Ecology And Environment, Inc. (NASDAQ:EEI)

LANCASTER, N.Y., Oct. 31, 2011 (GLOBE NEWSWIRE) -- Ecology and Environment, Inc., (E & E) (Nasdaq:EEI) reported record revenues of $169 million for fiscal year 2011, including record revenues for the fourth quarter of $44.2 million. E & E also reported net income of $1.65 per share for the fiscal year and $.45 per share for the fourth quarter – again both records for the year and quarter.

E & E's record fiscal year ending July 31, 2011, had an earnings increase of 63% to $1.65 per share on revenues of $169.2 million compared to earnings of $1.02 per share on revenues of $144.1 million in the prior year.

"We'd like to thank our clients and our employees globally," said E & E president and CEO Kevin Neumaier. "This was a record year for our operations around the world. Although there are economic uncertainties in the world, it is clear that the world must move to more sustainable business and a globally sustainable economy. E & E is well-positioned to support this with our depth of knowledge and global experience."         

Removing EEI from the GeoSpeicial List @ $16.90

Added to the GeoSpecial list @ $17.90 on 3/16/2011

Catalyst: Record second quarter 2011 results

Peak performance: Reached $22.84 on 5/11/2011; +35%
Current road block: Near term EPS growth not as strong as we had anticipated; inconsistent EPS growth.
Current Price: $16.90

Additional Comments: Will revisit in the second half of 2012 when EPS growth consistency is expected to improve.

LANCASTER, N.Y., June 15, 2011 (GLOBE NEWSWIRE) -- Ecology and Environment, Inc.,

• reported revenues for the third quarter of fiscal year 2011 of $41.4 million, up 24% from the $33.3 million reported in the third quarter of fiscal year 2010.
• Net income for the third quarter of fiscal year 2011 almost doubled to $1.4 million or $.34 per share, from the $.7 million or $.18 per share reported in the prior year.    
• E & E reported an increase of $8.1 million in revenue during the third quarter ending April 30, 2011 compared to the prior year, as work performed on contracts in the Company's energy and global sectors more than offset decreases in work in the US state market. Revenue less subcontract costs, a key business metric for E & E, was $33.5 million, an increase of $6.6 million or 25% from the $26.9 million reported in the third quarter of the prior year. 

E & E continued to improve financial performance with a combination of solid growth and improvements in efficiency of operations. Net income increased by 91% for the third quarter of fiscal year 2011 to $1.4 million or $.34 per share, compared to net income of $.7 million or $.18 per share in the third quarter of fiscal year 2010. "We continue to work on great projects for leading edge clients around the world," said E & E president and CEO Kevin Neumaier. "We have an outstanding staff improving long term environmental sustainability with every project we work on."

 ^a Adjusted to reflect a net gain of $0.25 attributable to the favorable tax settlement in Kuwait.

The resolution of an ongoing tax dispute has finally been achieved.  Commentary from their 3rd quarter press release states:

E & E took a step forward in Kuwait, settling the tax dispute and the related FIN 48 charges. As a result, the Company has released the remaining accrual of approximately $1.4 million (net of deferred tax) by reducing the current quarter's income tax provision by $850,000 and reducing interest expense and general and administrative costs each by $275,000.

EEI issued their second quarter press release this morning.  The GeoTeam® was hoping to gain some insight into the company's outlook for the coming year.  However, there was not much specific commentary to this point. 

Regardless, the company's growth in sales and EPS were very strong for the quarter.  Please see link to view the second quarter 2009 financial table.

The company may also potentially benefit from the Obama administration:

"Despite tough financial times, we continue to run our business well and in a sustainable manner," says E&E, Inc. President and CEO Kevin Neumaier. "Looking out over the next couple years, we see a number of positives for our business such as the Stimulus Plan and an increased global concern for our environment."

Source: GlobeNewswire (March 18, 2009)

The outstanding tax issue we touched on in the last GeoResearch update, on January 9, 2009, has not been resolved:

The Company received a tax assessment from the Kuwait Ministry of Finance dated March 15, 2009 in the amount of approximately $2.65 million compared to a liability accrued for this tax, including interest and penalties, of $4.3 million. The company has 30 days to evaluate this assessment and either file an objection or pay the tax. Due to the complexities of the contractual considerations related to the assessment of this tax, the Company will use this 30 day period to evaluate its options.

SEC Form 10Q (For the quarterly period ended January 31, 2009)

Per their SEC form 10Q, EEI reported significantly higher results for its second quarter ended January 2009.  The GeoTeam® is awaiting for the dissemination of the press release which should provide more details.

Source: SEC Form 10Q (For the quarterly period ended January 31, 2009)

New Geo feature:The GeoTeam^® does not limit its research to just Asia, thus we will also be including some commentary on stocks based in the United States.  

 Missed an initial run EEI. 

At first glance the stock seems to be selling at a P/E 19 on trailing EPS. The GeoTeam^® prefers to monitor stocks that sell at a P/E of less than 25, thus EEI has been on our radar. Closer inspection reveals that the P/E, based on operating earnings, is lower. The firm has been incurring non-cash charges related to a job they completed, for a customer in Kuwait, after the Gulf War. The dispute revolves around who is responsible for the associated tax liability: EEI or the customer?

From what the GeoTeam^® can initially garner it seems that EEI contends that the client should have paid the tax and sent confirming documentation to EEI. Apparently, the client never paid the tax and thus an outstanding liability exists. EEI is taking a charge in the event that the litigation surrounding this event does not work in their favor. This resulted in a $.15 charge for 2008.

It appears that adding back the associated charge will add about $.10 to trailing EEI EPS, putting trailing EPS at $.77 with a P/E of 17. The stock seems to have additional value if one is willing to apply a 25 P/E on trailing operating EPS.

- Need to determine how material a negative ruling in the tax case would be to the firm.

 - Still need to do further due diligence to determine the degree of how the current economic situation and the new Obama Administration may impact them.

- Also need to determine if EEI is capable of quarterly consistency as it relates to EPS growth.