
will address energy, water, materials management, 
transportation and land use, agriculture, governance, 
economic development, and climate change adaptation. 

For SunPower, E & E helped obtain permits and is now 
conducting construction monitoring for the 250-megawatt 
(MW) California Valley Solar Ranch (CVSR) project.  Upon 
completion, the CVSR will be the largest solar photovoltaic 
(PV) project in California and one of the largest in the 
world.  The CVSR is unique in that it incorporates a 
14,000-acre conservation program to be managed in 
perpetuity for special status species—an unprecedented 
benefit from a utility-scale project, proving that it is 
possible to construct large-scale renewable energy 
projects in an environmentally sound manner. 

In Bangladesh, E & E’s subsidiary, Gustavson Associates, 
assisted the Bangladesh Hydrocarbon Unit (HCU) under 
a program funded by a grant from the Royal Norwegian 
Government and administered by the Asian Development 
Bank.  The HCU is an organization within the Bangladesh 
Energy and Mineral Resources Division.  Gustavson’s 
team of petroleum engineers, geologists, economists, GIS 
specialists, and data management experts assisted the 
Bangladesh HCU in updating the country’s oil and gas 
reserve and resource reports.  We supported the creation 

of plans for future scenarios concerning hydrocarbon 
development, helped plan field development activities and 
promoted fields to attract investment by international oil 
and gas companies, and assisted in the establishment of a 
national oil and gas data archiving system. 

E & E is providing preliminary environmental support for a 
proposed privately-funded intercity passenger high-speed 
rail project in Texas.  E & E’s participation at an early 
design phase aids in creating a design with environmental 
impact mitigation as an integral part rather than an add-
on resulting from public and agency reviews.

11

E & E prepared mine closure plans for the Ares, Selene, and Arcata 
Mining Units in Peru.  The closure plans included prevention, mitigation, 
and control measures geared at guaranteeing environmental well-being, 
rehabilitation of the surrounding ecosystem, and public security.

Looking Forward
The cornerstone of E & E’s business approach has 
always been long-term, strategic growth measured in 
years and decades, not quarter-to-quarter.  Often E & E 
is a leader in its markets because we have the scientific 
understanding of the problems that we face earlier than 
others.  While FY 2012 was a down year, the long-term 
global demand for our services is increasing.  

E & E’s deep experience and resources, knowledge-based 
network organizational structure, and portfolio of iconic, 
ground-breaking projects around the world has positioned 
us to lead in emerging global markets and to excel as 
projects becoming increasingly complex.  This uniquely 
strong market position allows us to continue our long-term 
growth trajectory–a course built on turning challenges into 
opportunities for ourselves and our clients.

At our core, E & E is a firm dedicated to the principles 
of sustainability–environmental, economic, and social– 
and we understand in a very fundamental way how 
our decisions every day influence future outcomes.  
As projects continue to reflect the complexities of an 
interconnected and rapidly-changing world, E & E is well 
positioned globally to help clients meet today’s unique 
challenges and enjoy sustainable prosperity.  We thank 
you, our shareholders, and strive to deliver prosperity to 
you through the same processes. 

Some Words from Our Chairman
Last year was a difficult year with the political situation in 
the United States, which affected our renewable markets, 
but at the same time we saw an increase in concern for 
the global environment.  This has been reflected in a 
substantial increase in our overseas operation.  As the years 
have gone by, we have seen a major change in attitudes 
around the world about the environment.  No longer are 
American views on the environment the only voices to be 
heard.  The concerns about climate change are growing 
strong around the world.  China, with its rapid industrial 
growth, is realizing that it must make major strides in the 
area of the environment to meet the country’s objectives in 
improving the quality of life of it’s people.  We anticipate 
that with our 25 years in China, we will have the chance to 
help them in a substantial way in the next couple of years.  
Overall, we are optimistic that, as a result of the November 
2012 election and Superstorm Sandy, the United States will 
be concerned with climate change and that there will be an 
even stronger international commitment to the environment.  
This should bode well for us in the coming years.

Gerhard J. Neumaier, Chairman

13

Selected Consolidated Financial Data

Operating data:

Revenues

Year Ended July 31

2012               2011               2010               2009               2008
(In thousands, except per share amounts)

$    155,410

$    169,173

$    144,098

$    146,081

$    110,533

Income from operations

4,784

12,386

9,893

9,445

5,593

Income from continuing operations  
before income taxes

Net income attributable to Ecology and 
Environment, Inc.

Net income per common share: basic  
and diluted

Cash dividends declared per common 
share: basic and diluted 

Weighted average common shares  
outstanding: basic and diluted

Balance sheet data:

Working capital

Total assets 

Long-term debt and capital lease 
obligations

Ecology and Environment, Inc. 
shareholders’ equity

4,398

12,755

10,459

9,450

5,554

$           774

$        6,960

$       4,258

$       5,221 

$       1,834

    $          0.18

$          1.65

$         1.02

$         1.27 

$         0.43

$          0.48

$          0.46

$         0.42

$         0.39 

$         0.36

4,233,883

4,222,688

4,160,816

4,115,921

4,259,663

As of July 31
2012               2011               2010               2009               2008
(In thousands, except per share amounts)

$    38,511

$    41,979

$    38,950

$    36,142

$    36,871

97,512

94,268

79,959

77,808

75,602

591

2,138

1,695

815

1,860

48,146

50,034

44,864

41,051

39,254

Book value per share: basic and diluted

$      11.37

$      11.85

$      10.78

$        9.97

$        9.22

Management’s Discussion and Analysis of  
Financial Condition and Results of Operations
Liquidity and Capital Resources
Operating activities consumed cash flow of $.4 million 
during fiscal year 2012. Operating activities during fiscal 
year 2012 provided operating cash as a result of net 
income of $3.0 million, $2.2 million in depreciation and 
amortization expense and $.7 million in share based 
compensation expense. This was offset during the year 
by decreases in accounts payable, accrued payroll costs 
and accrued income taxes and an increase in accounts 
receivable. Accounts payable and accrued payroll costs 
consumed $3.3 million of cash during the period due 
to the payment of accrued bonuses and the timing of 
payments for operating costs and subcontracts. Accrued 
income taxes consumed $3.9 million of cash during the 
period due to the payment of tax estimates during the 
fiscal year 2012. Accounts receivable increased $2.3 
million during fiscal year 2012 due primarily to increased 
receivables on foreign work.

Investment activities consumed $5.5 million of cash which 
was used mainly for the purchase of an enterprise wide 
planning and reporting system and to purchase additional 
interest in the majority owned subsidiaries Walsh 
Environmental Scientists and Engineers, LLC (Walsh) and  
E & E do Brasil (Brasil).

Financing activities provided $8.0 million of cash during 
fiscal year 2012 mainly from net debt proceeds of $11.5 
million less dividend payments of $2.0 million, purchase 
of treasury stock for $.4 million and distributions to non-
controlling interests of $1.1 million. Short term debt has 
increased this year due mainly to the delinquency of the 
receivables in the Middle East.

Ecology and Environment, Inc. (Company) maintains an 
unsecured line of credit available for working capital and 
letters of credit of $34 million at interest rates ranging 
from 2.5% to 5% at July 31, 2012. The Company 

14

 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
guarantees the line of credit of Walsh. Its lenders have 
reaffirmed the Company’s lines of credit within the 
past twelve months. At July 31, 2012 and 2011, the 
Company had letters of credit and loans outstanding 
totaling approximately $14.9 million and $4.1 million, 
respectively. After letters of credit and loans, there was 
$19.1 million of availability under the lines of credit at 
July 31, 2012. The Company maintained a cash balance 
of $10.4 million at July 31, 2012, however borrowings 
of $12.3 million against the Company’s line of credit 
were necessary during the fiscal year due to the cash 
requirements at Ecology and Environment, Inc. (Parent 
Company). The Company believes that cash flows from 
operations and borrowings against the lines 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 
Year to Date and Fourth Quarter 2012 vs 2011
Revenue for fiscal year 2012 was $155.4 million, a 
decrease of $13.8 million or 8% from the $169.2 million 
reported for fiscal year 2011. Revenue at the Parent 
Company was $80.9 million for fiscal year 2012, a 
decrease of $18.6 million or 19% from the $99.5 million 
reported in the prior year due to reduced revenues from 
the commercial and international markets. Revenues from 
the Parent Company’s commercial market were $33.5 
million for fiscal year 2012, down $15.0 million from the 
$48.5 million reported in fiscal year 2011 attributable 
to decreased activity in the domestic energy market due 
to the completion of a significant project. Revenues from 
the Parent Company’s international market decreased 
$3.7 million over the prior year mainly attributable to 
decreased activity in the Middle East. This decrease was 
partially offset by increases in revenue at the Company’s 
majority owned subsidiaries E & E do Brasil and Gestion 
Ambiental Consultores (GAC). E & E do Brasil reported 
revenue of $15.7 million for fiscal year 2012, an increase 
of $4.0 million from the $11.7 million reported in fiscal 
year 2011 due to modifications received on contracts 
in the transmission and energy markets. GAC reported 
revenue of $11.3 million for fiscal year 2012, an increase 
of $3.2 million from the $8.1 million reported in the 
prior year due to increased work in the mining market. 
Revenues for fiscal year 2012 included a favorable 
settlement of government contract rates covering the years 
2002 through 2005 of approximately $.3 million.

E & E reported revenue of $36.9 million for the fourth 
quarter, a decrease of $7.3 million or 17% from the 
$44.2 million reported in the fourth quarter of fiscal 
year 2011. Revenue at the Parent Company was $20.1 
million, a decrease of $6.6 million or 25% from the 
$26.7 million reported in fiscal year 2011 due mainly 
to decreases in the Company’s domestic energy markets 
as a result of the completion of a significant project. The 

Company’s majority owned subsidiary Walsh reported 
revenue of $7.8 million during the fourth quarter of 
fiscal year 2012, a decrease of $1.8 million from the 
$9.6 million reported in fiscal year 2011 due mainly to 
decreases in the domestic energy and state/local markets. 
This decrease was partially offset by increases in revenue 
at the Company’s majority owned subsidiaries E & E do 
Brasil and GAC. E & E do Brasil reported revenue of $4.4 
million during the fourth quarter of fiscal year 2012, an 
increase of $1.4 million over fiscal year 2011 due to work 
in the transmission and energy markets. GAC reported 
revenue of $3.4 million during the fourth quarter of fiscal 
year 2012, an increase of $1.0 million over fiscal year 
2011 due to contracts in the mining market.

Year to Date and Fourth Quarter 2011 vs 2010
Revenue for fiscal year 2011 was $169.2 million, an 
increase of $25.1 million from the $144.1 million 
reported for fiscal year 2010 mainly attributable to 
increases at the Parent Company, ECSI and GAC. 
Revenue at the Parent Company was $99.5 million for 
fiscal year 2011, an increase of $15.3 million or 18% 
from the $84.2 million reported in the prior year. This 
increase was attributable to work performed on contracts 
in the Company’s commercial and international markets 
offset by decreases in work in the federal government 
and state markets. Revenues from the Parent Company’s 
commercial market were $48.5 million for fiscal year 
2011, up $16.5 million from the $32.0 million reported 
in fiscal year 2010 attributable to increased activity in 
the domestic energy market. Revenues from the Parent 
Company’s international market increased $5.2 million 
over the prior year mainly attributable to increased activity 
in the Middle East and Africa. Revenues from the Parent 
Company’s federal government market were $26.6 
million for fiscal year 2011, a decrease of $.6 million 
from the $27.2 million reported in the prior year mainly 
attributable to decreased activity in contracts with the 
United States Department of Defense (DOD). Revenues 
from the Parent Company’s state market were $14.7 
million for fiscal year 2011, down $5.8 million from the 
$20.5 million reported in fiscal year 2010. The decrease 
in state revenues was mainly attributable to decreased 
activity in Texas, Florida and California due to the state 
budgetary constraints. The inclusion of ECSI, formed 
in August 2010, contributed revenue of $5.2 million 
for fiscal year 2011. GAC, the Company’s Chilean 
subsidiary, reported revenue of $8.1 million during fiscal 
year 2011, an increase of $4.3 million or 113% from the 
$3.8 million reported in fiscal year 2010 due to increased 
work in mining and extractive industries. E & E do Brasil 
reported revenue of $11.7 million for fiscal year 2011, an 
increase of $1.2 million or 11% from the $10.5 million 
reported in the prior year. The increase in revenue at 
E & E do Brasil was associated with increased work on 
contracts in the energy market. The Company’s majority 
owned subsidiary Walsh Environmental reported revenues 

15

of $39.2 million for fiscal year 2011, a decrease of $2.9 
million or 7% from the $42.1 million reported in fiscal 
year 2010 mainly attributable to the completion of work 
associated with a redevelopment project and a decrease 
in work in the energy market. 

E & E reported revenue of $44.2 million for the fourth 
quarter, an increase of $3.5 million from the $40.7 
million reported in the fourth quarter of the prior year. 
Revenue at the Parent Company was $26.7 million during 
the fourth quarter of fiscal year 2011, an increase of $1.4 
million attributable to work performed on contracts in the 
Company’s domestic energy market. Revenues from the 
Parent Company’s commercial market were $13.3 million 
for the fourth quarter of fiscal year 2011, an increase 
of $1.4 million from the $11.9 million reported in the 
fourth quarter of fiscal year 2010 attributable to increased 
activity in the domestic energy market. The inclusion of 
ECSI contributed revenue of $1.2 million for the fourth 
quarter of fiscal year 2011. GAC reported revenue of 
$2.4 million during the fourth quarter of fiscal year 2011, 
an increase of $1.3 million or 118% from the $1.1 million 
reported in the prior year.

Income Before Income Taxes 
Year to Date and Fourth Quarter 2012 vs 2011
The Company’s income before income taxes was $4.4 
million for fiscal year 2012, a decrease of $8.4 million or 
66% from the $12.8 million reported in fiscal year 2011. 
Revenue less subcontract costs were $123.1 million, 
a decrease of $14.7 million or 11% from the $137.8 
million reported in the prior year, mainly due to the 
decrease in revenue in the Parent Company’s commercial 
energy and international markets. Gross profits (revenue 
less cost of professional services, other direct operating 
expenses and subcontract costs) decreased $4.5 million 
during fiscal year 2012. Indirect costs for fiscal year 
2012 were $60.5 million, an increase of $2.7 million 
from $57.8 million reported in the prior year are mainly 
the result of lower staff utilization in the Parent Company 
and Walsh. Indirect costs for fiscal year 2012 included 
a reduction of $.8 million due to the Parent Company’s 
decision to not award bonuses for fiscal year 2012 
and a decrease in the Parent Company’s discretionary 
contribution to the defined contribution retirement plan. 
Foreign exchange losses increased $.7 million in fiscal 
year 2012 mainly due to fluctuations in the exchange 
rates on receivables carried in Kuwaiti Dinar translated to 
US dollars. 

The Company’s income before income taxes was $.1 
million for the fourth quarter of fiscal year 2012, a 
decrease of $2.9 million or 97% from the $3.0 million 
reported in the fourth quarter of fiscal year 2011. Revenue 
less subcontract costs were $29.3 million, a decrease of 
$6.0 million from the $35.3 million reported in the fourth 
quarter of the prior year, mainly due to the decrease in 
revenue in the Parent Company’s domestic energy market. 

16

Gross profits decreased $2.6 million during the fourth 
quarter of fiscal year 2012. Indirect costs for the fourth 
quarter of fiscal year 2012 were $14.6 million, consistent 
with the fourth quarter of fiscal year 2011. Indirect costs 
for the fourth quarter of fiscal year 2012 included a 
reduction of $.8 million due to the Parent Company’s 
decision to not award bonuses for fiscal year 2012 
and a decrease in the Parent Company’s discretionary 
contribution to the defined contribution retirement plan. 
Foreign exchange losses increased $.3 million for the 
quarter mainly due to fluctuations in the exchange rates 
on receivables carried in Kuwaiti Dinar translated to US 
dollars. 

Year to Date and Fourth Quarter 2011 vs 2010
The Company’s income before income taxes was $12.8 
million for fiscal year 2011, an increase of $2.3 million 
from the $10.5 million reported in fiscal year 2010. 
Revenue less subcontract costs were $137.8 million, 
an increase of $24.0 million or 21% from the $113.8 
million reported in the prior year. Gross profits increased 
$7.7 million during fiscal year 2011. The gross margin 
percentage for fiscal year 2011 was 42%, down from 
the 44% reported for fiscal year 2010 due mainly to 
increased field work on large projects in the energy 
markets. Income from operations for fiscal year 2011 was 
$12.4 million, up 25% from the $9.9 million reported in 
fiscal year 2010. These increases were mainly attributable 
to the increased energy market work. Indirect costs fell 
as a percent of revenue from 36% in fiscal year 2010 to 
34% in fiscal year 2011. The Company recorded a sale 
of land during the first quarter of fiscal year 2010 for a 
gain of $809,000 ($453,000 after tax) which positively 
impacted earnings by $.11 per share compared to a 
$290,000 ($94,000 after tax and noncontrolling interest) 
gain on the sale of the assets of the Jordanian Fish 
Farm (AMARACO) in current fiscal year which impacted 
earnings by $.02 per share. The Company recognized a 
net foreign exchange gain of $.3 million for fiscal year 
2011.

The Company’s income before income taxes was $3.0 
million for the fourth quarter of fiscal year 2011, a 
decrease of $1.2 million from the $4.2 million reported 
in the fourth quarter of fiscal year 2010. Revenue less 
subcontract costs for the fourth quarter of fiscal year 2011 
were $35.3 million, an increase of $2.5 million from the 
$32.8 million reported in the prior year. Gross profits 
decreased slightly during the fourth quarter of fiscal year 
2011. Income from operations for the fourth quarter 
of fiscal year 2011 was $3.0 million, down 29% from 
the $4.2 million reported in fourth quarter of fiscal year 
2010. Consolidated indirect costs for the fourth quarter 
of fiscal year 2011 were $14.7 million, an increase of 
$1.0 million from the $13.7 million reported in the fourth 
quarter of fiscal year 2010 attributable to the formation 
of ECSI and excess staffing and other indirect operating 
expenses at E & E do Brasil. The Company recognized 

a net foreign exchange gain of $.1 million for the fourth 
quarter of fiscal year 2011.

Income Taxes
The effective tax rate for the fiscal year ended July 31, 
2012, is 30.9%, as compared to the tax rate of 36.3% 
reported for the fiscal year ended July 31, 2011. The 
reduction in the effective tax rate is mainly a result of 
increased income in the corporate partnerships as well 
as increased income from foreign entities in countries 
with a lower effective tax rate than in the U.S, along with 
a decrease in income in the U.S. with a higher effective 
tax rate. In addition, during the fiscal year ended July 31, 
2012, an income tax benefit of $.3 million and  
$.1 million, was recognized as result of favorable Kuwait 
and state related tax settlements, net of federal benefit, 
respectively. 

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 entered into with our 
clients. The revenues recognized, therefore, are derived 
from our ability to charge clients for those services under 
the contracts. 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.

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 

17

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 the 
Defense Contract Audit Agency (DCAA). The DCAA audits 
overhead rates, cost proposals, incurred government 
contract costs, and internal control systems. During the 
course of its audits, the 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 2005. 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 contract receivables 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 and allowance for contract 

adjustments 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.

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.

Uncertain Tax Positions
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.

Changes in Corporate Entities
On January 4, 2012, the Company purchased 
an additional 1.3% of Walsh from noncontrolling 
shareholders for approximately $254,000. Two thirds of 
the purchase price was paid in cash while the remaining 
one third was paid for with E & E stock. With this 

18

purchase E & E’s ownership share in Walsh increased to 
approximately 86% of that company.

On December 14, 2011, the Company increased its 
capital investment in its Brazilian subsidiary (Ecology and 
Environment do Brasil, LTDA.) by $1.5 million, which 
increased the Company’s ownership in the entity to 68%. 
The Company also purchased an additional 4% of the 
entity from its president for approximately $180,000, 
which increased the Company’s ownership in the entity to 
72%. The Brazilian company has experienced increased 
revenue growth and the additional $1.5 million investment 
will be used for working capital needs in the country.

On November 18, 2011, the Company purchased 
an additional 3.9% of Walsh Peru from noncontrolling 
shareholders for approximately $432,000. The entire 
purchase price was paid in cash.

On June 6, 2011, the Company purchased an additional 
1.1% of Walsh from noncontrolling shareholders for 
approximately $219,000. The Company paid one third in 
cash, one third in a two-year note, and issued E & E stock 
for the remaining one third of the sale price. With this 
purchase E & E’s ownership share in Walsh increased to 
approximately 85% of that company. 

On March 18, 2011 the Company purchased 5.5% of 
Walsh from noncontrolling shareholders for approximately 
$1,156,000. The Company paid one third in cash, one 
third in a two-year note, and issued E & E stock for the 
remaining one third of the sale price. 

On December 27, 2010, the Company purchased 
an additional 1.2% of Walsh from noncontrolling 
shareholders for approximately $257,000. Two thirds of 
the purchase price was paid in cash while the remaining 
one third was paid for with E & E stock.

On August 23, 2010 the Company purchased a 60% 
ownership interest in ECSI, LLC, a Lexington, Kentucky 
based engineering and environmental consulting 
company that specializes in mining work. The Company 
paid $1.0 million for this ownership interest and 
contributed the assets into a newly formed company. The 
company was consolidated into the Company’s financial 
reporting beginning in the first quarter of fiscal year 2011. 

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.

Financial Statements and 
Supplementary Data
Management’s Report on Internal Control 
Over Financial Reporting

The Board of Directors and Stockholders of  
Ecology and Environment, Inc.

Our management is responsible for establishing and 
maintaining adequate internal control over financial 
reporting. As defined in Exchange Act Rule 13a-15(f), 
internal control over financial reporting is a process 
designed by, or under the supervision of, our principal 
executive and principal financial officer and effected by 
our Board of Directors, management and other personnel 
to provide reasonable assurance regarding the reliability 
of financial reporting and the preparation of consolidated 
financial statements for external purposes in accordance 
with U.S. GAAP. Internal controls include those policies 
and procedures that (i) pertain to the maintenance of 
records that in reasonable detail accurately and fairly 
reflect the transactions and dispositions of our assets; 
(ii) provide reasonable assurance that transactions are 
recorded as necessary to permit preparation of financial 
statements in accordance with U.S. GAAP and that 
our receipts and expenditures are being made only in 
accordance with authorizations of our management 
and directors; and (iii) provide reasonable assurance 
regarding prevention or timely detection of unauthorized 
acquisition, use or disposition of our assets that could 
have a material effect on our consolidated financial 
statements.

Because of its inherent limitations, internal control 
over financial reporting may not prevent or detect 
misstatements. Also, projections of any evaluation of 
effectiveness to future periods are subject to the risk that 
controls may become inadequate because of changes 
in conditions, or that the degree of compliance with the 
policies or procedures may deteriorate. Accordingly, even 
effective internal control over financial reporting can only 
provide reasonable assurance of achieving their control 
objectives.

Under the supervision and with the participation of our 
management, including our Chief Executive Officer and 
Chief Financial Officer, we assessed the effectiveness of 
our internal control over financial reporting as of July 
31, 2012 based on the criteria in Internal Control—

19

Integrated Framework issued by the COSO. Based upon 
this assessment, management has concluded that our 
internal control over financial reporting was effective as 
of July 31, 2012.

This annual report does not include an attestation report 
of the Company’s registered public accounting firm 
regarding internal control over financial reporting.

By: 

Kevin S. Neumaier 
Chief Executive Officer

By: 

H. John Mye III 
Chief Financial and Accounting Officer

20

Report of Independent Registered Public 
Accounting Firm

To the Board of Directors and Shareholdersof Ecology and 
Environment, Inc.

We have audited the accompanying consolidated balance 
sheets of Ecology and Environment, Inc. and its subsidiaries 
(collectively, the Company) as of July 31, 2012 and 
2011, and the related consolidated statements of income, 
changes in shareholders’ equity and comprehensive 
income, and cash flows for each of the years in the three-
year period ended July 31, 2012. In addition, our audits 
included the financial statement schedule listed in the 
index at Item 15(a)(2). The Company’s management is 
responsible for these financial statements and the financial 
statement schedule. Our responsibility is to express an 
opinion on these 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 audit 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 the Company as of July 31, 2012 
and 2011, and the results of its operations and its cash 
flows for each of the years in the three-year period ended 
July 31, 2012 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.

Pittsburgh, Pennsylvania 
November 13, 2012

 
 
 
Consolidated Balance Sheets

Assets

Current assets:

Cash and cash equivalents

Investment securities available for sale

Contract receivables, net

Deferred income taxes

Income tax receivable

Other current assets

Total current assets

Property, building and equipment, net of accumulated depreciation, 
$22,584,958 and $22,972,422, respectively

Deferred income taxes

Other assets

Total assets

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

Line of credit

Accrued payroll costs

Income taxes payable

Current portion of long-term debt and capital lease obligations

Billings in excess of revenue

Other accrued liabilities

Total current liabilities

Income taxes payable

Deferred income taxes

Long-term debt and capital lease obligations

Commitments and contingencies (see note #17)

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 shares

Class B common stock, par value $.01 per share;  
Authorized - 10,000,000 shares; issued - 1,708,574 shares

Capital in excess of par value

Retained earnings

Accumulated other comprehensive income

Treasury stock - Class A common, 84,730 and 125,923 shares;
Class B common, 64,801 shares, at cost

Total Ecology and Environment, Inc., shareholders’ equity 
Noncontrolling interests

Total shareholders’ equity

Total liabilities and shareholders’ equity

 July 31, 2012

 July 31, 2011

$10,467,770

1,404,582

61,568,443

4,799,724

2,502,431

1,802,843

$8,529,842

1,491,459

63,750,870 

4,949,368 

—   

2,254,415

82,545,793

80,975,954 

12,112,078

860,499

1,993,785

9,961,304

1,300,181

2,030,203

$97,512,155

$94,267,642 

$11,492,602

$13,097,765

12,309,335

7,529,728

—   

488,460

8,281,919

3,932,588

—

9,146,711

1,195,741

1,689,920

7,727,725

6,139,423

44,034,632

38,997,285 

194,023

423,324

102,635

—   

—

 339,027

525,106  

448,391  

—   

—  

26,851

26,851 

17,087

19,751,992

29,534,783

711,842

17,087 

19,983,029

30,797,763 

1,527,189 

(1,897,032)

 (2,317,515)

48,145,523
4,612,018

50,034,404  
3,923,429 

52,757,541

 53,957,833 

$97,512,155

 $94,267,642

The accompanying notes are an integral part of these consolidated financial statements

21

 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Income

Year ended July 31,
 2011

2012

 2010

Revenue

$155,410,099

$169,172,860

$144,098,294 

Cost of professional services and other direct operating expenses

55,632,281

65,914,987

49,623,816

Subcontract costs

32,315,179

31,325,937

30,292,117

Administrative and indirect operating expenses

44,917,631

42,534,303

38,166,067

Marketing and related costs

Depreciation and amortization

Income from operations

Interest expense

Interest income

Other income (expense)

Gain on sale of assets

15,601,112

15,251,165

14,438,785

2,160,062

1,760,763

1,684,406

4,783,834

12,385,705

9,893,103 

(364,305)

(355,766)

 (222,558)

174,743

85,771 

 107,211 

206,813

64,524 

 (68,349)

-

290,526

 809,200 

Net foreign currency exchange gain (loss)

(403,419)

284,411

 (59,718)

Income before income tax provision

4,397,666

12,755,171

10,458,889

Income tax provision

Net income

1,357,916

4,631,235

3,902,222 

$3,039,750

$8,123,936

 $6,556,667 

Net income attributable to the noncontrolling interest

(2,266,171)

(1,163,673)

 (2,299,060)

Net income attributable to Ecology and Environment, Inc.

$773,579

$6,960,263

$4,257,607 

Net income per common share: basic and diluted

$0.18

$1.65

 $1.02 

Weighted average common shares outstanding: basic and diluted

4,233,883

4,222,688

 4,160,816

The accompanying notes are an integral part of these consolidated financial statements

22

Consolidated Statements of Cash Flows

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation expense and amortization expense

Benefit for deferred income taxes

Share-based compensation expense

Tax impact of share-based compensation

Gain on sale of assets

Provision for contract adjustments

Bad debt expense

(Increase) decrease in:

- contract receivables

- other current assets

- income tax receivable

- other non-current assets

Increase (decrease) in:

- accounts payable

- accrued payroll costs

- income taxes payable

- billings in excess of revenue

- other accrued liabilities

Net cash provided by (used in) operating activities

Cash flows provided by (used in) investing activities:

Acquisition of noncontrolling interest of subsidiaries

Purchase of Lowham Engineering LLC

Purchase of Engineering Consulting Services, Inc., net of cash equivalents of $309,487

Purchase of property, building and equipment

Change in accounts payable due to purchase of equipment

Proceeds from sale of property and equipment

Sale (purchase) of investment securities, net

Net cash used in investing activities

Cash flows provided by (used in) financing activities:

Dividends paid

Proceeds from debt

Repayment of debt and capital lease obligations

Net proceeds from line of credit 

Distributions to noncontrolling interests

Proceeds from sale of subsidiary shares to noncontrolling interests

Purchase of treasury stock

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Year ended July 31,
 2011

2012

 2010

$ 3,039,750

$ 8,123,936

$ 6,556,667

2,160,062

1,760,763

1,684,406

113,717

(910,413)

731,583

105,988

541,175

—

472,455

485,945

102,737

—

(290,526)

(809,200)

1,810,557

2,943,470

637,846

514,411

450,000

—

(2,287,607)

(18,286,613)

(5,661,388)

314,587

(114,402)

(2,502,431)

—

31,973

42,082

233,414

802,926

(64,430)

(1,859,530)

822,701

(3,120,409)

(1,458,928)

1,545,961

149,316

(1,375,614)

(98,721)

1,066,930

1,237,329

3,396,873

(121,749)

(936,135)

1,084,505

18,273

(360,288)

1,010,791

2,433,739

(908,892)

(637,745)

(1,000,000)

—

—

—

(200,000)

(790,513)

—

(4,443,962)

(2,476,059)

(1,992,724)

(283,071)

—

953,749

322,807

102,527

(195,163)

—

959,200

(55,791)

(5,533,398)

(2,822,924)

(2,289,315)

(2,046,657)

(1,814,839)

(1,684,482)

145,401

795,795

468,038

(974,644)

(945,320)

(778,035)

12,309,335

—

—

(1,123,896)

(847,749)

(845,106)

41,634

90,368

227,562

(363,050)

(1,335,960)

—

7,988,123

(4,057,705)

(2,612,023)

(156,509)

52,486

49,908

1,937,928

(5,817,352)

(2,417,691)

8,529,842

14,347,194

16,764,885

$10,467,770

$8,529,842

$14,347,194

The accompanying notes are an integral part of these consolidated financial statements

23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Changes in 
Shareholders’ Equity and Comprehensive Income

Class

Common Stock
Shares     Amount

Capital in Excess
of Par Value

Retained  
Earnings

Accumulated 
Other
Comprehensive 
Income (loss)

Treasury Stock
Shares        Amount

Noncontrolling 
Interest

Comprehensive
Income

Balance at July 31, 2009

Net income

Foreign currency translation adjustment

Cash dividends paid ($.42 per share)

Unrealized investment gain, net

Conversion of common stock - B to A

Issuance of stock under stock award plan

Share-based compensation expense

Tax impact of share based compensation

Sale of subsidiary shares to noncontrolling interests

Distributions to noncontrolling interests

Purchase of additional noncontrolling interests

Other

Balance at July 31, 2010

Net income

Foreign currency translation adjustment

Cash dividends paid ($.46 per share)

Unrealized investment gain, net

Conversion of common stock - B to A

Repurchase of Class A common stock

Issuance of stock under stock award plan

Share-based compensation expense

Sale of subsidiary shares to noncontrolling interests

Issuance of shares to noncontrolling interests

Distributions to noncontrolling interests

Purchase of additional noncontrolling interests

Stock award plan forfeitures

Balance at July 31, 2011

Net Income

Foreign currency translation adjustment

Cash dividends paid ($.48 per share)

Unrealized investment gain, net

Repurchase of Class A common stock

Issuance of stock under stock award plan

Share-based compensation expense

Tax impact of share based compensation

Sale of subsidiary shares to noncontrolling interests

Distributions to noncontrolling interests

Purchase of additional noncontrolling interests

Stock award plan forfeitures

Balance at July 31, 2012

A

B

A

B

A

B

A

B

A

B

A

B

24

$26,776
$17,162}
—
—

—

—

74
(74)}
—

—

—

—

—

—

$26,850
$17,088}
—

—

—
—

1
(1)}
—

—
—

—

—

—

—

—

—
—

—

—

—

—
—

—

—

2,677,651

1,716,074

—
—

—

—

7,421

(7,421)
—

—

—

—

—

—

2,685,072

1,708,653

—

—

—
—

79

(79)

—

—
—

—

—

—

—

—

—
—

—

—

—

—
—

—

—

—

2,685,151

—
2,685,151

1,708,574
—

—
$26,851

$17,087
—

$20,093,952

$23,290,768

$441,965

307,091 $(2,819,138)

$5,273,455

$6,517,228

—
—

4,257,607
—

— (1,747,572)

—
—

(372,172)

485,945

102,737

—

—

(254,181)

2,919

—
—

—

—

—

—

—

—

—
423,493

—

23,159

—

—

—

—

—

—

—
—

—

—
—

—
—

—

—
—

(42,675)

372,172

—

—

—

—

—

—

—

—

2,299,060
(59,236)

6,556,667
291,546

—

—
—

—

—

—
227,562

(845,106)

—

23,159

—

—

—

—

—

—

(72,711)

(66,667)

616,670

(2,526,094)

(72,711)

3,513

(25,170)

$20,059,200

$25,800,803

$815,906

201,262 $(1,855,466)

$4,369,641

$6,798,661

—

—

—
—

—

—

(482,061)
541,175

—

—

—

(135,285)

—
$19,983,029

—

—

—
—

—

(716,662)

731,583

105,988

—

—
(351,946)

$6,960,263

—
(1,963,303)
—

—

—

—
—

—

—

—

—

— $1,163,673

$8,123,936

—

686,380
—

(11,189)
—

—

—
—

—

—

—

—

—

—
—

—

—

—
—

—

84,002

(1,335,960)

(55,041)

482,061

—

—

—

—

—

—

—

—

12,119

—
—

—

—

—
—

90,368
667,000

(847,749)

698,499

—
(11,189)

—

—

—
—

—

—

—

36,092

(39,895)

391,850

(1,531,623)

36,092

—
$30,797,763

—
$1,527,189

396

—

190,724 $(2,317,515)

$3,923,429

—
$8,847,338

773,579

—

— (871,476)
—

(2,036,559)
—

—

—

—

—
—

—

—

17,597

—

—

—

—
—

—
38,532

—
$711,842

—

—

—
—

—

—

—
—

22,825

(363,050)

(62,099)

716,662

2,266,171

124,455

—
—

—

—

—

—
—

—
(5,208)

—
—

—
41,634

—
66,871

(1,123,896)

(619,775)

3,039,750

(747,021)

—
17,597

—

—

—

—
—

—
38,532

3,289
149,531

—
$(1,897,032)

—

$4,612,018

—
$2,348,858

—
$26,851

—
$19,751,992

—
$29,534,783

1,708,574

$17,087

The accompanying notes are an integral part of these consolidated financial statements

Notes to Consolidated Financial Statements

1. Summary of Operations and Basis of 

Presentation

Ecology and Environment, Inc., (“E & E” or “Company”) is a global 
broad-based environmental consulting firm whose underlying 
philosophy is to provide professional services worldwide so that 
sustainable economic and human development may proceed with 
minimum negative impact on the environment. The Company’s staff 
is comprised of individuals representing 85 scientific, engineering, 
health, and social disciplines working together in multidisciplinary 
teams to provide innovative environmental solutions. The Company 
has completed more than 50,000 projects for a wide variety of 
clients in 122 countries, providing environmental solutions in nearly 
every ecosystem on the planet. Revenues reflected in the Company’s 
consolidated statements 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.

2. 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 consolidated 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 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. 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

Consulting 

As incurred at contract rates.

Time and  
Materials
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. 
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.

Cost-Type

Consulting

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 2005. The Company records an allowance for contract 
adjustments which is recorded in other accrued liabilities principally 
represents a reserve for contract adjustments for the fiscal years 
1996-2012.

  We reduce our contract receivables 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. Revenues 
are recognized only up to the amount of costs incurred on 
contract claims when realization is probable, estimatable 
and reasonable support from the customer exists.

  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.

d. 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 basis of securities sold is based on the 
specific identification method. The Company had gross unrealized 
gains of approximately $42,000 and $24,000 at July 31, 2012 and 
2011, respectively.

25

 
e. Property, building and equipment, depreciation

Financial assets as of July 31, 2012: 

and amortization

Property, building and equipment are stated at the lower of cost or 
fair market value. 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 additional 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.

f. Fair value of financial instruments
The Company’s financial assets or liabilities are measured using 
inputs from the three levels of the fair value hierarchy. The asset’s 
or liability’s classification 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.

The three levels of the hierarchy are as follows:

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 mutual funds.

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 
corporate and 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.

26

Assets           

      Level 1      Level 2       Level 3       Total

Investment securities 
available for sale

  $1,353,365    $51,217        $ —      $1,404,582

Financial assets as of July 31, 2011:

Assets           

      Level 1      Level 2       Level 3       Total

Investment securities 
available for sale

  $1,438,286    $53,173        $ —      $1,491,459

The carrying amount of cash and cash equivalents at July 31, 2012 
and 2011 were classified as level 1 and approximate fair value. 
Long-term debt consists of bank loans and capitalized equipment 
leases. The demand loan payable consists of borrowings against 
the Company’s line of credit for working capital requirements. 
Based on the Company’s assessment of the current financial market 
and corresponding risks associated with the debt and line of credit 
borrowings, management believes that the carrying amount of 
the liabilities at July 31, 2012 and 2011 were classified as level 2 
and 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. The Company 
evaluated the significance of transfers between levels based upon 
the nature of the financial instrument. For the fiscal years ended July 
31, 2012 and 2011, there were no transfers in or out of levels 1, 2 
or 3, respectively.

g. 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. Transaction gains and losses that 
arise from exchange rate fluctuations on transactions denominated 
in a currency other than the functional currency are included in the 
results of operations as incurred. The Company recorded foreign 
currency transaction gains/(losses) of approximately $(403,000), 
$284,000 and $(60,000) for the fiscal years ended July 31, 2012, 
2011 and 2010, respectively.

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 2010- 2012.

h. Income taxes
The Company follows the asset and liability approach to account 
for income taxes. This approach requires the recognition of deferred 
tax liabilities and assets for the expected future tax consequences 
of temporary differences between the carrying amounts and the tax 
bases of assets and liabilities. Although realization is not assured, 

 
 
 
 
 
 
 
 
 
 
management believes it is more likely than not that the recorded 
net deferred tax assets will be realized. Since in some cases 
management has utilized estimates, the amount of the net deferred 
tax asset considered realizable could be reduced in the near 
term. No provision has been made for United States income taxes 
applicable to undistributed earnings of foreign subsidiaries as it is 
the intention of the Company to indefinitely reinvest those earnings 
in the operations of those entities.

Income tax expense includes U.S. and international income taxes, 
determined using the applicable statutory rates. 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 and accrued expenses. The Company 
periodically evaluates the likelihood of realization of deferred tax 
assets, and provides for a valuation allowance when necessary.

Additionally, the Financial Accounting Standards Board (“FASB”) 
Accounting Standard Codification (“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. 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.

i. Defined contribution plans
Ecology and Environment Inc. (Parent Company) has a non-
contributory defined contribution plan providing deferred benefits 
for substantially all of the Parent Company’s employees. The annual 
expense of the Parent Company’s supplemental defined contribution 
plan is based on a percentage of eligible wages as authorized by the 
Parent Company’s Board of Directors. Walsh Environmental (Walsh) 
has a defined contribution plan providing deferred benefits for 
substantially all of their employees. Walsh contributes a percentage 
of eligible wages up to a maximum of 4%.

j. Stock based compensation
The FASB ASC Topic Compensation requires companies to expense 
the value of employee stock options and similar awards. Share-
based payment 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.

k. Earnings per share (EPS)
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 11 and 15 to Consolidated Financial Statements for 
additional information.

l. Comprehensive Income
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. Other comprehensive income 
includes currency translation adjustments on foreign subsidiaries and 
unrealized gains or losses on available-for-sale securities.

m. 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.

n. 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 2012. 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 the 
identification of 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 during the year that necessitated an evaluation for an 
impairment of goodwill.

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, 2012 and 2011, short-term investments consist of money 
market funds. Short-term investments amounted to approximately 
$2.2 million and $2.0 million at July 31, 2012 and 2011, 
respectively and are reflected in cash and cash equivalents in the 
accompanying consolidated balance sheets and statements of cash 
flows.

4. Contract Receivables, net

Billed
Unbilled

Allowance for doubtful accounts and  
contract adjustments

July 31,

2012

$ 42,977,016
28,829,818
71,806,834
(10,238,391)
$ 61,568,443

 2011
$42,636,632
27,869,325
70,505,957
(6,755,087)
$63,750,870

27

 
 
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, 2012 unbilled receivables will be 
substantially billed and collected within one year. Within the 
above billed balances are contractual retainages in the amount 
of approximately $248,000 and $222,000 at July 31, 2012 and 
2011. Management anticipates that the July 31, 2012 retainage 
balance will be substantially collected within one year. Included in 
the balance of receivables are receivables due under the contracts 
with organizations in Kuwait of $14.5 million and $12.4 million at 
July 31, 2012 and 2011, respectively. Of the outstanding balances 
due from Kuwait, approximately $1.9 million and $1.8 million 
were included in billings in excess of revenue as of July 31, 2012 
and 2011, respectively. Additionally, approximately $3.8 million 
and $3.5 million of allowance for doubtful accounts has been 
recognized at July 31, 2012 and 2011, respectively. 

5. Property, Building and Equipment, net

Land and land improvements

July 31,

2012
$393,051

 2011
$393,051

Buildings and building improvements

12,231,788

12,149,915

Equipment

3,214,319

3,786,584

Information technology equipment

12,591,421

9,576,535

Office furniture and equipment

3,898,444

3,835,900

Leasehold improvements and other

2,363,250

2,237,992

Accumulated depreciation 
and amortization.

Construction in progress

$34,692,273

$31,979,977

(22,584,958)

(22,972,422)

12,107,135

9,007,555

4,763

953,749

$12,112,078

$ 9,961,304

6. Line of Credit
The Company maintains an unsecured line of credit available 
for working capital and letters of credit of $34 million at interest 
rates ranging from 2.5% to 5% at July 31, 2012. The Company 
guarantees the line of credit of Walsh Environmental Scientists and 
Engineers, LLC (Walsh). Its lenders have reaffirmed the Company’s 
lines of credit within the past twelve months. At July 31, 2012 and 
2011, the Company had letters of credit and loans outstanding 
totaling approximately $14.9 million and $4.1 million, respectively. 
After letters of credit and loans, there was $19.1 million of 
availability under the lines of credit at July 31, 2012.

7. Debt and Capital Lease Obligations
Debt, inclusive of capital lease obligations, consists of the following:

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%

Current portion of debt and capital lease 
obligations 

July 31,

2012

 2011

$372,744

$1,907,369

218,351

591,095

230,942

2,138,311

(488,460)

(1,689,920)

Long-term debt and capital lease obligations

$102,635

$448,391

The aggregate maturities of 
long-term debt and capital 
lease obligations at July 31, 
2012 are as follows:

 Fiscal Year
2013

Amount
$488,460 

2014

2015
2016

2017

Thereafter

87,693

14,942
—

—

—

$591,095

8. Income Taxes
Income (loss) from continuing operations before provision (benefit) 
for income taxes and noncontrolling interest was as follows:

Domestic

Foreign

2012

 2011

2010

$ (993,959)

$  7,212,154

$  3,216,835

5,391,625

5,543,017

7,242,054

$4,397,666

$12,755,171

$10,458,889

The provision (benefit) for income taxes for the years ended July 31 
was as follows:

2012

 2011

2010

Current:

     Federal

     State

     Foreign

Deferred:

     Federal

     State

     Foreign

$ (175,203)

$ 3,014,130

$ 1,381,857

(232,800) 

786,651

411,636

1,652,202 
$  1,244,199

1,740,868
$  5,541,649

1,636,274
$  3,429,767

$ 509,161

$ (409,268)

$    262,326

(35,273)

(91,656)

(360,171)

(409,489)

77,151

132,978

$  113,717

$  (910,413)

$    472,455

$ 1,357,916

$ 4,631,236

$ 3,902,222

28

A reconciliation of income tax expense (benefit) using the statutory 
U.S. income tax rate compared with actual income tax expense 
(benefit) for the years ended July 31 was as follows:

U.S. federal statutory 
income tax rate

Income from “pass-
through” entities taxable to 
noncontrolling partners

International rate differences

Other foreign taxes, net of 
federal benefit

Foreign dividend income

Domestic manufacturing 
deduction

State taxes, net of federal 
benefit

Re-evaluation and 
settlements of tax 
contingencies

Other permanent 
differences

Total

2012

 2011

2010

34.0%

34.0%

34.0%

(5.8%)

(7.5%)

4.8%

7.5%

(2.3%)

(2.1%)

0.9%

3.3%

(1.3%)

(2.4%)

1.7%

1.9%

—

(1.8%)

(0.3%)

0.3%

3.4%

3.5%

(4.1%)

1.7%

30.9%

—

(0.9%)

0.9%

36.3%

1.1%

37.3%

The significant components of deferred tax assets (liabilities) as of 
July 31 are as follows:

2012

 2011

Current   Noncurrent        Current   Noncurrent

Contract and other 
reserves

Fixed assets and 
intangibles

Accrued 
compensation and 
expenses

Net operating loss 
carryforwards

Foreign and state 
income taxes

Federal benefit on 
state deferred taxes

Foreign tax credit

$4,004,631

$           —

$3,561,551

$           —

—

(579,932)

—

159,452

1,267,004

531,386

1,537,003

381,767

—

—

555,437

65,274

—

—

282,885

117,122

(192,927)
—

(41,259)

295,674

(188,199)
—

(33,383)

(346,469)

Valuation Allowance

(258,831)

(61,406)

(267,371)

(79,098)

Other

(20,153)

95,325

306,384

124,967

Net deferred tax 
assets

$4,799,724

$  860,499

$4,949,368

$1,300,181

Other

$             —

$(423,324)

—

$(525,106)

Net deferred tax 
liabilities

$             —

$(423,324)

—

$(525,106)

The FASB ASC Topic Income Taxes 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 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. 

For fiscal years 2012 and 2011, there was no one item that 
significantly impacted the change in the deferred tax assets and 
liabilities. A valuation allowance of approximately $320,000 has 
been established primarily on excess foreign tax credit carryforwards, 
the utilization of which is dependent on future foreign source 
income.

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, 2012, these amounts 
totaling approximately $6.6 million related primarily to operations in 
Saudi Arabia, Chile, Peru and Ecuador. 

The Company files numerous consolidated and separate income tax 
returns in the U.S. federal jurisdiction and in many state and foreign 
jurisdictions. In fiscal year 2010, the Internal Revenue Service (IRS) 
completed the audit for fiscal year 2008 with no proposed changes. 
In fiscal year 2011, the IRS completed the audit for fiscal year 2009 
with no proposed changes. In October 2012, the IRS completed an 
examination of the fiscal year 2010 income tax return, which was 
settled without material adjustment. The Company’s tax matters 
for the fiscal years 2011 and 2012 remain subject to examination 
by the IRS. In fiscal year 2012, the Company was audited by New 
York State for fiscal years 2008 through 2010 and this examination 
has been completed with no changes. 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.

For the year ended July 31, 2012, the Company has generated 
approximately $0.2 million of net operating losses in the U.S. These 
net operating losses will be carried back to an earlier year and be 
fully utilized. Net operating losses still exist pertaining to operations 
in Brazil, Canada and China.

At July 31, 2012 and 2011, the Company had approximately 
$131,000 and $531,000, respectively, of gross unrecognized tax 
benefits (UTPs) that if realized, would favorably affect the effective 
income tax rate in future periods. It is reasonably possible that the 
liability associated with UTPs will increase or decrease within the 
next twelve months. At this time, an estimate of the range of the 
reasonably possible outcomes cannot be made. At July 31, 2012 
and 2011, the liability for UTPs and associated interest and penalties 
are all classified as noncurrent liabilities. For fiscal year ended 
July 31, 2012 and 2011, E & E recognized interest and penalties 
expense of approximately $68,000 and $44,000, respectively. At 
July 31, 2012, the Company has accrued $86,000 for interest and 
penalties on remaining uncertain tax positions.

29

A reconciliation of the beginning and ending amount of UTPs as of 
July 31 is as follows:

Beginning balance

2012

 2011

$530,500

$240,900

Additions for tax positions during the 
current year

—

Additions for tax positions of prior years

23,100

280,700

40,300

Reductions for tax positions of prior 
years for:

- Changes in judgment 

—

—

- Settlements during the period

(422,300)

(31,400)

- Changes in non-controlling 

interests

- Lapses of the applicable statute of 

limitations

Ending balance   

—

—

—

—

$131,300

$530,500

9. Other Accrued Liabilities

July 31,

 2012

2011

General cost disallowances

$2,724,474

$3,882,810

Other

1,208,114

2,256,613

$3,932,588

$6,139,423

Included in other accrued liabilities is an allowance for contract 
adjustments relating to potential cost disallowances on amounts 
billed and collected in current and prior years’ projects. The 
allowance for contract adjustments is recorded for contract disputes 
and government audits when the amounts are estimatable.

10. Stock Award Plan
Ecology and Environment, Inc. has adopted a 1998 Stock Award 
Plan effective March 16, 1998 (1998 Plan). To supplement the 
1998 Plan, a 2003 Stock Award Plan (2003 Plan) was approved 
by the shareholders at the Annual Meeting held in January 2004 
and a 2007 Stock Award Plan (2007 Plan) was approved by the 
shareholders at the Annual Meeting held in January of 2008 (the 
1998 Plan, 2003 Plan and the 2007 Plan collectively referred to 
as the Award Plan). The 2003 Plan was approved retroactive to 
October 16, 2003 and terminated on October 15, 2008 and the 
2007 Plan was approved retroactive to October 18, 2007 and 
terminated on October 17, 2012. 

The Company awarded 62,099 shares valued at approximately 
$.9 million in October 2011 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 was 
$330,000 and $225,000 at July 31, 2012 and 2011, respectively. 
Total gross compensation expense is recognized over the vesting 
period. Unrecognized compensation expense was approximately  
$.8 million and $.7 million at July 31, 2012 and 2011, respectively.

11. Shareholders’ Equity
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.

30

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.

b. Cash Dividend
The Company declared cash dividends of approximately $2.0 
million in fiscal years 2012 and 2011. Within accounts payable, the 
Company recorded outstanding dividend payables at July 31, 2012 
and 2011 of approximately $1.0 million, respectively.

c. Stock Repurchase
The Company’s Board of Directors approved a 200,000 share 
repurchase program in August 2010 in which 93,173 shares remain 
available for repurchase.

d. Noncontrolling Interest
The Company’s noncontrolling interest is disclosed as a separate 
component of the Company’s consolidated equity on the balance 
sheets. Earnings and other comprehensive income are separately 
attributed to both the controlling and noncontrolling interests. 
Earnings per share is calculated based on net income attributable to 
the Company’s controlling interest.

On January 4, 2012, the Company purchased an additional 
1.3% of Walsh from noncontrolling shareholders for approximately 
$254,000. Two thirds of the purchase price was paid in cash while 
the remaining one third was paid for with E & E stock. On December 
14, 2011, the Company purchased an additional 4.0% of E & E do 
Brasil from noncontrolling shareholders for approximately $180,000. 
The entire purchase price was paid in cash. On November 18, 
2011, the Company purchased an additional 3.9% of Walsh Peru 
from noncontrolling shareholders for approximately $432,000. The 
entire purchase price was paid in cash. There were three additional 
purchases of noncontrolling interest in fiscal year 2012 for which the 
Company paid cash of approximately $128,000.

On June 6, 2011, the Company purchased an additional 1.1% 
of Walsh from noncontrolling shareholders for approximately 
$219,000. The Company paid one third in cash, one third in a 
two-year note, and issued E & E stock for the remaining one third 
of the sale price. On March 18, 2011 the Company purchased an 
additional equity of 5.5% of Walsh, from noncontrolling shareholders 
for approximately $1,156,000. The Company paid one third in cash, 
one third in a two-year note, and issued E & E stock for the remaining 
one third of the sale price. On December 27, 2010, the Company 
purchased an additional 1.2% of Walsh from noncontrolling 
shareholders for approximately $257,000. Two thirds of the purchase 
price was paid in cash while the remaining one third was paid for 
with E & E stock. On August 23, 2010, for approximately $1.1 
million, the Company purchased assets and assumed liabilities 
from Engineering Consulting Services, Inc. and contributed them in 
exchange for a 60% ownership interest in the newly formed entity 
Engineering Consulting Services, Inc., LLC (ECSI). As part of this 
transaction, the noncontrolling interest contributed the remaining 
40% of the net assets which resulted in a $667,000 noncontrolling 
interest in ECSI.

Most transactions with noncontrolling shareholders for the fiscal year 
ended July 31, 2012 and 2011 were made at book value, which 

 
 
 
 
management believes approximates fair value. The purchase of the 
Walsh Peru and E & E do Brasil shares, were at a calculated value in 
excess of book value which management believes approximated the 
fair value.

Effects of changes in E & E’s ownership interest in its subsidiaries on 
E & E’s equity:

 Fiscal Year ended July 31,
 2011

2010

2012

Transfers to  
noncontrolling interest:
Sale of 160 Walsh 
common shares
Sale of 196 Walsh 
common shares
Sale of 200 Lowham – 
Walsh common shares
Sale of 15,000 Walsh Peru 
common shares

Sale of 900 Gustavson 
common shares
Issuance of 667 ECSI 
common shares
Sale of 75 Lowham – 
Walsh common shares
Sale of 600 Gustavson 
common shares
Total transfers to 
noncontrolling interest

$      —

$      —

$40,850

—

—

—

—

—

—

—

—

—

62,451

667,000

27,917

41,634

—

50,040

52,222

84,450

—

—

—

—

41,634

757,368

227,562

Transfers from noncontrolling interest:

Purchase of 182 Walsh 
common shares
Purchase of 7,343 Walsh 
common shares
Purchase of 11,000 Walsh 
Peru common shares
Purchase of 50 Gestion 
Ambiental Consultores 
common shares
Purchase of 20 Walsh 
common shares
Purchase of 496 Walsh 
common shares

Purchase of 2,205 Walsh 
common shares
Purchase of 243 Walsh 
common shares
Purchase of 426 Walsh 
common shares
Purchase of 100 Walsh 
common shares
Purchase of 152 Walsh 
common shares
Purchase of 496 Walsh 
common shares
Purchase of 5,389 Brazil 
common shares
Purchase of 26,482 Walsh 
Peru common shares
Purchase of 166 Walsh 
common shares
Purchase of 25 Gestion 
Ambiental Consultores 
common shares
Total transfers from 
noncontrolling interest
Transfers to (from) 
noncontrolling interest

—

—

—

—

—

—

—

—

—

—

(73,748)

(269,064) 

77,539 

(213,917)

(94,601)

(7,452)

—

—

—

—

(7,776)

(208,156)

(974,750)

(101,905)

(197,945)

(41,091)

—

—

—

—

—

—

(59,486)

(2,289,778)

(126,830)

(50,000)

—

—

—

—

—

—

—

—

—

—

—

—

(581,243)

(1,531,623)

(2,526,094)

$(539,609)

$  (774,255) $(2,298,532)

12. Shareholders’ Equity - Restrictive

Agreement

Messrs. Gerhard J. Neumaier, Silvestro, Frank, and Strobel entered 
into a Stockholders’ Agreement dated May 12, 1970, as amended 
January 24, 2011, which governs the sale of certain shares of 
common stock owned by them and the children of those individuals. 
The Agreement provides that prior to accepting a bona fide offer to 
purchase the certain covered 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.

13. Lease Commitments
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.

At July 31, 2012, future minimum rental commitments are as 
follows:  Fiscal Year 

 Amount 

2013 
2014 
2015 
2016 
2017 
Thereafter  

              $3,114,799 
 2,325,349 
 1,460,362 
 1,027,248 
    854,542 
 1,066,545 

Lease agreements may contain step rent provisions and/or free 
rent concessions. 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. Gross rental expense under the above lease commitments 
for 2012, 2011, and 2010 was approximately $4.2 million, $3.6 
million and $3.2 million, respectively.

14. Defined Contribution Plans
Contributions to the Parent Company’s defined contribution plan 
and supplemental retirement plan are discretionary and determined 
annually by the Board of Directors. Walsh’s defined contribution 
plan provides for mandatory employer contributions to match 
100% of employee contributions up to 4% of each participant’s 
compensation. The total expense under the plans for fiscal years 
2012, 2011, and 2010 was approximately $1.8 million, $2.2 
million, and $2.0 million, respectively.

15. Earnings Per Share
The computation of basic earnings per share reconciled to diluted 
earnings per share follows:

2012

 Fiscal Year
 2011

2010

Total income available to 
common stockholders

Dividend paid

$773,579

$6,960,263

$4,257,607

2,036,559

1,963,303

1,747,572

Undistributed earnings

$(1,262,980)

$4,996,960

$2,510,035

Weighted-average common 
shares outstanding: basic 
and diluted

4,233,883

4,222,688

4,160,816

Distributed earnings per 
share

Undistributed earnings per 
share

$            .48

$           .46

$           .42

(.30)

1.19

.60

Total earnings per share

$            .18

$         1.65

$         1.02

31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
After consideration of all the rights and privileges of the Class A and 
Class B stockholders discussed in Note 8, 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.

The Company has determined that its unvested share-based 
payment awards that contain non-forfeitable rights to dividends 
or dividend equivalents (whether paid or unpaid) are participating 
securities. These securities shall be included in the computation of 
earnings per share pursuant to the two-class method. The resulting 
impact was to include unvested restricted shares in the basic 
weighted average shares outstanding calculation.

16. Segment Reporting
Segment information for fiscal year ended July 31, 2012 are as 
follows:
Geographic information:

 Revenue (1) 

Gross
Long-Lived
Assets

United States

Foreign countries

$98,558,000

$29,506,000

56,852,000

5,191,000

(1) Revenue is attributed to countries based on the location of the 
customers. Revenues in the most significant foreign countries for 
fiscal year ended July 31, 2012 includes $17.2 million in Peru, 
$15.7 million in Brazil and $11.3 million in Chile.

Segment information for fiscal year ended July 31, 2011 are as 
follows:
Geographic information:

 Revenue 

Gross
Long-Lived
Assets

United States

Foreign countries

$115,041,000

$27,872,000

54,132,000

5,062,000

(1) Revenue is attributed to countries based on the location of the 
customers. Revenues in the most significant foreign countries for 
fiscal year ended July 31, 2011 includes $15.9 million in Peru, 
$11.8 million in Brazil, $9.1 million in Kuwait, $8.3 million in Chile 
and $4.4 million in Morocco.

Segment information for fiscal year ended July 31, 2010 are as 
follows:
Geographic information:

 Revenue 

Gross
Long-Lived
Assets

United States

Foreign countries

$101,105,000 

$25,991,000

42,993,000

3,714,000

(1) Revenue is attributed to countries based on the location of the 

customers. Revenues in the most significant foreign countries for fiscal 

year ended July 31, 2010 includes $19.2 million in Peru, $10.5 million 

in Brazil, $5.4 million in Kuwait, and $3.8 million in Chile.

17. Commitments and Contingencies
From time to time, the Company is a named defendant in legal 
actions arising out of the normal course of business. The Company 

32

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.

On September 21, 2012 the Colorado Department of Public Health 
and Environment (the “Department”) issued a proposed Compliance 
Order on Consent (the “Consent Order”) to the City and County 
of Denver (“Denver”) and to Walsh Environmental Scientists & 
Engineers LLC (“Walsh Environmental”). Walsh Environmental is 
a majority-owned subsidiary of Ecology and Environment, Inc. 
The proposed Consent Order concerns construction improvement 
activities of certain property owned by Denver which was the subject 
of asbestos remediation. Denver had entered into a contract with 
Walsh Environmental for Walsh Environmental to provide certain 
environmental consulting services (asbestos monitoring services) 
in connection with the asbestos containment and/or removal 
performed by other contractors at Denver’s real property. The 
Consent Order, among other provisions, proposes a violation 
penalty of $216,000, jointly and severally to be paid by Denver 
and Walsh Environmental. Under Walsh’s Environmental consulting 
contract with Denver, Walsh Environmental has agreed to indemnify 
Denver for certain liabilities which would include the imposition of 
this proposed penalty. Walsh Environmental has put its professional 
liability carrier on notice of this claimed penalty. At this time, neither 
Walsh nor Denver have filed a response to the September 21, 2012 
draft Consent Order. It is the position of Walsh Environmental that 
it has fully complied with all applicable Colorado laws, regulations 
and statutes in connection with its role as an environmental 
consultant to Denver and the claimed violations are not applicable 
to the activities of Walsh in connection with its environmental 
consulting contract with Denver. The Company believes that this 
administrative proceeding involving Walsh Environmental will 
not have an adverse material effect upon the operations of the 
Company.

On February 4, 2011 the Chico Mendes Institute of Biodiversity 
Conservation of Brazil (the “Institute”) issued a Notice of Infraction 
to Ecology and Environment do Brasil LTDA (“E & E Brasil”). E & E 
Brasil is a majority-owned subsidiary of Ecology and Environment, 
Inc. The Notice of Infraction concerns the taking and collecting 
species of wild animal specimens without authorization by the 
competent authority and imposes a fine of 520,000 Reais, which 
has a value of approximately $255,000 at July 31, 2012. No 
claim has been made against Ecology and Environment, Inc. The 
Institute has also filed Notices of Infraction against four employees 
of E & E Brasil alleging the same claims and has imposed fines 
against those individuals that, in the aggregate, are equal to the fine 
imposed against E & E Brasil. E & E Brasil has filed administrative 
responses with the Institute for itself and its employees that: (a) 
denies the jurisdiction of the Institute, (b) states that the Notice of 
Infraction is constitutionally vague and (c) affirmatively stated that 
E & E Brasil had obtained the necessary permits for the surveys and 

collections of specimens under applicable Brazilian regulations 
and that the protected conservation area is not clearly marked to 
show its boundaries. At this time, E & E Brasil has attended one 
meeting where depositions were taken. The Company believes that 
these administrative proceedings in Brazil will not have an adverse 
material effect upon the operations of the Company. 

18. Supplemental Cash Flow Information

Disclosure

For purposes of the consolidated statements 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 $395,000, $343,000 
and $224,000 for the fiscal years ended July 31, 2012, 2011 
and 2010, respectively. Cash paid for income taxes amounted to 
approximately $6.5 million, $5.6 million and $1.5 million for the 
fiscal years ended July 31, 2012, 2011 and 2010, respectively. 
Of the $2.0 million in dividends paid by the Company in the 
fiscal year ended July 31, 2012, approximately $1.0 million was 
accrued in accounts payable as of July 31, 2011. Of the $1.8 
million in dividends paid by the Company in the fiscal year ended 
July 31, 2011, approximately $.9 million was included in accounts 
payable as of July 31, 2010. In July 2012, the Company declared 
a dividend of $1.0 million which was accrued in accounts payable. 
On December 14, 2011, the Company increased its capital 
investment in its Brazilian subsidiary (Ecology and Environment do 
Brasil, LTDA.) by $1.5 million, which increased the Company’s 
ownership in the entity to 68%. The Company also purchased an 
additional 4% of the entity from its president for approximately 
$180,000, which increased the Company’s ownership in the entity 
to 72%. The Brazilian company has experienced increased revenue 
growth and the additional investment of $1.5 million will be used for 
working capital needs in the country.

On March 18, 2011 the Company purchased an additional equity 
of 5.5% of its majority owned subsidiary Walsh from noncontrolling 
shareholders for approximately $1,156,000. The Company paid 
one third in cash, one third in a two-year note, and issued E & E 
stock for the remaining one third of the sale price. On December 
27, 2010, the Company purchased an additional 1.2% of its 
majority owned subsidiary Walsh for approximately $257,000. Two 
thirds of this purchase price was paid in cash while the remaining 
one third was paid for with E & E stock. On August 23, 2010, 
the Company purchased a 60% ownership in the assets held by 
ECSI. The Company paid $1.0 million in cash for this ownership 
interest, and the noncontrolling partnership group ECSI, Inc. 
contributed cash, other assets, and liabilities for its 40% ($667,000) 
noncontrolling share of the new entity.

19. Transactions
On January 4, 2012, the Company purchased an additional 
1.3% of Walsh from noncontrolling shareholders for approximately 
$254,000. Two thirds of the purchase price was paid in cash 
while the remaining one third was paid for with E & E stock. With 
this purchase E & E’s ownership share in Walsh increased to 
approximately 86% of that company. 

On December 14, 2011, the Company increased its capital 
investment in its Brazilian subsidiary (Ecology and Environment do 
Brasil, LTDA.) by $1.5 million USD, which increased the Company’s 
ownership in the entity to 68%. The Company also purchased an 
additional 4% of the entity from its president for approximately 

$180,000 USD, which increased the Company’s ownership in the 
entity to 72%. The Brazilian company has experienced increased 
revenue growth and the $1.5 million investment will be used for 
working capital needs in the country.

On November 18, 2011, the Company purchased an additional 
3.9% of Walsh Peru from noncontrolling shareholders for 
approximately $432,000. The entire purchase price was paid in 
cash.

On June 6, 2011, the Company purchased an additional 1.1% 
of Walsh from noncontrolling shareholders for approximately 
$219,000. The Company paid one third in cash, one third in a 
two-year note, and issued E & E stock for the remaining one third of 
the sale price. With this purchase E & E’s ownership share in Walsh 
increased to approximately 85% of that company. 

On March 18, 2011 the Company purchased 5.5% of Walsh from 
noncontrolling shareholders for approximately $1,156,000. The 
Company paid one third in cash, one third in a two-year note, and 
issued E & E stock for the remaining one third of the sale price. 

On December 27, 2010, the Company purchased an additional 
1.2% of Walsh from noncontrolling shareholders for approximately 
$257,000. Two thirds of the purchase price was paid in cash while the 
remaining one third was paid for with E & E stock.

On August 23, 2010 the Company purchased a 60% ownership 
interest in ECSI, LLC, a Lexington, Kentucky based engineering and 
environmental consulting company that specializes in mining work. 
The Company paid $1.0 million for this ownership interest and 
contributed the assets into a newly formed company. The company 
was consolidated into the Company’s financial reporting beginning 
in the first quarter of fiscal year 2011.

20. Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) and the 
International Accounting Standards Board (IASB) have issued 
common disclosure requirements related to offsetting arrangements. 
Specifically, the FASB issued Accounting Standards Update (ASU) No. 
2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting 
Assets and Liabilities. The amendments in this ASU require an entity 
to disclose information about offsetting and related arrangements 
to enable users of its financial statements to understand the effect of 
those arrangements on its financial position. An entity is required to 
apply the amendments for annual reporting periods beginning on 
or after January 1, 2013, and interim periods within those annual 
periods. An entity should provide the disclosures required by those 
amendments retrospectively for all comparative periods presented. 
The Company has not yet assessed the impact that these provisions 
will have on its consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05 Comprehensive 
Income (Topic 220): Presentation of Comprehensive Income (“ASU 
2011-05”). ASU 2011-05 increases the prominence of other 
comprehensive income in financial statements. Under ASU 2011-
05, companies will have the option to present the components of net 
income and comprehensive income in either one or two consecutive 
financial statements. ASU 2011-05 eliminates the option to present 
other comprehensive income in the statement of changes in equity 
and is applied retrospectively. ASU 2011-05 is effective for fiscal 
years, and interim periods within those years, beginning after 
December 15, 2011. The Company does not expect the adoption 
of ASU 2011-05 to have a significant impact on its consolidated 
financial statements.

33

In May 2011, the FASB issued ASU No. 2011-04, Fair Value 
Measurement: Amendments to Achieve Common Fair Value 
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. 
This ASU provides a consistent definition of fair value to ensure 
that the fair value measurement and disclosure requirements are 
similar between U.S. GAAP and IFRS. This standard changes certain 

fair value measurement principles and enhances the disclosure 
requirements. ASU No. 2011-04 is effective for interim and annual 
periods beginning after December 15, 2011 and should be applied 
prospectively. The adoption of this standard did not have a material 
impact on the Company’s consolidated financial statements. 

21. Selected Quarterly Financial Data (unaudited) (In thousands, except per share information)

  2012                                      

   First      

Second     

Third        

Revenues 
Income from operations
Income from continuing operations before income taxes
Net Income
Net Income per common share: basic and diluted

$ 42,312
2,040
2,084
$   1,160
$       .28

$ 40,173
1,867
1,685
$      503
$       .12

$ 36,011
574
503
$        56
$       .01

  2011                                       

   First      

Second     

Third        

Revenues 
Income from operations
Income from continuing operations before income taxes
Net Income
Net Income per common share: basic and diluted

$ 42,026
4,008
3,941
$   1,859
$       .44

$ 41,866
3,204
    3,238
$   1,758
$       .42

$ 41,120
2,199
    2,587
$   1,429
$       .34

Fourth

$ 36,914
303
126
$    (945)
 $     (.23)

Fourth

$ 44,161
2,975
    2,989
$   1,914
$       .45

Market for E & E’s Common Equity, Related Stockholder Matters 
and Issuer Purchases of Equity Securities

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 NASDAQ for the periods 
indicated.

  FISCAL 2012                                       

    High    

        Low

First Quarter (commencing August 1, 2011 - October 29, 2011) 

             $ 17.65 

Second Quarter (commencing October 30, 2011 - January 31, 2012) 

Third Quarter (commencing February 1, 2012 - April 30, 2012)  

Fourth Quarter (commencing May 1, 2012 - July 31, 2012) 

 17.50 

 17.00 

 15.19 

 $ 14.95

    15.64

    14.60

    11.26

  FISCAL 2011                                       

    High    

        Low

First Quarter (commencing August 1, 2010 - October 30, 2010) 

              $ 13.50 

Second Quarter (commencing October 31, 2010 - January 29, 2011) 

Third Quarter (commencing January 30, 2011 - April 30, 2011)  

Fourth Quarter (commencing May 1, 2011 - July 31, 2011) 

 15.33 

 20.69 

 22.76 

 $ 11.40

    12.44

    14.70

    16.42

34

 
 
 
 
 
 
 
 
 
    
 
 
 
  
  
     
 
 
 
     
 
 
 
 
     
 
 
 
 
    
 
 
 
 
 
  
     
 
 
 
    
 
 
 
 
     
 
 
Gerhard J. Neumaier 
  Chairman and Director
Frank B. Silvestro 

BOARD OF DIRECTORS

Ronald L. Frank 

Executive Vice President, Secretary,  
and Director

Executive Vice President and Director

Gerard A. Gallagher, Jr.  

Gerald A. Strobel, P.E. 

Executive Vice President of 
Technical Services and Director

Retired Company Officer and 

  Director

Michael C. Gross 

Insurance Broker and Director

Ross M. Cellino 
  Attorney and Director
Timothy Butler 

Retired Bank Executive and Director

Gerhard J. Neumaier 
  Chairman
Kevin S. Neumaier, P.E. 

President and Chief Executive Officer

Frank B. Silvestro 

Executive Vice President

Gerald A. Strobel, P.E. 

Executive Vice President of Technical 
Services

Ronald L. Frank 

Executive Vice President, Secretary

Laurence M. Brickman, Ph.D. 

Senior Vice President

Kevin Donovan 

Senior Vice President
Gerard A. Gallagher, III 

Senior Vice President of  
Environmental Sustainability

CORPORATE HEADQUARTERS
Buffalo Corporate Center
368 Pleasant View Drive
Lancaster, NY 14086-1397
TEL: 1 (716) 684-8060
FAX: 1 (716) 684-0844
E-MAIL: jmye@ene.com
WEB: www.ene.com

STOCK TRANSFER AGENT
American Stock Transfer & Trust Co.
40 Wall Street
New York, NY 10005
TEL: 1 (212) 936-5100

CORPORATE OFFICERS

Roger J. Gray 

Senior Vice President

Fred J. McKosky, P.E. 

Senior Vice President  

Ronald J. Skare 

Senior Vice President

Cheryl A. Karpowicz, AICP    

Senior Vice President

Nancy Aungst 

Vice President
James B. Collins 
Vice President

Timothy J. Grady, P.E. 

Vice President

Robert J. King 

Vice President

Craig Hathaway, C.P.A. 

Vice President of Finance

EXCHANGE LISTING
NASDAQ® Global Market
Ticker Symbol: EEI

INDEPENDENT REGISTERED 
ACCOUNTING FIRM
Schneider Downs & Co., Inc.
1133 Penn Avenue
Pittsburgh, PA 15222

LEGAL COUNSEL
Gross, Shuman, Brizdle & Gilfillan, P.C.
465 Main Street, Suite 600
Buffalo, NY 14203

SUBSIDIARIES

H. John Mye, P.E. 

Vice President, Treasurer 
and Chief Financial Officer

Christopher L. Quina, P.G. 

Vice President

Richard Rudy, P.G., C.P.G. 

Vice President

George A. Rusk, J.D. 

Vice President

Carmine A. Tronolone 

Vice President
George W. Welsh 
Vice President

Colleen C. Mullaney-Westfall, J.D. 
  Assistant Secretary

FORM 10-K
E & E’s Annual Report including financial 
statements is for the general information 
of the Company’s shareholders. It is not 
intended to be used in connection with any 
sale or purchase of securities. Shareholders 
may obtain from the Company without charge 
a copy of its Annual Report on Form 10-K 
as filed with the Securities and Exchange 
Commission, including financial schedules, by 
sending a written request to: 
  Mr. H. John Mye, Chief Financial Officer 

Ecology and Environment, Inc.
368 Pleasant View Drive
Lancaster, NY 14086-1397

Consortium of International Consultants, LLC

ecology and environment do brasil Ltda. (Brazil)

Gustavson Associates, LLC

E & E Consulting, Inc. (Vancouver)

E & E Environmental Services, LLC  (Russia)

E & E International, LLC (Russia)

E & E Unwelt-Beratung GmbH (Germany)

Ecology & Environment Engineering, Inc.

Ecology and Environment de Mexico, S.A. de 
C.V. (Mexico)

Ecology and Environment, S.A.(Venezuela)

Ecology and Environment Eurasia (Russia)

Ecology & Environment of Saudi Arabia Co. 
Ltd. (Saudi Arabia)

Lowham-Walsh Engineering & Environment 
Services, LLC 

Ecology and Environment South America Inc. 
(Cayman Islands)

Ecology and Environment International  
Services, Inc. (EEIS) 

ECSI, LLC

E.E.I.S. (SARL) (Morocco)

Gestión Ambiental Consultores S.A. (Chile)

Overstreet Orlando Mitigation Team, LLC

Servicios Ambientales Walsh, S.A. (Ecuador)

Tianjin Green Engineering Company (China)

Walsh Environmental Scientist & Engineers, LLC

Walsh Peru, S.A. (Peru)

YiYi Ecology and Environment Consulting 

(Wuxi) Co., Ltd. (China)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
www.ene.com

OFFICES

Albany, NY
Anchorage, AK
Austin, TX
Baton Rouge, LA
Beijing, China*
Berlin, Germany
Bismarck, ND
Blacksburg, VA
Bogotá, Colombia
Boulder, CO*

Buenos Aires, Argentina
Buffalo, NY
Cairo, Egypt
Casablanca, Morocco
Chicago, IL
Colorado Springs, CO
Corbin, KY
Dallas, TX
Denver, CO
Fort Collins, CO

Gillette, WY 
Grand Junction, CO
Greenville, SC
Houston, TX
Jeddah, Saudi Arabia
Kansas City, KS
Kuwait City, Kuwait
Lakewood, CO
Lander, WY
Lexington, KY

Lima, Peru 
Long Beach, CA
Miami, FL
New York, NY
Oakland, CA
Orlando, FL
Owensboro, KY
Pensacola, FL
Pikeville, KY
Pittsburgh, PA

Portland, OR
Quito, Ecuador
Rio de Janeiro, Brazil
Salt Lake City, UT
San Diego, CA
San Francisco, CA
Santiago, Chile
Seattle, WA
Tallahassee, FL
Tripoli, Libya

Tucson, AZ
Vancouver, Canada
Virginia Beach, VA
Washington, DC
West Palm Beach, FL
Williamson, WV
Wuxi, China

*Multiple Offices

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