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EEI > SEC Filings for EEI > Form 10-Q on 18-Mar-2013All Recent SEC Filings

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Form 10-Q for ECOLOGY & ENVIRONMENT INC


18-Mar-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Our income before income tax provision was $3.3 million for the three months ended January 31, 2013, which represented a 93% increase from our income before income taxes of $1.7 million for the same period in the prior fiscal year. A $4.0 million (10%) decrease in contract revenues was more than offset by a $5.5 million (14%) decrease in operating expenses during the current quarter.

For the six months ended January 31, 2013, our income before income tax provision of $4.2 million was 10% higher than income before income tax provision of $3.8 million for the same period in the prior fiscal year. A $9.5 million (12%) decrease in contract revenues was more than offset by a $10.0 million (13%) decrease in operating expenses during the current period.

During the three months ended January 31, 2013, we received $7.1 million of cash from clients in the Middle East, which related to billed receivables during reporting periods prior to fiscal year 2013. This resulted in a significant positive impact on our liquidity position and on revenues reported during the second quarter and first half of 2013. Refer to Results of Operations below for additional commentary.


Liquidity and Capital Resources

Cash and cash equivalents activity and balances are summarized in the following
table.

                                                        Six months ended       Six months ended
                                                        January 31, 2013       January 31, 2012
Cash (used in) provided by:
Operating activities                                   $       11,271,380     $        2,985,722
Investing activities                                           (3,450,403 )           (3,273,195 )
Financing activities                                           (8,619,297 )            3,447,527
Effect of exchange rate changes on cash and cash
equivalents                                                       194,040                 82,516

Net (decrease) increase in cash and cash equivalents   $         (604,280 )   $        3,242,570

Cash and cash equivalents:
U.S. operations                                        $        5,450,048     $        3,847,762
Foreign operations                                              4,413,442              7,924,650

Total cash and cash equivalents                        $        9,863,490     $       11,772,412

For the six months ended January 31, 2013, cash provided by operations resulted from the following net activity:
Net income (after adjustment for non-cash items) provided approximately $3.0 million of operating cash;

Net contract receivables decreased approximately $10.3 million, which resulted from cash received on outstanding receivables, including $7.1 million of cash received on outstanding receivables in the Middle East that were billed prior to July 31, 2012, and from lower revenues due to lower sales volume in the energy, mining, state and federal government markets; and

Other working capital activity resulted in a net use of $2.0 million of operating cash, due primarily to decreased work levels associated with lower revenue and payment of subcontractor invoices as a result of an improved liquidity position at the Parent Company.

Investment activities during the six months ended January 31, 2013 included:
Purchase of $1.5 million of investment securities by a foreign subsidiary;

Purchases of property, building and equipment of $1.3 million; and

Acquisitions of $0.6 million of noncontrolling interests in two majority-owned subsidiaries, Walsh Environmental Scientists & Engineers, LLC ("Walsh") and Gustavson Associates, LLC ("Gustavson").

Financing activities during the six months ended January 31, 2013 included:
Repayment of borrowings against our line of credit of $5.5 million, which was made possible by the receipt of cash on outstanding receivables in the Middle East noted above;

Dividend payments to common shareholders of $2.0 million; and

Distributions to non-controlling interests of $0.8 million.

We have sufficient funds available from cash and available lines of credit in the domestic companies to fund our U. S. operations. We intend to permanently reinvest foreign cash balances into opportunities outside the U.S. If the foreign cash and cash equivalents were needed to fund domestic operations, we would be required to accrue and pay taxes on any amounts repatriated.

We maintain unsecured lines of credit available for working capital and letters of credit. Contractual interest rates ranged from 2.5% to 3% at January 31, 2013 and 2.5% to 5% at July 31, 2012. Our lenders have reaffirmed the lines of credit within the past twelve months. Our lines of credit are summarized in the following table.

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