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SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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F O R M 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1995
or
[ ] TRANSITION REPORT REQUIRED PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________.
Commission file number 1-9065
Ecology and Environment, Inc.
(Exact name of registrant as specified in its charter)
NEW YORK 16-0971022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
368 Pleasant View Drive, Lancaster, New York 14086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (716) 684-8060
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
Class A Common Stock, American Stock Exchange, Inc.
par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X_ No ___
Exhibit Index on Page __
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, in definitive proxy or
information statements incorporated by reference in part III of this Form 10-K
or any amendments to this Form 10-K.
X
As of September 29, 1995, 2,258,376 shares of the registrant's Class
A Common Stock, $.01 par value (the "Class A Common Stock") were issued and
outstanding, and the aggregate market value (based on the closing price as
quoted by American Stock Exchange on September 29, 1995) of the Class A Common
Stock held by nonaffiliates of the registrant was approximately $18,998,486.
As of the same date, 1,858,316 shares of the registrant's Class B Common
Stock, $.01 par value ("Class B Common Stock") were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Registration Statement on Form S-1, as
amended by Amendment Nos. 1 and 2 (Registration No. 33-11543) as well as
portions of the Company's Form 10-K for Fiscal Years ending July 31, 1988,
July 31, 1990 and July 31, 1994 are incorporated by reference in Part IV of
this Form 10-K.
TABLE OF CONTENTS
INDEX
PART I
Page
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 5
General . . . . . . . . . . . . . . . . . . . . . . . . . 5
TAT Contract . . . . . . . . . . . . . . . . . . . . . . . 5
Hazardous Material Services . . . . . . . . . . . . . . . 6
Environmental Consulting Services. . . . . . . . . . . . . 6
Analytical Laboratory Services . . . . . . . . . . . . . . 7
Regulatory Background . . . . . . . . . . . . . . . . . . 8
Potential Liability and Insurance . . . . . . . . . . . . 9
Market and Customers . . . . . . . . . . . . . . . . . . . 10
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . 11
Competition . . . . . . . . . . . . . . . . . . . . . . . 11
Employees . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 12
Item 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . 12
PART II
Item 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 12
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . 14
Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . 15
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . 16
Item 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES . . . . . . . . . . . . . . . . . . 35
PART III
Page
Item 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . 35
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . 36
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS . . . . . . . . . . . . . . . . . . . . 41
SECURITIES OWNERSHIP OF MANAGEMENT . . . . . . . . . . . . 42
Item 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . 44
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS . . . . . . . . . . . . . . 45
PART I
Item 1. BUSINESS
General
Ecology and Environment, Inc. ("EEI" or the "Company") is a broad based
environmental consulting and testing firm whose underlying philosophy is to
provide professional services worldwide so that sustainable economic and human
development may proceed with minimum negative impact on the environment. The
Company offers a broad range of environmental consulting services including:
environmental audits; environmental impact assessments; terrestrial, aquatic
and marine surveys; air quality management and air toxics pollution control;
environmental engineering; noise pollution evaluations; wastewater analyses;
water pollution control; industrial hygiene and occupational health studies;
archaeological and cultural resource studies; environmental infrastructure
planning, air, water and groundwater monitoring and analytical laboratory
services.
EEI's services related to toxic, hazardous, nuclear and solid waste
disposal management include: site investigations and evaluations, hazard and
risk assessments, underground storage tank programs, remedial engineering
design and project management, oil and chemical spill emergency response and
complete regulatory compliance management programs. The Company also provides
comprehensive services to manage the removal of asbestos from educational,
institutional, governmental and commercial buildings. Virtually all of EEI's
services are available to clients, both industrial and governmental,
worldwide.
The Company employs over 75 separate disciplines embracing the physical,
biological, social and health sciences. The Company was incorporated in
February, 1970. Its principal offices are located at 368 Pleasant View Drive,
Lancaster, New York and its telephone number is 716-684-8060.
TAT Contract
In August, 1990, the Environmental Protection Agency ("EPA") awarded the
Company a Technical Assistance Team ("TAT") contract to provide technical
assistance teams to assist the EPA in responding to environmental emergencies
caused by the release of oil, petroleum or other hazardous substances and in
conducting spill prevention compliance inspections, process inspections,
contingency planning and training.
In October, 1995, the EPA issued a modification to the TAT contract which
extended the term of the contract through December, 1995. This extension
period will allow time for replacement contracts to be put in place by the
EPA. The Company, as of July 31, 1995, has realized total net revenues of
approximately $118.3 million under the TAT contract. The estimated remaining
value of the contract through the end of the extension is $15.1 million.
The TAT contract contains termination provisions under which the EPA may,
without penalty, terminate the contract upon written notice to the Company.
In the event of termination, the Company would be paid only termination costs
in accordance with the contract.
Hazardous Material Services
Introduction. EEI has conducted hazardous waste site evaluations
throughout the United States. In conducting these site evaluations, the
Company provides site investigation (e.g., geophysical surveys, monitoring
well installation, and sample collection and analysis), engineering design,
and operation and maintenance for a wide range of industrial and governmental
clients. In providing such services, the Company inventories and collects
sample materials onsite and then evaluates waste management practices,
potential off-site impacts and liability concerns. EEI then recommends and
designs clean up programs and assists in the implementation and monitoring of
those clean up programs.
Field Investigation. The Company's field investigation services
primarily involve the development of work plans, health and safety plans and
quality assurance and quality control plans to govern field investigations and
conduct such field investigations to define the nature and extent of
contaminants at a site.
Engineering Services. After field investigation services have been
completed and the necessary approvals obtained, the Company's engineering
specialists develop plans and specifications for remedial clean up activities.
This work includes the development of methods and standard operating
procedures to assess contamination problems, and to identify, develop and
design appropriate pollution control schemes. Alternative clean up strategies
are evaluated and conceptual engineering approaches are formulated. The
Company also provides supervision of actual cleanup or remedial construction
work performed by other contractors.
Environmental Consulting Services
The Company's staff includes various individuals with advanced
degrees representing over 75 scientific and engineering disciplines which
relate to the identification, quantification, analysis, and remediation of
hazards to the environment. The Company has rendered consulting services to
industrial and government clients in the following areas:
Hazard and Risk Analysis. EEI has provided analyses of the hazards and
risks of energy transportation to facility designers, contractors, and
operators for over fifteen years. The Company has developed a proprietary
hazardous material exposure model which determines the impact of potential
energy facility accidents on a plant and its employees, as well as on the
people and property in the surrounding community. EEI's hazard and risk
analyses have considered such factors as the physics of brittle fractures,
flammable vapor clouds, cryogenic liquid release and containment, thermal
radiation effects, and replacement and rerouting strategies. In addition, the
Company provides risk analysis for hazardous and toxic material spills and
releases as required under CERCLA and RCRA. These analyses have evaluated
human and ecological risks posed by contaminants in rural and urban settings,
and coastal, riverine, wetland and upland environments throughout the United
States.
Underground Storage Tank Management. The 1984 amendments to RCRA
created special provisions for the regulation of underground storage tanks.
Extensive federal regulations were promulgated in late 1988 which include
notification provisions, strict requirements for tank design and installation,
leak detection and monitoring and financial responsibility. The Company's
staff includes various individuals experienced in hydrogeology, engineering
and the evaluation of tank facilities for existing and potential leakage.
EEI's services also include analyzing the corrosive potential of underground
tanks, monitoring adjacent ground water, performing soil gas monitoring or
other geophysical procedures requiring the use of drilling equipment, and
establishing monitoring programs to verify the effectiveness of mitigative
programs and the status of properly functioning tanks. EEI also designs tank
removal, replacement and monitoring programs.
Environmental Assessments. In response to the requirements of NEPA
and other state environmental laws, EEI has provided environmental evaluation
services to both the government and the private sector for more than 22 years.
As part of the environmental evaluation process, EEI assists clients in
evaluating and developing methods to avoid or mitigate the potential
environmental impacts of a proposed project and to help ensure that the
project complies with regulatory requirements. EEI's services include air and
water quality analysis, terrestrial and aquatic biological surveys, threatened
and endangered species surveys and wetland delineations.
Archeological Surveys. The National Historic Preservation Act
(1966), Executive Order 11593 (1971), and NEPA require that developers of
certain projects requiring federal funding, licensing, or approval consider
the potential adverse effects of their projects on cultural resources. In
accordance with these regulations, EEI's archeologists conduct documentary
background research and field investigations to determine the presence of
cultural resources within proposed project areas and design plans to mitigate
adverse impacts on the resources prior to project development.
Emergency Spill Response Management. The Company has developed a
twenty-four hour emergency spill response subscription program for industrial
clients. This program generally consists of the development of a clean up
plan and supervision of the clean up and disposal operations. These functions
are generally performed by dispatching a response team to the site. The team
is supported by personnel from the Company's corporate response center. EEI's
emergency preparedness and response programs are enhanced by the use of
proprietary hazards exposure models. The Company's analytical laboratory is
used to assist in the chemical identification process.
Analytical Laboratory Services
The Company provides analytical testing services to industrial and
government customers who require accurate measurements to identify and
monitor existing hazardous waste sites. The laboratory analyzes waste, soil,
sediment, air tissue and potable and non-potable water using state of the art
computer controlled instrumentation. EEI's laboratory is a participant in the
EPA sponsored Contract Laboratory Program ("CLP"). CLP establishes methods
and procedures under which analytical laboratory services associated with
Superfund and RCRA activities are to be performed. The Company also is
certified to perform environmental testing services for some branches of the
U.S. military and a number of state agencies.
Regulatory Background
The United States Congress and most State Legislatures have enacted a
series of laws to prevent and correct environmental problems. These laws and
their implementing regulations help to create the demand for the
multi-disciplinary consulting services offered by the Company. The principal
federal legislation and corresponding regulatory programs which affect the
Company's business are as follows:
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY
ACT OF 1980, AS AMENDED ("CERCLA", "Superfund" or the "Superfund Act").
CERCLA is a remedial statute which generally authorizes the Federal government
to order responsible parties to study and clean up inactive hazardous
substance disposal sites, or, to itself undertake and fund such activities.
This legislation has four basic provisions: (i) creation of an information
gathering and analysis program; (ii) grant of federal authority to respond to
emergencies associated with contamination by hazardous substances, and to
clean up sites contaminated with hazardous substances; (iii) imposition of
joint, several, and strict liability on persons connected with the treatment
or disposal of hazardous substances which results in a release or threatened
release into the environment; and (iv) creation of a Federally managed trust
fund to pay for the clean up and restoration of sites contaminated with
hazardous substances when voluntary clean-up by responsible parties cannot be
accomplished.
As of the date of this annual report, CERCLA program funding has
been extended through December 31, 1995. Reauthorization of the Superfund law
has not occurred, however, because of a lack of consensus within Congress and
between Congress and the President on numerous aspects of the legislation,
including the extent of CERCLA program budget cuts, changes to the retroactive
liability scheme and program funding mechanisms, clean up standards,
mechanisms for allocation of potentially-responsible-party responsibility, and
state authorization for cleanups.
THE RESOURCE CONSERVATION AND RECOVERY ACT of 1976 ("RCRA"). RCRA
generally provides "cradle to grave" coverage of hazardous wastes. It seeks
to achieve this goal by imposing performance, testing and record keeping
requirements on persons who generate, transport, treat, store, or dispose of
hazardous wastes. The 1984 Hazardous Solid Waste Amendments ("HSWA") to RCRA
have strengthened the regulation of treatment, storage, and disposal
facilities, and increased the regulatory scope of RCRA to include small
quantity waste generators, waste oil handlers, and underground storage tanks.
RCRA has increased the demand for the Company's services from companies
involved in the generation, transportation, storage and disposal of hazardous
wastes. Numerous regulatory changes in the RCRA corrective action program
require RCRA regulated facilities to engage in detailed site characterization,
corrective measures study and closure activity. RCRA enforcement programs
continue to evolve and require a variety of responses including such things as
audit compliance, training and site remediation programs.
TOXIC SUBSTANCE CONTROL ACT OF 1976 ("TSCA"). TSCA authorizes the
EPA to gather information on the risks posed to public health and the
environment by chemicals and to regulate the manufacture, use and disposal of
chemical substances. The 1986 amendments to TSCA and its implementing
regulations require school systems to inspect their buildings for asbestos,
determine where asbestos containing materials pose hazards to humans and abate
those hazards. Regarding PCBs specifically, amendments to TSCA regulations
dated December 21, 1989 established comprehensive record keeping requirements
for persons engaged in PCB transportation, storage and disposal activities.
The Company's principal work under TSCA involves field sampling, site
reconnaissance, development of remedial programs and supervision of
construction activities at sites involving PCB contamination. The Company
also conducts asbestos surveys and investigations.
THE NATIONAL ENVIRONMENTAL POLICY ACT ("NEPA"). NEPA generally
requires that a detailed environmental impact statement ("EIS") be prepared
for every major federal action significantly affecting the quality of the
human environment. With limited exceptions, all federal agencies are subject
to NEPA. A number of states have EIS requirements similar to NEPA. The
Company frequently engages in NEPA related projects (or state equivalent) for
both public and private clients.
CLEAN AIR ACT. In 1990, comprehensive changes were made to the Clean
Air Act which will fundamentally redefine the regulation of air pollutants.
The Clean Air Act Amendments of 1990 have created a flurry of federal and
state regulatory initiatives and industry responses which will require the
development of detailed inventories and risk management plans, as well as the
acquisition of federally enforceable air permits. Complementary changes have
also been integrated into the RCRA Boilers and Industrial Furnace (BIF)
regulatory programs calling for upgraded air emission controls, more rigorous
permit conditions and the acquisition of permits and/or significant permit
modifications. These regulatory actions are likely to stimulate new demand
for the Company's air related services in both the public and private sector.
Other. The Company's operations are also influenced by other federal
and state laws protecting the environment: e.g. the Clean Water Act, the
Atomic Energy Act, the Oil Pollution Act of 1990, the Safe Drinking Water Act
and comparable state statutory and regulatory programs. Related laws such as
the Occupational Safety and Health Act, which regulates exposures of employees
to toxic chemicals and other physical agents in the workplace, also have a
significant impact on E & E operations. An example is the process safety
regulation issued by the Occupational Safety and Health Administration (OSHA)
which requires safety and hazard analysis and accidental release contingency
planning activity to be performed if certain chemicals are used in the work
place.
Potential Liability and Insurance
The Company's contracts with the EPA require it to maintain certain
insurance, including comprehensive general liability insurance for bodily
injury, death or loss of or damage to property. In addition, many of the
Company's other contracts require the Company to indemnify its clients for
claims, damages or losses for personal injury or property damage relating to
the Company's negligent performance of its duties unless such injury or damage
is the result of the client's negligence or willful acts. Currently, the
Company is able to provide adequate insurance coverage to meet the
requirements of its contracts, however, certain pollution exclusions apply.
Since February 1990, the Company has been able to purchase an errors and
omissions insurance policy that covers its asbestos and environmental
consulting services, including legal liability for pollution conditions
resulting therefrom. The policy is a claims made policy, with limits of $10.0
million for each claim and $10.0 million in the aggregate with a $500,000
deductible for contracts entered into subsequent to November, 1994; for
contracts entered into between February, 1990 and November, 1994, the limits
are $2.0 million for each claim and $2 million in the aggregate with a
$250,000 deductible. The Company's general liability insurance policy
provides coverage in the amount of $2.0 million per occurrence and $3.0
million in the aggregate; an excess liability policy of $10.0 million is also
maintained with respect to its general liability coverage. In addition, E & E
has a special endorsement to its general liability insurance policy up to $1.0
million for damages to third parties for bodily injury or property damage
resulting from sudden or accidental releases. With respect to EPA project
work, the EPA has agreed to indemnify the Company for third party claims to
the extent that such liability arises out of Company's negligent performance
and is not compensated by insurance. The EPA is not required to indemnify the
Company for losses that are the result of the Company's gross negligence or
willful misconduct, and the total indemnity provided under each contract
cannot exceed $50.0 million. Each EPA contract provides that this
indemnification is subject to continued funding of Superfund and imposes a
$100,000 deductible upon the Company for each EPA occurrence. Where possible,
the Company requires that its other clients cross-indemnify it for asserted
claims. There can be no assurance, however, that any of these agreements,
together with the Company's general liability insurance and errors and
omissions coverage will be sufficient to protect the Company against an
asserted claim.
Market and Customers
A substantial portion of the Company's revenues are currently derived
from the federal government under Superfund-related activities, including the
EPA, U.S. Department of Defense and U.S. Department of Energy contracts. The
balance of the Company's revenues originate from state and local governments,
domestic industrial clients, and private and governmental international
clients.
Backlog
The Company's firm backlog of uncompleted projects and maximum
potential gross revenues from indefinite quantity task order contracts, at
July 31, 1995 and 1994 were as follows:
(Millions of $)
Fiscal Year Fiscal Year
Ended 7/31/95 Ended 7/31/94
Total Firm Backlog 26.6 25.8
Anticipated Completion of Firm
Backlog in Next Twelve Months 23.7 24.1
Maximum Potential Gross Revenues
from Task Order Contracts 244.0 220.0
In October 1995, a modification was issued by the EPA to extend the
term of the TAT contract through December, 1995. The dollar value of the
extension is approximately $9.6 million in net revenues. This amount is not
included in the above figures.
This backlog includes a substantial amount of work to be performed
under contracts which contain termination provisions under which the contract
can be terminated without penalty upon written notice to the Company. The
likelihood of obtaining the full value of the task order contracts cannot be
determined at this time.
Competition
EEI is subject to competition with respect to each of the services
that it provides. No entity, including the Company, currently dominates the
environmental services industry and the Company does not believe that one
organization has the capability to serve the entire market. Some of its
competitors are larger and have greater financial resources than the Company
while others may be more specialized in certain areas. EEI competes primarily
on the basis of its reputation, quality of service, expertise, and price.
Employees
As of July 31, 1995, the Company had over 850 employees. The
Company's ability to remain competitive will depend largely upon its ability
to recruit and retain qualified personnel. None of the Company's employees is
represented by a labor organization and employee relations are good.
Item 2. PROPERTIES
The Company's headquarters (60,000 square feet) is located in
Lancaster, New York, a suburb of Buffalo. In August 1994 the Company
completed construction of its new laboratory and warehouse facility in
Lancaster, New York at a total cost of approximately $5.7 million. The
facility, consisting of two buildings totaling approximately 50,000 square
feet, commenced operations in the same month. The Company also leases office
and storage facilities at twenty-two regional offices, with terms which
generally coincide with the duration of the Company's contracts in those
areas.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Principal Market or Markets. The Company's Class A Common Stock is
traded on the American Stock Exchange. There is no separate market for the
Company's Class B Common Stock.
The following table represents the range of high and low prices of
the Company's Class A Common Stock as reported by the American Stock Exchange
for the periods indicated. Stock prices for fiscal year 1994 have been
restated to reflect the 5% stock dividend distributed in August, 1994.
Fiscal 1994 High Low
First Quarter
(commencing August 1, 1993- 16-3/4 13-1/2
October 30, 1993)
Second Quarter
(commencing October 31, 1993 - 15-1/4 13-5/8
January 29, 1994)
Third Quarter
(commencing January 30, 1994 - 14-1/2 11-3/4
April 30, 1994)
Fourth Quarter
(commencing May 1, 1994 - 12-1/2 9-7/8
July 31, 1994)
Fiscal 1995 High Low
First Quarter
(commencing August 1, 1994 - 11-1/8 9-3/4
October 29, 1994)
Second Quarter
(commencing October 30, 1994 - 10-1/4 8-3/4
January 28, 1995)
Third Quarter
(commencing January 29, 1995 - 9-5/8 7-3/4
April 29, 1995)
Fourth Quarter
(commencing April 30, 1995 - 9-3/8 7-7/8
July 31, 1995)
(b) Approximate Number of Holders of Class A Common Stock. As of
September 29, 1995, 2,258,376 shares of the Company's Class A Common Stock
were outstanding and the number of holders of record of the Company's Class A
Common Stock at that date was 555. The Company estimates that it has a
significantly greater number of Class A Common Stock shareholders because a
substantial number of the Company's shares are held in street name. As of the
same date, there were 1,858,316 shares of the Company's Class B Common Stock
outstanding and the number of holders of record of the Class B Common Stock at
that date was 82.
(c) Dividend. In the fiscal years ended July 31, 1994 and 1995, the
Company declared cash dividends of $0.29 and $0.32, respectively, per share of
common stock. The amount, if any, of future dividends remains within the
discretion of the Company's Board of Directors and will depend upon the
Company's future earnings, financial condition and requirements and other
factors as determined by the Board of Directors.
In July 1994, the Company's board of directors declared a 5%
stock dividend to both Class A and Class B shareholders of record as of
August 1, 1994 to be distributed on or before August 30, 1994. All financial
data included in this annual report with respect to net income per common
share, weighted average common shares outstanding, stock prices and stock
options have been restated to reflect the impact of the declaration of the 5%
stock dividend.
The Company's Certificate of Incorporation provides that any cash
or property dividend paid on Class A Common Stock must be at least equal to
the cash or property dividend paid on Class B Common Stock on a per share
basis.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended July 31,
1995 1994 1993 1992 1991
(In thousands, except per share amounts)
Operating data:
Gross revenues . . . . $ 91,512 $ 99,559 $ 88,747 $ 89,958 $ 99,787
Net revenues . . . . . $ 77,715 $ 86,334 $ 76,872 $ 78,402 $ 87,449
Income from operations $ 2,870 $ 7,185 $ 7,213 $ 6,870 $ 8,622
Income before income
taxes . . . . . . . $ 3,552 $ 7,645 $ 7,697 $ 7,464 $ 8,954
Net income before
cumulative effect of
accounting change . . . $ 2,154 $ 4,670 $ 4,655 $ 4,477 $ 5,315
Cumulative effect of
accounting change . . . $ - $ (118) - - -
Net Income . . . . . . $ 2,154 $ 4,552 $ 4,655 $ 4,477 $ 5,315
Net income before
cumulative effect of
accounting change
per common share . . . $ .52 $ 1.13 $ 1.13 $ 1.08 $ 1.29
Cumulative effect of
accounting change per
common share . . . . . $ - $ (.03) $ - $ - $ -
Net income per
common share . . . . . . $ .52 $ 1.10 $ 1.13 $ 1.08 $ 1.29
Cash dividends declared
per common share . . . . $ .32 $ .29 $ .25 $ .22 $ .20
Weighted average common
shares outstanding . 4,136,929 4,138,121 4,135,462 4,132,667 4,127,612
As of July 31,
1995 1994 1993 1992 1991
(In thousands)
Balance sheet data:
Working capital. . $32,662 $32,061 $33,207 $29,364 $26,074
Total assets . . . $59,476 $62,157 $56,042 $50,815 $50,406
Long-term debt . . $ 782 $ 1,345 $ 692 $ 742 $ 792
Shareholders' equity $46,907 $46,158 $42,781 $39,098 $35,447
Book value per share $11.34 $11.15 $10.35 $9.46 $8.59
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company had working capital of approximately $32.7 million at
July 31, 1995 as compared to $32.1 million at July 31, 1994. Net contract
receivables decreased $10.7 million in fiscal year 1995. This decrease was
due primarily to the delay in payment of two significant receivables at July
31, 1994 and significant improvement in the Company's collection of its
outstanding receivables. The decrease in contracts receivable resulted in
increases in cash and cash equivalents and investment securities available for
sale. Cash and cash equivalents increased $5.3 million as the Company's
short-term investments in commercial paper increased $4.0 million. Investment
securities available for sale increased $3.1 million with approximately
one-half of the increase resulting from the Company's purchase of treasury
notes and bills. The Company's accounts payable decreased $.9 million while
other accrued liabilities decreased $1.9 million. A large portion of the
accrued liability decrease was the result of the decrease in the Company's
allowance for contract adjustments account as the Company settled various
outstanding issues with government and private sector clients. These
settlements had no material impact on fiscal year 1995 net income. Also, in
February 1995 the Company made a $475,000 lump sum payment on the $1.0 million
industrial revenue bond which was obtained in fiscal year 1988 to finance a
portion of the cost of its new corporate headquarters. In addition, in June,
1995 the directors of the Company authorized the Company to repurchase up to
200,000 shares of its Class A Common Stock on the open market. As of
September 29, 1995, 21,800 shares have been repurchased.
The Company maintains an unsecured line of credit of $10.0 million with a
bank at the prevailing prime rate. There are no borrowings outstanding under
this line of credit at July 31, 1995 and none were required during fiscal year
1995. The Company has financed its activities through cash flows from
operations. Internally generated funds have been adequate to support demands
for working capital, the purchase of new fixed assets and the payment of
dividends. There are no significant working capital requirements pending at
July 31, 1995. The Company's existing cash along with that generated by
future operations and the existing credit line is expected to be sufficient to
meet the Company's needs for the foreseeable future.
Results of Operations
Net Revenues
Net revenues for fiscal year 1995 were $77.7 million, down 10% from the
$86.3 million recorded in fiscal year 1994. The decrease in net revenues for
fiscal year 1995 was due to lower private sector sales, declines in work
orders with the United States Department of Defense (DOD) and Department of
Energy (DOE) and lower sales derived from contracts with state agencies. Net
revenues from the DOD were negatively affected by that agency's decision to
shift funds targeted for environmental programs to various foreign military
activities. Private sector sales were likely affected by uncertainties
created by proposed federal legislation that would ease environmental
regulations and enforcement. In addition, a commercial customer canceled a
major energy development project which adversely affected net revenues. Total
net revenues in fiscal year 1994 were up from the $76.9 million recognized in
fiscal year 1993 primarily as a result of the Company's expanded workload
under its TAT contract and with the DOD and various energy industry clients.
A bright spot in the revenue picture is the Company's continued growth in
its international business. Fiscal year 1995 net revenues from contracts in
Kuwait, Indonesia, Venezuela, China and other non-domestic sources
significantly increased over like net revenues in fiscal year 1994. Though
these revenues are currently less than 10% of net revenues the Company expects
the contribution from the international sector to increase significantly in
the future.
Income Before Income Taxes
The Company's income before income taxes for fiscal year 1995 was $3.6
million as compared to $7.6 million recorded in the prior year. This decrease
was due primarily to the aforementioned decrease in net revenues.
Contributing to the decline in net income were increased proposal costs during
the 1995 fiscal year primarily due to the Company's efforts to obtain various
EPA contracts. The Company continues to await decisions by the EPA on the
award of these multi-year contracts. In addition, the Company experienced
reduced staff utilization and lower operating margins as a result of the
decrease in net revenues.
During the fiscal year 1995, the Company initiated streamlining measures
to decrease costs by reducing staff positions and consolidating some domestic
facilities. These initiatives, estimated at a cost reduction of $3.5 million,
helped to reduce administrative and indirect expenses in the third and fourth
quarters of fiscal year 1995. In addition, subsequent to the fiscal year-end,
additional cost reduction measures have been implemented that will bring the
total reduction in indirect costs to more than $7.0 million over the last
twelve months.
Income before income taxes for fiscal year 1994 was $7.6 million, down
slightly from the $7.7 million recorded in fiscal year 1993. This decrease
was primarily the result of increased spending in fiscal year 1994 related to
the Company's pursuit of expanded business in international markets.
Income Taxes
The effective income tax rate for fiscal year 1995 was 39.4% as compared
to 38.9% for fiscal year 1994. Differences from the federal statutory rate
consist primarily of provisions for state income taxes net of the federal tax
benefit.
During the first quarter of fiscal year 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109 which relates to
the accounting for income taxes. Consequently, net income was adversely
affected by approximately $.03 per share. This was a one time adjustment for
the adoption which will have no further impact on the tax provisions of the
Company.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants
To the Board of Directors
and Shareholders of
Ecology and Environment, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) 1. and 2. on this Form 10-K present fairly, in all
material respects, the financial position of Ecology and Environment, Inc. and
its subsidiaries at July 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended July 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for income taxes as of August 1, 1993 and
changed its method of accounting for investment securities as of July 31,
1994.
PRICE WATERHOUSE LLP
Buffalo, New York
October 2, 1995
ECOLOGY AND ENVIRONMENT, INC.
CONSOLIDATED BALANCE SHEET
July 31,
--------
1995 1994
Assets ------------- -------------
------
Current assets:
Cash and cash equivalents $9,658,139 $4,390,422
Investment securities available for sale 6,271,982 3,124,782
Contract receivables, net 24,855,471 35,541,883
Other current assets 3,663,079 3,658,266
------------- -------------
Total current assets 44,448,671 46,715,353
Property, building and equipment, net 14,314,301 14,795,610
Other assets 712,560 646,070
------------- -------------
Total assets $59,475,532 $62,157,033
============= =============
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $4,490,083 $5,405,560
Accrued payroll costs 4,428,199 5,507,237
Other accrued liabilities 2,868,431 3,570,313
Income taxes payable --- 170,776
------------- -------------
Total current liabilities 11,786,713 14,653,886
Long-term debt 782,291 1,344,792
Shareholders' equity
Preferred stock, par value $.01 per share;
authorized - 2,000,000 shares; no shares
issued --- ---
Class A common stock, par value $.01 per
share; authorized - 6,000,000 shares;
issued - 2,280,176 and 2,265,590 shares 22,801 22,655
Class B common stock, par value $.01 per
share; authorized - 10,000,000 shares;
issued - 1,884,575 and 1,899,161 shares 18,846 18,992
Capital in excess of par value 17,562,587 17,562,587
Retained earnings 29,491,719 28,602,061
Treasury stock - Class A common, 16,300 shares
in 1995; Class B common, 26,259 shares in
1995 and 1994, at cost (189,425) (47,940)
------------- -------------
Total shareholders' equity 46,906,528 46,158,355
------------- -------------
Total liabilities and shareholders' equity $59,475,532 $62,157,033
============= =============
The accompanying notes are an integral part of these financial statements.
ECOLOGY & ENVIRONMENT, INC.
CONSOLIDATED STATEMENT OF INCOME
Year ended July 31,
-------------------
1995 1994 1993
------------ ------------ ------------
Gross revenues $91,512,204 $99,559,024 $88,747,211
Less: direct subcontract costs 13,796,706 13,225,382 11,874,932
------------ ------------ ------------
Net revenues 77,715,498 86,333,642 76,872,279
------------ ------------ ------------
Operating costs and expenses:
Cost of professional services
and other direct operating
expenses 43,326,432 47,650,102 40,640,073
Administrative and indirect
operating expenses 19,034,727 20,067,218 18,129,976
Marketing and related costs 10,399,590 9,443,214 8,802,506
Depreciation 1,980,697 1,916,617 2,036,812
Interest expense 104,421 71,465 50,108
------------ ------------ ------------
74,845,867 79,148,616 69,659,475
------------ ------------ ------------
Income from operations 2,869,631 7,185,026 7,212,804
Interest income 682,175 459,552 484,096
------------ ------------ ------------
Income before income taxes 3,551,806 7,644,578 7,696,900
------------ ------------ ------------
Income tax provision (benefit):
Federal 807,958 2,469,367 2,510,926
State 217,588 593,320 611,514
Deferred 372,416 (87,447) (80,988)
------------ ------------ ------------
1,397,962 2,975,240 3,041,452
------------ ------------ ------------
Net income before cumulative effect of
accounting change 2,153,844 4,669,338 4,655,448
Cumulative effect of accounting change --- (117,690) ---
------------ ------------ ------------
Net income $2,153,844 $4,551,648 $4,655,448
============ ============ ============
Net income before cumulative effect of
accounting change per common share $0.52 $1.13 $1.13
Cumulative effect of accounting
change per common share --- (0.03) ---
----- ----- -----
Net income per common share $0.52 $1.10 $1.13
===== ===== =====
Weighted average common shares outstanding 4,136,929 4,138,121 4,135,462
============ ============ ============
The accompanying notes are an integral part of these financial statements.
ECOLOGY AND ENVIRONMENT, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Class A Class B Capital in
------- ------- ----------
Common stock Common stock excess of Retained Treasury stock
------------ ------------ --------- -------- --------------
Shares Amount Shares Amount par value earnings Shares Amount
------ ------ ------ ------ --------- -------- ------ --------
Balance at July 31, 1992 2,115,477 $21,154 1,845,653 $18,456 $15,306,583 $23,780,439 23,829 ($28,470)
Net income - 1993 --- --- --- --- --- 4,655,448 --- ---
Cash dividends paid ($.25 per
share) --- --- --- --- --- (984,663) --- ---
Conversion of Class B common
stock to Class A common stock 16,658 167 (16,658) (167) --- --- --- ---
Issuance of stock under
incentive stock option plan 1,650 17 --- --- 12,114 --- --- ---
---------- -------- ---------- -------- ------------ ------------ ------- ---------
Balance at July 31, 1993 2,133,785 $21,338 1,828,995 $18,289 $15,318,697 $27,451,224 23,829 ($28,470)
========== ======== ========== ======== ============ ============ ======= =========
Net income - 1994 --- --- --- --- --- $4,551,648 --- ---
Cash dividends paid ($.29 per
share) --- --- --- --- --- (1,141,447) --- ---
Conversion of Class B common
stock to Class A common stock 20,125 $201 (20,125) ($201) --- --- --- ---
Repurchase of stock --- --- --- --- --- --- 1,180 ($19,470)
Issuance of stock under
incentive stock option plan 3,795 38 --- --- $39,474 --- --- ---
5% stock dividend distributed
on August 30, 1994 107,885 1,078 90,291 904 2,204,416 (2,206,399) 1,250 ---
Unrealized investment loss, net --- --- --- --- --- (52,965) --- ---
---------- -------- ---------- -------- ------------ ------------ ------- ---------
Balance at July 31, 1994 2,265,590 $22,655 1,899,161 $18,992 $17,562,587 $28,602,061 26,259 ($47,940)
========== ======== ========== ======== ============ ============ ======= =========
Net income - 1995 --- --- --- --- --- $2,153,844 --- ---
Cash dividends paid ($.32 per
share) --- --- --- --- --- (1,324,317) --- ---
Conversion of Class B common
stock to Class A common stock 14,586 $146 (14,586) ($146) --- --- --- ---
Repurchase of stock --- --- --- --- --- --- 16,300 ($141,485)
Unrealized investment gain, net --- --- --- --- --- 60,131 --- ---
---------- -------- ---------- -------- ------------ ------------ ------- ---------
Balance at July 31, 1995 2,280,176 $22,801 1,884,575 $18,846 $17,562,587 $29,491,719 42,559 ($189,425)
========== ======== ========== ======== ============ ============ ======= =========
The accompanying notes are an integral part of these financial statements.
ECOLOGY AND ENVIRONMENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended July 31,
-------------------
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income $2,153,844 $4,551,648 $4,655,448
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,980,697 1,916,617 2,036,812
Gain on sale of assets (56,525) --- ---
(Gain) loss on sale of investment securities (13,145) 182 ---
(Benefit) Provision for contract adjustments (32,511) 804,908 221,050
(Increase) decrease in:
- contracts receivable 10,718,923 (8,803,549) (4,570,612)
- other current assets (85,615) (18,427) (632,882)
Increase (decrease) in:
- accounts payable (915,477) 963,767 1,218,893
- accrued payroll costs (1,079,038) 773,210 72,212
- other accrued liabilities (701,882) 139,843 302,897
- income taxes payable (170,776) 170,776 ---
Other, net (46,722) 67,350 22,380
------------- ------------- -------------
Net cash provided by operating activities 11,751,773 566,325 3,326,198
------------- ------------- -------------
Cash flows provided by (used in) investing activities:
Purchase of property, building and equipment, net (1,643,279) (6,860,128) (1,848,592)
Proceeds from sale of assets 218,222 --- ---
Purchase of investment securities (4,334,164) (196,248) (3,068,697)
Proceeds from sale of investment securities 1,303,468 49,442 ---
Investment in China joint venture --- (300,000) ---
------------- ------------- -------------
Net cash used in investing activities (4,455,753) (7,306,934) (4,917,289)
------------- ------------- -------------
Cash flows provided by (used in) financing activities:
Dividends paid (1,324,317) (1,141,447) (984,663)
Proceeds from issuance of long-term debt --- 750,000 ---
Repayment of long-term debt (562,501) (59,375) (50,000)
Issuance of common stock --- 39,512 12,130
Repurchase of common stock (141,485) (19,470) ---
------------- ------------- -------------
Net cash used in financing activities (2,028,303) (430,780) (1,022,533)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 5,267,717 (7,171,389) (2,613,624)
Cash and cash equivalents at beginning of year 4,390,422 11,561,811 14,175,435
------------- ------------- -------------
Cash and cash equivalents at end of period $9,658,139 $4,390,422 $11,561,811
============= ============= =============
The accompanying notes are an integral part of these financial statements.
ECOLOGY AND ENVIRONMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of business
Ecology and Environment, Inc. (the Company) is an environmental consulting
and testing firm whose underlying philosophy is to provide a broad range
of environmental consulting services so that sustainable economic and
human development may proceed with minimum negative impact on the
environment. Gross revenues reflected in the Company's consolidated
statement of income represent services rendered for which the Company
maintains a primary contractual relationship with its customers. Included
in gross revenues are certain services outside the Company's normal
operations which the Company has elected to subcontract to other
contractors. The costs relative to such subcontract services are deducted
from gross revenues to derive net revenues.
During fiscal years ended July 31, 1995, 1994 and 1993, the percentage of
total net revenues derived from contracts exclusively with the United
States Environmental Protection Agency (EPA) were 47%, 40% and 40%,
respectively. The Company's Technical Assistance Teams (TAT) contract
accounted for the majority of the EPA net revenue. The percentage of net
revenues derived from contracts with the United States Department of
Defense (DOD) were 17%, 18% and 11% for fiscal years ended July 31, 1995,
1994 and 1993, respectively.
2. Summary of significant accounting principles
a. Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. Also reflected in the
financial statements is the Company's 66-2/3% ownership in the assets
of a nonoperating subsidiary, Ecology and Environment of Saudi Arabia
Ltd. (EESAL) and a 50% ownership in the operating joint venture,
Beijing Yi Yi Ecology and Engineering Co. Ltd. which are being
accounted for under the equity method. All significant intercompany
transactions and balances have been eliminated. Certain amounts in
the prior years' consolidated financial statements and notes have been
reclassified to conform with the current year presentation.
b. Revenue recognition
Substantial amounts of the Company's revenues are derived from
cost-plus-fee contracts and are recognized on the basis of costs
incurred during the period, plus the fee earned. The fees under
certain government contracts are determined in accordance with
performance incentive provisions. Such awards are recognized at the
time the amounts can be reasonably determined. Provisions for
estimated contract adjustments relating to cost based contracts have
been deducted from gross revenues in the accompanying consolidated
statement of income. Such adjustments typically arise as a result of
interpretations of cost allowability under cost based contracts.
Revenues related to long-term government contracts are subject to
audit by an agency of the United States government. Government audits
have been completed through fiscal year 1986 and are currently in
process for fiscal years 1987 through 1992. The majority of the
balance in the allowance for contract adjustments accounts represent a
reserve against possible adjustments for fiscal years 1987 through
1995.
c. Investment securities
On July 31, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", which changed its method
of accounting for investment securities. As required, the provisions
of SFAS No. 115 were not applied to prior periods. Investment
securities have been classified as available for sale and are stated
at estimated fair value. Unrealized gains or losses related to
investment securities available for sale are reflected in retained
earnings, net of applicable income taxes in the consolidated balance
sheet and statement of changes in shareholders' equity. Realized
gains and losses on the sale of investment securities are determined
using the specific identification method. Prior to July 31, 1994,
investment securities were stated at the lower of cost or estimated
fair value.
d. Property, building and equipment, depreciation and amortization
Property, building and equipment are stated at cost. Office furniture
and all equipment are depreciated on the straight-line method for book
purposes, excluding computer equipment which is depreciated on the
accelerated method for book purposes, and on accelerated methods for
tax purposes over the estimated useful lives of the assets (three to
seven years). The headquarters building is depreciated on the
straight line method for both book and tax purposes over an estimated
useful life of 32 years. Its components are depreciated over their
estimated useful lives ranging from 7 to 15 years. The new analytical
services center building and warehouse is depreciated on the straight
line method over an estimated useful life of 40 years for both book
and tax purposes. Leasehold improvements are amortized for book
purposes over the terms of the leases or the estimated useful lives of
the assets, whichever is shorter, and over approximately 30 years for
tax purposes. Expenditures for maintenance and repairs are charged to
expense as incurred. Expenditures for improvements are capitalized.
When property or equipment is retired or sold, any gain or loss on the
transaction is reflected in the current year's earnings.
e. Income taxes
In the first quarter of fiscal year 1994, the Company adopted SFAS No.
109, "Accounting for Income Taxes", which changed its method of
accounting for income taxes from the deferred method to the liability
method. The cumulative effect of the implementation of SFAS No. 109
resulted in a $117,690 decrease in the Company's net deferred tax
assets in fiscal year 1994. Under the liability method, a deferred
tax liability or asset is recognized for the tax consequences of all
events that have been recognized in the financial statements. The
deferred tax consequences of such events are equal to the expected
amount of taxes payable or refundable in future years, based upon tax
laws currently in effect.
f. Pension costs
The Company has a non-contributory defined benefit plan and a
non-contributory defined contribution plan providing deferred benefits
for substantially all of the Company's employees. Additionally, in
fiscal year 1995, the Company implemented a supplemental defined
benefit and contribution plan to provide deferred benefits for senior
executives of the Company. Benefits under the defined benefit plan
are based on years of service and average compensation. The annual
expense of the Company's defined contribution plan is based on a
percentage of eligible wages as authorized by the Company's Board of
Directors. Accrued benefits under the defined benefit plan are funded
in accordance with the minimum funding requirements of the Employee
Retirement Income Security Act. Benefits under the defined
contribution plan are funded as accrued.
The Company does not offer any benefits that would result in a
liability under either SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" or SFAS No. 112
"Employers' Accounting for Postemployment Benefits".
g. Net income per common share
The computations of net income per common share are based upon the
weighted average of Class A and B common shares outstanding during
each period restated in fiscal years prior to 1995 for the 5% stock
dividend distributed on August 30, 1994.
3. Cash and cash equivalents
The Company's policy is to invest cash in excess of operating requirements
in income-producing short-term investments. At July 31, 1995 and 1994,
short-term investments consist of commercial paper. These investments are
carried at cost. Short-term investments amounted to approximately
$7,100,000 and $3,100,000 at July 31, 1995 and 1994, respectively, and are
reflected in cash and cash equivalents in the accompanying consolidated
balance sheet and statement of cash flows.
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or
less to be cash equivalents. Cash paid for interest amounted to
$104,421, $66,181, and $47,144 in fiscal years 1995, 1994 and 1993,
respectively. Cash paid for income taxes amounted to $1,969,248,
$2,868,633 and $3,113,032 in fiscal years 1995, 1994 and 1993,
respectively.
4. Investment securities
The amortized cost and estimated fair values of investment securities were
as follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
July 31, 1995
Investment securities
available for sale:
Mutual funds $2,492,564 $ - $ 21,691 $2,470,873
Municipal notes and bonds 2,301,011 3,208 2,557 2,301,662
U.S. Treasury notes and
bills 1,465,587 33,860 - 1,499,447
---------- ---------- ---------- ----------
$6,259,162 $ 37,068 $ 24,248 $6,271,982
========== ========== ========== ==========
July 31, 1994
Investment securities
available for sale:
Mutual funds $2,201,372 $ - $ 58,739 $2,142,633
Municipal notes and
bonds 1,013,949 - 31,800 982,149
---------- ---------- ---------- ----------
$3,215,321 $ - $ 90,539 $3,124,782
========== ========== ========== ==========
The amortized cost and estimated fair value of debt securities available for
sale by contractual maturity as of July 31, 1995 were as follows:
Amortized Estimated
cost fair value
Due in one year or less $1,565,520 $1,599,176
Due after one year through five years 976,453 977,490
Due after five years through ten years 724,625 724,443
Due after ten years 500,000 500,000
---------- ----------
3,766,598 3,801,109
Mutual Funds Available for Sale 2,492,564 2,470,873
---------- ----------
$6,259,162 $6,271,982
========== ==========
Proceeds, gross realized gains and losses from the sale of investment
securities were $1,303,468, $15,237 and $2,092, respectively, in fiscal
year 1995 and $49,442, $0 and $182, respectively, in fiscal year 1994.
5. Contract receivables, net
July 31,
1995 1994
United States government -
Billed $ 7,253,451 $14,075,092
Unbilled 9,366,677 9,308,379
------------ ------------
16,620,128 23,383,471
------------ ------------
Industrial customers and state
and municipal governments -
Billed 3,904,639 7,522,308
Unbilled 4,876,597 5,474,046
------------ ------------
8,781,236 12,996,354
------------ ------------
Less allowance for contract
adjustments (545,893) (837,942)
------------ ------------
$24,855,471 $35,541,883
============ ============
United States government receivables arise from long-term U.S. government
prime contracts and subcontracts. Unbilled receivables result from
revenues which have been earned, but are not billed as of period-end. The
above unbilled balances are comprised of incurred costs plus fees not yet
processed and billed; and differences between year-to-date provisional
billings and year-to-date actual contract costs incurred and fees earned
of approximately $3,076,000 at July 31, 1995 and $1,976,000 at July 31,
1994. Management anticipates that the July 31, 1995 unbilled receivables
will be substantially billed and collected in fiscal 1996. Within the
above billed balances are contractual retainages in the amount of
approximately $1,308,000 at July 31, 1995 and $1,139,000 at July 31, 1994.
Included in other accrued liabilities is an additional allowance for
contract adjustments relating to potential cost disallowances on amounts
billed and collected of approximately $2,578,000 at July 31, 1995 and
$3,232,000 at July 31, 1994.
6. Property, building and equipment, net
July 31,
1995 1994
Land $ 528,320 $ 496,716
Buildings 12,680,520 12,291,491
Laboratory and other equipment 5,643,381 5,374,302
Data processing equipment 6,094,694 5,734,736
Office furniture and equipment 4,114,857 3,693,887
Leasehold improvements and other 1,314,684 1,469,231
------------ ------------
30,376,456 29,060,363
Less accumulated depreciation
and amortization (16,062,155) (14,264,753)
------------ ------------
$14,314,301 $14,795,610
============ ============
7. Line of credit
The Company has an unsecured $10,000,000 line of credit available which is
subject to annual renewal and which bears interest at the prime rate. No
borrowings on the line of credit were outstanding at July 31, 1995 and
July 31, 1994 and none were required during fiscal years 1995 and 1994.
8. Long-term debt
During fiscal year 1994, the Company obtained industrial revenue bond
capital lease financing in the amount of $750,000 to finance a portion of
the cost of the newly constructed analytical services facility. The lease
is collateralized by a portion of the land and the analytical services
facility building in an amount equal to the bond. The bond is payable in
equal monthly principal installments of $3,125 through 2014 and bears
interest at the borrower's base rate which approximates prime (8.75% at
July 31, 1995). In addition, the Company must meet certain financial
ratio covenants relating to current assets to current liabilities and debt
to tangible net worth. At July 31, 1995 the Company was in compliance
with all financial ratio covenants.
During fiscal year 1988, the Company obtained industrial revenue bond
capital lease financing in the amount of $1,000,000 to finance a portion
of the cost of the newly constructed corporate headquarters. The lease is
collateralized by a portion of the land and the corporate headquarters
building in an amount equal to the bond. The bond is payable in equal
monthly principal installments of $4,167 through 2008 and bears interest
at the borrower's base rate which approximates prime (8.75% at July 31,
1995). In February 1995, the Company made a $475,000 lump-sum payment on
this bond.
The current portion of long-term debt at July 31, 1995 in the amount of
$87,500 is included in other accrued liabilities in the accompanying
consolidated balance sheet.
9. Income taxes
The provision for income taxes differs from the federal statutory rate due
to the following:
Fiscal year
1995 1994 1993
Statutory rate 34.0% 34.0% 34.0%
State income taxes, less federal
effect 5.4 4.7 5.1
Other - .2 .4
----- ----- -----
Effective tax rate 39.4% 38.9% 39.5%
===== ===== =====
The deferred (benefit) for income taxes resulted from the following:
1993
Provisions for cost based contract
adjustments $ 46,000
Excess depreciation (90,000)
Vacation and compensatory time (26,000)
State taxes (16,000)
Other 5,012
-----------
$ (80,988)
===========
Deferred tax assets (liabilities) included in other current assets were
comprised of the following:
July 31,
1995 1994
Allowance for contract adjustments $1,276,453 $1,669,275
Vacation and compensatory time 720,495 764,966
Excess depreciation 217,373 140,703
Other 37,574 90,529
----------- -----------
Gross deferred tax assets 2,251,895 2,665,473
State income taxes (134,035) (155,489)
Other (87,844) (64,324)
----------- -----------
Gross deferred tax liabilities (221,879) (219,813)
----------- -----------
Net deferred current asset $2,030,016 $2,445,660
=========== ===========
10. Shareholders' equity
a. Stock dividend
On July 1, 1994, the Board of Directors declared a 5% stock dividend
on the Company's Class A and Class B common stock distributed on
August 30, 1994 to shareholders of record on August 1, 1994. As of
July 31, 1994, an amount equal to the fair value of the common stock
distributed was transferred from retained earnings to the common stock
and capital in excess of par value accounts. All data with respect to
net income per common share, weighted average common shares
outstanding, stock prices and stock options has been retroactively
adjusted to reflect the stock dividend.
b. Class A and Class B common stock
The relative rights, preferences and limitations of the Company's
Class A and Class B common stock can be summarized as follows:
Holders of Class A shares are entitled to elect 25% of the Board of
Directors so long as the number of outstanding Class A shares is at
least 10% of the combined total number of outstanding Class A and
Class B common shares. Holders of Class A common shares have
one-tenth the voting power of Class B common shares with respect to
most other matters.
In addition, Class A shares are eligible to receive dividends in
excess of (and not less than) those paid to holders of Class B shares.
Holders of Class B shares have the option to convert at any time, each
share of Class B common stock into one share of Class A common stock.
Upon sale or transfer, shares of Class B common stock will
automatically convert into an equal number of shares of Class A common
stock, except that sales or transfers of Class B common stock to an
existing holder of Class B common stock or to an immediate family
member will not cause such shares to automatically convert into Class
A common stock.
c. Incentive stock option plan
Under the Company's incentive stock option plan (the "plan"), key
employees, including officers of the Company, may be granted options
to purchase shares of Class A common stock at an option price of at
least 100% of the shares' fair market value at the date of grant.
Shares become exercisable after a minimum holding period of five
years. The plan's data has been retroactively adjusted to reflect the
stock dividend declared in fiscal year 1994.
During the three year period ended July 31, 1995, 19,500, 21,315 and
25,042 options were granted at prices of $9.00, $12.38 and $12.38,
respectively. Exercised options during the same period amounted to
0, 3,985 and 1,732, respectively, in the price range between $5.65 and
$13.10. Canceled options during the same period amounted to 13,525,
1,942 and 2,205, respectively, in the price range between $5.65 and
$13.10. Options outstanding during the same period were 175,181,
169,206 and 153,818, respectively, in the price range between $5.65
and $16.08.
Of the options outstanding at July 31, 1995, 85,763 are currently
exercisable at prices ranging between $5.65 and $13.10. Shares
available for future grants under this plan amounted to 22,014 and
27,989 at July 31, 1995 and 1994, respectively. A total of 209,390
shares were authorized for granting under the plan.
11. Lease commitments
The Company rents certain office facilities and equipment under noncancel-
able operating leases. The Company also rents certain facilities for
servicing project sites over the term of the related long-term government
contracts. These contracts provide for reimbursement of any remaining
rental commitments under such lease agreements in the event that the
government terminates the contract.
At July 31, 1995, future minimum rental commitments, net of estimated
amounts allocable to government contracts with rental cost reimbursement
clauses, were as follows:
Fiscal year Gross Reimbursable Net
1996 $1,434,757 $451,120 $983,637
1997 801,649 146,291 655,358
1998 361,332 36,563 324,769
1999 241,302 36,563 204,739
2000 23,184 9,140 14,044
Gross rental expense under the above lease commitments for 1995, 1994, and
1993 was $2,637,185, $2,882,597, and $2,776,612, respectively.
12. Pension plans
a. Defined benefit plan
The Company's pension expense associated with this plan for fiscal
years ended July 31, 1995, 1994, and 1993 was $470,996, $521,597, and
$315,639, respectively. The increase in fiscal year 1994 expenses is
attributable to an increase in both eligible participants and
benefits earned during the period.
Pension cost of this plan includes the following cost components:
1995 1994 1993
Service cost -
benefits earned during the period $408,900 $385,000 $270,000
Interest costs on projected benefit
obligation 342,100 325,300 241,000
Actual return on plan assets (351,212) 22,113 (261,063)
Net amortization and deferral 71,208 (210,816) 65,702
--------- --------- ---------
Net periodic pension cost $470,996 $521,597 $315,639
========= ========= =========
Data relating to the funding position of this plan were as follows:
July 31,
1995 1994
Actuarial present value of:
Vested benefit obligations $2,680,500 $2,487,500
Nonvested benefit obligations 337,400 184,000
----------- -----------
Accumulated benefit obligations 3,017,900 2,671,500
Benefits attributable to future
salaries 1,453,600 1,779,400
----------- -----------
Projected benefit obligations 4,471,500 4,450,900
Plan assets at fair value 4,026,596 3,402,098
----------- -----------
Excess of projected benefit
obligations over plan assets 444,904 1,048,802
----------- -----------
Remaining unrecognized net asset
at transition 11,431 14,521
Unrecognized experience loss (923,861) (957,861)
Unrecognized prior service costs 224,903 (38,291)
----------- -----------
Net accrued pension (asset) liability $ (242,623) $ 67,171
=========== ===========
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the above benefit
obligations were 7.5% and 5%, respectively, for fiscal years 1995 and
1994. The expected long-term rate of return on plan assets was 9%
for fiscal years 1995 and 1994. The plan assets are primarily
invested in corporate bonds, money market funds and U.S. government
securities.
In September 1995, the Company made the decision to terminate the
defined benefit plan. No material impact on the financial results
for fiscal year 1996 is anticipated.
b. Defined contribution plan
Contributions to the defined contribution plan are discretionary and
determined annually by the Board of Directors. The total expens
under the plan for fiscal years 1995, 1994, and 1993 was $1,786,857,
$1,722,959, and $1,621,777, respectively.
13. Contingencies
Certain contracts with the EPA contain termination provisions under which
the EPA may, without penalty, terminate the contracts upon written notice
to the Company. In the event of termination, the Company would be paid
only termination costs in accordance with the particular contract.
The Company is involved in litigation arising in the normal course of
business. In the opinion of management, any adverse outcome to this
litigation would not have a material impact on the financial results of
the Company.
14. Selected quarterly financial data (Unaudited)
---------------------------------------------
Quarter
--------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
(In thousands, except per share information)
1995
----
Gross revenues $26,322 $21,811 $20,962 $22,417
Net revenues 21,937 18,773 18,469 18,536
Income from operations 1,767 944 149 10
Income before income taxes 1,870 1,128 329 225
Net income 1,130 699 192 133
Net income per common share $0.27 $0.17 $0.05 $0.03
Cash dividends declared per
common share $ -- $0.16 $ -- $0.16
1994
----
Gross revenues $26,461 $22,829 $23,944 $26,325
Net revenues 22,117 19,656 21,790 22,771
Income from operations 2,207 1,621 1,654 1,703
Income before income taxes 2,331 1,742 1,751 1,821
Net income before cumulative
effect of accounting change 1,422 1,063 1,076 1,108
Cum. effect of accounting change (118) --- --- ---
Net income 1,305 1,063 1,076 1,108
Net income before cumulative
effect of accounting change
per common share $0.34 $0.26 $0.26 $0.27
Cum. effect of accounting change
per common share ($0.03) --- --- ---
Net income per common share $0.31 $0.26 $0.26 $0.27
Cash dividends declared per
common share $ -- $0.14 $ -- $0.15
ECOLOGY AND ENVIRONMENT, INC.
SCHEDULE VIII
Allowance for Doubtful Accounts
Years Ended July 31, 1995, 1994, and 1993
Balance at Charged to Balance
Beginning Cost and at End
Year Ended of Period Expense Deduction* of Year
July 31, l995 $4,070,326 $ (32,511) $ 914,106 $3,123,709
July 31, 1994 $4,318,418 $ 804,908 $1,053,000 $4,070,326
July 31, 1993 $4,452,527 $ 221,050 $ 355,159 $4,318,418
* Various outstanding issues with government and private sector clients were
settled by the Company. These settlements had no impact on the operating
results for any of the fiscal years presented.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of the
Directors and executive officers of the Company.
Name Age Position
Gerhard J. Neumaier 58 President and Director
Frank B. Silvestro 58 Executive Vice President
and Director
Gerald A. Strobel 55 Executive Vice President of
Technical Services and Director
Ronald L. Frank 57 Executive Vice President of Finance,
Secretary, Treasurer and Director
Gerard A. Gallagher, Jr. 64 Senior Vice President of Special
Projects and Director
Roger J. Gray 54 Senior Vice President
Laurence M. Brickman 51 Senior Vice President
Harvey J. Gross 67 Director
Ralph Bookbinder 65 Director
Ross M. Cellino 63 Director
Each Director is elected to hold office until the next annual meeting of
shareholders and until his successor is elected and qualified. Executive
officers are elected annually and serve at the discretion of the Board of
Directors.
Mr. Neumaier is a founder of the Company and has served as the President
and a Director since its inception in 1970. Mr. Neumaier has a B.M.E. in
engineering and a M.A. in physics.
Mr. Silvestro is a founder of the Company and has served as a Vice
President and a Director since its inception in 1970. In August 1986, he
became Executive Vice President. Mr. Silvestro has a B.A. in physics and a
M.A. in biophysics.
Mr. Strobel is a founder of the Company and has served as a Vice
President and a Director since its inception in 1970. In August 1986, he
became Executive Vice President of Technical Services. Mr. Strobel is a
registered Professional Engineer with a B.S. in civil engineering and a M.S.
in sanitary engineering.
Mr. Frank is a founder of the Company and has served as Secretary,
Treasurer, Vice President of Finance and a Director since its inception in
1970. In August 1986, he became Executive Vice President of Finance. Mr.
Frank has a B.S. in engineering and a M.S. in biophysics.
Mr. Gallagher joined the Company in 1972. In March 1979, he became a
Vice President of Special Projects and in February, 1986 he became a Director.
Mr. Gallagher is in charge of quality assurance for hazardous substance
projects. In August 1986, he became a Senior Vice
President of Special Projects. Mr. Gallagher has a B.S. in physics.
Mr. Gray joined the Company in 1970 as an engineer. In 1980, he became
Vice President and in August 1986 he became a Senior Vice President. Mr. Gray
holds a B.S. in engineering.
Mr. Brickman joined the Company in 1971. He became Vice President in
April 1988 and became a Senior Vice President in August, 1994. Mr. Brickman
has a B.S., M.S. and Ph.D. in biology.
Mr. Gross has been a Director of the Company since its inception in 1970.
Mr. Gross is an independent insurance broker and a capital financing
consultant.
Mr. Bookbinder has been a Director of the Company since its inception in
1970. Mr. Bookbinder is an independent travel consultant.
Mr. Cellino has been a Director of the Company since its inception in
1970. Since 1956, Mr. Cellino is an attorney and counselor-at-law retired
from private practice.
Item 11. EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-
term compensation for services in all capacities to the Company for the
fiscal years ended July 31, 1993, 1994 and 1995 of those persons who were at
July 31, 1995 (i) the chief executive officer and (ii) the four other most
highly compensated executive officers with annual salary and bonus for the
fiscal year ended July 31, 1995 in excess of $100,000. In this report, the
five persons named in the table below are referred to as the "Named
Executives".
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
STOCK INCENTIVE LONG-TERM ALL
NAME AND FISCAL OPTIONS COMPENSATION OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) OTHER (SHARES) PAYOUTS (2)
Gerhard J. Neumaier 1995 $220,118 $28,200 -0- -0- -0- 12,213
President and Director 1994 $213,687 $62,000 -0- -0- -0- 12,435
1993 $206,342 $62,000 -0- -0- -0- 12,118
Frank B. Silvestro 1995 $200,118 $28,200 -0- -0- -0- 11,149
Executive VP and Director 1994 $194,270 $62,000 -0- -0- -0- 12,375
1993 $187,592 $62,000 -0- -0- -0- 12,059
Ronald L. Frank 1995 $200,118 $28,200 -0- -0- -0- 11,149
Executive Vice President 1994 $194,270 $62,000 -0- -0- -0- 12,375
of Finance, Secretary, 1993 $187,592 $62,000 -0- -0- -0- 12,059
Treasurer and Director
Gerald A. Strobel 1995 $200,118 $28,200 -0- -0- -0- 11,156
Exeutive Vice President 1994 $194,270 $62,000 -0- -0- -0- 12,375
of Technical Services 1993 $187,592 $62,000 -0- -0- -0- 12,059
and Director
Gerard A. Gallagher, Jr. 1995 $177,268 $20,000 -0- -0- -0- 9,843
Senior Vice President 1994 $172,088 $43,900 -0- -0- -0- 11,339
of Special Projects and 1993 $166,172 $43,000 -0- -0- -0- 11,109
Director
(1) Amounts earned for bonus compensation determined by the Board of Directors.
(2) Represents group term life insurance premiums, contributions made by the Company to its Defined Contribution
Plan and Defined Contribution Plan SERP accruals on behalf of each of the Named Executives.
None of the Company's executive officers have employment agreements.
Directors who are not employees of the Company are paid an annual fee of
$20,826 ($20,025 prior to March 1995) payable quarterly.
Compensation Pursuant to Plans
Pension Plan. The Company maintains a Defined Benefit Pension
Plan (the "Pension Plan") which is qualified under the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"). The Pension Plan is
administered by trustees who are appointed by the Board of Directors. All
employees who have attained age 21 and who have completed one year of
employment with at least 1,000 hours of service are eligible to participate in
the Pension Plan (the "Participant").
Upon attaining age 65, the Participant receives a monthly benefit
equal to 15% of the Participant's average monthly compensation plus 15% of the
Participant's average monthly compensation in excess of the applicable social
security covered compensation reduced linearly for each year of service less
than 25 years, as follows:
ANNUAL PENSION*
Average Annual Base 15 yrs. 20 yrs. 25 yrs.
Pay Used for Computing of of of
Pension Service Service Service
$ 50,000 $ 6,812 $ 9,083 $11,353
100,000 15,812 21,083 26,353
150,000 24,812 33,083 41,353
200,000 24,812 33,083 41,353
250,000 24,812 33,083 41,353
300,000 24,812 33,083 41,353
The benefits set forth in the preceding table assume that the
employee elects a straight life annuity although the Pension Plan provides
that unless a married employee elects otherwise he will receive a joint and
survivor annuity under which he will be paid a lower annual pension during his
lifetime and his spouse will thereafter be entitled to receive 50% of such
lower pension for her lifetime. Federal law limits the annual benefits
payable from qualified pension plans in the form of a life annuity, after
reduction for Social Security benefits, to the greater of (i) $90,000 plus
adjustments for increases in the cost of living after 1987 or (ii) an
employee's accrued benefit at December 31, 1982 not to exceed $136,425. In
addition, those employees who were participants in the Pension Plan as of July
31, 1989 will receive an accrued benefit based upon 33% of the participant's
average monthly compensation in excess of the then social security wage base
with the same 25 years of service linear reduction. Effective August 1, 1989
those participants' benefits then accrued under the above described formula.
The following table shows the annual pension benefits payable on a
straight life annuity basis at normal retirement date (age 65) to each of the
individuals listed in the Summary Compensation Table on page 37, based on the
Plan's freezing of accruals as of September 30, 1995, not including any Social
Security benefits. The table below computes the annual retirement benefits
under the Retirement Plan without regard to the Internal Revenue Code's limit
on annual pension benefits. For calendar year 1994, the limitation was
$118,800. The limitation for calendar year 1995 is $120,000.
Annual Pension Years of Service Normal
Benefits (1) as of July 31, 1995 Retirement Date
Gerhard J. Neumaier $41,985 24 July 27, 2002
Frank B. Silvestro $38,515 24 February 15, 2002
Ronald L. Frank $37,300 24 August 19, 2003
Gerald A. Strobel $35,236 24 September 18, 2005
Gerard A. Gallagher, Jr. $34,942 23 May 30, 1996
The amounts of annual pension benefits are based on the full amount of
plan compensation without regard to Internal Revenue Code section 401(a)(17),
plan compensation limit ($150,000 for the 1994 plan year). Annual pension
benefits based on plan compensation limits of $150,000 would be $39,290 for
Mr. Neumaier, $36,871 for Mr. Silvestro, $35,663 for Mr. Frank, $33,605 for
Mr. Strobel and $34,136 for Mr. Gallagher. The limitation for 1995 is
$150,000.
Participants who have ten years of participation in the Pension Plan may
elect early retirement with reduced benefits after reaching age 55. The
benefit is paid in the form of an annuity, unless the Participant elects one
of the optional forms of payment available under the Pension Plan.
Subsequent to July 31, 1995 the Board of Directors voted to terminate the
Pension Plan as of November 30, 1995. It is anticipated that its termination
will be complete in fiscal year 1996.
Defined Contribution Plan. The Company also maintains a Defined
Contribution Plan ("the DC Plan") which is qualified under the Internal
Revenue Code pursuant to which 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 executive officers 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
least 1,000 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 participants determined 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 after
August 1, 1979.
Supplemental Retirement Plan. In April 1994, the Board of Directors of
the Company, in response to changes in the tax code, voted to establish a
Supplemental Executive Retirement Plans ("SERP") for purposes of providing
retirement benefits to employees including officers of the Company whose
retirement benefits under the Pension Plan and the DC Plan are reduced as a
result of the $150,000 compensation limitation imposed by the tax code change.
This plan is a non-qualified plan which provides benefits that would have been
lost from both the Pension Plan and the DC Plan due to the imposition of the
compensation restriction.
Subsequent to July 31, 1995, the Board of Directors voted to
terminate the Pension Plan SERP in conjunction with the termination of the
Defined Benefit Pension Plan.
Incentive Stock Option Plan
In February 1986, the Company adopted an Incentive Stock Option Plan
(the "Option Plan") under which key employees, including officers, of the
Company may be granted options to purchase up to an aggregate of 100,000
shares of Class A Common Stock. During the fiscal year ending July 31, 1990,
the shareholders of the Company authorized an additional 100,000 shares,
bringing the aggregate to 200,000 shares of Class A Common Stock currently
authorized to be issued under the Plan. The anti-dilution provisions of the
plan resulted in an increase of 9,390 shares upon distribution of the stock
dividend distributed by the company on August 30, 1994 to shareholders of
record on August 1, 1994. See Note 10 of "Notes to Consolidated Financial
Statements". The Board of Directors administers the Option Plan and has
authority to determine the persons to whom options are to be granted, the
number of shares to be covered by each option, the time at which each option
shall be granted, the exercise price and the time during which options may be
exercised. The Option Plan is designed to qualify as an "incentive stock
option plan" under Section 422A of the Internal Revenue Code.
The option exercise price must be at least 100% of the fair market
value per share of the Company's Class A Common Stock, as determined by the
Board of Directors on the date of grant. The exercise price may be paid in
cash or with previously owned shares of Class A Common Stock or both. The
options are exercisable commencing after a minimum holding period of not more
than ten years after the date of grant, as determined by the Board of
Directors. The exercise price of options granted to employees possessing more
than 10% of the combined voting power of all classes of capital stock on the
effective date of the grant must be not less than 110% of fair market value on
the date of grant, and the options may not be exercised more than five years
after the date of grant. The Named Executive officers found in the Summary
Compensation Table have not been granted any options pursuant to the Option
Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of September 30, 1994, the number
of outstanding shares of Class A Common Stock and Class B Common Stock of the
Company beneficially owned by each person known by the Company to be the
beneficial owner of more than 5 percent of the then outstanding shares of
Common Stock:
Class A Common Stock Class B Common Stock
Nature and Percent Nature and
Amount of of Amount of
Beneficial Class As Beneficial Percent
Ownership Adjusted Ownership of
Name and Address(1) (2) (3) (2) Class
Gerhard J. Neumaier* 346,944 13.3% 345,894 18.6%
Frank B. Silvestro* 288,937 11.3% 288,937 15.5%
Ronald L. Frank* 274,776 10.8% 268,194 14.4%
Gerald A. Strobel* 271,796 10.7% 271,796 14.6%
Lazard Freres & Co. 224,700 10.0% 0 0
* See Footnotes in next table
(1) The address for Gerhard J. Neumaier, Frank B. Silvestro, Ronald L. Frank
and Gerald A. Strobel is c/o Ecology and Environment, Inc., 368
Pleasant View Drive, Lancaster, New York 14086, unless otherwise
indicated. The address for Lazard Freres & Co. is 1 Rockefeller Plaza,
New York, New York 10020.
(2) Each named individual or corporation are deemed to be the beneficial
owners of securities that may be acquired within 60 days through the
exercise of exchange or conversion rights. The shares of Class A Common
Stock issuable upon conversion by any such shareholder are not included
in calculating the number of shares or percentage of Class A Common Stock
beneficially owned by any other shareholder.
(3) There are 2,258,376 shares of Class A Common Stock issued and outstanding
and 1,858,316 shares of Class B Common Stock issued and outstanding as of
September 30, 1995. The figures in the "as adjusted" columns are based
upon these totals and except as set forth in the preceding sentence, upon
the assumptions described in footnote 2 above.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Class A Common Stock and Class B Common
Stock as of September 30, 1995, by (i) each Director of the Company and (ii)
all Directors and officers of the Company as a group.
Class A Common Stock Class B Common Stock
Nature and Percent Nature and
Amount of of Amount of
Beneficial Class As Beneficial Percent
Ownership Adjusted Ownership of
Name (1) (2)(3) (4) (2)(3) Class
Gerhard J. Neumaier
(5)(13) 346,944 13.3% 345,894 18.6%
Frank B. Silvestro 288,937 11.3% 288,937 15.5%
(13)
Ronald L. Frank 274,776 10.8% 268,194 14.4%
(6)(13)
Gerald A. Strobel 271,796 10.7% 271,796 14.6%
(7)(13)
Harvey J. Gross (8) 99,287 4.2% 99,287 5.3%
Gerald A. Gallagher, Jr. 76,987 3.3% 76,646 4.1%
Ralph Bookbinder (9) 18,200 * 17,850 1.0%
Ross M. Cellino (10) 13,206 * 1,050 *
Directors and officers
as a Group (11)(12) 1,406,503 38.6% 1,383,243 79.4%
(10 individuals)
* Less than 0.1%
__________
(1) The address of each of the above shareholders is c/o Ecology and
Environment, Inc., 368 Pleasantview Drive, Lancaster, New York 14086.
(2) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the vote) or sole or
shared investment power (including the power to dispose or direct the
disposition) with respect to a security whether through any contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, the shareholders identified in this table have sole voting and
investment power of the shares beneficially owned by them.
(3) Each named person and all Directors and officers as a group are deemed to
be the beneficial owners of securities that may be acquired within 60
days through the exercise of exchange or conversion rights. The shares
of Class A Common Stock issuable upon conversion by any such shareholder
are not included in calculating the number of shares or percentage of
Class A Common Stock beneficially owned by any other shareholder.
Moreover, the table gives effect to only 2,781 shares of Class A Common
Stock of the total 85,238 shares of Class A Common Stock that may be
issued pursuant to the Company's Incentive Stock Option Plan, which may
be purchased within the next 60 days pursuant to vested options granted
to one officer.
(4) There are 2,258,376 shares of Class A Common Stock issued and outstanding
and 1,858,316 shares of Class B Common Stock issued and outstanding as of
September 30, 1995. The figure in the "as adjusted" columns are based
upon these totals and except as set forth in the preceding sentence, upon
the assumptions described in footnotes 2 and 3 above.
(5) Includes 525 shares of Class A Common Stock owned by Mr. Neumaier's
spouse, as to which he disclaims beneficial ownership. Includes 525
shares of Class A Common Stock owned by Mr. Neumaier's Individual
Retirement Account. Does not include any shares of Class A Common Stock
or Class B Common Stock held by Mr. Neumaier's adult children.
(6) Includes 5,450 shares of Class B Common Stock owned by one of Mr. Frank's
children and 6,067 shares of Class A Common Stock owned by one of Mr.
Frank's children as to which he disclaims beneficial ownership. Does not
include any shares of Class A Common Stock or Class B Common Stock held
by Mr. Frank's other adult children. Includes 46,225 shares of Class B
Common Stock owned by Mr. Frank's former spouse as to which he disclaims
beneficial ownership except for the right to vote the shares which he
retains pursuant to an agreement with his former spouse. Includes 515
shares of Class A Common Stock owned by Mr. Frank's individual retirement
account.
(7) Includes 44,226 shares of Class B Common Stock owned in equal amounts by
Mr. Strobel's three children (Mr. Strobel holds 21,171 shares as
custodian for these children), as to which he disclaims beneficial
ownership.
(8) Includes an aggregate of 21,047 shares of Class B Common Stock owned by
two trusts created by Mr. Gross of which he and his spouse are the sole
beneficiaries during their lifetimes.
(9) Includes 1,050 shares of Class B Common Stock owned by Mr. Bookbinder's
spouse as to which he disclaims beneficial ownership.
(10) Includes 10,396 shares of Class A Common Stock owned by Mr. Cellino's
spouse, as to which shares he disclaims beneficial ownership; also
includes 1,655 shares of Class A Common Stock owned by Mr. Cellino's
Individual Retirement Account.
(11) Does not include 49,932 shares 19,475 shares of Class A Common Stock and
30,457 shares of Class B Common Stock) owned by the Company's Defined
Contribution Plan; nor 10,175 shares of Class A Common Stock owned by the
Company's Defined Benefit Plan of which Messrs. Gerhard J. Neumaier,
Frank, Silvestro and Strobel constitute four of the five trustees of each
Plan.
(12) Includes 708 shares of Class A Common Stock which may be issued upon
exercise of a stock option granted to one officer in July 1986 pursuant
to the Company's Incentive Stock Option Plan; includes 1,181 shares of
Class A Common Stock which may be issued upon exercise of a stock option
granted to one officer in July 1988, pursuant to the Company's Incentive
Stock Option Plan; includes 892 shares of Class A Common Stock which may
be issued upon exercise of a stock option granted to one officer in July
1990, pursuant to the Company's Incentive Stock Option Plan; does not
include 892 shares of Class A Common Stock which may be issued upon
exercise of a stock option granted to one officer in September, 1991
pursuant to the Company's Incentive Stock Option Plan; does not include
787 shares of Class A Common Stock which may be issued upon the exercise
of a stock option granted to one officer in November, 1992 pursuant to
the Company's Incentive Stock Option Plan; does not include 630 shares
of Class A Common Stock which may be issued upon the exercise of a stock
option granted to one officer in April, 1994 pursuant to the Company's
Incentive Stock Option Plan; does not include 600 shares of Class A
Common Stock which may be issued upon the exercise of a stock option
granted to one officer in December, 1994 pursuant to the Company's
Incentive Stock Option Plan.
(13) Subject to the terms of the Restrictive Agreement. See "Security
Ownership of Certain Beneficial Owners-Restrictive Agreement".
Restrictive Agreement
Messrs. Gerhard J. Neumaier, Silvestro, Frank, and Strobel entered into a
Stockholders' Agreement in 1970 which governs the sale of an aggregate of
1,279,118 shares Class B Common Stock owned by them, the former spouse of one
of the individuals and the children of the individuals. The agreement
provides that prior to accepting a bona fide offer to purchase all or any part
of their shares, each party must first allow the other members to the
agreement the opportunity to acquire on a pro rata basis, with right of
over-allotment, all of such shares covered by the offer on the same terms and
conditions proposed by the offer.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS
(a) 1. Financial Statements Page
Report of Independent Accountants 17
Consolidated Balance Sheet -
July 31, 1995 and 1994 18
Consolidated Statement of Income
for the fiscal years ended July 31, 1995,
1994 and 1993 19
Consolidated Statement of Changes in
Shareholders' Equity for the fiscal years
ended July 31, 1995, 1994 and 1993 20
Consolidated Statement of Cash Flows for
the fiscal years ended July 31, 1995,
1994 and 1993 21
Notes to Consolidated Financial Statements 22
2. Financial Statement Schedule
Schedule VIII - Allowance for
Doubtful Accounts 34
All other schedules are omitted because they are not applicable, or not
required, or because the required information in included in the consolidated
financial statements or notes thereto.
3. Exhibits
Exhibit No. 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 Certificate of Amendment of Certificate of Incorporation filed
January 15, 1988 (2)
4.1 Specimen Class A Common Stock Certificate (1)
4.2 Specimen Class B Common Stock Certificate (1)
10.1 Stockholders' Agreement among Gerhard J. Neumaier, Ronald L.
Frank, Frank B. Silvestro and Gerald A. Strobel dated May 12,
1970 (1)
10.3 Ecology and Environment, Inc. Defined Benefit Pension Plan
Agreement dated July 25, 1980, as amended on April 28, 1981 and
restated effective August 1, 1984 (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 effective August 1, 1984 (1)
10.5 Ecology and Environment, Inc. 1986 Incentive Stock Option Plan
approved by Shareholders February 13, 1983 and amended and
restated by Board of Directors December 29, 1986 (1)
10.6 Form of Ecology and Environments, Inc. Incentive Stock Option
Plan option agreement (1)
10.6.1 Amendment No. 2 to Ecology and Environment, Inc. 1986 Incentive
Stock Option Plan (3)
10.9 Contract No. 68-WO-0037 issued by the Environmental Protection
Agency to Ecology and Environment, Inc. to Assistance Teams for
Emergency, Response, Removal and Protection (Zone II),
effective October 1, 1990 (3). (Note: Confidential treatment
was requested pursuant to separate application to the SEC)
21.5 Schedule of Subsidiaries as of July 31, 1994 (4)
23.0 Consent of Independent Accountants (5)
FOOTNOTES
(1) Filed as exhibits to the Company's Registration Statement on Form
S-1, as amended by Amendment Nos. 1 and 2, (Registration No.
33-11543), and incorporated herein by reference.
(2) Filed as exhibits to the Company's Form 10-K for Fiscal Year Ending
July 31, 1988, and incorporated herein by reference.
(3) Filed as exhibit to the Company's Form 10-K for Fiscal Year ending
July 31, 1990, and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Form 10-K for Fiscal Year
ending July 31, 1994, and incorporated herein by reference.
(5) Filed herewith.
(b) Reports on Form 8-K
Registrant has not filed any reports on Form 8-K during the fourth
quarter ended July 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ECOLOGY AND ENVIRONMENT, INC. has duly caused this
Annual Report to be signed on its behalf by the undersigned thereunto duly
authorized:
Dated: October __, 1995 ECOLOGY AND ENVIRONMENT, INC.
By: Gerhard J. Neumaier
Gerhard J. Neumaier, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
Signature Title Date
/S/ Gerhard J. Neumaier President October 27, 1995
Gerhard J. Neumaier (Chief Executive
Officer)
/S/ Frank B. Silvestro Executive October 27, 1995
Frank B. Silvestro Vice-President
/S/ Gerald A. Strobel Executive October 27, 1995
Gerald A. Strobel Vice-President
/S/ Ronald L. Frank Secretary, October 27, 1995
Ronald L. Frank Treasurer, Executive
Vice-President of
Finance
(Principal Financial
and Accounting Officer)
/S/ Gerard A. Gallagher, Jr. Senior Vice October 27, 1995
Gerard A. Gallagher, Jr. President of
Special Projects
and Director
/S/ Ralph Bookbinder Director October 27, 1995
Ralph Bookbinder
/S/ Harvey J. Gross Director October 27, 1995
Harvey J. Gross
/S/ Ross M. Cellino Director October 27, 1995
Ross M. Cellino
Exhibit Index
Exhibit 23 Consent of Independent Accountants
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-41998) of Ecology and Environment, Inc. of our
report dated October 2, 1995 appearing under Item 14 (a) 1. of this Form 10-K.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PRICE WATERHOUSE LLP
Buffalo, New York
October 25, 1995