Ecology and Environment, Inc.
Annual Report 2017

Plain-text annual report

ecology and environment, inc. Global Environmental Specialists A N N U A L R E P O R T 2 0 1 7 To Our Shareholders Three years ago, Ecology and Environment, Inc. embarked on strategic initiatives to prepare for future growth by aligning with new and emerging opportunities in the marketplace and reducing operating expenses. We are pleased to report that we emerged from fiscal year 2017 as a stronger, more disciplined company, focused on progress and growth, and committed to our vision of helping clients address today’s most pressing environmental challenges. We reported net earnings of $0.70 per share for fiscal year 2017, more than three times earnings of $0.21 per share reported for the prior year. Our ongoing initiatives to reduce operating expenses, coupled with a significantly lower effective tax rate for our South American operations, more than offset slight reductions in domestic and foreign revenues. Favorable resolution of long-standing contract settlement liabilities and adjustments to close out the activities of dormant subsidiaries also contributed to our results in 2017. In South America, the economic downturn that adversely affected our Brazilian subsidiary during prior years stabilized, as the continent began a slow recovery. Consequently, our Brazilian operations showed improvement in 2017 with increasing backlog and revenues. Revenues from operations in Peru also improved during the fourth quarter due to a higher volume of work, and our Chilean operations continued to perform well. Our South American presence provides geographic diversification and allows us to participate in developing and expanding markets. Our fiscal year 2017 results were encouraging. We now have a stable foundation with substantial available liquidity upon which to build, and opportunities for growth in new and exciting directions. Going forward, we see opportunity in fiscal year 2018, but we also see challenges. We expect that the trend toward longer decision-making to award new contracts and extended timeframes to fund and begin ongoing project work will continue. Board of Directors We welcomed three new independent members to our Board of Directors during fiscal year 2017: Marshall Heinberg, Justin Jacobs, and Michael El-Hillow. Each brings extensive knowledge and relevant experience in operations, investment banking, and corporate governance, which will help us to carry out our strategic objectives and achieve our long-term goals. The Board has implemented improvements to its governance structure and is committed to working closely with management to pursue paths for disciplined growth and improved profitability. It has also implemented enhanced risk management and compliance programs within the company to foster informed decision-making in support of our strategic growth initiatives. Business Objectives Our vision is to assist our clients in addressing the leading environmental challenges of our time. We have a renewed clarity of purpose, with a set of business objectives for increasing our presence in the marketplace, growing the company, and building value. One key objective is to align ourselves within market sectors where we see the greatest long-term potential for higher end consulting services while identifying and investing in new market sectors. We are focused on advancing areas of specialization and expertise that will create new opportunities for growth while enhancing our service offerings in existing markets. In recent years, we experienced downturns in two core business areas: oil and gas and mining, both in the U.S. and South America. We recognize the cyclical nature of these sectors and believe that over the long term they will continue to create opportunities for profitable work. Policies of the new administration in Washington focusing on energy independence, infrastructure development, and regulatory streamlining all have the potential to be catalysts for new opportunities. In the meantime, we have been laying the groundwork and making investments in a number of other sectors and service lines that we see as promising for our future over the next three to five years. This forward-looking effort is exemplified in a number of our recent projects that we believe have us on the right path. For example, our work on renewable energy development projects has grown and is now extending into the offshore environment. We worked with the New York State Energy Research and Development Authority (NYSERDA) on the New York Offshore Wind Master Plan, which will help the state achieve its goal of 2.4 gigawatts (GW) of wind energy by 2030. Our resource area experts developed studies on environmental, social, economic, regulatory, and infrastructure considerations to help the state identify the most favorable areas for offshore wind energy development. In fiscal year 2017, we witnessed a shift in leadership on addressing climate change and environmental issues away from the federal government to the state and local levels. As a result, we expect an expanding field of opportunities in several areas, including climate change adaptation and resilience planning. We worked, for example, with the Mobile Bay National Estuary Program and Thompson Engineering on a Watershed Management Plan to assess the impacts of climate change on Alabama’s coastal watershed. We studied shoreline changes due to sea level rise and summarized recent projections using Sea Level Affecting Marshes Model (SLAMM) to assess potential impacts of sea level rise and climate change on water and habitat quality. Our established practices in ecological and coastal restoration continue to have an important place in our portfolio of work and the company is working to do more in this area. For the New York State Office of Parks, Recreation and Historic Preservation, we are providing planning and conceptual design services and restoration construction oversight for four sites on Grand Island within the Niagara River Area of Concern. In Peru, we completed a modification to the Environmental Impact Assessment for the expansion of the Jorge Chávez International Airport, a key transportation hub for South America. The expansion plan includes a second runway and a new international terminal. Our subsidiary Walsh Peru prepared socio-environmental, traffic, and risk studies; developed management plans and property assessments for expropriations; and conducted public outreach with stakeholders. Recognizing the importance technology plays in all of our markets, our innovation group focuses on integrating technology, including data collection, advanced analytical applications, “big data” management, and a variety of decision support tools. We continue to pursue growth opportunities that will allow us to expand our capabilities and be more competitive in key markets and geographic regions, while creating opportunities to enhance bottom line performance. As we seek to grow and evolve as a company, building leadership capacity is important to carry our vision forward. We are developing leadership internally, and preparing our people to take on greater roles and responsibilities within our company. We are also recruiting externally to bring valuable knowledge and skills into the company, and outside perspectives to our processes and our work. We recruited a number of strategic hires in 2017, and we will continue to make this activity a priority as we move forward. Investor Relations We value each of our shareholders and we are committed to providing you with relevant, timely information and an open line of communication. In fiscal year 2017, we embarked on a more robust Investor Relations program with a two-fold purpose: to assure responsiveness to shareholder questions, and to develop a proactive outreach program. We have initiated quarterly investor conference calls following quarterly earnings releases. More information, including call-in information, call recordings, transcripts, and presentation slide decks, are available on our investor relations webpage. Thank you for your ongoing support as shareholders of our company. Sincerely, Gerard A. Gallagher III President and CEO Marshall A. Heinberg Chairman of the Board Marshall A. Heinberg Chairman of the Board Frank B. Silvestro Gerard A. Gallagher III President and CEO Fred J. McKosky, P.E. Chief Operating Officer H. John Mye III, P.E. Chief Financial Officer Ronald L. Frank Executive Vice President, Secretary Cheryl A. Karpowicz, AICP Senior Vice President 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 BOARD OF DIRECTORS as of April 20, 2017 Ronald L. Frank Gerald A. Strobel Michael C. Gross CORPORATE OFFICERS Todd Musterait, P.E. Senior Vice President Timothy J. Grady, P.E. Senior Vice President Kevin Donovan Senior Vice President Daniel R. Castle, AICP Vice President Michael L. Donnelly Vice President STOCK TRANSFER AGENT American Stock Transfer & Trust Co. 40 Wall Street New York, NY 10005 TEL: 1 (212) 936-5100 EXCHANGE LISTING NASDAQ® Global Market Ticker Symbol: EEI ACTIVE SUBSIDIARIES Justin C. Jacobs Michael El-Hillow Colleen C. Mullaney-Westfall, Esq. Vice President, Assistant Secretary Daniel I. Sewall Vice President Carmine A. Tronolone Vice President Gerorge Rusk, ESQ. Compliance Officer INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Suite 1500 50 Fountain Plaza Buffalo, NY 14202 LEGAL COUNSEL Gross, Shuman, Brizdle & Gilfillan, P.C. 465 Main Street, Suite 600 Buffalo, NY 14203 Ecology & Environment Engineering, Inc. ecology and environment do brasil Ltda. (Brazil) Gestión Ambiental Consultores S.A. (Chile) Gustavson Associates, LLC Lowham-Walsh Engineering & Environment Services, LLC Servicios Ambientales Walsh, S.A. (Ecuador) Walsh Environmental, LLC Walsh Peru, S.A. (Peru) Forward-Looking Statements Information presented in this communication contains forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995. All statements relating to events or results that may occur in the future, including, but not limited to, current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management, the Company’s future costs of solicitation, record or meeting dates, compensation arrangements, business objectives, company policies, corporate governance practices as well as capital and corporate structure (including major shareholders, board structure and board composition), are forward-looking statements. Forward-looking statements generally can be identified by words such as “expect,” “will,” “change,” “intend,” “target,” “future,” “anticipate,” “to be,” “goal,” “project,” “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” and similar expressions. These statements are based on numerous assumptions and involve known and unknown risks, uncertainties and other factors that could significantly affect the Company’s operations and may cause the Company’s actual actions, results, financial condition, performance or achievements to be substantially different from any future actions, results, financial condition, performance or achievements expressed or implied by any such forward-looking statements. Those factors include, but are not limited to, (i) general economic and business conditions; (ii) changes in market conditions; (iii) changes in regulations; (iv) actual or potential takeover or other change- of-control threats; (v) the effect of merger or acquisition activities; (vi) changes in the Company’s plans, strategies, targets, objectives, expectations or intentions; and (vii) other risks, uncertainties and factors indicated from time to time in the Company’s reports and filings with the SEC including, without limitation, most recently the Company’s Annual Report on Form 10-K for the period ended July 31, 2017, under the heading Item 1A - “Risk Factors” and the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Company does not intend, and undertakes no obligation to update or publicly release any revision to any such forward-looking statements, whether as a result of the receipt of new information, the occurrence of subsequent events, the change of circumstance or otherwise. Each forward-looking statement contained in the Company’s proxy statement is specifically qualified in its entirety by the aforementioned factors. You are advised to carefully read the Company’s proxy statement in conjunction with the important disclaimers set forth above prior to reaching any conclusions or making any investment decisions. E & E has printed on recycled paper since 1971. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K ☑Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended July 31, 2017☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from __________ to __________ Commission File Number 1-9065ECOLOGY AND ENVIRONMENT, INC.(Exact name of registrant as specified in its charter)New York 16-0971022(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number) 368 Pleasant View Drive, Lancaster, NY 14086(Address of principal executive offices) (Zip code)716-684-8060(Registrant's telephone number, including area code)Securities registered pursuant to section 12(b) of the Act:Title of each class Name of each exchange on which registeredClass A Common Stock par value $.01 per shareNASDAQ Stock ExchangeSecurities registered pursuant to section 12(g) of the Act: None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months,(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☑Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, indefinitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See thedefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer☐Accelerated filer☐Non-accelerated filer (Do not check if a smaller reporting company)☐Smaller reporting company☑ Emerging growth company☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ Exhibit Index on Page 67.The aggregate market value of the Class A Common Stock held by non-affiliates as of January 31, 2017 (the last business day of the registrant’s most recently completed second fiscalquarter) was $29,925,693. This amount is based on the closing price of the registrant’s Class A Common Stock on the National Association of Securities Dealers Automated Quotations(NASDAQ) Stock Market for that date. Shares of Class A Common Stock held by the executive officers and directors of the registrant are not included in this computation.As of September 29, 2017, 3,008,458 shares of the registrant's Class A Common Stock, $.01 par value (the "Class A Common Stock") were outstanding, and 1,293,146 shares of theregistrant's Class B Common Stock, $.01 par value (the "Class B Common Stock") were outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant's Registration Statement on Form S-1, as amended by Amendment Nos. 1 and 2 (Registration No. 33-11543), portions of the Company's Form 10-K for fiscalyears ended July 31, 2002, 2003, 2004, 2010, 2011 and 2016, portions of the Company’s Definitive Proxy Statement (Schedule 14A) dated December 13, 2011, portions of the Company’sDefinitive Proxy Statement (Schedule 14A) dated January 21, 2017, and the Company’s Current Reports on Form 8-K dated August 21, 2013 and June 1, 2017 are incorporated byreference in Part IV of this Form 10-K. 2Table of Contents PART I Page Item 1.Business4Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments15Item 2.Properties15Item 3.Legal Proceedings15Item 4.Mine Safety Disclosures16 PART II Item 5.Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities17Item 6.Selected Consolidated Financial Data19Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operation19Item 8.Financial Statements and Supplementary Data30Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure57Item 9A.Controls and Procedures57Item 9B.Other Information59 PART III Item 10.Directors and Executive Officers of the Registrant60Item 11.Executive Compensation63Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters66Item 13.Certain Relationships and Related Transactions68Item 14.Principal Accounting Fees and Services68 PART IV Item 15.Exhibits, Financial Statements, Schedules70 3Table of ContentsPART IItem 1. BusinessReferences in this Annual Report on Form 10-K (the “Annual Report”) to “EEI” refer to Ecology and Environment, Inc., a New York corporation. References to “the Company,” “we,”“us,” “our,” or similar terms refer to EEI together with its consolidated subsidiaries.Organization and BackgroundEEI was incorporated in February 1970 as a global broad-based environmental consulting firm with an underlying philosophy to provide professional services worldwide so thatsustainable economic and human development may proceed with acceptable impact on the environment. Together with its subsidiaries, EEI has direct and indirect ownership in 8 activewholly-owned and majority-owned operating subsidiaries in 5 countries. Our staff is comprised of individuals representing numerous scientific, engineering, health, and socialdisciplines working together in multidisciplinary teams to provide innovative environmental solutions. Our consolidated group of companies have completed thousands of projects for awide variety of clients including some of the most iconic, high-profile projects in the world. Our revenues originate from federal, state and local governments in the United States,domestic private clients in the United States, and private and governmental international clients.Fiscal Year 2017 Operations OverviewConsolidated net income attributable to EEI (“net income”) was $3.0 million for the fiscal year ended July 31, 2017, a more than threefold increase from $0.9 million in the prior fiscal year. Earnings per share increased to $0.70 for fiscal year 2017, from $0.21 for the prior year. Selected financial information by business segment is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) EEI and its subsidiaries located in the United States: Revenue, net $82,094 $83,095 $88,715 Net revenue less subcontract costs (1) 69,104 69,724 73,264 Direct operating expenses (2) 29,579 30,363 32,278 Indirect operating expenses (3) 32,021 34,130 35,602 Income before income tax provision 5,831 4,652 4,592 Net income attributable to EEI 3,803 2,026 1,039 Subsidiaries located in South America: Revenue, net 22,408 22,722 38,220 Net revenue less subcontract costs 17,019 17,543 30,344 Direct operating expenses 8,755 8,549 15,214 Indirect operating expenses 8,785 8,845 10,288 Income (loss) before income tax provision (391) (189) 4,444 Net income (loss) attributable to EEI (773) (1,081) 2,988 Other foreign subsidiaries: Revenue, net --- --- --- Net revenue less subcontract costs --- --- --- Direct operating expenses --- --- 8 Indirect operating expenses 15 95 1,147 Income (loss) before income tax provision (15) (96) (1,067)Net income (loss) attributable to EEI (15) (59) (631) (1)Net revenue less subcontract costs represents the net of revenue, net, and subcontract costs from the consolidated statements of operations.(2)Direct operating expenses consist of cost of professional services and other direct operating expenses from the consolidated statements of operations.(3)Indirect operating expenses consist of administrative and indirect operating expenses and marketing and related costs from the consolidated statements of operations. 4Table of ContentsU.S. OperationsNet income from U.S. operations nearly doubled to $1.8 million during fiscal year 2017, as lower revenues were more than offset by lower direct and indirect operating expenses.Competitive pricing pressure continued to have an impact on our ability to win new work in many of our domestic market sectors. In addition, for the second straight year, weexperienced a higher proportion of revenues from federal, state and local government projects, which are generally billed at lower rates than our commercial work.Indirect operating expenses decreased 6% during fiscal year 2017. We continue to improve operating efficiency within our domestic operations and operate under an expensemanagement strategy that has resulted in significant reductions in indirect operating expenses over the past three fiscal years.South American OperationsAn economic downturn that adversely affected our Brazilian operations during previous fiscal years appeared to stabilize during fiscal year 2017, resulting in additional businessdevelopment opportunities and higher revenues in Brazil. Although improving, economic conditions continue to be challenging for certain of our clients in Brazil, resulting in continuedhigh levels of collection risk and receivable reserves.Global economic trends in oil, gas and commodity prices continued to have a severe negative impact on revenues and net income in Peru during fiscal year 2017. Significant energysector project work completed in Peru during fiscal years 2016 and 2017 has not been replaced.Reduced volumes of work on power generation and transmission projects resulted in lower revenues and net income in Chile during fiscal year 2017. Government and privateinvestments in mining projects in Chile have steadily decreased since 2013.Environmental Consulting Services OfferedWe offer consulting services to commercial and government clients in a variety of service sectors, which include the following:Government START ContractWe provide support services to the United States Environmental Protection Agency (the “EPA”) for response and site assessment activities related to the release and threat of release ofoil, petroleum products, hazardous substances, weapons of mass destruction or pollutants or contaminants that pose an actual or potential threat to human health or welfare, or to theenvironment. We have supported the EPA under more than 40 contracts with a total award value exceeding $1 billion spanning nearly 40 years.In July 2013, the EPA awarded us with renewal of a contract known as START IV to provide continuing support to EPA Region 10, which covers the four state territory of Alaska, Idaho,Washington and Oregon. This is a combination time and materials/cost plus contract with a base term of three years and two two-year option periods, for a total potential contract termof seven years. During fiscal year 2016, the EPA awarded the first of the option periods to EEI. This contract contains termination provisions under which the EPA may, without penalty,terminate the contract during the contract term upon written notice to us. In the event of termination, we would be paid only termination costs in accordance with the contract. We havenever had a contract terminated during the contract term by the EPA. 5Table of ContentsGovernment Task Order ContractsWe have numerous task order contracts with state and federal governmental agencies which contain indefinite order quantities and/or option periods ranging from one to seven years. Services provided under these contracts include numerous environmental assessment projects with the U.S. Navy, engineering and oversight of pollution remediation, and otherhazardous waste remediation activities for various state entities. We also prepare environmental impact assessment documents for federal land management agencies such as the Bureauof Land Management.EnergyNew technology and increasing demand for less carbon intensive and more sustainable use of resources presents complex challenges to energy developers and providers. To keep pacewith growing energy needs worldwide, we provide services to all phases of energy development by conducting critical feature/fatal flaw analyses, social and health impact assessments,feasibility and siting studies, field surveys, permitting, construction inspection and compliance monitoring. As public participation has become increasingly important, EEI hasdeveloped specialized tools and techniques for successful stakeholder engagement.·Electric TransmissionOur comprehensive approach to transmission project siting and permitting has developed from experience on over 16,000 miles of transmission line, including underwater andunderground DC lines, urban rebuilds, and renewable generation interconnections. We prepare feasibility studies, evaluate alternative routes, analyze environmental impacts, andacquire needed certificates, approvals, and permits for electric transmission facilities worldwide to bring renewable energy from its source to regional population centers as well asto upgrade aging infrastructure. Recognizing the increasing need for proactive public involvement, we work closely with our clients to effectively engage stakeholders andidentify environmental constraints, community concerns, and permitting requirements early.·PipelinesTo date, we have worked on more than 250 projects in the pipeline industry involving more than 50,000 miles of pipeline systems. Our extensive experience includes routeselection, evaluation of alternatives, field surveys, regulatory compliance and permit support, preparation of environmental monitoring and restoration plans, and environmentalinspection, including development of quality assurance specifications.·Offshore EnergyGlobal demand for renewable energy has stimulated the development of new technologies for generating energy from ocean currents, tides, waves, and thermal resources. Therising demand for fossil fuels, particularly natural gas, has expanded the exploration and production of offshore oil and gas reserves and global trade of liquefied natural gas(“LNG”).The LNG industry in the United States has seen dramatic changes in the last few years. The rapid development of shale gas resources has advanced the U.S. from having toimport natural gas to now producing natural gas in excess of domestic needs. This has transformed the U.S. LNG marketplace from one where LNG import terminals were beingpermitted and constructed to one where LNG export terminals are now being permitted and constructed. E & E has worked with clients to develop offshore and onshore LNGimport and export terminals and associated pipelines.We have extensive experience conducting siting, environmental analyses, and permitting for offshore energy projects worldwide, including wind farms, wave energy converters,deep water ports, floating production storage and offloading facilities (“FPSOs”), and subsea pipeline and electrical transmission cables. We guide clients in developingsuccessful permitting strategies and provide comprehensive environmental and regulatory support for offshore energy projects.We prepare third-party Environmental Impact Statements (“EISs”) and Environmental Impact Assessments (“EIAs”), Deepwater Port Applications, and Federal Energy RegulationCommission (“FERC”) Environmental Reports (“ERs”). We also perform siting/feasibility studies, plankton surveys, marine mammal acoustic impact modeling, dredging impactstudies, coastal zone consistency evaluations, risk assessments, and marine vessel traffic studies, and develop and implement comprehensive plans for stakeholderengagement/outreach. 6Table of Contents·Wind EnergyWe have extensive experience providing strategic environmental consulting services to wind energy developers and are a consulting member of the American Wind EnergyAssociation (“AWEA”). Our nationwide team has collectively worked on more than 475 wind energy projects in 38 states, helping clients successfully develop wind projectscapable of producing more than 7,000 megawatts (“MWs”) of environmentally safe, renewable electricity. Our direct experience with wind energy development, from initial sitingstudies through construction and mitigation monitoring of completed wind energy projects, allows us to anticipate potential project delays and resolve issues to keep clientprojects on schedule.We provide strategic consulting in all facets of environmental permitting and compliance, environmental evaluation, threatened and endangered species, avian and bat surveys,and land use studies. Our civil engineering support services include design of structure foundations and roadways and coordination for gathering line placement, substation, andtransmission line requirements. In addition, we recognize that public outreach efforts are an important component of any wind power project and, therefore, maintain in-housepublic relations experts and graphic artists, who work as an integrated team to design outreach programs geared toward landowners and officials.·Solar EnergyWe have assisted solar developers to permit and build projects powering more than 6,540 MWs of clean, renewable energy in 31 states. We have worked on more than 150 solarassignments, supporting all phases of solar energy development, including critical issues analyses, feasibility and siting studies, permitting and due diligence audits,environmental impact assessments, project permitting and construction monitoring and operational compliance. Natural Resource Management and RestorationOur approach to restoration design focuses on mimicking natural systems in form, function, and process—developing practical strategies for sustainable design and uplift. We conceiveand design environmental restoration projects that restore affected habitat through the efficient and innovative integration of biological and engineering solutions. We assist our clientsin meeting their goals by applying restoration measures to mine reclamation, contaminated sediment remediation, land development strategies, recreational planning, comprehensivewatershed planning, and threatened and endangered species protection. Current work also includes helping clients such as the US Army Corps of Engineers address invasive speciessuch as hydrilla and algal blooms in the Great Lakes watershed. Through our work with The Nature Conservancy, we are also helping to restore areas on the Gulf Coast.Sustainability, Resiliency, and Climate AdaptationE & E planning teams are working with communities around the world to develop and implement sustainable approaches for projects as varied as neighborhood-scale urbanredevelopment, large-scale green city planning and design, and regional sustainability plans. We help organizations and government agencies to become more resilient by assistingthem to plan for, respond to, and recover from extreme disruptive events that can result in a wide range of cascading emergencies, with emphasis on building more resilient communities. We are a founding corporate sponsor of the International Sea Level Institute, and are working with clients to understand the short- and long-term effects of sea level rise on theirbusinesses and communities. 7Table of ContentsWater ResourcesWater supply, water quality and watershed management issues are becoming increasingly intertwined as communities face mounting difficulties securing future resources. Waterresource planning and management projects present diverse challenges ranging from understanding complex hydrologic systems to highly charged political issues and solutions mustaddress stakeholder concerns, water rights, permitting requirements, ecosystem sustainability, public health, water supply, water quality, and economic feasibility. EEI’s water resourcemanagement practice includes work in water resources engineering, water studies and planning, and environmental restoration. We have experience working in the world’s mostimportant water systems, including the Florida Everglades, Louisiana Coastline, Sacramento-San Francisco Bay Delta, Great Lakes, Hudson River, Chesapeake Bay, Puget Sound,Amazon River Basin, Yangtze River Basin, and many others.Planning·Environmental Planning and AssessmentEnvironmental impact assessment is at the core of our business. Since EEI’s inception, this work has included numerous major EIS and ER projects, initial studies and EAs, andhas mitigated negative declarations in accordance with the National Environmental Policy Act (“NEPA”) and various state requirements. We also prepare similar documents understate laws, such as the California Environmental Quality Act.·Military Master Planning and Land Use Compatibility StudiesIn response to the advances seen in military master planning under taken by the Department of Defense (“DOD”) over the past few years, we have developed a team ofexperienced professionals in the areas of real property master planning, military programming, geospatial data and systems support, database management, and water resourcesplanning. Through our experience with modern military facility planning, we develop technologically advanced military master planning tools by leveraging the latest inGeographic Information System (“GIS”) and information technology. We assist DOD installations to incorporate renewable energy and reduce their environmental footprint whilesustaining mission requirements and maintaining positive relationships with the surrounding communities. Emergency Planning and ManagementEvents around the world involving terrorism, bioterrorism, and natural disasters continue to raise concerns for public health and safety as well as environmental protection. We providelogistical support, emergency response/management services, and comprehensive planning to businesses and state, county, and municipal governments in all phases of incidentmanagement, including preparedness, mitigation, response, and recovery. In providing these multifaceted services, we determine local vulnerabilities and hazards and the in-placeresources/assets to address those hazards in the context of applicable state and federal laws and regulations and community desires to become more resilient.Hazardous and Radioactive Material ServicesWe have conducted thousands of hazardous waste site evaluations throughout the United States, providing site investigation, engineering design, and operation and maintenance for awide range of industrial and governmental clients. We inventory and collect sample materials on site and then evaluate waste management practices, potential off-site impacts, andliability concerns. We then design, implement, and monitor associated cleanup programs. Our field investigation services primarily involve the development of work plans, health andsafety plans, and quality assurance/quality control plans to govern and conduct field investigations to define the nature and extent of contaminants at a site. After field investigationservices have been completed and the necessary approvals obtained, our engineering specialists develop plans and specifications for remedial cleanup activities. This work includesdevelopment of methods and standard operating procedures to assess contamination problems; and to identify, develop, and design appropriate pollution-control schemes. Alternativecleanup strategies are evaluated and conceptual engineering approaches are formulated. We also supervise actual cleanup or remedial construction work performed by othercontractors. 8Table of ContentsInternationalSince EEI’s incorporation in 1970, we have completed more than 50,000 environmental assignments in more than 120 countries worldwide. Many of the services provided for our globalclients are similar to the services we provide in the U.S. and help our clients to meet local expectations and regulatory requirements. With an understanding of cultural, political,economic, operational, and legal factors that influence the solution to a given environmental problem, we aid international governments and lending institutions in their efforts toadvance institutional systems for environmental management. We have completed assignments involving environmental assessment; management and financial planning; institutionalstrengthening and standards development; water supply and development; wastewater treatment; and solid waste project construction supervision. More recently, issues of publichealth, sustainability, and social and economic development have been added to that portfolio.As modernizing economies continue to develop, demand for global environmental services has also grown. Most countries now have environmental laws to protect and regulatedevelopment of natural resources. Many countries are also investing in infrastructure-related projects like bridges, roads, hydroelectric dams, mines, water supply, power generation andtransmission, communications networks, and ports, all of which present opportunities for us to provide environmental services. Our international offices are also providing services forthe development of renewable energy. Frequent and dramatic natural disasters in recent years have spurred many governments around the world to address disaster response andprevention strategies and the impacts of climate change, such as sea-level rise and storm intensity and frequency. Through our U.S. and South American operations, we believe that weare well-positioned to benefit from these growth opportunities.Regulatory ComplianceThe federal governments of the U.S. and other countries where we operate have enacted numerous environmental laws governing a wide range of topics. Similarly, most U.S. statelegislatures have enacted laws to prevent and correct environmental problems. Our operations are also influenced by international laws, treaties, conventions, and regulations designedto protect the environment. These laws and regulations help to create the demand for the multidisciplinary consulting services we offer. The principal U.S. federal legislation that affectsour business include:·National Environmental Policy Act·Comprehensive Environmental Response, Compensation, and Liability Act of 1980, As Amended·Resource Conservation and Recovery Act of 1976·Clean Air Act·Safe Drinking Water Act of 1996·Clean Water Act·Endangered Species Act·Marine Mammal Protection Act·Migratory Bird Treaty Act·Golden Eagle Protection Act·Atomic Energy Act·Oil Pollution Control Act·Occupational Safety and Health Act·Coastal Zone Management ActContract BacklogAt any point in time, we have a backlog of uncompleted projects and outstanding indefinite task order contracts that are expected to provide future revenue over a period of 1 to 7 years. These projects include a substantial amount of work to be performed under contracts which contain termination provisions that may be exercised without penalty at any time by ourclients upon written notice to us. Changes in economic or market conditions or other extraordinary events, such as terrorist acts or natural disasters, could lead to delays in our ability torecognize revenue, or to us not realizing all of the potential revenue under these contracts. The likelihood of obtaining the full value under these contracts cannot be determined at thistime. 9Table of ContentsThe backlog of uncompleted projects and maximum potential revenues from indefinite task order contracts, by business segment, are summarized in the following table. Amount as of July 31, 2017 2016 (in thousands) Total firm backlog of uncompleted contracts: EEI and its subsidiaries located in the United States $77,355 $75,146 Subsidiaries located in South America 20,744 17,237 Consolidated totals $98,099 $92,383 Anticipated completion of firm backlog in next twelve months: EEI and its subsidiaries located in the United States $55,571 $49,851 Subsidiaries located in South America 14,660 8,580 Consolidated totals $70,231 $58,431 Maximum potential revenue from task order contracts: EEI and its subsidiaries located in the United States $205,402 $219,695 Consolidated totals $205,402 $219,695 Business DevelopmentOur business development activities take place everywhere we work. Although we have a dedicated business development group that includes sales, marketing and communicationsprofessionals, our technical staff is also active in identifying opportunities and developing business relationships. Specific business development activities include: ·Meeting with existing and potential clients to understand their needs and anticipate new markets;·Participating in professional organizations and speaking at seminars and conferences to enhance our professional knowledge and relationships;·Attending and participating in trade shows and professional seminars relating to our business;·Sponsoring a popular seminar series that targets specific markets;·Monitoring numerous environmental, business and other publications to identify potential clients and their needs;·Close tracking of government contract procurements;·Monitoring government regulations, environmental and social trends, and other events that may affect our clients and thereby generate new business;·Responding to requests for proposals, bids, and qualifications, and developing proposals to win new or repeat business; and·Providing specialized business development training to our staff.CompetitionWe are subject to competition with respect to each of the services that we provide. No single entity currently dominates the environmental services industry or has the capability toserve the entire market. Some of our competitors are larger than us, have greater financial and other resources than we do, or may be more specialized in certain disciplines or locations. Others have special status as small businesses. We compete primarily on the basis of our reputation, quality of service, expertise, responsiveness and price. 10Table of ContentsManagement Team and EmployeesOur management and staff is comprised of individuals with advanced degrees representing scientific and engineering disciplines working together in multidisciplinary teams to provideinnovative solutions. The members of our executive management team have extensive experience in the environmental consulting industry.As of July 31, 2017 we had 876 employees (705 full-time) in all of our offices, which included 552 employees (416 full-time) in domestic offices and 324 employees (289 full-time) in foreignoffices. The majority of our employees hold bachelor's and/or advanced degrees in such areas as chemical, civil, mechanical, sanitary, soil, structural and transportation engineering,biology, geology, hydrogeology, ecology, urban and regional planning and oceanography. The employees at our majority-owned subsidiary in Brazil (116 full time employees as of July31, 2017) are represented by a labor organization. We believe that our relationship with the labor organization in Brazil and with all of our employees is good.Corporate Governance and Security Exchange RulesOur shares of Class A Common Stock are listed on the National Association of Securities Dealers Automated Quotations (NASDAQ) Stock Market. NASDAQ requires all of its listingcompanies to be in compliance with NASDAQ’s standards of corporate governance set forth in the NASDAQ Marketplace Rules (NASDAQ CG Rules). We have certified to theNASDAQ that we are in compliance with the NASDAQ CG Rules except for those NASDAQ CG Rules relating to the Director Nominations Process, the Compensation of Officers andBoard Compensation. For these items, we relied upon the “controlled company” exception found in the NASDAQ CG Rules. A “controlled company” is a listing company where morethan 50 percent of the voting power of the listing company is in the control of a group. As of July 31, 2017, a group that holds more than 50 percent of the voting power of our CommonStock, consisting of Messrs. Frank B. Silvestro, Ronald L. Frank, Gerald A. Strobel, Gerard A. Gallagher Jr. and Michael C. Gross and members of their families, does exist. Therefore, weare a “controlled company” for purposes of the NASDAQ CG Rules.The Board of Directors will consider nominees for Directors recommended by shareholders. Shareholders wishing to recommend a director candidate for consideration by the Board ofDirectors can do so by writing to the Secretary of Ecology and Environment, Inc., 368 Pleasant View Drive, Lancaster, New York, 14086. Nominations must be received not later than theclose of business on the 120th day prior to the first anniversary of the previous year’s annual shareholders meeting and not earlier than the close of business on the 180th day prior tothe first anniversary of the preceding year’s annual shareholders meeting. In no event shall any adjournment or postponement of an annual meeting or the announcement thereofcommence a new time period for the giving of a shareholder’s notice as described above. Nominations must meet the requirements of Article II, Section 4.A.1. of the Company’s Re-stated By-Laws dated February 25, 2016.In evaluating candidates, the Board considers the entirety of each candidate’s credentials to ensure that the Board consists of individuals who collectively provide meaningful counselto management. The Board does not maintain a specific diversity policy. It believes that diversity is an expansive attribute that includes differing points of view, professional experienceand expertise, and education, as well as more traditional diversity concepts. The Board considers the candidates’ character, integrity, experience, understanding of strategy and policy-setting, and reputation for working well with others. If candidates are recommended by our shareholders, then such candidates will be evaluated using the same criteria. With respect tonomination of continuing directors for re-election, the individual’s past contributions to the Board are also considered.The Company has revised its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, as well as all otheremployees, directors, officers, subsidiaries, affiliates, consultants, representatives and agents of the Company. The revised code of ethics, which the Company calls its Code ofConduct, was approved by the Board of Directors on June 1, 2017 and was filed as an exhibit to the Company’s current report on Form 8-K which was filed on June 6, 2017 and is postedon the Company's website at www.ene.com. If the Company makes any substantive amendments to, or grants a waiver (including an implicit waiver) from, a provision of its code ofethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, and that relates to any element of the code of ethics definitionenumerated in Item 406(b) of Regulation S-K, the Company will disclose the nature of such amendment or waiver in a current report on Form 8-K. 11Table of ContentsItem 1A. Risk FactorsIn addition to other information referenced in this report, we are subject to a number of specific risks, which are outlined below. If any of these events occur, our business, financialcondition, profitability and the market price of our Class A Common Stock could be materially affected.Risks Factors Related to Our Markets and ClientsChanges in environmental laws and regulations, or fundamental changes in the operations of government agencies, could reduce demand or impact the timing for our services.Most of our business is driven by laws and regulations related to the protection of the environment. Any relaxation or repeal of these laws, or changes in governmental policiesregarding the funding or enforcement of these laws, may have an adverse impact on our revenues. Fundamental changes in the operations of government agencies, including significantstaffing reductions or changes in processes for awarding contracts, also could reduce or impact the timing of our revenues. Also, reduced spending by governments may increasecompetition within our industry which may directly affect future revenue and profits.As a government contractor, we are subject to a number of procurement laws and regulations and government agency audits. Any violation of these laws could result in economicharm to our operations.We must comply with federal, state, and foreign laws relating to the procurement and administration of government contracts. Such laws include the Federal Acquisition Regulation(FAR), the Truth in Negotiations Act (TINA), the Cost Accounting Standards (CAS), and the Service Contract Act (SCA). These laws impact how we do business with governmentclients and can increase the cost of doing business. In addition, in recent years, government agencies have mandated that their primary contractors utilize a higher portion of small anddisadvantaged businesses as subcontractors.Government agencies such as EPA and the Defense Contract Audit Agency (DCAA), as well as numerous state agencies routinely audit government contractors and their performanceunder specific contracts to determine if a contractor’s cost structure is compliant with applicable laws and regulations. They may question the incurrence of certain costs based on theFAR and CAS and disallow those costs on their contracts. These audits may occur several years after payment for services has been received. Historically, we have been able tosuccessfully defend against the disallowance of any significant costs. However, future audits may uncover instances of noncompliance and result in material disallowances for costsincurred in the future. Such material disallowances could negatively affect revenue, profits and cash flow.We depend on municipal, state and federal government work for a significant portion of our revenues. Inability to win or renew government contracts during procurement cyclescould significantly reduce our revenue and profits.Revenues from all municipal, state and federal government contracts represented 33%, 36% and 27% of total revenues for fiscal years 2017, 2016 and 2015, respectively.Government contracts are typically awarded through a highly regulated procurement process. Some government contracts are awarded to multiple competitors, causing increasedcompetition and downward pricing pressure. Inability to win or renew government contracts could adversely affect our operations and significantly reduce our revenue and profits. Inaddition, if we cannot reduce or control costs associated with these contracts, we may not be able to bid competitively, or unexpected losses on these contracts may occur.Our clients may be acquired by other entities, or may elect to sell their interest in ongoing projects to other entities. These transactions would subject us to increased risk of contractterminations or renegotiations. If our clients sell their interest in ongoing projects or are acquired by other entities, we may not be able to control or influence decisions made by the acquiring company regarding theongoing contractual relationships of our client, including decisions to terminate existing contracts or to award future contracts. Such decisions by acquiring companies to terminateexisting contracts, or to exclude us when awarding future contracts, could have an adverse impact on our revenues and results of operations. 12Table of ContentsEconomic uncertainty could affect our public and private sector work.Poor global and domestic economic conditions could impact the availability of funding for certain private environmental projects. In addition, governmental budget cuts or delays ingovernmental spending could defer or halt work on public environmental programs. These economic uncertainties could adversely affect our operations and significantly reduce ourprofits.Risk Factors Related to Our Management of Project ActivityWe must be able to accurately estimate and control contract costs to prevent losses on contracts.We have three basic types of contracts with our clients: time and materials, fixed price and cost-plus. The percentage of our revenues associated with these contract types aresummarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 Time and materials 47% 50% 49%Fixed price 37 39 43 Cost-plus 16 11 8 Total revenue 100% 100% 100%We must control direct contract costs in order to maintain acceptable profit margins. Under cost-plus contracts, which may be subject to various types of ceilings, we are reimbursed forallowable costs plus a negotiated profit. If costs exceed ceilings or are otherwise deemed unallowable under provisions of the contract or regulations, we may not be reimbursed for all ofour costs. Under fixed price contracts, we are paid a fixed price regardless of the actual costs incurred. Consequently, a profit is realized on fixed price contracts only if we are able tocontrol costs and avoid overruns. Under time and material contracts, we are paid for our direct labor hours at fixed rates plus reimbursement of allocable other direct costs. Profitabilityis dependent on a consistently high utilization of staff and our ability to control our overhead costs.The use of the percentage of completion method of accounting could result in a reduction or reversal of previously recorded revenues and profits.A portion of our revenues and profit margins are measured and recognized using the percentage of completion method of accounting which is discussed further in Note 3 of theConsolidated Financial Statements. The use of this method results in the recognition of revenues and profit margins ratably over the life of a contract. The effect of revisions to revenuesand estimated costs is recorded when the amounts are known or can be reasonably estimated. Such revisions could occur in subsequent periods and their effects could be material.Although we have historically been able to make reasonably accurate estimates of work progress, the uncertainties inherent in the estimation process make it possible for actual costs tovary from estimates in a material amount, including reductions or reversals of previously recorded revenues and profits.Subcontractor performance and pricing could expose us to loss of reputation and additional financial or performance obligations that could result in reduced profits or losses.We often hire subcontractors for our projects. The success of these projects depends, in varying degrees, on the satisfactory performance of our subcontractors and our ability tosuccessfully manage subcontractor costs and pass them through to our customers. If our subcontractors do not meet their obligations or we are unable to manage or pass throughcosts, we may be unable to profitably perform and deliver our contracted services. Under these circumstances, we may be required to make additional investments and expend additionalresources to ensure the adequate performance and delivery of the contracted services. In addition, the inability of our subcontractors to adequately perform or our inability to managesubcontractor costs on certain projects could hurt our competitive reputation and ability to obtain future projects. 13Table of ContentsRisk Factors Related to Our OperationsInternational operations are subject to a number of risks.Revenues from international operations represented 21%, 21% and 30% of total revenues for fiscal years 2017, 2016 and 2015, respectively. International operations are subject to anumber of risks, including:·greater counterparty risk, leading to longer collection cycles and potentially uncollectible accounts;·currency fluctuations;·logistical and language challenges that affect our ability to effectively communicate with and manage foreign employees;·exposure to liability and sanctions under the Foreign Corrupt Practices Act;·exposure to liability and sanctions under laws and regulations established by foreign jurisdictions in which we conduct business;·lack of developed legal systems to enforce our contractual rights;·volatility in economic and political conditions, particularly in our South American markets;·civil disturbance, unrest or violence; and·difficulties in staffing international operations with appropriately credentialed and trained personnel.Failure to manage these risks effectively may result in harm to our overall operations and significantly reduce our future revenues, earnings and available liquidity.Failure to attract and retain key employees could impair our ability to provide quality service to clients.We provide professional and technical services that depend on our ability to attract, retain and train our professional employees to conduct our business and perform our obligations toensure success. The experience of our senior management team and other key employees is essential to the success of any company and our ability to retain such talent is crucial to ourprofitability. Failure to effectively develop staff and complete succession planning for key senior management roles could adversely affect customer relationships, the quality of workthat we complete for our clients and business development efforts.Our services could expose us to significant liability not covered by insurance.The services we provide expose us to significant risks of professional and other liabilities. Our contracts generally require us to maintain certain insurance coverages and to indemnifyour clients for claims, damages or losses for personal injury or property damage relating to performance of our duties unless such injury or damage is the result of the client's negligenceor willful acts. Currently, we are able to obtain insurance coverage to meet the requirements of our contracts, subject to certain pollution exclusions. Additionally, we have an errors andomissions insurance policy that covers our environmental consulting services, including legal liability for pollution conditions resulting therefrom. Where possible, we require that ourclients cross-indemnify us for asserted claims. There can be no assurance, however, that any such cross-indemnification agreements, together with our general liability insurance anderrors and omissions coverage, will be sufficient to protect us against any asserted claim.We are unable to predict the total amount of all potential liabilities that could arise under contracts with our clients. While we believe that we hold an appropriate level of coverage,insurance may be inadequate or unavailable in the future to protect us for such liabilities and risks.Extraordinary events, including natural disasters and terrorist actions, could negatively impact the economies in which we operate or disrupt our operations.The geographic area of our operations includes regions that have experienced hurricanes, earthquakes and forest fires. The occurrence of extraordinary events such as these, as well asother natural disasters or terrorist actions, could cause the delay or cancellation of projects, closure of offices, and the evacuation or loss of personnel. Such events could limit ordisrupt markets and our operations, which could have a negative impact on our business, financial condition, and results of operations or cash flows. Failure to establish and maintain effective internal controls over financial reporting could result in material misstatements in our financial statements.Our management is responsible for establishing and maintaining adequate internal controls over financial reporting. As reported in Item 9A of this Annual Report, management identifiedcontrol deficiencies as of July 31, 2017 related to accounting for income taxes and to management’s review controls over the financial statement close process. Although the deficienciesdid not result in a material misstatement of the Company’s financial statements, management concluded that there was a reasonable possibility that, if any material misstatement hadoccurred, it would not have been prevented or detected on a timely basis. Therefore, management reported that material weaknesses in our internal controls over financial reportingexisted as of July 31, 2017. If the remedial measures that are designed to address these material weaknesses are insufficient to address the deficiencies, or if additional material weaknesses or significantdeficiencies in our internal controls are discovered or occur in the future, our consolidated financial statements may contain material errors and misstatements, and we could be requiredto restate financial results reported in prior periods. 14Table of ContentsRisk Factors Related to Our Ownership and Corporate GovernanceManagement's voting rights could block or discourage a change in control.Three of EEI’s current directors, one of which is also an executive officer, owned or controlled approximately 54% of the outstanding shares of Class B Common Stock as of September29, 2017, which has one vote per share while the Class A Common Stock has one-tenth of a vote per share. In addition, since the Company qualifies for the NASDAQ “controlledcompany exception” (refer to the section entitled “Corporate Governance and Security Exchange Rules” included in Part I of this Annual Report), there exists a group of holders of ClassB Common Stock, composed principally of certain of the Company’s current directors and executive officers and members of their families (the “CCE Group”), that controls greater than50% of the votes that may be cast for any proposal at a shareholders meeting. This concentration of voting control by the CCE Group may effectively prevent any influence by theholders of Class A Common Stock over matters submitted to a vote by all shareholders.The Company may receive change in control offers by third parties. Such change in control offers may be declined by the Company’s Board of Directors after taking into considerationits obligations to the Company and its shareholders under applicable law. Alternatively, such offers may be taken to a vote by shareholders, the results of which could be heavilyinfluenced by members of the CCE Group, which could adversely affect the value of outstanding common stock.Item 1B. Unresolved Staff CommentsNone to report.Item 2. PropertiesOur corporate headquarters (60,000 square feet) is located in Lancaster, New York, a suburb of Buffalo. The corporate headquarters building also serves as our Buffalo regional office. We also lease twenty-nine (29) regional offices in the United States and six (6) offices in foreign locations.Item 3. Legal ProceedingsLegal ProceedingsFrom time to time, the Company is a named defendant in legal actions arising out of the normal course of business. The Company is not a party to any pending legal proceeding, theresolution of which the management believes will have a material adverse effect on the Company’s results of operations, financial condition or cash flows, or to any other pending legalproceedings other than ordinary, routine litigation incidental to its business. The Company maintains liability insurance against risks arising out of the normal course of business.On February 4, 2011, the Chico Mendes Institute of Biodiversity Conservation of Brazil (the “Institute”) issued a Notice of Infraction to E&E Brasil, a majority-owned subsidiary of EEI. The Notice of Infraction concerned the taking and collecting of wild animal specimens without authorization by the competent authority and imposed a fine of 520,000 Brazilian Reais($0.2 million as of July 31, 2017) against E&E Brazil. The Institute also filed Notices of Infraction against four employees of E&E Brasil alleging the same claims and imposed fines againstthose individuals that, in the aggregate, were equal to the fine imposed against E&E Brasil. No claim has been made against EEI. 15Table of ContentsE&E Brasil has filed court claims appealing the administrative decisions of the Institute for E & E Brasil’s employees that: (a) deny the jurisdiction of the Institute; (b) state that theNotice of Infraction is constitutionally vague; and (c) affirmatively state that E&E Brasil had obtained the necessary permits for the surveys and collections of specimens underapplicable Brazilian regulations and that the protected conservation area is not clearly marked to show its boundaries. The claim of violations against one of the four employees wasdismissed. The remaining three employees have fines assessed against them that are being appealed through the federal courts. Violations against E&E Brasil are pending agencydetermination. As of July 31, 2017, the Company recorded a reserve of approximately $0.4 million in other accrued liabilities related to these claims.Contract Termination ProvisionsCertain contracts contain termination provisions under which the customer may, without penalty, terminate the contracts upon written notice to the Company. In the event oftermination, the Company would be paid only termination costs in accordance with the particular contract. Generally, termination costs include unpaid costs incurred to date, earned feesand any additional costs directly allocable to the termination. The Company did not experience early termination of any material contracts during fiscal years 2017 or 2016.Item 4. Mine Safety DisclosuresNot Applicable. 16Table of ContentsPART IIItem 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesPrincipal Market for EEI Common StockThe Company’s Class A Common Stock is listed on NASDAQ. There is no separate market for the Company’s Class B Common Stock.High and Low Stock Prices for Class A Common StockQuarterly high and low prices for the Company's Class A Common Stock, as reported by NASDAQ, are summarized in the following table. HighSharePrice LowSharePrice Fiscal Year Ended July 31, 2017: First Quarter $10.44 $9.25 Second Quarter 10.70 8.75 Third Quarter 11.10 9.45 Fourth Quarter 13.06 10.25 Fiscal Year Ended July 31, 2016: First Quarter $11.99 $10.25 Second Quarter 11.53 8.51 Third Quarter 11.19 9.21 Fourth Quarter 11.20 9.70 Holders of Common StockAs of September 29, 2017, 3,008,458 shares of the Company's Class A Common Stock were outstanding and there were 279 holders of record of the Company's Class A Common Stock. We estimate that the Company has a significantly greater number of Class A Common Stock shareholders because a substantial number of the Company's shares are held in street name.As of September 29, 2017, 1,293,146 shares of the Company's Class B Common Stock were outstanding and there were 52 holders of record of the Class B Common Stock.DividendsIncluding fiscal year 2017, the Company has declared semi-annual dividends for 31 consecutive years. The Company declared dividends totaling $0.40, $0.44 and $0.48 per commonshare during fiscal years 2017, 2016 and 2015, respectively.The Company's Certificate of Incorporation provides that any cash or property dividend paid on Class A Common Stock must be at least equal to the cash or property dividend paid onClass B Common Stock on a per share basis. The amount, if any, of future dividends remains within the discretion of the Company's Board of Directors and will depend upon the Company's future earnings, financial condition,liquidity requirements and other factors as determined by the Board of Directors. 17Table of ContentsEquity Compensation Plan InformationEEI adopted the 1998 Stock Award Plan effective March 16, 1998. This plan, together with supplemental plans that were subsequently adopted by the Company’s Board of Directors, isreferred to as the “Stock Award Plan”. Equity compensation plan information as of July 31, 2017 is summarized in the following table. Plan category Number ofSecurities to beIssued UponExercise ofOutstandingOptions, Warrantsand Rights Weighted AverageExercise Price ofOutstandingOptions,Warrants andRights Number ofSecuritiesRemainingAvailable forFuture Issuance Equity compensation plans approved by security holders: Stock Award Plan --- --- 192,498Total --- --- 192,498 Refer to Note 14 of the Consolidated Financial Statements, included in Item 8 of this Annual Report, for additional information regarding the Stock Award Plan.Purchased Equity SecuritiesIn August 2010, the Company’s Board of Directors approved a 200,000 share repurchase program. The following table summarizes the Company's purchases of its common stock duringfiscal year 2017 under this share repurchase program.Fiscal Year2017ReportingMonth TotalNumberof SharesPurchased AveragePricePaid PerShare Total Numberof SharesPurchased asPart of PubliclyAnnouncedPlans orPrograms MaximumNumberof Shares ThatMay Yet BePurchasedUnder the Plansor Programs August --- --- --- 77,082 September --- --- --- 77,082 October --- --- --- 77,082 November --- --- --- 77,082 December --- --- --- 77,082 January --- --- --- 77,082 February --- --- --- 77,082 March --- --- --- 77,082 April --- --- --- 77,082 May --- --- --- 77,082 June --- --- --- 77,082 July --- --- --- 77,082 18Table of ContentsItem 6. Selected Consolidated Financial Data Fiscal Year Ended July 31, 2017 2016 2015 2014 2013 (In thousands, except per share amounts) Operating data: Revenues, net $104,502 $105,817 $126,935 $128,427 $134,937 Income (loss) from operations $5,928 $4,142 $7,604 $(507) $(898)Income (loss) before income tax provision $5,425 $4,367 $7,969 $(447) $(968)Net income (loss) attributable to Ecology and Environment, Inc. $3,015 $886 $3,396 $(1,383) $(2,130)Net income (loss) per common share - basic and diluted $0.70 $0.21 $0.79 $(0.32) $(0.50)Cash dividends declared per common share $0.40 $0.44 $0.48 $0.48 $0.48 Weighted average common shares outstanding - basic and diluted 4,294,501 4,289,993 4,287,775 4,283,984 4,247,821 Balance at July 31, 2017 2016 2015 2014 2013 (In thousands, except per share amounts) Balance sheet data: Working capital $32,491 $28,241 $27,761 $26,502 $33,582 Total assets $60,777 $59,512 $68,489 $71,708 $81,682 Outstanding advances under lines of credit $581 $312 $672 $1,572 $6,529 Total long-term debt and capital lease obligations $448 $457 $946 $842 $451 Ecology and Environment, Inc. shareholders’ equity $38,106 $35,572 $36,915 $37,678 $43,544 Book value per share $8.87 $8.29 $8.61 $8.80 $10.25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesCash, cash equivalents and restricted cash increased $3.2 million during fiscal year 2017. Excluding the payment of $1.7 million of cash dividends, which were approved on adiscretionary basis by the Company’s Board of Directors, cash generated from operations exceeded cash required to fund investing and financing activities by $4.7 million during theyear, which includes $1.5 million received from the sale of land, a vacant building, related building improvements and fixtures and warehouse space to a non-affiliated third party.Unsecured lines of credit of $39.5 million and $39.0 million were available for working capital and letters of credit at July 31, 2017 and 2016, respectively, of which $3.3 million and $2.5million were used at July 31, 2017 and 2016, respectively. Contractual interest rates ranged from 3.25% to 9.75% at July 31, 2017. Our lenders have reaffirmed the lines of credit within thepast twelve months.We believe that available cash balances in our domestic companies, anticipated cash flows from U.S. operations, and our available lines of credit will be sufficient to cover workingcapital requirements of our U.S. operations during the next twelve months and the foreseeable future.Historically, our foreign subsidiaries have generated adequate cash flow to fund their operations. During fiscal years 2016 and 2017, our South American operations have been affectedby adverse economic conditions. The total scope and duration of the economic downturn and the ultimate impact that it will have on our South American operations are uncertain. Inthe event that these subsidiaries are unable to generate adequate cash flow to fund their operations, additional funding from EEI or lending institutions will be considered.We intend to reinvest net cash generated from undistributed foreign earnings into operations and business expansion opportunities outside the U.S. Excess cash accumulated by anyforeign subsidiary, beyond that necessary to fund operations or business expansion, may be repatriated to the U.S. at the discretion of the Boards of Directors of the respective entities. The Company is required to accrue and pay taxes on any amounts repatriated to the U.S. from foreign subsidiaries. During fiscal year 2017, one of the Company’s majority ownedsubsidiaries in South America declared a total of $1.5 million of dividends to its shareholders, of which $0.2 million was paid to minority shareholders and $0.2 million was repatriated tothe U.S. during fiscal year 2017. 19Table of ContentsContract Receivable ConcentrationsSignificant concentrations of contract receivables and the allowance for doubtful accounts and contract adjustments are summarized in the following table. Balance at July 31, 2017 Balance at July 31, 2016 Region ContractReceivables Allowance forDoubtfulAccounts andContractAdjustments ContractReceivables Allowance forDoubtfulAccounts andContractAdjustments (in thousands) EEI and its subsidiaries located in the U.S. $25,528 $797 $29,027 $5,809 Subsidiaries located in South America 11,704 1,328 11,659 983 Other foreign subsidiaries --- --- 425 --- Totals $37,232 $2,125 $41,111 $6,792 Contract adjustments related to projects in the United States, Canada and South America typically result from cost overruns related to current or recently completed projects, or fromrecoveries of cost overruns recorded as contract adjustments in prior reporting periods. Contract adjustments related to projects in the Middle East, Africa and Asia typically result fromdifficulties encountered while attempting to settle and close-out claims that may be several years old.During fiscal year 2017, the Company wrote-off $4.9 million of aged and fully reserved contract receivable balances at EEI related to a specific project in the Middle East, based onmanagement’s assessment that the client is unlikely to approve payment.The allowance for doubtful accounts and contract adjustments as a percentage of contract receivables at the Company’s subsidiaries located in South America was 11% and 8% at July31, 2017 and 2016, respectively. During fiscal year 2017, challenging economic conditions in Brazil, Peru and Chile continued to adversely impact the operations and liquidity of certain ofour local clients, resulting in increased collection risk and the risk that the Company will expend resources that it may not recover for several months, or at all. Management is monitoringany adverse trends or events that may impact the realizability of recorded receivables from our South American clients.Allowance for Doubtful Accounts and Contract AdjustmentsActivity within the allowance for doubtful accounts and contract adjustments is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Balance at beginning of period $6,792 $6,817 $7,371 Net increase (decrease) due to adjustments in the allowance for: Contract adjustments (4,941) (577) (263)Doubtful accounts 274 552 (291)Balance at end of period $2,125 $6,792 $6,817 The decrease in the allowance for contract adjustments during fiscal year 2017 was primarily the result of the $4.9 million write-off of receivables related to a project in the Middle East, asdescribed above. 20Table of ContentsResults of OperationsWe report segment information based on the geographic location of EEI and its principal operating subsidiaries. Management generally assesses operating performance and makesstrategic decisions for the following groups of entities, each of which is deemed to be a business segment for financial reporting purposes: ·EEI and its subsidiaries located in the U.S.;·Subsidiaries located in South America; and·Other foreign subsidiariesThe following tables and commentary address our results of operations within these three business segments.Revenue, netRevenue, net and revenue, net less subcontract costs, by business entity, are summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Revenue, net, by business segment: EEI and its subsidiaries located in the U.S. $82,094 $83,095 $88,715 Subsidiaries located in South America: Walsh Peru, S.A. Ingenieros y Cientificos Consultores (“Walsh Peru”) 6,253 9,718 22,797 Gestion Ambiental Consultores S.A. (“GAC”) 7,666 7,530 6,545 E&E Brasil 8,241 5,009 8,010 Other 248 465 868 22,408 22,722 38,220 Total $104,502 $105,817 $126,935 Revenue, net less subcontract costs, by business segment: EEI and its subsidiaries located in the U.S. $69,104 $69,724 $73,264 Subsidiaries located in South America: Walsh Peru 4,321 6,675 16,447 GAC 5,907 6,237 5,849 E&E Brasil 6,581 4,235 7,353 Other 210 396 695 17,019 17,543 30,344 Total $86,123 $87,267 $103,608 Revenue, net represents gross revenue recognized for the services provided to our clients, adjusted for the impacts of cost overruns or settlements recorded upon completion and closeout of a project. Revenue, net less subcontract costs is a key metric utilized by management for operational monitoring and decision-making. References to “revenues” in the followingcommentary refer to revenue, net less subcontract costs from the table above.Fiscal Year 2017 Versus 2016 The Company records an allowance for project disallowances in other accrued liabilities for potential disallowances resulting from government audits. During fiscal year 2017, as a resultof final settlements of allowances originally recorded in prior years, the Company reduced its allowance for project disallowances by $1.1 million, which was recorded as an addition torevenue, net on the consolidated statement of operations.During fiscal year 2017, the Company completed a review of historical project activity recorded in certain subsidiaries that have been dormant for several years. During fiscal year 2017,as a result of this review, the Company reversed $0.7 million of amounts previously recorded as reserves against contract receivables. The resulting increases to revenue, net for fiscalyear 2017 were corrections of amounts recorded prior to the fiscal years presented in the accompanying financial statements.During fiscal year 2017, the Company reversed $0.6 million of amounts previously recorded as liabilities to subcontractors that were no longer deemed to be necessary to record on theCompany’s consolidated balance sheet. These amounts were associated with fully-reserved contract receivable balances that were written-off during fiscal year 2017. This adjustmentwas recorded as a $0.6 million decrease to subcontract costs on the consolidated statement of operations for the fiscal year ended July 31, 2017.Excluding the above adjustments, which did not result from normal, recurring operations, fiscal year 2017 revenues from EEI and its U.S. subsidiaries decreased 4% from the prior year,primarily due to a lower average selling rate per hour of service charged to our clients. General competitive pricing pressure continues to have a negative impact on revenues for many ofour domestic market sectors. To a lesser degree, a reduction in the volume of hours charged to clients, particularly in the energy and mining market sectors, also contributed to theoverall decrease in revenues. During fiscal year 2016, we recorded $0.5 million of revenues from our Kentucky-based subsidiary that was sold during the first quarter of fiscal year 2016, which also contributed tocomparatively lower revenues from U.S. subsidiaries during the current fiscal year. 21Table of ContentsFiscal year 2017 revenues from our Brazilian operations increased 55% from the prior year, mainly due to increased project activity in the energy transmission sector. An economicdownturn that adversely affected our Brazilian operations during recent fiscal years appears to have stabilized, resulting in additional business development opportunities for E&EBrasil.Fiscal year 2017 revenues from our Peruvian operations decreased 35% from the prior year, due to lower project activity within the energy sector. Global economic trends in oil, gas andcommodity prices continued to have a severe negative impact on revenues from energy and mining sectors in Peru.EEI management continues to work closely with management in Brazil and Peru to implement business development strategies that are responsive to current economic conditions whilealso reducing operating costs and improving operating efficiency.Fiscal year 2017 revenues from our Chilean operations decreased 5% from the prior year, due to reduced levels of work on power generation and transmission projects. Government andprivate investments in mining projects in Chile have steadily decreased since 2013, which has had a stifling effect on business development opportunities in the mining sector.Fiscal Year 2016 Versus 2015Fiscal year 2016 revenues from EEI and its U.S. subsidiaries decreased 5% from the prior year. As described earlier in this Annual Report, EEI sold its investment in a majority ownedKentucky-based subsidiary in October 2015, which led to a $1.8 million reduction in revenue during fiscal year 2016. A lower selling rate per hour of service provided to our clients alsocontributed to lower revenue during fiscal year 2016, as EEI experienced a distinct shift of direct labor hours from commercial projects for which selling rates are openly negotiated fromproject to project, to government projects for which selling rates tend to be lower than commercial rates. In addition, competitive pricing pressure continues to have a negative impact onrevenues for many of EEI’s market sectors.Global economic factors, such a depressed oil and commodities prices, had a negative impact on our Peruvian operations during fiscal year 2016. Fiscal year 2016 revenues from ourPeruvian operations decreased 59% due mainly to significantly reduced energy sector sales volume, as mining projects completed during fiscal year 2015 and early in fiscal year 2016were not renewed or replaced. Peruvian results were also negatively impacted by a 10% decline in the average exchange rate for the Peruvian Sol in relation to the U.S. dollar.Fiscal year 2016 revenues from our Chilean operations increased 7% from the prior year, as higher transmission and renewable energy sector revenues were partially offset by a 12%decline in the average exchange rate for the Chilean Peso in relation to the U.S. dollar.A broad economic downturn in Brazil had a negative impact on our Brazilian operations and earnings in fiscal year 2016. Fiscal year 2016 revenues from our Brazilian operationsdecreased 42% from the prior year, mainly due to generally lower energy transmission sector revenues and a 31% decline in the average exchange rate for the Brazilian Real in relation tothe U.S. dollar.Direct Operating ExpensesThe cost of professional services and other direct operating expenses represents labor and other direct costs of providing services to our clients under our project agreements. We referto these expenses as “direct operating expenses.” These costs, and fluctuations in these costs, generally correlate directly with related project work volumes and revenues. Directoperating expenses, by business entity, are summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) EEI and its subsidiaries located in the U.S. $29,579 $30,363 $32,278 Subsidiaries located in South America: Walsh Peru 1,405 2,829 6,921 GAC 2,837 2,739 3,820 E&E Brasil 4,361 2,772 4,037 Other 152 209 436 8,755 8,549 15,214 Other foreign subsidiaries --- --- 8 Total direct operating expenses $38,334 $38,912 $47,500 22Table of ContentsFiscal Year 2017 Versus 2016Total direct operating expenses for fiscal year 2017 decreased 1% from the prior year. Comparative increases and/or decreases within business segments were generally consistent withcorresponding changes in segment revenues.Fiscal Year 2016 Versus 2015Total direct operating expenses for fiscal year 2016 decreased 18% from the prior year. Lower direct expenses generally resulted from lower project revenue for each of our businesssegments. Our consolidated project revenue and related costs were generally lower in all of our business segments during fiscal year 2016. The sale of the Company’s majorityinvestment in a Kentucky-based subsidiary during the first quarter of fiscal year 2016 also contributed to lower direct operating expenses during fiscal year 2016.Indirect Operating ExpensesAdministrative and indirect operating expenses and marketing and related costs represent administrative and other operating costs not directly associated with the generation ofrevenue. We refer to these costs as “indirect operating expenses.” Indirect operating expenses by business entity are summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) EEI and its subsidiaries located in the U.S. $32,021 $34,130 $35,602 Subsidiaries located in South America: Walsh Peru 3,308 3,505 4,896 GAC 2,601 2,247 1,294 E&E Brasil 2,522 2,923 3,841 Other 354 170 257 8,785 8,845 10,288 Other foreign subsidiaries 15 95 1,147 Total indirect operating expenses $40,821 $43,070 $47,037 EEI and its subsidiaries may, at the discretion of their respective Board of Directors, award incentive compensation to senior management and other employees in the form of cashbonuses. Cash bonuses to EEI’s Directors were also considered at the discretion of EEI’s Board of Directors prior to fiscal year 2017. During fiscal year 2017, the Board of Directorsdecided to discontinue cash bonuses to Directors. Cash bonus expense may vary significantly from year to year depending on company financial performance. The Company recorded$0.9 million, $1.0 million and $2.8 million of incentive compensation expense in indirect operating expenses during fiscal years 2017, 2016 and 2015, respectively, as a result of cash bonusawards. 23Table of ContentsIn October 2015, EEI sold its majority interest in a Kentucky-based subsidiary. Indirect operating expenses were $0.3 million lower during fiscal year 2017 as a result of sale of thissubsidiary during the prior year. EEI recognized a loss on its investment in this subsidiary of approximately $0.4 million in administrative and indirect operating expenses during thefourth quarter of fiscal year 2015. Also during fiscal year 2015, management completed an assessment of goodwill recorded on the acquisition date of this subsidiary, and recorded $0.1million of goodwill impairment loss in administrative and indirect operating expenses.Fiscal Year 2017 Versus 2016Excluding the impact of bonuses and the sale of a subsidiary noted above, total indirect operating expenses from U.S. operations decreased 6% during fiscal year 2017. The Company’sU.S. operations continue to improve operating efficiency and operate under an expense management strategy that has resulted in significant reductions in indirect operating expensesover the past three fiscal years.Indirect operating expenses generally decreased within our South American business segment during fiscal year 2017, as management within our foreign subsidiaries continued withtheir critical review of indirect staffing levels and key administrative processes, resulting in improved operating efficiency and cost reductions. These operations also realized a full yearbenefit of efficiencies and cost reductions initiated in the prior fiscal year. The increase in indirect expenses at GAC was primarily the result of higher bad debt expense.Fiscal Year 2016 Versus 2015Excluding the effects of bonuses and sale of a subsidiary noted above, total indirect operating expenses for fiscal year 2016 decreased 6% from the prior year, as compared with the priorfiscal year. With the exception of our Chilean operations in South America, indirect operating expenses generally decreased within all of our operating segments. During fiscal year 2016,management continued its critical review of indirect staffing levels and key administrative processes at EEI and all of its significant domestic and foreign subsidiaries, resulting inimproved operating efficiency and cost reductions. The Company also realized a full year benefit of efficiencies and cost reductions initiated in prior fiscal years.Income TaxesThe income tax provision resulting from domestic and foreign operations is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 ($ in thousands) Income tax provision from: Domestic operations $2,276 $2,158 $2,119 Foreign operations 196 1,601 1,650 Consolidated operations $2,472 $3,759 $3,769 Consolidated effective tax rate from: Domestic operations 41.8% 46.4% 67.8%Foreign operations *% *% 31.3%Consolidated operations 45.6% 86.1% 47.3%* percentage based on minimal pre-tax income not meaningful.Fiscal Year 2017 Versus 2016The consolidated effective tax rate decreased to 45.6% for fiscal year 2017 from 86.1% for the prior year, primarily due to a higher tax rate for our South American operations in fiscal 2016.The effective tax rate fiscal year 2017 includes the incremental tax impact of the Company’s portion of dividends declared by its majority owned subsidiary in Chile, which was greaterthan the dividends anticipated at July 31, 2016, and the write-off of a deferred tax asset previously maintained by the Company’s majority owned subsidiary in Peru. 24Table of ContentsThe effective tax rate for fiscal year 2016 includes a valuation allowance of $0.9 million recorded as a reduction of deferred tax assets maintained by the Company’s majority ownedsubsidiary in Brazil, and the impact of $0.7 million of taxable dividends repatriated to the U.S. from foreign subsidiaries.Fiscal Year 2016 Versus 2015The consolidated effective tax rate increased to 86.1% for fiscal year 2016 from 47.3% for the prior year, primarily due to a higher tax rate for our South American operations. Despite afiscal year 2016 operating loss, E&E Brasil recorded a significant tax provision for the year due to a valuation allowance of $0.9 million recorded as a reduction of deferred tax assets onthe consolidated balance sheets and as an addition to income tax expense on the consolidated statements of operations. In addition, operating losses were incurred by E&E Brazilduring fiscal year 2016 for which no tax benefit was recognized in the Company’s consolidated tax provision. During the previous year, the Company realized a tax benefit for operatinglosses in Brazil.Other discrete tax provision items recorded by Walsh Peru and GAC were offset by lower dividends repatriated to the U.S. from South American operations during fiscal year 2016.Recent Accounting PronouncementsA summary of recent accounting pronouncements is provided in the consolidated financial statements included in Item 8 of this Annual Report.Critical Accounting PoliciesThe preceding discussion and analysis of financial condition and results of operating results are based on our consolidated financial statements, which have been prepared inconformity with accounting principles generally accepted in the United States. The significant accounting policies used in the preparation of our consolidated financial statements aremore fully described in the consolidated financial statements included in Item 8 of this Annual Report.Many of our significant accounting policies require complex judgments to estimate values of assets and liabilities. In making these judgments, management must make certain estimatesand assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Because changes in such estimates and assumptions could significantly affect ourreported financial position and results of operations, detailed policies and control procedures have been established to ensure that valuation methods, including judgments made as partof such methods, are well controlled, independently reviewed, and are applied consistently from period to period.On an on-going basis, we evaluate our estimates to ensure that they are based on assumptions that we believe to be reasonable under current circumstances. Our actual results maydiffer from these estimates and assumptions.Of the significant policies used to prepare our consolidated financial statements, the items discussed below require critical accounting estimates involving a high degree of judgment andcomplexity. For all of these critical policies, we caution that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment. This informationshould be read in conjunction with our consolidated financial statements included herein.Revenue RecognitionSubstantially all of the Company's revenue is derived from environmental consulting work, which is principally derived from the sale of labor hours. Revenues reflected in the Company'sconsolidated statements of operations represent services rendered for which the Company maintains a primary contractual relationship with its customers. Included in revenues arecertain services outside the Company's normal operations which the Company has elected to subcontract to other contractors. Sales and cost of sales at our South Americansubsidiaries exclude tax assessments by governmental authorities, which are collected from clients and then remitted to governmental authorities. 25Table of ContentsThe consulting work is performed under a mix of time and materials, fixed price and cost-plus, and contracts. Contracts are required from all customers. Revenue is recognized asfollows:Contract TypeWork TypeRevenue Recognition Policy Time and materialsConsultingAs incurred at contract rates. Fixed priceConsultingPercentage of completion, approximating the ratio of either total costs or Level ofEffort (LOE) hours incurred to date to total estimated costs or LOE hours. Cost-plusConsultingCosts as incurred plus fees. Fees are recognized as revenue using percentage ofcompletion determined by the percentage of LOE hours incurred to total LOE hoursin the respective contracts.Revenue, net associated with these contract types is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Time and materials $49,008 $52,741 $61,444 Fixed price 38,423 40,951 55,108 Cost-plus 17,071 12,125 10,383 Total revenue $104,502 $105,817 $126,935 The Company accounts for time and material contracts over the period of performance, in proportion to the costs of performance, predominately based on labor hours incurred. Time andmaterials contracts generally represent the time spent by our professional staff at stated or negotiated billing rates, plus materials used during project work. Many time and materialscontracts contain “not to exceed” provisions that effectively cap the amount of revenue that we can bill to the client. In order to record revenue that exceeds the billing cap, we mustobtain written approval from the client for expanded scope or increased pricing.The Company accounts for fixed price contracts using the percentage-of-completion method, wherein revenue is recognized as project progress occurs. Fixed-price contracts generallypresent the highest level of financial and performance risk, but often also provide the highest potential financial returns.Cost-plus contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract, plus fees that we record as revenue. These contracts establish an estimateof total cost and an invoicing ceiling that the contractor may not exceed without the approval of the client. Cost-plus contracts present a lower risk, but generally provide lower returnsand often include more onerous terms and conditions.Our project management teams continuously monitor the budgets, costs to date and estimated costs to complete project work. If the estimated cost at completion for any contractindicates that a loss will be incurred, the entire estimated loss is charged to operations as a reduction of revenue in the period the loss becomes evident.The percentage of completion revenue recognition method requires the use of estimates and judgment regarding a project’s expected revenues, costs and the extent of progress towardscompletion. We have a history of making dependable estimates of the extent of progress towards completion, contract revenue and contract completion costs. However, due touncertainties inherent in the estimation process, actual completion costs may occasionally vary significantly 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-costmethod, 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 untilthe 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. Therevenue for the current period is calculated as cumulative revenues less project revenues already recognized. The recognition of revenues and profit is dependent upon a variety ofestimates which can be difficult to accurately determine until a project is significantly underway. 26Table of ContentsFor 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 onthe 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, includingthese 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 amore appropriate measure of the progress on the project.Our contracts with the U.S. government contain provisions requiring compliance with the Federal Acquisition Regulation (“FAR”), and the Cost Accounting Standards (“CAS”). Theseregulations are generally applicable to all of our federal government contracts and are partially or fully incorporated in many local and state agency contracts. They limit the recovery ofcertain 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 differfrom 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 costsincurred 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 ContractAudit Agency (“DCAA”). The DCAA audits overhead rates, cost proposals, incurred government contract costs, and internal control systems. During the course of its audits, theDCAA 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, wecan provide no assurance that such audits will not result in material disallowances of incurred costs in the future.We maintain an allowance for project disallowances in other accrued liabilities for potential cost disallowances resulting from government audits and project close-outs. Governmentaudits have been completed and final rates have been negotiated for fiscal years through 2014. We have estimated our exposure based on completed audits, historical experience anddiscussions with the government auditors. If these estimates or their related assumptions change, we may be required to adjust our recorded allowance for project disallowances.Allowance for Doubtful Accounts and Contract AdjustmentsWe reduce our contract receivables by recording an allowance for doubtful accounts for estimated credit losses resulting from a client’s inability or unwillingness to pay validobligations to us. The resulting provision for bad debts is recorded within administrative and indirect operating expenses on the consolidated statements of operations. The likelihoodthat the client will pay is based on the judgment of those closest to the related project and the client. At a minimum, management considers the following factors to determine thecollectability of contract receivables for any specific project:·client acknowledgment of amount owed to us;·client liquidity/ability to pay;·historical experience with collections from the client;·amount of time elapsed since last payment; and·economic, geopolitical and cultural considerations for the home country of the client.We recognize that there is a high degree of subjectivity and imprecision inherent in the process of estimating future credit losses that are based on historical trends and client data. As aresult, actual credit losses can differ from these estimates.We also reduce contract receivables by establishing an allowance for contract adjustments related to revenues that are deemed to be unrealizable, or that may become unrealizable in thefuture. Management reviews contract receivables and determines allowances amounts based on: 27Table of Contents·our operating performance related to the adequacy of the services performed under the contract;·the status of change orders and claims;·our historical experience with the client for settling change orders and claims; and·economic, geopolitical and cultural considerations for the home country of the client.Because of the high degree of subjectivity and imprecision inherent in the process of estimating allowances that are based on historical trends and client data, actual contract losses candiffer from these estimates.GoodwillWe allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. We evaluate our reporting units on an annual basis and, ifnecessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below anoperating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unitbelow its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale ordisposition of a significant portion of a reporting unit.Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment ofgoodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily through the use of a discounted cashflow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate ofgrowth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.Based on the annual impairment assessment completed at July 31, 2017, management concluded that goodwill was not impaired at July 31, 2017. As of July 31, 2017, the calculated fairvalues of the reporting units to which goodwill is assigned exceeded the book values of the respective reporting units by a minimum of 28%. The estimates used to calculate the fairvalue of a reporting unit change from year to year based on operating results, market conditions, and other factors. Should future earnings and projected cash flows of our reportingunits decline and/or should general economic factors deteriorate, future impairment charges to goodwill may be required.Income TaxesWe operate within multiple tax jurisdictions in the United States and in foreign countries. The calculations of income tax expense or benefit and related balance sheet amounts involve ahigh degree of management judgment regarding estimates of the timing and probability of recognition of revenue and deductions. The interpretation of tax laws involves uncertainty,since tax authorities may interpret laws differently than we do. We are subject to audit in all of our tax jurisdictions, which may involve complex issues and may require an extendedperiod of time to resolve. Ultimate resolution of tax matters may result in favorable or unfavorable impacts to our net income and/or cash flows. In management’s opinion, adequatereserves have been recorded for any future taxes that may be owed as a result of examination by any taxing authority.A tax position is a position in a previously filed tax filing or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets andliabilities. Tax positions shall be recognized when, in management’s judgement, it is “more likely than not” (as defined under U.S. GAAP) that the position will be sustained. Taxpositions that meet the “more likely than not” definition shall be measured at the largest amount of tax impact that is likely to be realized upon settlement. We recognize interest accruedrelated to unrecognized tax benefits in interest expense and penalties in administrative and indirect operating expenses. Whether the more-likely-than-not recognition threshold is metfor 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 had approximately$0.3 million, $0.1 million and $0.1 million of uncertain tax positions at July 31, 2017, 2016 and 2015, respectively. 28Table of ContentsDeferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used forincome tax purposes using enacted tax rates expected to be in effect for the year in which the temporary differences are expected to reverse. Our policy is to establish a valuationallowance if it is “more likely than not” that the related tax benefits will not be realized. At July 31, 2017 and 2016, we determined based on available evidence, including historicalfinancial results for the last three years and forecasts of future results, that it is “more likely than not” that a portion of these items may not be recoverable in the future. Accordingly, wemaintain total valuation allowances of $2.0 million and $2.3 million as a reduction of deferred tax assets at July 31, 2017 and 2016, respectively.The valuation allowance related to deferred tax assets is considered to be a critical estimate because, in assessing the likelihood of realization of deferred tax assets, managementconsiders taxable income trends and forecasts. Actual income taxes expensed and/or paid could vary from estimated amounts due to the impacts of various factors, including:·changes to tax laws enacted by taxing authorities;·final review of filed tax returns by taxing authorities; and·actual financial condition and results of operations for future periods that could differ from forecasted amounts.InflationDuring fiscal years 2017, 2016 and 2015, inflation did not have a material impact on our business because a significant amount of our contracts are either cost based or containcommercial rates for services that are adjusted annually.Off-Balance Sheet ArrangementsWe had outstanding letters of credit drawn under our lines of credit to support operations of $2.5 million and $2.2 million at July 31, 2017 and 2016, respectively. Other than these lettersof credit, we did not have any off-balance sheet arrangements as of July 31, 2017 or 2016. 29Table of ContentsItem 8. Financial Statements and Supplementary DataREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Shareholders of Ecology and Environment, Inc.We have audited the accompanying consolidated balance sheets of Ecology and Environment, Inc. as of July 31, 2017, and 2016, and the related consolidated statements of operations,comprehensive income, shareholders’ equity, and cash flows for the years ended July 31, 2017 and 2016. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements 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 theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internalcontrol over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no suchopinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ecology and Environment, Inc. at July 31, 2017 and2016, and the consolidated results of its operations and its cash flows for years ended July 31, 2017 and 2016, in conformity with U.S. generally accepted accounting principles./s/ Ernst & Young LLPBuffalo, New YorkNovember 14, 2017 30Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders of Ecology and Environment, Inc.We have audited the accompanying consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for the year ended July 31, 2015 ofEcology and Environment, Inc. and its subsidiaries (collectively, the Company). The 2015 financial statements are the responsibility of the Company’s management. Our responsibility isto express an opinion on these financial statements based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform theaudit 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 engagedto 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 proceduresthat 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, weexpress no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.In our opinion, the 2015 consolidated statements of operations, changes in shareholders’ equity and cash flows, present fairly, in all material respects, the results of its operations and itscash flows for the year ended July 31, 2015 in conformity with accounting principles generally accepted in the United States of America./s/ Schneider Downs & Co., Inc.Pittsburgh, PennsylvaniaOctober 29, 2015 31Table of ContentsEcology and Environment, Inc.Consolidated Balance Sheets(amounts in thousands, except share data) Balance at July 31, 2017 2016 Assets Current assets: Cash, cash equivalents and restricted cash $13,343 $10,161 Investment securities available for sale 1,498 1,499 Contract receivables, net of allowance for doubtful accounts and contract adjustments of $2,125 and $6,792, respectively 35,107 34,319 Income tax receivable 1,293 916 Other current assets 2,119 2,104 Total current assets 53,360 48,999 Property, buildings and equipment, net of accumulated depreciation of $16,994 and $18,324, respectively 4,428 6,094 Deferred income taxes 1,203 2,650 Other assets 1,786 1,769 Total assets $60,777 $59,512 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $8,073 $6,874 Lines of credit 581 312 Accrued payroll costs 6,338 6,590 Current portion of long-term debt and capital lease obligations 382 240 Billings in excess of revenue 2,850 3,297 Other accrued liabilities 2,645 3,445 Total current liabilities 20,869 20,758 Income taxes payable 31 107 Deferred income taxes 3 525 Long-term debt and capital lease obligations 66 217 Commitments and contingencies (Note 20) - - Shareholders' equity: Preferred stock, par value $.01 per share (2,000,000 shares authorized; no shares issued) - - Class A common stock, par value $.01 per share (6,000,000 shares authorized; 3,035,778 shares issued) 30 30 Class B common stock, par value $.01 per share; (10,000,000 shares authorized; 1,357,947 shares issued) 14 14 Capital in excess of par value 17,608 16,606 Retained earnings 23,509 22,237 Accumulated other comprehensive loss (2,018) (2,143)Treasury stock, at cost (Class A common: 27,320 and 39,272 shares; Class B common: 64,801 shares) (1,037) (1,172) Total Ecology and Environment, Inc. shareholders' equity 38,106 35,572 Noncontrolling interests 1,702 2,333 Total shareholders' equity 39,808 37,905 Total liabilities and shareholders' equity $60,777 $59,512 The accompanying notes are an integral part of these consolidated financial statements. 32Table of ContentsEcology and Environment, Inc.Consolidated Statements of Operations(amounts in thousands, except share data) Fiscal Year Ended July 31, 2017 2016 2015 Revenue, net $104,502 $105,817 $126,935 Cost of professional services and other direct operating expenses 38,334 38,912 47,500 Subcontract costs 18,379 18,550 23,327 Administrative and indirect operating expenses 30,576 31,769 35,604 Marketing and related costs 10,245 11,301 11,433 Depreciation and amortization 1,040 1,143 1,467 Income from operations 5,928 4,142 7,604 Interest income (expense) 17 (73) (31)Proxy contest costs, net (375) - - Net foreign exchange (loss) gain (91) 44 134 Other (expense) income (54) (104) 262 Gain on insurance settement - 358 - Income before income tax provision 5,425 4,367 7,969 Income tax provision 2,472 3,759 3,769 Net income $2,953 $608 $4,200 Net loss (income) attributable to the noncontrolling interest 62 278 (804) Net income attributable to Ecology and Environment, Inc. $3,015 $886 $3,396 Net income per common share: basic and diluted $0.70 $0.21 $0.79 Weighted average common shares outstanding: basic and diluted 4,294,501 4,289,993 4,287,775 The accompanying notes are an integral part of these consolidated financial statements. 33Table of ContentsEcology and Environment, Inc.Consolidated Statements of Comprehensive Income(amounts in thousands) Fiscal Year Ended July 31, 2017 2016 2015 Net income including noncontrolling interests $2,953 $608 $4,200 Foreign currency translation adjustments 230 (557) (2,152)Unrealized investment (losses) gains, net (18) 21 (4) Comprehensive income 3,165 72 2,044 Comprehensive (income) loss attributable to noncontrolling interests (25) 397 (192) Comprehensive income attributable to Ecology and Environment, Inc. $3,140 $469 $1,852 The accompanying notes are an integral part of these consolidated financial statements. 34Table of ContentsEcology and Environment, Inc.Consolidated Statements of Cash Flows(amounts in thousands) Fiscal Year Ended July 31, 2017 2016 2015 Cash flows from operating activities: Net income $2,953 $608 $4,200 Adjustments to reconcile net income to net cash provided by operating activities: Impairment of long-lived assets - 375 - Impairment of goodwill - - 104 Impairment of Investment in ECSI - - 355 Depreciation and amortization 1,040 1,143 1,467 Provision for deferred income taxes 1,924 1,697 1,154 Share based compensation expense 69 37 59 Tax impact of share-based compensation (6) - (92)(Gain) loss on sale of assets and investment securities (81) 135 (186)Net recovery of contract adjustments and project disallowance reserves (1,178) (910) (413)Net bad debt expense (recovery) 244 453 (326)Changes in: - contract receivables (686) 7,394 (934)- other current assets (39) (400) (440)- income tax receivable (376) (329) 270 - other non-current assets (14) 42 48 - accounts payable 1,160 (3,157) 1,052 - accrued payroll costs (295) (1,909) 1,805 - income taxes payable (89) 40 132 - billings in excess of revenue (498) 607 (1,909)- other accrued liabilities 269 (29) 202 Net cash provided by operating activities 4,397 5,797 6,548 Cash flows from investing activities: Acquisition of noncontrolling interest of subsidiaries - - (50)Proceeds from sale of subsidiaries 75 150 - Purchase of property, building and equipment (721) (722) (735)Proceeds from sale of building and equipment 1,495 5 255 Proceeds from maturity of investments - 26 - Purchase of investment securities (29) (55) (33)Net cash provided by (used in) investing activities 820 (596) (563) Cash flows from financing activities: Dividends paid (1,720) (2,066) (2,066)Proceeds from debt 200 6 384 Repayment of debt (241) (547) (753)Net borrowings (repayment) of lines of credit 246 (380) (870)Distributions to noncontrolling interests (680) (530) (537)Net cash used in financing activities (2,195) (3,517) (3,842) Effect of exchange rate changes on cash and cash equivalents 160 (226) (329) Net increase in cash, cash equivalents and restricted cash 3,182 1,458 1,814 Cash, cash equivalents and restricted cash at beginning of period 10,161 8,703 6,889 Cash, cash equivalents and restricted cash at end of period $13,343 $10,161 $8,703 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $151 $151 $110 Income taxes 792 2,742 1,542 Supplemental disclosure of non-cash items: Dividends declared and not paid 860 861 1,033 Proceeds from capital lease obligations 29 69 322 Sale of subsidiary (loans receivable) - 75 - Acquistion of noncontrolling interest of subsidiaries (loans receivable and stock) - - 233 The accompanying notes are an integral part of these consolidated financial statements. 35Table of ContentsEcology and Environment, Inc.Consolidated Statements of Shareholders’ Equity(amounts in thousands, except share data) Class ACommonStockShares Class ACommonStockAmount Class BCommonStockShares Class BCommonStockAmount Capital inExcess of ParValue RetainedEarnings AccumulatedOtherComprehensiveIncome (Loss) TreasuryStockShares TreasuryStockAmount NoncontrollingInterest Balance at July 31, 2014 2,685,151 $27 1,708,574 $17 $17,124 $21,917 $(183) 105,354 $(1,224) $4,114 Net income - - - - - 3,396 - - - 804 Foreign currency translation adjustment - - - - - - (1,540) - - (611)Cash dividends declared ($0.48 pershare) - - - - - (2,067) - - - - Unrealized investment loss, net - - - - - - (3) - - - Conversion of Class B common stock toClass A common stock 338,055 3 (338,055) (3) - - - - - - Share-based compensation expense - - - - 59 - - - - - Tax impact of share based compensation - - - - (92) - - - - - Tax impact of noncontrolling interests - - - - (428) - - - - - Distributions to noncontrolling interests - - - - - - - - - (537)Purchase of additional noncontrollinginterests - - - - (88) - - - - (200)Stock award plan forfeitures - - - - - - - 1,692 - - Balance at July 31, 2015 3,023,206 $30 1,370,519 $14 $16,575 $23,246 $(1,726) 107,046 $(1,224) $3,570 Net income (loss) - - - - - 886 - - - (278)Foreign currency translation adjustment - - - - - - (438) - - (119)Cash dividends declared ($0.44 pershare) - - - - - (1,895) - - - - Unrealized investment gains, net - - - - - - 21 - - - Conversion of Class B common stock toClass A common stock 12,572 - (12,572) - - - - - - - Issuance of stock under stock awardplan - - - - (6) - - (4,533) 52 - Share-based compensation expense - - - - 37 - - - - - Distributions to noncontrolling interests - - - - - - - - - (530)Sale of majority-owned subsidiary - - - - - - - - - (310)Stock award plan forfeitures - - - - - - - 1,560 - - Balance at July 31, 2016 3,035,778 $30 1,357,947 $14 $16,606 $22,237 $(2,143) 104,073 $(1,172) $2,333 Net income (loss) - - - - - 3,015 - - - (62)Foreign currency translation adjustment - - - - - - 143 - - 87 Cash dividends declared ($0.40 pershare) - - - - - (1,719) - - - - Unrealized investment losses, net - - - - - - (18) - - - Issuance of stock under stock awardplan - - - - 4 - - (11,952) 135 - Tax impact of share based compensation - - - - (6) - - - - - Tax impact of noncontrolling interests - - - - - (24) - - - 24 Distributions to noncontrolling interests - - - - - - - - - (680)Adjustment to deferred income taxesrelated to acquisition of noncontrollinginterests in prior years - - - - 1,004 - - - - - Balance at July 31, 2017 3,035,778 $30 1,357,947 $14 $17,608 $23,509 $(2,018) 92,121 $(1,037) $1,702 The accompanying notes are an integral part of these consolidated financial statements. 36Table of ContentsEcology and Environment, Inc.Notes to Consolidated Financial Statements1.Organization and Basis of PresentationEcology and Environment, Inc., (“EEI” or the “Parent Company”) was incorporated in 1970 as a global broad-based environmental consulting firm whose underlying philosophy is toprovide professional services worldwide so that sustainable economic and human development may proceed with acceptable impact on the environment. Together with its subsidiaries(collectively, the “Company”), EEI has direct and indirect ownership in 8 active wholly-owned and majority-owned operating subsidiaries in 5 countries. The Company’s staff iscomprised of individuals representing more than 80 scientific, engineering, health, and social disciplines working together in multidisciplinary teams to provide innovative environmentalsolutions. The Company has completed more than 50,000 projects for a wide variety of clients in more than 120 countries, providing environmental solutions in nearly every ecosystemon the planet.The consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and inaccordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The financial statements reflect all adjustments that are, in the opinion ofmanagement, necessary for a fair presentation of such information. All such adjustments are of a normal recurring nature. Restricted cash balances of $0.1 million were reclassified frominvestment securities available for sale to cash, cash equivalents and restricted cash at July 31, 2016 to conform to the consolidated financial statement presentation for fiscal year endedJuly 31, 2017.2.Recent Accounting PronouncementsAccounting Pronouncements Adopted During Fiscal Year 2017In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-16, Business Combinations (Topic 805) – Simplifyingthe Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 requires an acquirer to recognize adjustments to provisional amounts that are identified during themeasurement period in the reporting period in which the adjustment amounts are determined. In addition, the amendments in ASU 2015-16 require an acquirer to record, in the sameperiod’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts,calculated as if the accounting had been completed at the acquisition date. The amendments in ASU 2015-16 also require an entity to present separately on the face of the incomestatement, or disclose in the notes to the financial statements, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previousreporting periods if the adjustment to the provisional amounts had been recognized at the acquisition date. The amendments in ASU 2015-16 are to be applied prospectively toadjustments to provisional amounts that occur after the effective date. The Company adopted the provisions of ASU 2015-16 effective August 1, 2016. The Company did not completeany business combination transactions during the fiscal years ended July 31, 2017, 2016 or 2015. Therefore, adoption of this standard did not have any impact on the Company’sconsolidated financial statements.In May 2015, FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share (Or itsEquivalent) (“ASU 2015-07”). ASU 2015-07 removes the requirements to: 1) categorize within the fair value hierarchy all investments for which fair value is measured using the net assetvalue (“NAV”) per share practical expedient; and 2) make certain disclosures for all investments that are eligible to be measured at fair value using the NAV per share practical expedient. The amendment is to be applied retrospectively. The Company adopted ASU 2015-07 effective August 1, 2016. Other than the changes to disclosures noted above, adoption of thisstandard did not have any impact on the Company’s consolidated financial statements. Refer to Note 6 of these consolidated financial statements for additional disclosures regardingthe Company’s investments in available for sale securities that are valued using the NAV practical expedient. 37Table of ContentsIn August 2014, FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 requires an entity’smanagement to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern withinone year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15provides guidance for management’s evaluation, including guidance regarding when substantial doubt about an entity’s ability to continue as a going concern exists, and when suchdoubt may be alleviated by management’s plans that are intended to mitigate those relevant conditions or events. ASU 2014-15 also provides guidance regarding appropriate financialstatement disclosures regarding conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern, management’s evaluation of the significanceof those conditions or events in relation to the entity’s ability to meet its obligations, and management’s plans that are intended to mitigate those conditions or events. The Companyadopted ASU 2014-15 effective August 1, 2016. Adoption of this standard did not have any impact on the Company’s consolidated financial statements.In November 2016, FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) – Restricted Cash – a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). Theamendments included in this update require that amounts described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling thebeginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted the provisions of ASU 2016-18 effective August 1, 2016. Adoptionof this standard did not have a material impact on the Company’s consolidated financial statements. Refer to Note 5 of these consolidated financial statements for additional disclosuresregarding the Company’s cash, cash equivalents and restricted cash.Accounting Pronouncements Not Yet Adopted as of July 31, 2017In May 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is the result of a joint project of FASB and theInternational Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for use in the U.S and internationally. ASU 2014-09 supersedes the revenue recognition requirements in Topic 605 of FASB’s Accounting Standards Codification (the “Codification”) and most industry-specific guidance throughout theIndustry Topics of the Codification. ASU 2014-09 enhances comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, reduces thenumber of requirements an entity must consider for recognizing revenue, and requires improved disclosures to help users of financial statements better understand the nature, amount,timing, and uncertainty of revenue that is recognized.ASU 2014-09 was to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within the annual reporting period. In August 2015, FASBissued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date (“ASU 2015-14”). The amendments in ASU 2015-14 defer the effective dateof ASU 2014-09 for all entities by one year.Subsequent to the issuance of ASU 2014-09, FASB issued additional ASUs that provide clarification for specific aspects of ASU 2014-09. The effective dates and transitionrequirements for these ASUs are the same as the effective dates and transition requirements included in ASU 2014-09 and ASU 2015-14.ASU 2014-09 requires retrospective application by either restating each prior period presented in the financial statements, or by recording the cumulative effect on prior reporting periodsto beginning retained earnings in the year that the standard becomes effective (the “modified retrospective approach”), and includes a number of optional practical expedients thatentities may elect to apply. The Company expects to adopt the revenue recognition guidance using the modified retrospective approach.ASU 2014-09 will be effective for the Company beginning August 1, 2018. The Company is comparing historical accounting policies and practices to the new standard, has madesubstantial progress on its detailed review of contracts for its operations in the United States, and has begun the evaluation at all of its foreign subsidiaries. Management continues toassess the impact of ASU 2014-09. 38Table of ContentsIn January 2016, FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU2016-01”). The amendments included in this update make targeted improvements to U.S. GAAP. Entities are required to apply the amendments included in ASU 2016-01 by means of acumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values(including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. This accounting standard update will be effective for theCompany beginning August 1, 2018. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.In March 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The main difference between previous U.S. GAAP and ASU 2016-02 is the recognition of leaseassets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU 2016-02 provides specific guidance for determining whether acontractual arrangement contains a lease, lease classification by lessees and lessors, initial and subsequent measurement of leases by lessees and lessors, sale and leasebacktransactions, transition, and financial statement disclosures. ASU 2016-02 requires entities to use a modified retrospective approach to apply its guidance, and includes a number ofoptional practical expedients that entities may elect to apply. ASU 2016-02 will be effective for the Company beginning August 1, 2019. Early adoption is permitted. Management iscurrently assessing the provisions of ASU 2016-02. The Company anticipates that adoption of ASU 2016-02 will result in the addition of material right-of-use assets and lease liabilitiesto the Company’s consolidated balance sheet in addition to expanding required disclosures. Management has not yet estimated the impact of ASU 2016-02 on the Company'sconsolidated statements of operations and cash flows.In March 2016, FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). Theobjective of ASU 2016-09 is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards aseither equity or liabilities, and classification on the statement of cash flows. This accounting standard update was adopted by the Company effective August 1, 2017. Management iscurrently assessing the provisions of ASU 2016-09 and has not yet estimated its impact on the Company’s consolidated financial statements.In June 2016, FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”). The amendments included in this update affect entities holdingfinancial assets, including trade receivables and investment securities available for sale, that are not accounted for at fair value through net income. ASU 2016-13 requires a financialasset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments included in this update also provideguidance for measurement of expected credit losses and for presentation of increases or decreases of expected credit losses on the statement of operations. ASU No. 2016-13 will beeffective for the Company beginning August 1, 2020. Early adoption is permitted for the Company beginning August 1, 2019. Management is currently assessing the provisions ofASU 2016-13 and has not yet estimated its impact on the Company’s consolidated financial statements.In August 2016, FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The amendmentsincluded in this update provide guidance regarding eight specific cash flow classification issues that are not specifically addressed in previous U.S. GAAP. This accounting standardupdate will be effective for the Company beginning August 1, 2018. Management is currently assessing the provisions of ASU 2016-15 and has not yet estimated its impact on theCompany’s consolidated financial statements.In January 2017, FASB issued ASU No. 2017-01, Business Combinations (Topic 805) – Clarifying the Definition of a Business (“ASU 2017-01”). The amendments included in this updateclarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) ofassets or businesses. The definition of a business affects many areas of accounting including acquisition, disposals, goodwill and consolidation. This accounting standard update willbe effective for the Company beginning August 1, 2018. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. 39Table of ContentsIn January 2017, FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 232) – Amendmentsto SEC Paragraphs Pursuant to staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (“ASU 2017-03”). The amendments included in this updateexpand required qualitative disclosures when registrants cannot reasonably estimate the impact that adoption of the ASU will have on the financial statements. Such qualitativedisclosures would include a comparison of the registrant’s new accounting policies, if determined, to current accounting policies, a description of the status of the registrant’s process toimplement the new standard and a description of the significant implementation matters yet to be addressed by the registrant. Other than enhancements to the qualitative disclosuresregarding future adoption of new ASUs, adoption of the provisions of this standard is not expected to have any impact on the Company’s consolidated financial statements.In January 2017, FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The amendmentsincluded in this update simplify the subsequent measurement of goodwill by revising the steps required during the registrant’s annual goodwill impairment test. This accountingstandard update will be effective for the Company beginning August 1, 2021. Management is currently assessing the provisions of ASU 2017-04 and has not yet estimated its impact onthe Company’s consolidated financial statements.In February 2017, FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) – Clarifying the Scope of AssetDerecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). The amendments included in this update clarify the scope of current U.S. GAAP andadd guidance for partial sales of nonfinancial assets. ASU 2017-05 requires retrospective application by either restating each prior period presented in the financial statements, or byrecording the cumulative effect on prior reporting periods to beginning retained earnings in the year that the standard becomes effective. This accounting standard update will beeffective for the Company beginning August 1, 2018. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.In May 2017, FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718) – Scope of Modification Accounting (“ASU 2017-09”). The amendments included in thisupdate provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments in thisupdate will be applied prospectively to an award modified on or after the adoption date. This accounting standard update will be effective for the Company beginning August 1, 2018. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.3.Summary of Significant Accounting PoliciesConsolidationThe consolidated financial statements include the accounts of EEI and its wholly owned and majority owned subsidiaries. All intercompany transactions and balances have beeneliminated.Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions as of the date of the financial statements, which affectthe reported values of assets and liabilities and revenues and expenses and disclosures of contingent assets and liabilities. Actual results may differ from those estimates.Investment Securities Available for SaleInvestment securities available for sale are stated at fair value. Unrealized gains or losses related to investment securities available for sale are recorded in accumulated othercomprehensive income, net of applicable income taxes in the accompanying consolidated balance sheets and consolidated statements of changes in shareholders' equity. The cost basisof securities sold is based on the specific identification method. Reclassification adjustments out of accumulated other comprehensive income resulting from disposition of investmentsecurities available for sale are included within other income (expense) in the consolidated statements of operations. 40Table of ContentsInvestment securities available for sale include mutual funds that are valued at the NAV of shares held by the Company at period end. Mutual funds held by the Company are open-endmutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily NAV and to transact at that price. The mutual funds heldby the Company are deemed to be actively traded.Refer to Note 6 of these consolidated financial statements for additional disclosures regarding the Company’s investment securities available for sale.Revenue Recognition and Contract Receivables, NetThe Company derives substantially all of its revenue from environmental consulting work, principally from the sale of labor hours. The consulting work is performed under a mix of timeand materials, fixed price and cost-plus, and contracts. Contracts are required from all customers. Revenue is recognized as follows:Contract TypeWork TypeRevenue Recognition Policy Time and materialsConsultingAs incurred at contract rates. Fixed priceConsultingPercentage of completion, approximating the ratio of either total costs or Level of Effort(LOE) hours incurred to date to total estimated costs or LOE hours. Cost-plusConsultingCosts as incurred plus fees. Fees are recognized as revenue using percentage ofcompletion determined by the percentage of LOE hours incurred to total LOE hours inthe respective contracts.Revenues reflected in the Company's consolidated statements of operations represent services rendered for which the Company maintains a primary contractual relationship with itscustomers. Included in revenues are certain services that the Company has elected to subcontract to other contractors.The Company accounts for time and material contracts over the period of performance, in proportion to the costs of performance, predominately based on labor hours incurred. Revenueearned from fixed price and cost-plus contracts is recognized using the “percentage-of-completion” method, wherein revenue is recognized as project progress occurs. If an estimate ofcosts 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.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 rateshave been negotiated through fiscal year 2014. The Company records an allowance for project disallowances in other accrued liabilities for potential disallowances resulting fromgovernment audits (refer to Note 13 of these consolidated financial statements). Allowances for project disallowances are recorded as adjustments to revenue when the amounts areestimable. Resolution of these amounts is dependent upon the results of government audits and other formal contract close-out procedures.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 theagreed 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. The Company recognizescosts related to change orders and claims as incurred. Revenues and profit are recognized on change orders when it is probable that the change order will be approved and the amountcan be reasonably estimated. Revenues are recognized only up to the amount of costs incurred on contract claims when realization is probable, estimable and reasonable support fromthe customer exists.The Company expenses all bid and proposal and other pre-contract costs as incurred. Out of pocket expenses such as travel, meals, field supplies, and other costs billed direct tocontracts 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 bygovernmental authorities, which the Company collects from its customers and remits to governmental authorities. 41Table of ContentsBilled contract receivables represent amounts billed to clients in accordance with contracted terms but not collected as of the end of the reporting period. Billed contract receivables mayinclude: (i) amounts billed for revenues from incurred costs and fees that have been earned in accordance with contractual terms; and (ii) progress billings in accordance with contractualterms that include revenue not yet earned as of the end of the reporting period.Unbilled contract receivables result from: (i) revenues from incurred costs and fees which have been earned, but are not billed as of period-end; and (ii) differences between year-to-dateprovisional billings and year-to-date actual contract costs incurred.The Company reduces contract receivables by establishing an allowance for contract adjustments related to revenues that are deemed to be unrealizable, or that may become unrealizablein the future. Management reviews contract receivables and determines allowance amounts based on the adequacy of the Company’s performance under the contract, the status ofchange orders and claims, historical experience with the client for settling change orders and claims, and economic, geopolitical and cultural considerations for the home country of theclient. The Company records such contract adjustments as direct adjustments to revenue in the consolidated statements of operations.The Company also reduces contract receivables by recording an allowance for doubtful accounts to account for the estimated impact of collection issues resulting from a client’sinability or unwillingness to pay valid obligations to the Company. The resulting provision for bad debts is recorded within administrative and indirect operating expenses on theconsolidated statements of operations.Refer to Note 7 of these consolidated financial statements for additional disclosures regarding the Company’s contract receivables, net.Property, Buildings and Equipment, Depreciation and AmortizationProperty, buildings and equipment are stated at the lower of depreciated or amortized cost or fair value. Land and land improvements are not depreciated or amortized. Methods ofdepreciation or amortization and useful lives for all other long-lived assets are summarized in the following table. Depreciation / Amortization MethodUseful Lives BuildingsStraight-line32-40 YearsBuilding ImprovementsStraight-line7-15 YearsField EquipmentStraight-line3-7 YearsComputer equipmentStraight-line and Accelerated3-7 YearsComputer softwareStraight-line10 YearsOffice furniture and equipmentStraight-line3-7 YearsVehiclesStraight-line3-5 YearsLeasehold improvementsStraight-line(1) (1)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 either the value or useful life of the related asset havebeen increased. When property or equipment is retired or sold, any gain or loss on the transaction is reflected in the current year's earnings.The Company capitalizes costs of software acquisition and development projects, including costs related to software design, configuration, coding, installation, testing and parallelprocessing. Capitalized software costs are recorded in fixed assets, net of accumulated amortization, on the consolidated balance sheets. Capitalized software development costsgenerally include: ·external direct costs of materials and services consumed to obtain or develop software for internal use;·payroll and payroll-related costs for employees who are directly associated with and who devote time to the project, to the extent of time spent directly on the project;·costs to obtain or develop software that allows for access or conversion of old data by new systems;·costs of upgrades and/or enhancements that result in additional functionality for existing software; and·interest costs incurred while developing internal-use software that could have been avoided if the expenditures had not been made. 42Table of ContentsThe costs of computer software obtained or developed for internal use is amortized on a straight-line basis over the estimated useful life of the software. Amortization begins when thesoftware and all related software modules on which it is functionally dependent are ready for their intended use. Amortization expense is recorded in depreciation and amortization in theconsolidated statements of operations.The following software-related costs are expensed as incurred and recorded in general and administrative expenses on the consolidated statements of operations: ·research costs, such as costs related to the determination of needed technology and the formulation, evaluation and selection of alternatives;·costs to determine system performance requirements for a proposed software project;·costs of selecting a vendor for acquired software;·costs of selecting a consultant to assist in the development or installation of new software;·internal or external training costs related to software;·internal or external maintenance costs related to software;·costs associated with the process of converting data from old to new systems, including purging or cleansing existing data, reconciling or balancing of data in the old and newsystems and creation of new data;·updates and minor modifications; and·fees paid for general systems consulting and overall control reviews that are not directly associated with the development of software.Capitalized software costs are evaluated for recoverability/impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable, includingwhen:·existing software is not expected to provide future service potential;·it is no longer probable that software under development will be completed and placed in service; and·costs of developing or modifying internal-use software significantly exceed expected development costs or costs of comparable third-party software.Refer to Note 8 of these consolidated financial statements for additional disclosures regarding the Company’s property, buildings and equipment.GoodwillGoodwill is included in other assets on the accompanying consolidated balance sheets. Goodwill is subject to an annual assessment for impairment by comparing the estimated fairvalues of reporting units to which goodwill has been assigned to the recorded book value of the respective reporting units. The estimated fair value of reporting units is calculatedusing a discounted cash flows methodology. Goodwill is also assessed for impairment between annual assessments whenever events or circumstances make it more likely than not thatusing a discounted cash flows methodology. Goodwill is also assessed for impairment between annual assessments whenever events or circumstances make it more likely than not thatan impairment may have occurred.Refer to Note 9 of these consolidated financial statements for additional disclosures regarding the Company’s recorded goodwill.Impairment of Long-Lived AssetsThe 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, includingeventual 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 valueand fair value.Income TaxesThe Company follows the asset and liability approach to account for income taxes. This approach requires the recognition of deferred tax assets and liabilities for the expected future taxconsequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Although realization is not assured, management believes it is morelikely 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 consideredrealizable could be reduced in the near term. 43Table of ContentsThe Company does not record United States income taxes applicable to undistributed earnings of foreign subsidiaries that the Company intends to indefinitely reinvest in the operationsof those entities. Excess cash accumulated by any foreign subsidiary, beyond that necessary to fund operations or business expansion, may be repatriated to the U.S. at the discretionof Board of Directors of the respective entities. The Company would be required to accrue and pay taxes on any amounts repatriated to the U.S. from foreign subsidiaries.Income tax expense includes U.S. and international income taxes, determined using the applicable statutory rates. A deferred tax asset is recognized for all deductible temporarydifferences and net operating loss carryforwards, and a deferred tax liability is recognized for all taxable temporary differences.The Company’s deferred tax assets principally result from timing differences in the recognition of entity operating losses, contract reserves and accrued expenses. The Companyperiodically evaluates the likelihood of realization of deferred tax assets, and provides for a valuation allowance when necessary.U.S. GAAP 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 positionis a position in a previously filed tax filing 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. Taxpositions 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 meetthe 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 uponsettlement. We recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in administrative and indirect operating expenses. 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 availableevidence. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in administrative and indirect operating expenses.Refer to Note 12 of these consolidated financial statements for additional disclosures regarding income taxes.Defined Contribution PlansEEI has a non-contributory defined contribution plan providing deferred benefits for substantially all of its employees (the “EEI Defined Contribution Plan”). The annual expense of theEEI Defined Contribution Plan is based on a percentage of eligible wages as authorized by EEI’s Board of Directors.EEI also has a supplemental retirement plan that provides post-retirement health care coverage for EEI’s founders and their spouses. As of July 31, 2017, two founders, their spousesand the spouse of a deceased founder were receiving healthcare coverage under this plan. The annual expense associated with this plan is determined based on discounted annual costestimates over the estimated life expectancy of the founders and their spouses.Refer to Note 17 of these consolidated financial statements for additional disclosures regarding the Company’s defined contribution plans.Incentive CompensationEEI and its subsidiaries may, at the discretion of their respective Boards of Directors, award incentive compensation to Directors, senior management and other employees based on therespective company’s financial performance and the individual’s job performance. Incentive compensation may be awarded as cash bonuses, Class A Common Stock issued under EEI’sStock Award Plan (defined below), or a combination of both cash and stock.The Company expenses cash bonuses during the performance period to which they relate. The value of stock awards is expensed over the vesting period of the respective award. Share-based awards are measured at fair value on the respective grant date, based on the estimated number of awards that are expected to vest. Compensation cost for awards that vestis not reversed if the awards expire without being exercised. 44Table of ContentsRefer to Note 14 of these consolidated financial statements for additional disclosures regarding the Company’s incentive compensation awards.Earnings per ShareBasic and diluted earnings per share (“EPS”) are computed by dividing the net income attributable to Ecology and Environment, Inc. common shareholders by the weighted averagenumber of common shares outstanding for the period. After consideration of all the rights and privileges of the Class A and Class B stockholders (refer to Note 14 of these consolidatedfinancial statements), 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 Companywill 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 whencomputing 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) areparticipating securities. These securities are included in the computation of earnings per share pursuant to the two-class method. As a result, unvested restricted shares are included inthe weighted average shares outstanding calculation.Refer to Note 18 of these consolidated financial statements for additional disclosures regarding the Company’s earnings per share.Comprehensive IncomeComprehensive income represents the change in shareholders’ equity during a period, excluding changes arising from transactions with shareholders. Comprehensive income includesnet income from the consolidated statements of operations, plus other comprehensive income during a reporting period.Other comprehensive income (loss) represents the net effect of accounting transactions that are recognized directly in shareholders’ equity, such as unrealized net income or lossesresulting from currency translation adjustments from foreign operations and unrealized gains or losses on available-for-sale securities. Refer to Note 15 of these consolidated financialstatements for additional disclosures regarding accumulated other comprehensive income (loss).Foreign Currencies and InflationThe 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 assetsand 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 net foreignexchange (loss) gain in the consolidated statements of operations as incurred.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 localcurrencies into U.S. dollars creates transaction adjustments which are included in net income. The Company did not record any highly inflationary economy translation adjustmentsduring fiscal years 2017, 2016 or 2015.Noncontrolling InterestsEarnings and other comprehensive income (loss) are separately attributed to both the controlling and noncontrolling interests. Purchases of noncontrolling interests are recorded asreductions of shareholders’ equity on the consolidated statements of shareholders’ equity. EPS is calculated based on net income (loss) attributable to the Company’s controllinginterests. 45Table of Contents4.Significant Transactions and Adjustments During Fiscal Year 2017Reduction in Allowance for Project DisallowancesThe Company records an allowance for project disallowances in other accrued liabilities for potential disallowances resulting from government audits. During fiscal year 2017, as a resultof final settlements of allowances originally recorded in prior years, the Company reduced its allowance for project disallowances by $1.1 million, which was recorded as an addition torevenue, net on the consolidated statement of operations. The settlements resulted in cash payments of less than $0.1 million during fiscal year 2017. Refer to Note 13 of theseconsolidated financial statements for additional information regarding the Company’s allowance for project disallowances. Adjustments Related to Activities of Dormant Subsidiaries During fiscal year 2017, the Company completed a review of historical project activity recorded in certain subsidiaries that have been dormant for several years. During fiscal year 2017,as a result of this review, the Company reversed $0.7 million of amounts previously recorded as reserves against contract receivables. The resulting increases to revenue, net for fiscalyear 2017 were corrections of amounts recorded prior to the fiscal years presented in the accompanying financial statements. The Company determined that these corrections were notmaterial to the current or any prior period.During fiscal year 2017, the Company reversed $0.6 million of amounts previously recorded as liabilities to subcontractors that were no longer deemed to be necessary to record on theCompany’s consolidated balance sheet. These amounts were associated with fully-reserved contract receivable balances that were written-off during fiscal year 2017. This adjustmentwas recorded as a $0.6 million decrease to subcontract costs on the consolidated statement of operations for the fiscal year ended July 31, 2017. Proxy Contest CostsPrior to the Company’s Annual Meeting of Shareholders held in April 2017, a significant Class A shareholder contested the Company’s two nominees for Class A directors. As a resultof the ensuing election contest, which was settled amicably among the parties prior to the Annual Meeting of Shareholders, the Company recorded $0.4 million of net legal andconsulting expenses during fiscal year 2017.Adjustments of Deferred Taxes and Capital in Excess of Par Value Related to Purchases of Noncontrolling Interests in Prior YearsThe Company identified and recorded adjustments to deferred tax assets and liabilities and capital in excess of par value related to the purchases of noncontrolling interests duringperiods prior to fiscal year 2016. The Company determined that these amounts are not material to the current or any prior period. The adjustments resulted in a $0.7 million increase indeferred tax assets, a $0.3 million decrease in deferred tax liabilities, and a $1.0 million increase in capital in excess of par value at July 31, 2017. There was no impact to net income or cashflows as a result of these adjustments.Adjustments Related to Prior Year Tax Filings of a South American Subsidiary The Company identified and recorded adjustments of income tax liability related to errors in the tax filings of a South American subsidiary for calendar years 2013 through 2016. TheCompany determined that these amounts are not material to the current or any prior period. The adjustments resulted in a $0.3 million balance sheet reclassification from deferred incometax liability to current income tax liability, and $0.1 million of interest and penalties expense recorded in administrative and indirect operating expenses on the consolidated statements ofoperations during the fiscal year ended July 31, 2017. 5.Cash, Cash Equivalents and Restricted CashCash, cash equivalents and restricted cash are summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Cash and cash equivalents $13,029 $9,902 Restricted cash 314 259 Total cash, cash equivalents and restricted cash $13,343 $10,161 The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company invests cash in excess of operatingrequirements in income-producing short-term investments. Money market funds of $0.2 million and $0.3 million were included in cash and cash equivalents in the table above at July 31,2017 and 2016, respectively.The Company is required to maintain restricted cash on deposit in Brazil as collateral for pending litigation matters. 46Table of Contents6.Fair Value of Financial InstrumentsThe Company’s financial assets or liabilities are measured using inputs from the three levels of the fair value hierarchy. The Company classifies assets and liabilities within the fair valuehierarchy 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 minimizethe 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 andequity securities 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-backedsecurities that are highly liquid and are actively traded in over-the-counter markets.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 modelswhere the significant inputs are observable (e.g., interest rates, yield curves, credit risks, etc.) or can be corroborated by observable market data.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 thatmarket participants would use.The Company monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economicconditions 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 thebeginning of the reporting period. There were no transfers in or out of levels 1, 2 or 3 during fiscal years 2017, 2016 or 2015.The carrying amount of cash, cash equivalents and restricted cash approximated fair value at July 31, 2017 and 2016. These assets were classified as level 1 instruments at both dates.Investment securities available for sale of $1.5 million at July 31, 2017 and 2016 primarily included mutual funds invested in U.S. municipal bonds, which the Company may immediatelyredeem without prior notice. These mutual funds are valued at the NAV of shares held by the Company at period end as a practical expedient to estimate fair value. These mutual fundsare deemed to be actively traded, are required to publish their daily NAV and are required to transact at that price.The Company recorded gross unrealized gains of less than $0.1 million related to investment securities available for sale in accumulated other comprehensive loss at July 31, 2017 and2016. The Company did not record any sales of investment securities during the twelve months ended July 31, 2017.Long-term debt consists of bank loans and capitalized equipment leases. Lines of credit consist of borrowings for working capital requirements. Based on the Company's assessment ofthe current financial market and corresponding risks associated with the debt and line of credit borrowings, management believes that the carrying amount of these liabilitiesapproximated fair value at July 31, 2017 and 2016. These liabilities were classified as level 2 instruments at both dates. Refer to Note 10 and Note 11 of these consolidated financialstatements for additional disclosures regarding the Company’s lines of credit, debt and capital lease obligations. 47Table of Contents7.Contract Receivables, netContract receivables, net are summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Contract Receivables: Billed $16,033 $20,415 Unbilled 21,199 20,696 37,232 41,111 Allowance for doubtful accounts and contract adjustments (2,125) (6,792)Contract receivables, net $35,107 $34,319 Billed contract receivables included contractual retainage balances of $0.9 million at each of July 31, 2017 and 2016. Management anticipates that unbilled contract receivables andretainage balances at July 31, 2017 will be substantially billed and collected within one year.Contract Receivable ConcentrationsSignificant concentrations of contract receivables and the allowance for doubtful accounts and contract adjustments are summarized in the following table. Balance at July 31, 2017 Balance at July 31, 2016 Region ContractReceivables Allowance forDoubtfulAccounts andContractAdjustments ContractReceivables Allowance forDoubtfulAccounts andContractAdjustments (in thousands) EEI and its subsidiaries located in the U.S. $25,528 $797 $29,027 $5,809 Subsidiaries located in South America 11,704 1,328 11,659 983 Other foreign subsidiaries --- --- 425 --- Totals $37,232 $2,125 $41,111 $6,792 Contract adjustments related to projects in the United States, Canada and South America typically result from cost overruns related to current or recently completed projects, or fromrecoveries of cost overruns recorded as contract adjustments in prior reporting periods. Contract adjustments related to projects in the Middle East, Africa and Asia typically result fromdifficulties encountered while attempting to settle and close-out claims that may be several years old.The allowance for doubtful accounts and contract adjustments as a percentage of contract receivables at the Company’s subsidiaries located in South America was 11% and 8% at July31, 2017 and 2016, respectively. During fiscal year 2017, local South American economies continued to adversely impact certain of our local clients. These heightened operating riskshave resulted in increased collection risks and the Company expending resources that it may not recover for several months, or at all. Management is monitoring any adverse trends orevents that may impact the realizability of recorded receivables from our South American clients.During fiscal year 2017, the Company wrote-off $4.9 million of aged and fully reserved contract receivable balances at EEI related to a specific project in the Middle East, based onmanagement’s assessment that the client is unlikely to approve payment. 48Table of ContentsAllowance for Doubtful Accounts and Contract AdjustmentsActivity within the allowance for doubtful accounts and contract adjustments is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Balance at beginning of period $6,792 $6,817 $7,371 Net increase (decrease) due to adjustments in the allowance for: Contract adjustments (1) (4,941) (577) (263)Doubtful accounts (2) 274 552 (291)Balance at end of period $2,125 $6,792 $6,817 (1)Increases (decreases) to the allowance for contract adjustments on the consolidated balance sheets are recorded as (decreases) increases to revenue on the consolidatedstatements of operations. During fiscal year 2017, the Company reversed $4.9 million of allowance related to a specific project in the Middle East, for which a corresponding $4.9million contract receivable balance was also written off during the period.(2)Increases (decreases) to the allowance for doubtful accounts on the consolidated balance sheets are recorded as increases (decreases) to administrative and other indirectoperating expenses on the consolidated statements of operations.During fiscal year 2017, the South American economies continue to adversely impact some of our local clients. Management is monitoring any adverse trends or events that may impactthe realizability of the recorded net book value of contract receivables from our South American clients.8.Property, Buildings and Equipment, netProperty, buildings and equipment is summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Land and land improvements $393 $393 Buildings and building improvements 7,338 9,700 Field equipment 2,267 2,222 Computer equipment 4,339 4,439 Computer software 3,107 3,105 Office furniture and equipment 2,264 2,683 Vehicles 1,331 1,333 Other 383 543 21,422 24,418 Accumulated depreciation and amortization (16,994) (18,324)Property, buildings and equipment, net $4,428 $6,094 During fiscal year 2017, the Company consummated the sale of land, a vacant building, related building improvements and fixtures, and warehouse space to a non-affiliated third party forapproximately $1.5 million. After closing costs, the Company recorded a gain on sale of $0.1 million from this transaction in other (expense) income in the consolidated statements ofincome during fiscal year 2017.9.GoodwillGoodwill of $1.1 million is included in other assets on the accompanying consolidated balance sheets at July 31, 2017 and 2016. The Company’s most recent annual impairmentassessment for goodwill was completed at July 31, 2017. Based on this assessment, the fair values of the reporting units to which goodwill is assigned exceeded the book values of therespective reporting units. As a result, no impairment of goodwill was identified. 49Table of Contents10.Lines of CreditUnsecured lines of credit are summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Outstanding cash draws, recorded as lines of credit on the accompanying consolidated balance sheets $581 $312 Term loan 200 --- Outstanding letters of credit to support operations 2,511 2,187 Total amounts used under lines of credit 3,292 2,499 Remaining amounts available under lines of credit 36,227 36,496 Total approved unsecured lines of credit $39,519 $38,995 As of July 31, 2017, contractual interest rates for lines of credit ranged from 3.25% to 3.50% for the Company’s U.S. operations and 9.12% to 9.75% for the Company’s South Americanoperations. The Company’s lenders have reaffirmed the lines of credit within the past twelve months.11.Debt and Capital Lease ObligationsDebt and capital lease obligations are summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Various loans and advances (interest rates ranging from 5.75% to 6.58%) $328 $217 Capital lease obligations (interest rates ranging from 7.36% to 15.09%) 120 240 448 457 Current portion of long-term debt and capital lease obligations (382) (240)Long-term debt and capital lease obligations $66 $217 The aggregate maturities of long-term debt and capital lease obligations as of July 31, 2017 are summarized in the following table.Fiscal Year EndingJuly 31, Amount (in thousands) 2018 $382 2019 37 2020 23 2021 6 Total $448 12.Income TaxesIncome (loss) before income tax provision is summarized in the following table.Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Domestic $5,432 $4,558 $3,500 Foreign (7) (191) 4,469 $5,425 $4,367 $7,969 50Table of ContentsThe income tax provision is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Current: Federal $(149) $1,155 $488 State 42 177 80 Foreign 655 730 2,047 Total current 548 2,062 2,615 Deferred: Federal 2,075 587 1,379 State 308 269 172 Foreign (459) 841 (397)Total deferred 1,924 1,697 1,154 Total income tax provision $2,472 $3,759 $3,769 A reconciliation of the income tax provision using the statutory U.S. income tax rate compared with the actual income tax provision reported on the consolidated statements of operationsis summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Income tax provision at the U.S. federal statutory income tax rate $1,845 $1,485 $2,709 Foreign dividend income 240 263 508 State taxes, net of federal benefit 200 312 166 Brazil valuation allowance 137 1,582 --- Other permanent differences 54 88 209 Peru non-deductible expenses 53 59 167 Other foreign taxes, net of federal benefit 14 153 161 International rate differences 2 (145) (338)Income from "pass-through" entities taxable to noncontrolling partners (1) (39) 31 Re-evaluation and settlements of tax contingencies (33) --- --- Canada and China valuation allowance (39) 1 156 Income tax provision, as reported on the consolidated statements of operations $2,472 $3,759 $3,769 The significant components of deferred tax assets and liabilities are summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Deferred tax assets: Contract and other reserves $520 $3,023 Accrued compensation and expenses 752 734 Net operating loss carryforwards 1,470 1,265 Foreign and state income taxes 17 59 Foreign tax credit 296 296 Federal benefit from foreign tax audits --- 157 Other 714 (26)Deferred tax assets 3,769 5,508 Less: valuation allowance (2,020) (2,278)Net deferred tax assets $1,749 $3,230 Deferred tax liabilities: Federal expense on state deferred taxes $(73) $(133)Fixed assets and intangibles (144) (759)Federal expense from foreign accounting differences (332) (213)Net deferred tax liabilities $(549) $(1,105) 51Table of ContentsAs of July 31, 2017, net operating losses attributable to operations in Brazil, Peru, Chili and Canada and net operating losses for U.S. federal and state income tax purposes exist. TheU.S. federal net operating loss at July 31, 2017 is approximately $0.8 million.The Company periodically evaluates the likelihood of realization of deferred tax assets, and provides for a valuation allowance when necessary. Activity within the deferred tax assetvaluation allowance is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 (in thousands) Balance at beginning of period $2,278 $560 Additions during the period 2 1,765 Reductions during period (260) (47)Balance at end of period $2,020 $2,278 The valuation allowance maintained by the Company primarily relates to: (i) net operating losses in Brazil and Canada, the utilization of which is dependent on future earnings; (ii) excessforeign tax credit carryforwards, the utilization of which is dependent on future foreign source income; and (iii) capital loss carryforwards, the utilization of which is dependent on futurecapital gains. Additions to the valuation allowance during fiscal year 2017 primarily related to a deferred tax asset that resulted from net operating loss carryforwards from theCompany’s Brazilian operations. During fiscal year 2017, based on available evidence including recent cumulative operating losses, management determined that it is more likely than notthat these deferred tax assets will not be realized.During the fiscal years ended July 31, 2017, 2016 and 2015, the Company recorded $0.3 million, $0.1 million and $0, respectively, of income taxes applicable to undistributed earnings offoreign subsidiaries that will not be indefinitely reinvested in those operations. At July 31, 2017, the Company’s operations in Chile, Peru and Ecuador had $7.1 million of combinedundistributed earnings that were indefinitely reinvested in those operations.The Company files numerous consolidated and separate income tax returns in U.S. federal, state and foreign jurisdictions. The Company’s U.S. federal tax matters for fiscal years 2014through 2017 remain subject to examination by the IRS. The Company’s state, local and foreign tax matters for fiscal years 2013 through 2017 remain subject to examination by therespective tax authorities. No waivers have been executed that would extend the period subject to examination beyond the period prescribed by statute.The Company had approximately $0.3 million, $0.1 million and $0.1 million of uncertain tax positions (“UTPs”) at July 31, 2017, 2016 and 2015, respectively. For the year ended July 31,2017, the company reversed a previously recorded uncertain tax position and associated penalties and interest for approximately $0.1 and recorded additional UTPs of approximately $0.3with additional interest and penalties of $0.1 million. 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.The Company recognizes interest accrued related to liabilities for UTPs in other accrued liabilities on the consolidated balance sheets and in administrative and indirect operatingexpenses on the consolidated statements of operations. The Company recorded interest and penalties expense related to liabilities for UTPs for $0.1 million during fiscal year ended July31, 2017 and less than $0.1 million for fiscal years 2016 and 2015. 52Table of Contents13.Other Accrued LiabilitiesOther accrued liabilities are summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Allowance for project disallowances $687 $1,819 Other 1,958 1,626 Total other accrued liabilities $2,645 $3,445 Activity within the allowance for project disallowances is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Balance at beginning of period $1,819 $2,243 $2,393 Reduction of reserves recorded in prior fiscal years (1,132) (424) (150)Balance at end of period $687 $1,819 $2,243 The reductions in the allowance for project disallowances during fiscal years 2017, 2016 and 2015, which were recorded as additions to revenue, net on the consolidated statements ofoperations, resulted from final settlements of allowances recorded in prior fiscal years. The settlements resulted in cash payments of less than $0.1 million during fiscal years 2017, 2016and 2015.14.Incentive CompensationCash BonusesEEI and its subsidiaries may, at the discretion of their respective Boards of Directors, award incentive compensation to Directors, senior management and other employees in the form ofcash bonuses. The Company recorded $1.1 million, $1.7 million and $3.0 million of cash bonus awards as incentive compensation expense during fiscal years 2017, 2016 and 2015,respectively.Stock Award PlanEEI adopted the 1998 Stock Award Plan effective March 16, 1998. This plan, together with supplemental plans that were subsequently adopted by the Company’s Board of Directors, arereferred to as the “Stock Award Plan”. The Stock Award Plan is not a qualified plan under Section 401(a) of the Internal Revenue Code. Under the Stock Award Plan, directors, officersand other key employees of EEI or any of its subsidiaries may be awarded Class A Common Stock as a bonus for services rendered to the Company or its subsidiaries, based upon thefair market value of the common stock at the time of the award. The Stock Award Plan authorizes the Company’s Board of Directors to determine the vesting period and thecircumstances under which the awards may be forfeited.Under the supplemental plan which expired in October 2016, the Company issued 21,836 shares of Class A Common Stock under the Stock Award Plan, all of which are fully vested andexpensed as of July 31, 2017. In October 2016, the Company’s Board of Directors adopted the current supplemental plan, the 2016 Stock Award Plan. This plan permits awards of up to200,000 shares of Class A Common Stock for a period of up to five years until its termination in October 2021.In July 2017, the Company issued a total of 7,502 Class A shares under the 2016 Stock Award Plan, valued at less than $0.1 million, to four directors as a portion of their annualcompensation. These shares will fully vest in April 2018 upon expration of certain restrictions regarding transfer of the shares. In September 2016, EEI issued 4,450 Class A shares from the Stock Award Plan, which were valued at less than $0.1 million, to three directors as additional compensation for their roles asChairman and members of EEI’s Audit Committee. These stock awards vested immediately upon issuance, subject to certain restrictions regarding transfer of the shares that expire oneyear after issuance. 53Table of ContentsEEI recorded non-cash compensation expense of less than $0.1 million during the twelve months ended July 31, 2017, 2016 and 2015, respectively, in connection with outstanding stockcompensation awards. The "pool" of excess tax benefits accumulated in Capital in Excess of Par Value was $0.1 million at July 31, 2017 and 2016.15.Shareholders' EquityClass A and Class B Common StockThe relative rights, preferences and limitations of the Company's Class A and Class B Common Stock are summarized as follows: Holders of Class A shares are entitled to elect 25% of theBoard 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 ofClass A common shares have one-tenth the voting power of Class B common shares with respect to most other matters.In addition, Class A shares are eligible to receive dividends in excess of (and not less than) those paid to holders of Class B shares. Holders of Class B shares have the option to convertat 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 anequal 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 familymember will not cause such shares to automatically convert into Class A Common Stock.Restrictive Shareholder AgreementMessrs. Gerhard J. Neumaier (deceased), Frank B. Silvestro, Ronald L. Frank, and Gerald A. Strobel entered into a Stockholders’ Agreement dated May 12, 1970, as amended January 24,2011, which governs the sale of certain shares of Ecology and Environment, Inc. common stock (now classified as Class B Common Stock) owned by them, certain children of thoseindividuals and any such shares subsequently transferred to their spouses and/or children outright or in trust for their benefit upon the demise of a signatory to the Agreement(“Permitted Transferees”). The Agreement provides that prior to accepting a bona fide offer to purchase some or all of their shares of Class B Common Stock governed by theAgreement, that the selling party must first allow the other signatories to the Agreement (not including any Permitted Transferee) the opportunity to acquire on a pro rata basis, withright of over-allotment, all of such shares covered by the offer on the same terms and conditions proposed by the offer.Cash DividendsThe Company declared cash dividends of $1.7 million, $1.9 million and $2.1 million during fiscal years 2017, 2016 and 2015, respectively. The Company paid cash dividends of $1.7 millionduring fiscal year 2017 and $2.1 million during fiscal years 2016 and 2015. The Company paid cash dividends of $0.9 million in August 2017 and 2016 and $1.0 million in August 2015 thatwere declared and accrued in prior periods.Stock Repurchase ProgramIn August 2010, the Company’s Board of Directors approved a program for repurchase of 200,000 shares of Class A Common Stock (the “Stock Repurchase Program”). As of July 31,2017, the Company repurchased 122,918 shares of Class A stock, and 77,082 shares had yet to be repurchased under the Stock Repurchase Program. The Company did not acquire anyClass A shares under the Stock Repurchase Program during fiscal years 2017, 2016 or 2015.Noncontrolling InterestsThe Company did not purchase additional shares of any its majority owned subsidiaries during fiscal years 2017 or 2016. 54Fiscal Year EndingJuly 31, Amount (in thousands) 2018 $2,635 2019 1,999 2020 1,367 2021 1,209 2022 774 Thereafter 516 Table of ContentsDuring fiscal year 2015, Gustavson Associates, LLC (“Gustavson”), a majority owned indirect subsidiary of EEI, purchased an additional 7.2% of its outstanding common shares fromnoncontrolling shareholders for $0.3 million, paid as follows: (i) $0.1 million of cash paid on the transaction date; and (ii) $0.2 million payable in 3 annual installments during fiscal years2016, 2017 and 2018, plus interest accrued at 6% per annum. EEI’s indirect ownership of Gustavson increased to 83.6% as a result of this transaction.Accumulated Other Comprehensive LossThe components of accumulated other comprehensive loss are summarized in the following table. Balance at July 31, 2017 2016 (in thousands) Unrealized net foreign currency translation losses $(2,033) $(2,176)Unrealized net investment gains on available for sale investments 15 33 Total accumulated other comprehensive loss $(2,018) $(2,143)16.Operating Lease CommitmentsThe Company rents certain office facilities and equipment under non-cancelable operating leases and certain other facilities for servicing project sites over the term of the related long-term government contracts. Lease agreements may contain step rent provisions and/or free rent concessions. Lease payments based on a price index have rent expense recognized ona straight line or substantially equivalent basis, and are included in the calculation of minimum lease payments. Gross rental expense associated with lease commitments was $3.4 millionin fiscal year 2017 and $3.5 million in fiscal years 2016 and 2015.Future minimum rental commitments under operating leases as of July 31, 2017 are summarized in the following table.17.Defined Contribution PlansContributions to the EEI Defined Contribution Plan and EEI Supplemental Retirement Plan are discretionary and determined annually by its Board of Directors. The total expense underthis plan was $1.5 million, $1.4 million, and $1.2 million for fiscal years 2017, 2016 and 2015, respectively.18.Earnings Per ShareThe computation of basic and diluted EPS is included in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands, except share and per share amounts) Net income attributable to Ecology and Environment, Inc. $3,015 $886 $3,396 Dividend declared 1,719 1,895 2,067 Undistributed earnings (distributions in excess of earnings) $1,296 $(1,009) $1,329 Weighted-average common shares outstanding - basic and diluted 4,294,501 4,289,993 4,287,775 Distributed earnings per share $0.40 $0.44 $0.48 Undistributed earnings (distributions in excess of earnings) per share 0.30 (0.23) 0.31 Total earnings per share $0.70 $0.21 $0.79 55Table of Contents19.Segment ReportingThe Company reports segment information based on the geographic location of EEI and its direct and indirect subsidiaries. Revenue, net and long-lived assets by business segment aresummarized in the following tables. Fiscal Years Ended July 31, 2017 2016 2015 (in thousands) Revenue, net, by Business Segment: EEI and its subsidiaries located in the United States $82,094 $83,095 $88,715 Subsidiaries located in South America (1) 22,408 22,722 38,220 (1)Significant South American revenues included revenues from subsidiaries located in Peru ($6.3 million, $9.7 million and $22.8 million for fiscal years 2017, 2016 and 2015,respectively), Brazil ($8.2 million, $5.0 million and $8.0 million for fiscal years 2017, 2016 and 2015, respectively) and Chile ($7.7 million, $7.5 million and $6.5 million for fiscalyears 2017, 2016 and 2015, respectively). Balance at July 31, 2017 2016 (in thousands) Long-lived assets by geographic location: EEI and its subsidiaries located in the United States $3,293 $4,916 Subsidiaries located in South America 1,135 1,178 20.Commitments and ContingenciesLegal ProceedingsFrom time to time, the Company is a named defendant in legal actions arising out of the normal course of business. The Company is not a party to any pending legal proceeding, theresolution of which the management believes will have a material adverse effect on the Company’s results of operations, financial condition or cash flows, or to any other pending legalproceedings other than ordinary, routine litigation incidental to its business. The Company maintains liability insurance against risks arising out of the normal course of business.On February 4, 2011, the Chico Mendes Institute of Biodiversity Conservation of Brazil (the “Institute”) issued a Notice of Infraction to E&E Brasil, a majority-owned subsidiary of EEI. The Notice of Infraction concerned the taking and collecting wild animal specimens without authorization by the competent authority and imposed a fine of 520,000 Reais against E&EBrazil. The Institute also filed Notices of Infraction against four employees of E&E Brasil alleging the same claims and imposed fines against those individuals that, in the aggregate,were equal to the fine imposed against E&E Brasil. No claim has been made against EEI. 56Table of ContentsE&E Brasil has filed court claims appealing the administrative decisions of the Institute for E & E Brasil’s employees that: (a) deny the jurisdiction of the Institute; (b) state that theNotice of Infraction is constitutionally vague; and (c) affirmatively state that E&E Brasil had obtained the necessary permits for the surveys and collections of specimens underapplicable Brazilian regulations and that the protected conservation area is not clearly marked to show its boundaries. The claim of violations against one of the four employees wasdismissed. The remaining three employees have fines assessed against them that are being appealed through the federal courts. Violations against E&E Brasil are pending agencydetermination. At July 31, 2017, the Company recorded a reserve of approximately $0.4 million in other accrued liabilities related to these claims.Contract Termination ProvisionsCertain contracts contain termination provisions under which the customer may, without penalty, terminate the contracts upon written notice to the Company. In the event oftermination, the Company would be paid only termination costs in accordance with the particular contract. Generally, termination costs include unpaid costs incurred to date, earned feesand any additional costs directly allocable to the termination. The Company did not experience early termination of any material contracts during fiscal years 2017 or 2016.Item 9. Changes In and Disagreements With Accountants on Accounting and Financial DisclosureNone to report.Item 9A. Controls and ProceduresDisclosure Controls and ProceduresDisclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934,as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and proceduresinclude, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act isaccumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure. Management believes, however, that a controls system, nomatter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, within a Company have been detected.As of the end of the period covered by this report, our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of theeffectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 promulgated under the Exchange Act. Notwithstanding the material weaknesses discussed below,management has concluded that the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations andcash flows for the periods presented in conformity with U.S. GAAP.Changes in Internal Control Over Financial ReportingOther than the controls and procedures described below to address the material weaknesses disclosed in the Company’s Annual Report on Form 10-K, no changes in our internal controlover financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during fiscal year 2017 that materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control overfinancial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for externalpurposes in accordance with U.S. GAAP and includes those policies and procedures that: 57Table of Contents·pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;·provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that our receiptsand expenditures are being made only in accordance with authorizations; and·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on ourconsolidated 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 futureperiods 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.As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2016, management concluded that the Company’s internal control over financial reportingwas not effective as of July 31, 2016 due to a material weakness in the Company’s internal control over financial reporting. A material weakness is a deficiency, or a combination ofdeficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statementswould not be prevented or detected on a timely basis.Specifically, management identified control deficiencies related to: (i) contingent losses that were incorrectly accrued as liabilities by certain foreign subsidiaries during fiscal years priorto 2016; and (ii) deferred income tax assets and liabilities that were incorrectly recorded by certain foreign subsidiaries during fiscal years prior to 2016. Although the combineddeficiencies did not result in a material misstatement of the Company’s financial statements for any of the periods presented in this Form 10-K, management concluded that there was areasonable possibility that, if any material misstatement had occurred, it would not have been prevented or detected on a timely basis.Management developed a remediation plan to address the material weakness noted above. Specifically, the following controls were established during fiscal year 2017, and were deemedby management to be effective as of July 31, 2017:·Foreign accounting staff were trained regarding U.S. GAAP accounting and reporting requirements and reporting risks inherent in their balance sheets;·Specific controls were developed to ensure review of assets and liabilities that require significant management judgement to determine recorded values;·Management contracted with local tax experts in Peru, Chile and Brazil to review tax provisions and tax filings; and·Corporate finance management located in the U.S. developed new review controls to ensure adequate oversight and review of the accounting and reporting activities ofsubsidiaries.Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management assessed the effectiveness of our internal control over financialreporting as of July 31, 2017 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—IntegratedFramework (1992). Based upon this assessment, management has concluded that the Company’s internal control over financial reporting was not effective as of July 31, 2017 due tomaterial weaknesses in the Company’s internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financialreporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected on a timelybasis.Specifically, management identified control deficiencies related to the Company’s accounting for income taxes and to management's review controls over the financial statement closeprocess, particularly controls related to certain non-routine and estimation processes (i.e., the goodwill impairment assessment model) and review controls related to the Company'sintercompany and consolidation process. Although the deficiencies did not result in a material misstatement of the Company’s financial statements for any of the periods presented inthis Form 10-K, management concluded that there was a reasonable possibility that, if any material misstatement had occurred, it would not have been prevented or detected on a timelybasis. 58Table of ContentsManagement has developed a remediation plan to address the material weakness noted above. Specifically, the following controls have been established or will be established duringthe fiscal year ended July 31, 2018: ·Enhancing management review controls over the financial statement close process to ensure appropriate cutoff for purposes of recording revenues and expenses, and appropriatereview of the consolidation process, including intercompany elimination entries;·Expanding the roles of third-party tax experts for preparation and review of income tax provisions, and development of specific procedures for management to monitor and reviewthe work of third-party tax experts; and·Developing a process for periodic review of specific key factors and assumptions utilized in the goodwill impairment assessment model to identify changes that potentially couldresult in goodwill impairment.Management has developed a detailed plan and timetable for the implementation of the foregoing remediation efforts. Under the direction of the Audit Committee, management willmonitor the implementation plan and continue to review and make necessary changes to the plan to improve the overall design of the Company’s internal control environment.In May 2014, COSO adopted an updated Internal Control—Integrated Framework, which includes enhancements to, and clarifications of, its original framework published in 1992. TheCompany adopted COSO’s updated framework during fiscal year 2017, and intends to fully implement the updated framework during fiscal year 2018.This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. By:/s/Gerard A. Gallagher III By:/s/H. John Mye III Gerard A. Gallagher III H. John Mye III Chief Executive Officer Chief Financial and Accounting OfficerItem 9B. Other InformationNone to report. 59Table of ContentsPART IIIItem 10. Directors and Executive Officers of the RegistrantThe names, ages and positions of the executive officers and Directors of the Company are included in the following table.NameAgePosition Marshall A. Heinberg60Chairman of the Board and DirectorRonald L. Frank79Executive Vice President, Secretary, and DirectorGerard A. Gallagher III60President and Chief Executive OfficerFred J. McKosky63Senior Vice President, Chief Operating OfficerH. John Mye III65Vice President, Chief Financial and Accounting Officer, and TreasurerCheryl A. Karpowicz66Senior Vice PresidentFrank B. Silvestro80DirectorGerald A. Strobel77DirectorMichael C. Gross57DirectorJustin C. Jacobs43DirectorMichael El-Hillow66Director Each Director is elected to hold office until the next annual meeting of shareholders and until his successor is elected and qualified. Executive officers are elected annually and serve atthe discretion of the Board of Directors. Specific experience, qualifications, attributes and skills for each Director and executive officer follow.Mr. Marshall A. Heinberg was elected as a Director in April 2017. He was appointed Chairman of the Board of Directors and Chairman of the Governance, Nominating and CompensationCommittee in June 2017. Mr. Heinberg began his investment banking career in 1987 in the Corporate Finance Division of Oppenheimer & Co, Inc., which was acquired by CanadianImperial Bank of Commerce (“CIBC”) in 1997. Mr. Heinberg served as Head of the Investment Banking Department and as a Senior Managing Director of Oppenheimer & Co. Inc. from2008 until July 2012, and as the Head of U.S. Investment Banking at CIBC World Markets from 2001 until 2008. During his career, he has worked on several financing and merger andacquisition transactions with many leading environmental engineering and consulting firms. Mr. Heinberg is the founder and Managing Director of MAH Associates, LLC, whichprovides strategic advisory and consulting services, a director of Universal Biosensors and serves as a Senior Capital Markets Advisor to Burford Capital. Mr. Heinberg has a B.S. ineconomics from the Wharton School at the University of Pennsylvania and a J.D. from Fordham Law School. His experience managing a professional services business and in variousinvestment banking, capital markets and advisory roles provide valuable experience and perspective to the Board of Directors.Mr. Gerard A. Gallagher III has served as Chief Executive Officer (“CEO”) of the Company since 2015 and as President of the Company since 2014. He has been employed by theCompany for 35 years, and previously served as Senior Vice President of Environmental Sustainability, Vice President and Regional Manager for the Company’s Southern U.S.operations. Mr. Gallagher has a B.A. in physical geography.Mr. Fred J. McKosky has served as the Chief Operating Officer of the Company since 2014. He has been employed by the Company for 39 years, and previously served as Senior VicePresident of Corporate Operations. Mr. McKosky has an M.S. in environmental engineering and a B.S. in environmental science, and is a registered Professional Engineer in the state ofNew York.Mr. H. John Mye III has served as Chief Financial Officer, a Vice President and Treasurer of the Company since 2008. Mr. Mye was previously employed in various finance roles,including: Finance Director at Vishay Intertechnology, a high technology company located in Buffalo, N.Y. (2002-2007); Vice President with FAI, Inc., a start-up company located inBuffalo, N.Y. (2000-2002); and Director of Finance for American Precision Industries, a Fortune 500 company located in Buffalo, N.Y. (1993-2000). During his career, Mr. Mye has gainedextensive experience with management of sales, earnings and cash flow reporting, evaluating and consummating mergers and acquisitions, financial planning and analysis, and generalfinance operations. Mr. Mye has an MBA and is a registered Professional Engineer in the state of New York. 60Table of ContentsIn October 2017, Mr Mye announced his intention to retire effective six months after his announcement date.Ms. Cheryl A. Karpowicz has been a Senior Vice President of the Company since 2011 and was named Senior Vice President of Business Development in 2014. Ms. Karpowicz has beenemployed by the Company for 39 years and previously led its energy services area. She has a B.A. in Interdepartmental Studies and is a Certified Planner and member of the AmericanInstitute of Certified Planners.Mr. Frank B. Silvestro is a co-founder of the Company and served as a Vice President and Director since its inception in 1970. In 1986, he became Executive Vice President. In 2013, hewas appointed Chairman of the Board of Directors. He also serves on the Pension Review Committee. Mr. Silvestro retired from his positions as Executive Vice President and Chairmanof the Board of Directors effective January 1, 2017. He continues to serve as a Director of the Company and as a contracted consultant to the Company. Mr. Silvestro has a B.A. inphysics and an M.A. in biophysics.Mr. Ronald L. Frank is a co-founder of the Company and has served as Secretary, Treasurer, Vice President of Finance and a Director since its inception in 1970. In 1986, he becameExecutive Vice President of Finance. In 2008, Mr. Frank resigned his positions as Vice President of Finance and Treasurer of the Company. He continues in his position as Executive VicePresident on a part-time basis. He also continues to serve as a Director of the Company, as Corporation Secretary, and as Chairman of the Pension Review Committee. Mr. Frank has aB.S. in engineering and a M.A. in Physics.Mr. Gerald A. Strobel is a co-founder of the Company and has served as a Vice President and a Director since its inception in 1970. In 1986, he became Executive Vice President ofTechnical Services. He served as the Company’s CEO from 2013 until his retirement in 2015. He continues to serve as a Director of the Company and as a contracted consultant to theCompany. Mr. Strobel is a registered Professional Engineer in the state of New York, and has a B.S. in civil engineering and a M.S. in sanitary engineering.Messrs. Silvestro, Frank and Strobel each have over forty years of work experience in managing the Company and knowledge of its markets and customers, which makes them uniquelyqualified to serve as Directors.Mr. Michael C. Gross has been a Director of the Company since 2010, and currently serves on the Audit Committee, Governance, Nominating and Compensation Committee and PensionReview Committee. Mr. Gross was employed by the Audit Division of the New York State Department of Taxation and Finance for 32 years until his retirement in March 2016. He has aB.S. in accounting and was a licensed property and casualty insurance broker from 2003 until 2016. Mr. Gross’ accounting and insurance experience provide valuable experience andperspective to the Board of Directors.Mr. Justin C. Jacobs was elected as a Director in April 2017 and currently serves on the Audit Committee and the Governance, Nominating and Compensation Committee. Mr. Jacobs is aManagement Committee Director of Mill Road Capital II, L.P., an investment firm focused on investments in small, publicly traded companies, where he has worked since 2005. From 1999to 2004, Mr. Jacobs held various operational positions in numerous portfolio companies at LiveWire Capital, an investment and management group focused on control, operationally-intensive buyouts of small companies. Mr. Jacobs was an investment professional in the private equity group of The Blackstone Group from 1996 to 1999. Mr. Jacobs holds a B.S. fromthe McIntire School of Commerce at the University of Virginia. His experience in various investment banking, capital markets and advisory roles provide valuable experience andperspective to the Board of Directors.Mr. Michael El-Hillow was elected as a Director in April 2017 and was appointed Chairman of the Audit Committee in June 2017. Mr. El-Hillow served as Chief Financial Officer ofNational Technical Systems, Inc., an engineering services company, from 2012 until 2017. Mr. El-Hillow, a certified public accountant, has over two decades of experience serving as aChief Financial Officer of public companies, including in technology and engineering environments. He also has sixteen years’ experience working for Ernst & Young in numerous roles,including Audit Partner. Mr. El-Hillow holds a B.S. in Accounting from the University of Massachusetts and an MBA from Babson College. 61Table of ContentsCode of EthicsThe Company has revised its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, as well as all otheremployees, directors, officers, subsidiaries, affiliates, consultants, representatives and agents of the Company. The revised code of ethics, which the Company calls its Code ofConduct, was approved by the Board of Directors on June 1, 2017 and was filed as an exhibit to the Company’s current report on Form 8-K which was filed on June 6, 2017 and is postedon the Company's website at www.ene.com. If the Company makes any substantive amendments to, or grants a waiver (including an implicit waiver) from, a provision of its code ofethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, and that relates to any element of the code of ethics definitionenumerated in Item 406(b) of Regulation S-K, the Company will disclose the nature of such amendment or waiver in a current report on Form 8-K.Board of Directors Leadership, Structure and Risk OversightThe Board of Directors operates under the leadership of its Chairman. The Company’s restated bylaws require that the offices of Chairman of the Board, CEO and Secretary must be heldby separate individuals. Notwithstanding anything to the contrary in the previous sentence, in the event of removal, incapacity, or extended leave of the CEO, the Chairman of the Boardwill act as the CEO temporarily, until the CEO returns or is replaced by a resolution of the Board of Directors. E&E believes the current leadership structure provides the appropriatebalance of oversight, independence, administration and hands-on involvement in activities of the Board of Directors that are required for the efficient conduct of corporate governanceactivities.The Board of Directors has a standing Audit Committee established in accordance with section 3 (a)(58)(A) of the Securities Exchange Act of 1934 and the requirements of NASDAQ. Messrs. El-Hillow, Gross and Jacobs serve as members of the Audit Committee. The Board of Directors has designated Mr. El-Hillow as the financial expert serving on its AuditCommittee, as Chairman of the Audit Committee. Messrs. El-Hillow, Gross and Jacobs are each independent, as that term is used in Item 407 (a) (as to Messrs. El-Hillow, Gross andJacobs) and 407 (d)(5)(i)(B) (as to just Mr. El-Hillow) of Regulation S-K and Rule 5605 (a)(2) of the NASDAQ listing standards in that none of them is an employee of the Company, nor isthere any family relationship of those three individuals to the Company’s other Directors or any Executive Officer of the Company.The Board of Directors is responsible for overseeing the Company’s risk profile and management’s processes for managing risk. This oversight is conducted primarily through the AuditCommittee. The Audit Committee focuses on financial risks, including those that could arise from accounting and financial reporting processes, as well as review of overall risk functionand senior management’s establishment of appropriate systems and processes for managing areas of material risk to the Company, including, but not limited to, operational, financial,legal, regulatory and strategic risks.The Board of Directors has a standing Governance, Nominating and Compensation Committee that functions to ensure that the Board of Directors fulfills its legal, ethical and functionalresponsibilities through adequate corporate and Board governance. Messrs. Heinberg (Chairman), Jacobs and Gross serve on the Governance, Nominating and CompensationCommittee.The Board of Directors has a standing Pension Review Committee, the principal functions of which are to review changes to retirement plans necessitated by law or regulation and todetermine whether retirement plans meet the compensation goals for the Company’s employees as established by the Board of Directors. Messrs. Frank (Chairman), Silvestro and Grossserve on the Pension Review Committee.Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Securities Exchange Act of 1934 requires the Company’s Executive Officers and Directors, and persons who beneficially own more than ten percent (10%) of theCompany’s stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Executive Officers, Directors and greater thanten percent (10%) beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. 62Table of ContentsBased solely on a review of the copies of such forms furnished to the Company and written representations from the Company’s Executive Officers and Directors, the Company believesthat during the fiscal year ending July 31, 2017 all Section 16(a) filing requirements applicable to its Executive Officers, Directors and greater than ten percent (10%) beneficial ownerswere complied with by such persons, except for the following: Ronald L. Frank purchased 500 shares of Class A Common Stock on August 29, 2016 but did not file his Form 4 concerningthat transaction until September 1, 2016.Item 11. Executive CompensationThe Company's Board of Directors, acting as a Compensation Committee of the whole, is responsible for overseeing all of the executive compensation and equity plans and programs toensure that its officers and senior staff are compensated in a manner that is consistent with its competitively based annual and long term performance goals.The Board of Directors is responsible for establishing and approving our policies governing the compensation of our executive officers. The Company provides what it believes is acompetitive total compensation package to our executive team through a combination of base salary, cash bonuses, equity plans (for Company officers other than its Executive VicePresidents) and other broad-based benefit programs. Our compensation philosophy, policies, and practices with respect to all of the Company’s officers, including the CEO and ourthree most highly compensated officers as of July 31, 2017, is described below.Objectives and Philosophy of Our Executive Compensation ProgramOur primary objectives with respect to executive compensation are to:·attract, retain, and motivate talented executives by offering executive compensation that is competitive with our peer group;·promote the achievement of key financial and strategic performance measures by linking short- and long-term cash and equity incentives to the achievement of measurablecorporate and, in some cases, individual performance goals; and·align the incentives of our executives with the creation of value for our shareholders.We compete with many other companies for executive personnel. Accordingly, our Board of Directors will generally target overall compensation for executives to be competitive withthat of the Company’s peer group. Variations to this targeted compensation may occur depending on the experience level of the individual and market factors, such as the demand forexecutives with similar skills and experience.Our executive compensation program ties a substantial portion of each executive’s overall compensation to key strategic, financial, and operational goals such as our financial andoperational performance, the growth of our customer base, new development initiatives, and the establishment and maintenance of key strategic relationships.Components of Our Executive Compensation ProgramThe primary elements of our executive compensation program are:·base salary;·cash incentive bonuses;·equity incentive awards;·severance benefits upon termination without cause; and·insurance and other employee benefits and compensation. 63Table of ContentsWe do not have a formal or informal policy or target for allocating compensation between short-term and long-term compensation or between cash and non-cash compensation. Salariesand bonuses of executive officers are reviewed and approved annually by the Board of Directors based primarily upon: ·financial and operational performance of the Company as a whole, as evaluated against annual operating goals established by the Board of Directors;·individual performance of the executive, as evaluated against individual goals and objectives established by the Board of Directors;·performance of the executive management team as a whole, as evaluated against corporate goals and objectives established by the Board of Directors; and·informal benchmarking data, including comparison of our executive compensation to other peer companies.Bonuses of executive officers may be in the form of cash, restricted awards of Class A Common Stock, or a combination of both. The allocation between cash and non-cashcompensation of executive officers is considered annually on a discretionary basis by the Board of Directors.The following table provides a summary of the annual and long-term compensation for services in all capacities to the Company for the fiscal years ended July 31, 2017 and 2016 of thosepersons who were at July 31, 2017: (i) the Company’s CEO and President; and (ii) the three other most highly compensated executive officers employed at July 31, 2017 with annual salaryand bonus for the fiscal year ended July 31, 2017 in excess of $100,000. In this Annual Report, the four persons named in the table below are referred to as the "Named Executives." SUMMARY COMPENSATON TABLE Name andPrincipal PositionFiscalYear Salary Bonus(1) StockAwards(2) OptionAwards Non-EquityIncentive PlanCompensation NonqualifiedDeferredCompensationEarnings All OtherCompensation(3) Total Gerard A. Gallagher III2017 $324,000 $70,000 --- --- --- --- $10,930 $404,930 CEO and President2016 $314,390 $30,000 --- --- --- --- $10,930 $355,320 Ronald L. Frank2017 $213,960 --- --- --- --- --- $8,822 $222,782 Executive Vice President and Director2016 $213,960 --- --- --- --- --- $8,822 $222,782 Fred J. McKosky2017 $220,139 $55,000 --- --- --- --- $9,096 $284,235 Senior Vice President and Chief Operating Officer2016 $214,870 $30,000 --- --- --- --- $8,879 $253,749 Cheryl A. Karpowicz2017 $202,125 $35,000 --- --- --- --- $8,350 $245,475 Senior Vice President (1)Amounts earned for bonus compensation are determined at the discretion of the Board of Directors.(2)As of July 31, 2017, there were no outstanding restricted stock awards issued to Mr. Gallagher III or Mr. McKosky pursuant to the Company's Stock Award Plan.(3)Represents group term life insurance premiums and contributions made by the Company to its Defined Contribution Plan on behalf of the Named Executives.Compensation Pursuant to PlansDefined Contribution PlanThe Company maintains a Defined Contribution Plan ("the DC Plan") which is qualified under the Internal Revenue Code of 1986, as amended (“the Internal Revenue Code") pursuant towhich the Company contributes an amount not in excess of 15% of the aggregate compensation of all employees who participate in the DC Plan. All employees, including the executiveofficers identified under "Executive Compensation", are eligible to participate in the plan, provided that they have attained age 21 and completed one year of employment with at least1,000 hours of service. The amounts contributed to the plan by the Company are allocated to participants based on a ratio of each participant's points to total points of all participantsdetermined as follows: one point per $1,000 of compensation plus two points per year of service completed prior to August 1, 1979, and one point for each year of service completed afterAugust 1, 1979. 64Table of ContentsStock Award PlanEEI adopted the 1998 Stock Award Plan effective March 16, 1998. This plan, together with supplemental plans that were subsequently adopted by the Company’s Board of Directors, isreferred to as the “Stock Award Plan”. The Stock Award Plan is not a qualified plan Section 401(a) of the Internal Revenue Code. Under the Stock Award Plan, Directors, officers andother key employees of EEI or any of its subsidiaries may be awarded Class A Common Stock as a bonus for services rendered to the Company or its subsidiaries, based upon the fairmarket value of the common stock at the time of the award. The Stock Award Plan authorizes the Company’s Board of Directors to determine the vesting period and the circumstancesunder which the awards may be forfeited.Under the supplemental plan which expired in October 2016, the Company issued 21,836 shares of Class A Common Stock, all of which are fully vested as of July 31, 2017. In October2016, the Company’s Board of Directors adopted the current supplemental plan, the 2016 Stock Award Plan. This plan permits awards of up to 200,000 shares of Class A Common Stockfor a period of up to five years until its termination in October 2021. As of July 31, 2017, the Company has issued 7,502 shares of Class A Common Stock under the 2016 Stock AwardPlan, all of which are fully vested.Outstanding Equity AwardsAt July 31, 2017, there were no outstanding awards for shares of Class A Common Stock that were granted and remained subject to vesting under the Stock Award Plan.Director CompensationCompensation earned by each employee and non-employee director for his services during fiscal year 2017 is summarized in the following table. DIRECTOR COMPENSATIONName Fees Earned orPaid in Cash StockAwards(1) OptionAwards Non-EquityIncentive PlanCompensationEarnings Nonqualified DeferredCompensationEarnings All OtherCompensation(2) Total Marshall A. Heinberg (3) $12,000 $32,000 --- --- --- --- $44,000 Frank B. Silvestro $129,167 --- --- --- --- $29,166 $158,333 Ronald L. Frank --- --- --- --- --- --- --- Gerald A. Strobel $50,000 --- --- --- --- $50,000 $100,000 Michael C. Gross $35,966 $20,000 --- --- --- --- $55,966 Michael El-Hillow (3) $8,250 $22,000 --- --- --- --- $30,250 Justin C. Jacobs (3) $7,500 $20,000 --- --- --- --- $27,500 Gerard A. Gallagher, Jr. (3) $37,500 --- --- --- --- $25,397 $62,897 Michael R. Cellino, M.D. (3) $27,459 --- --- --- --- --- $27,459 Michael S. Betrus (3) $28,984 --- --- --- --- --- $28,984 (1)In July 2017, the Company issued 1,596 shares of Class A Common Stock to Mr. Gross and Mr. Jacobs, and 2,554 shares and 1,756 shares of Class A Common Stock to Mr.Heinberg, and Mr. El-Hillow, respectively. These shares vested immediately upon issuance, subject to certain restrictions regarding transfer of the shares that expire one year afterissuance.(2)Represents compensation paid under a consulting arrangement.(3)Mr. Gallagher Jr., Dr. Cellino and Mr. Betrus tenure as Directors were terminated effective April 20, 2017. Mr. Heinberg, Mr. El-Hillow and Mr. Jacobs were elected Directorseffective April 20, 2017.Bonuses paid to Directors are reviewed and approved by the Board of Directors based primarily upon: ·financial and operational performance of the Company as a whole, as evaluated against annual operating goals established by the Board of Directors;·individual performance of each Director; and·performance of the Board of Directors as a whole.As an employee Director, Mr. Frank did not receive any director fees as compensation for his services.As an employee Director, Mr. Frank did not receive any director compensation during fiscal year 2017. As non-employees, all other Directors in the table above received director feesduring fiscal year 2017. Messrs. Strobel, Gallagher and Silvestro also earned consulting fees during fiscal year 2017. Cash bonuses to EEI’s Directors were considered at the discretionof EEI’s Board of Directors prior to fiscal year 2017. During fiscal year 2017, the Board of Directors decided to discontinue cash bonuses to Directors. 65Table of ContentsOn July 19, 2017, the Board of Directors determined that annual director compensation of $50,000 will be paid 60 percent in cash and 40 percent in shares of Class A Common Stock,except that Directors holding more than 100,000 shares of Common Stock (Class A and/or Class B) have the option to decline being paid 40 percent of their director compensation inCommon Stock and can choose to take their compensation completely in cash. Messrs. Silvestro, Strobel and Frank choose to take their director compensation completely in cash. TheBoard of Directors also increased the annual director compensation for Mr. Heinberg to $75,000 for his service as Chairman of the Board of Directors plus $5,000 for also being Chair ofthe Governance, Nominating and Compensation Committee. In addition, Mr. Heinberg will be included in the Company's health care program. Mr. El-Hillow also received an additional$5,000 for chairing the Audit Committee for a total of $55,000 in annual director compensation.On July 25, 2017, the Company issued 2,554 shares, 1,596 shares, 1,756 shares and 1,596 shares of Class A Common Stock to Mr. Heinberg, Mr. Jacobs, Mr. El-Hillow and Mr. Gross,respectively. These shares will fully vest in April 2018 upon expiration of certain restrictions regarding transfer of the shares.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders MattersThe number of outstanding shares of Class A Common Stock and Class B Common Stock of the Company beneficially owned by each person known by the Company to be the beneficialowner of more than 5 percent of the then outstanding shares of Common Stock as of September 29, 2017 are summarized in the following table. Class A Common Stock Class B Common Stock Name and Address (1) Nature andAmountof BeneficialOwnership (2) (3) Percent ofClass asAdjusted (3) Nature andAmountof BeneficialOwnership (2) (3) PercentOf Class Frank B. Silvestro* 297,052 9.0% 292,052 22.6%Ronald L. Frank* 224,545 7.0% 187,234 14.5%Gerald A. Strobel* 219,604 6.8% 219,604 17.0%Gerhard J. Neumaier Testamentary Trust U/A Fourth 97,039 3.1% 97,039 7.5%Kirsten Shelly 115,558 3.7% 115,558 8.9%Edward W. Wedbush (4) 363,673 12.1% --- --- Mill Road Capital II, L.P. (5)(6) 464,668 15.4% --- --- North Star Investment Management Corporation (7) 255,750 8.5% --- --- *See Footnotes in the Security Ownership of Management table below.(1)The address for the Gerhard J. Neumaier Testamentary Trust U/A Fourth is 248 Mill Road, East Aurora, New York 14052. The address for Kevin S. Neumaier is 340 Pleasant ViewDrive, Lancaster, New York 14086. The address for Kirsten Shelly is 12 Running Brook Drive, Lancaster, New York 14086. The address for Frank B. Silvestro, Ronald L. Frank andGerald A. Strobel is c/o Ecology and Environment, Inc., 368 Pleasant View Drive, Lancaster, New York 14086, unless otherwise indicated. The address for Edward W. Wedbush isP.O. Box 30014, Los Angeles, CA 90030-0014. The address for Mill Road Capital II, L.P. is 382 Greenwich Avenue, Suite One, Greenwich, CT 06830. The address for North StarInvestment Management Corporation is 20 N. Wacker Drive, Suite 1416, Chicago, Illinois 60606.(2)Each named individual or corporation is deemed to be the beneficial owners of securities that may be acquired within 60 days through the exercise of exchange or conversionrights. The shares of Class A Common Stock issuable upon conversion by any such shareholder are not included in calculating the number of shares or percentage of Class ACommon Stock beneficially owned by any other shareholder.(3)There are 3,008,458 shares of Class A Common Stock issued and outstanding and 1,293,146 shares of Class B Common Stock issued and outstanding as of September 29, 2017. For each named individual, the percentage in the “Class A Common Stock — Percent of Class as Adjusted” column is based upon the total shares of Class A Common Stockoutstanding, plus shares of Class B Common Stock that may be converted at any time by that holder to Class A Common Stock on a per person basis. The shares of Class BCommon Stock assumed to be converted to Class A Common Stock for any named individual are not included in the calculation of the percentage of Class A Common Stockbeneficially owned by any other named individual.(4)Includes shares owned by subsidiaries and affiliates of Edward W. Wedbush based upon a Schedule 13-G filed on February 15, 2013.(5)Includes shares owned by subsidiaries and affiliates of Mill Road Capital II, L.P. (“MRC”) based upon a Form 4 filed on August 1, 2017. The shares reported are directly held byMRC; see also Footnote (6) below. Mill Road Capital II GP LLC (the “GP”) is the sole general partner of MRC and has sole authority to vote (or direct the vote of), and to dispose(or direct the disposal) of, these shares on behalf of MRC. Both Messrs. Thomas E. Lynch and Scott Scharfman are management committee directors of the GP and have sharedauthority to vote (or direct the vote of), and to dispose (or direct the disposal of), these shares on behalf of the GP. Each of the subsidiaries and affiliates of MRC listed in theForm 4 filed on January 10, 2017 disclaims beneficial ownership of such shares except to the extent of his or its pecuniary interest therein, if any. 66Table of Contents(6)Includes MRC’s acquisition of an indirect pecuniary interest in 1,596 shares of restricted stock granted by the Company to Mr. Justin Jacobs in accordance with Rule 16b-3(d) ascompensation for serving as a member of the Company’s board of directors. The shares of restricted stock will vest on April 18, 2018. Pursuant to a pre-existing contractualobligation, Mill Road Capital Management LLC, an affiliate of MRC that does not have Section 13(d) beneficial ownership of any shares of the Company, has the right to receive theeconomic benefit of the reported shares and, accordingly, Mr. Jacobs has no direct pecuniary interest in such shares. Each of the subsidiaries and affiliates of MRC listed in theForm 4 filed on January 10, 2017 may be deemed to have an indirect pecuniary interest in the reported shares. Each of the subsidiaries and affiliates of MRC listed in the Form 4 filedon January 10, 2017 disclaims beneficial ownership of such shares except to the extent of his or its pecuniary interest therein, if any. (7)Includes shares owned by North Star Investment Management Corporation based upon a Schedule 13-G filed on January 10, 2017.Security Ownership of ManagementBeneficial ownership of the Company's Class A Common Stock and Class B Common Stock as of September 29, 2017, by (i) each Director of the Company; and (ii) all Directors andofficers of the Company as a group are summarized in the following table. Class A Common Stock Class B Common Stock Name (1) Nature andAmountof BeneficialOwnership(2) (3) Percent ofClass asAdjusted(4) Nature andAmountof BeneficialOwnership(2) (3) Percentof Class Frank B. Silvestro (8) 297,052 9.0% 292,052 22.6%Ronald L. Frank (5)(8) 224,545 7.0% 187,234 14.5%Gerald A. Strobel (6)(8) 219,604 6.8% 219,604 17.0%Marshall A. Heinberg 2,554 * --- --- Michael C. Gross (7) 28,114 * 23,449 1.8%Justin C. Jacobs (9) --- --- --- --- Michael El-Hillow 1,756 * --- --- Directors and Officers Group (11 individuals) 824,754 22.1% 727,356 56.2%* Less than 1.0%(1)The address of each of the above shareholders is c/o Ecology and Environment, Inc., 368 Pleasant View Drive, Lancaster, New York 14086.(2)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, beneficial ownership of a security consists of sole or shared voting power (including the powerto vote or direct the vote) or sole or shared investment power (including the power to dispose or direct the disposition) with respect to a security whether through any contract,arrangement, understanding, relationship or otherwise. Unless otherwise indicated, the shareholders identified in this table have sole voting and investment power of theshares beneficially owned by them.(3)Each named person and all Directors and officers as a group are deemed to be the beneficial owners of securities that may be acquired within 60 days through the exercise ofexchange or conversion rights. The shares of Class A Common Stock issuable upon conversion by any such shareholder are not included in calculating the number of sharesor percentage of Class A Common Stock beneficially owned by any other shareholder.(4)There are 3,008,458 shares of Class A Common Stock issued and outstanding and 1,293,146 shares of Class B Common Stock issued and outstanding as of September 29, 2017. For each named individual, the percentage in the “Class A Common Stock — Percent of Class as Adjusted” column is based upon the total shares of Class A Common Stockoutstanding, plus shares of Class B Common Stock that may be converted at any time by that holder to Class A Common Stock on a per person basis. The shares of Class BCommon Stock assumed to be converted to Class A Common Stock for any named individual are not included in the calculation of the percentage of Class A Common Stockbeneficially owned by any other named individual.(5)Includes 8,640 shares of Class A Common Stock owned by Mr. Frank's individual retirement account and 6,265 shares of Class A Common Stock owned by Mr. Frank’s 401(k)plan account.(6)Includes 704 shares of Class B Common Stock held in equal amounts by Mr. Strobel as custodian for two of his children, as to which he disclaims beneficial ownership. Doesnot include any shares of Class B Common Stock held by a trust created by one of his children for which Mr. Strobel serves as Trustee.(7)Mr. Gross is one of three co-trustees of two inter vivos trusts established by his parents for their benefit that own these shares of Class B Common Stock and is a one-thirdcontingent remainder beneficiary of both trusts’ assets, which include an aggregate total of 70,348 such shares, of which he disclaims beneficial interest in 46,899 of thoseshares.(8)Subject to the terms of the Restrictive Agreement. See "Security Ownership of Certain Beneficial Owners-Restrictive Agreement."(9)Mr. Jacobs is a Management Committee Director of Mill Road Capital GP II LLC (the “GP”), the sole general partner of Mill Road Capital II L.P. (“MRC”). The GP has sharedpower to vote and dispose of the 463,072 shares of Class A Common Stock beneficially owned by MRC, of which 1,000 shares are held of record by MRC. Mr. Jacobs may bedeemed to be a beneficial owner of the shares of Class A Common Stock beneficially owned by MRC; however, Mr. Jacobs disclaims beneficial ownership of such shares exceptto the extent of his pecuniary interest therein. 67Table of ContentsRestrictive AgreementMessrs. Gerhard J. Neumaier (deceased), Frank B. Silvestro, Ronald L. Frank, and Gerald A. Strobel entered into a Stockholders’ Agreement dated May 12, 1970, as amended January 24,2011, which governs the sale of certain shares of Ecology and Environment, Inc. common stock (now classified as Class B Common Stock) owned by them, certain children of thoseindividuals and any such shares subsequently transferred to their spouses and/or children outright or in trust for their benefit upon the demise of a signatory to the Agreement(“Permitted Transferees”). The Agreement provides that prior to accepting a bona fide offer to purchase some or all of their shares of Class B Common Stock governed by theAgreement, that the selling party must first allow the other signatories to the Agreement (not including any Permitted Transferee) the opportunity to acquire on a pro rata basis, withright of over-allotment, all of such shares covered by the offer on the same terms and conditions proposed by the offer. Item 13. Certain Relationships and Related TransactionsFormer Director Gerard A. Gallagher, Jr.'s son, Gerard A. Gallagher, III, serves as CEO and President of the Company and received aggregate compensation of $404,930 for his servicesduring fiscal year 2017. The Company believes that his compensation was commensurate with his peers during fiscal year 2017 and that his relationships during the year werereasonable and in the best interest of the Company. Gerard A. Gallagher, Jr.'s tenure as a Director terminated effective April 20, 2017.Directors Marshall A. Heinberg, Michael El-Hillow, Michael C. Gross and Justin C. Jacobs are independent, as that term is used in Item 407(a) of Regulation S-K and Rule 5605(a)(2) of theNASDAQ listing standards, as described in their relevant business experiences set forth in Item 10 hereof in that none of them is an employee of the Company, nor is there any familyrelationship of those four individuals to the Company’s other three Directors or any Executive Officer of the Company. Item 14. Principal Accounting Fees and ServicesThe Audit Committee meets with the Company’s independent registered accounting firm to approve the annual scope of accounting services to be performed, including all audit, audit-related, and non-audit services, and the related fee estimates. The Audit Committee also meets with the Company’s independent registered accounting firm on a quarterly basis,following completion of their quarterly reviews and annual audit before our earnings announcements, to review the results of their work. As appropriate, management and ourindependent registered accounting firm update the Audit Committee with material changes to any service engagement and related fee estimates as compared to amounts previouslyapproved. Under its charter, the Audit Committee has the authority and responsibility to review and approve, in advance, any audit and proposed permissible non-audit services to beprovided to the Company by its independent registered public accounting firm.Effective November 6, 2016, the Company dismissed its independent registered public accounting firm, Schneider Downs & Co. Inc. and engaged Ernst & Young LLP as the successorindependent registered public accounting firm to provide audit and certain audit-related services. The aggregate fees billed by Ernst & Young LLP to the Company for audit and audit-related services during fiscal years 2017 and 2016 are summarized in the following table. Fiscal Year Ended July 31, 2017 2016 (in thousands) Audit fees $445 $416 Audit-related fees 24 --- Total $469 $416 68Table of ContentsAudit FeesAudit fees include aggregate fees paid or accrued for the audit of the annual financial statements included in this Annual Report on Form 10-K, reviews of the financial statementsincluded in the Company's quarterly reports on Form 10-Q, and expenses incurred related to audit services.Audit-Related FeesAudit-related fees include aggregate fees paid or accrued for services rendered for indirect rate audits. 69Table of ContentsPART IVItem 15. Exhibits, Financial Statements, Schedules(a)1.Financial Statements Page Report of Independent Registered Public Accounting Firm30 - 31 Consolidated Balance Sheets at July 31, 2017 and 201632 Consolidated Statements of Operations for the fiscal years ended July 31, 2017, 2016 and 201533 Consolidated Statements of Comprehensive Income for the fiscal years ended July 31, 2017, 2016 and 201534 Consolidated Statements of Cash Flows for the fiscal years ended July 31, 2017, 2016 and 201535 Consolidated Statements of Changes in Shareholders Equity for the fiscal years ended July 31, 2017, 2016 and 201536 Notes to Consolidated Financial Statements37 2.Financial Statement Schedules All schedules are omitted because they are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. 3.Exhibits ExhibitNo. Description 3.1 Certificate of Incorporation (1)3.2 Certificate of Amendment of Certificate of Incorporation filed on March 23, 1970 (1)3.3 Certificate of Amendment of Certificate of Incorporation filed on January 19, 1982 (1)3.4 Certificate of Amendment of Certificate of Incorporation filed on January 29, 1987 (1)3.5 Certificate of Amendment of Certificate of Incorporation filed on February 10, 1987 (1)3.6 Restated By-Laws adopted on July 30, 1986 by Board of Directors (1)3.7 Certificate of Change under Section 805-A of the Business Corporation Law filed August 18, 1988 (2)3.8 Amendment to the By-Laws dated August 21, 2013 (8)3.9 Re-stated By-Laws dated February 25, 2016 (9)3.10 Certificate of Amendment of Certificate of Incorporation filed on March 1, 2016 (9)4.1 Specimen Class A Common Stock Certificate (1)4.2 Specimen Class B Common Stock Certificates (1)10.1 Stockholders' Agreement among Gerhard J. Neumaier, Ronald L. Frank, Frank B. Silvestro and Gerald A. Strobel dated May 12, 1970 (1)10.4 Ecology and Environment, Inc. Defined Contribution Plan Agreement dated July 25, 1980 as amended on April 28, 1981 and July 21, 1983 and restated effectiveAugust 1, 1984 (1)10.5 Summary of Ecology and Environment Discretionary Performance Plan (3)10.6 1998 Ecology and Environment, Inc. Stock Award Plan and Amendments (2)10.7 2003 Ecology and Environment, Inc. Stock Award Plan (4) 10.8 2007 Ecology and Environment, Inc. Stock Award Plan (5)10.9 2011 Ecology and Environment, Inc. Stock Award Plan (7)10.10 2016 Ecology and Environment, Inc. Stock Award Plan (10)10.11 Amendment No. 1 dated January 24, 2011 to the Stockholders’ Agreement among Gerhard J. Neumaier, Ronald L. Frank, Frank B. Silvestro and Gerald A. Strobeldated May 12, 1970 (6)14.1 Code of Ethics (11)21.5 Schedule of Subsidiaries as of July 31, 2017 (12)23.1 Consent of Independent Registered Public Accounting Firm – Ernst & Young LLP (12)23.2 Consent of Independent Registered Public Accounting Firm – Schneider Downs & Co., Inc. (12)31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (12)31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (12)32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12)32.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12) 70Table of ContentsFootnotes (1)Filed as exhibits to the Company's Registration Statement on Form S-1, as amended by Amendment Nos. 1 and 2, (Registration No. 33-11543), and incorporated herein byreference. (2)Filed as exhibits to the Company's Form 10-K for Fiscal Year Ending July 31, 2002, and incorporated herein by reference. (3)Filed as exhibits to the Company's 10-K for the Fiscal Year Ended July 31, 2003, and incorporated herein by reference. (4)Filed as exhibits to the Company's 10-K for the Fiscal Year Ending July 31, 2004, and incorporated herein by reference. (5)Filed as exhibits to the Company’s 10-K for the Fiscal Year Ending July 31, 2010, and incorporated herein by reference. (6)Filed as exhibits to the Company’s 10-K for the Fiscal Year Ending July 31, 2011, and incorporated herein by reference. (7)Filed as Appendix A to the Company’s Definitive Proxy Statement (Schedule 14A) dated December 13, 2011, and incorporated herein by reference. (8)Filed as an exhibit to Current Report on Form 8-K for August 21, 2013, and incorporated herein by reference. (9)Filed as exhibits to the Company’s 10-K for the Fiscal Year Ending July 31, 2016, and incorporated herein by reference. (10)Filed as Annex B to the Company’s Definitive Proxy Statement (Schedule 14A) dated March 7, 2017, and incorporated herein by reference. (11)Filed as an exhibit to the Company’s Form 8-K dated June 1, 2017, and incorporated herein by reference. (12)Filed herewith. 71Table of ContentsPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized. ECOLOGY AND ENVIRONMENT, INC. Dated: November 14, 2017/s/ Gerard A. Gallagher III Gerard A. Gallagher, Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on thedates indicated:Signature Title Date /s/ Gerard A. Gallagher III Gerard A. Gallagher III Chief Executive Officer and President November 14, 2017 /s/ Ronald L. Frank Ronald L. Frank Executive Vice President, Secretary and Director November 14, 2017 /s/ H. John Mye III H. John Mye III Vice President, Treasurer, Chief Financial Officer and Chief Accounting Officer November 14, 2017 /s/ Marshall A. Heinberg Marshall A. Heinberg Chairman of the Board of Directors and Director November 14, 2017 /s/ Frank B. Silvestro Frank B. Silvestro Director November 14, 2017 /s/ Gerald A. Strobel Gerald A. Strobel Director November 14, 2017 /s/ Michael C. Gross Michael C. Gross Director November 14, 2017 /s/ Michael El-Hillow Michael El-Hillow Director November 14, 2017 /s/ Justin C. Jacobs Justin C. Jacobs Director November 14, 2017 72Exhibit 21.5 Subsidiaries of Ecology and Environment, Inc. (the “Company”) as of July 31, 2017 Percentage ofSubsidiary CapitalStock Owned bythe Company 1.Ecology & Environment Engineering, Inc.(a Colorado corporation)100% 2.Gestión Ambiental Consultores S.A.(a corporation formed under the laws of Chile)55.1% 3.ecology and environment do brasil Ltda.(a limited liability partnership formed under the laws of Brazil)72% 4.Walsh Environmental, LLC(a limited liability company formed under the laws of Colorado)100% 5.Gustavson Associates, LLC(a limited liability company formed under the laws of Colorado)83.6% (*) 6.Lowham-Walsh Engineering & Environment Services, LLC(a limited liability company formed under the laws of Wyoming)80.56% (*) 7.Walsh Peru, S.A. Ingenieros y Cientificos Consultores(a corporation formed under the laws of Peru)74.78% (*) 8.Servicios Ambientales Walsh, S.A.(a corporation formed under the laws of Ecuador)51% (*) 9.Tianjin Green Engineering Company(a limited liability company formed under the laws of the People's Republic of China)50% 10.Consortium of International Consultants, LLC(a limited liability company formed under the laws of Delaware)98% 11.E & E Consulting, Inc.(formed under the laws of British Columbia, Canada)100% 12.Ecology and Environment de Mexico, S.A. de C.V.(a corporation formed under the laws of Mexico)99.998% 13.Ecology & Environment of Saudi Arabia Co. Ltd.(a limited liability company formed under the laws of Saudi Arabia)66 2/3%(*)Listed percentage owned by Walsh Environmental, LLC. Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-30085) pertaining to the Ecology and Environment, Inc. 401(k) Plan of our reportdated November 14, 2017, with respect to the consolidated financial statements of Ecology and Environment, Inc. included in this Annual Report (Form 10-K) for the year ended July 31,2017./s/ Ernst & Young LLPBuffalo, New YorkNovember 14, 2017 Exhibit 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-30085) of Ecology and Environment, Inc. of our report dated October 29, 2015,relating to the consolidated financial statements for the year ended July 31, 2015, which appears in this Form 10-K./s/ Schneider Downs & Co., Inc.Pittsburgh, PennsylvaniaNovember 14, 2017 Exhibit 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERI, GERARD A. GALLAGHER III, certify that:1. I have reviewed this Annual Report for the fiscal year ended July 31, 2017 on Form 10-K of Ecology and Environment, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, resultsof operation and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which thisreport is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (theregistrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control overfinancial reporting.5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditorsand the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adverselyaffect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financialreporting. ECOLOGY AND ENVIRONMENT, INC. Date:November 14, 2017/s/ Gerard A. Gallagher III Gerard A. Gallagher III Chief Executive Officer and President (Principal Executive Officer) Exhibit 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERI, H. JOHN MYE III, certify that:1. I have reviewed this Annual Report for the fiscal year ended July 31, 2017 on Form 10-K of Ecology and Environment, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, resultsof operation and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which thisreport is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (theregistrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control overfinancial reporting.5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditorsand the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adverselyaffect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financialreporting. ECOLOGY AND ENVIRONMENT, INC. Date:November 14, 2017/s/ H. John Mye III H. John Mye III Vice President, Chief Financial Officer and Treasurer – Principal Financial Officer Exhibit 32.1Certification of Principal Executive OfficerPursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002I, Gerard A. Gallagher III, the principal executive officer of Ecology and Environment, Inc. (the “Company”), hereby certify pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that the Form 10-K of the Company for the fiscal year ended July 31, 2017 accompanying thiscertification (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairlypresents, in all material respects, the financial condition and the results of operations of the Company. This Certification is made to comply with the provisions of Section 906 of theSarbanes-Oxley Act and is not intended to be used for any other purpose. ECOLOGY AND ENVIRONMENT, INC. Date: November 14, 2017/s/ Gerard A. Gallagher III Gerard A. Gallagher III Chief Executive Officer (Principal Executive Officer) Exhibit 32.2Certification of Principal Financial OfficerPursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002I, H. John Mye, III, the principal financial officer of Ecology and Environment, Inc. (the “Company”), hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that the Form 10-K of the Company for the fiscal year ended July 31, 2017 accompanying this certification(the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in allmaterial respects, the financial condition and the results of operations of the Company. This Certification is made to comply with the provisions of Section 906 of the Sarbanes-Oxley Actand is not intended to be used for any other purpose. ECOLOGY AND ENVIRONMENT, INC. Date: November 14, 2017/s/ H. John Mye III H. John Mye III Vice President, Chief Financial Officer and Treasurer – Principal Financial Officer 

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