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Ecology & Environment Inc. Wednesday said its fourth-quarter profit fell 45.9 percent due to continued weak profit margins on one of its primary government contracts.

Fiscal year 1997 net income took an even bigger tumble, dropping 90.2 percent, the Lancaster-based environmental services firm reported.

For the three-month period ending July 31, net income at E&E totaled $79,000 or 2 cents per common share, down from $146,000 and 4 cents per share a year ago.

The sharp drop in net income came despite an increase of 5.5 percent, or $844,000, in net revenue, to $16.21 million from $15.37 million.

The earnings drop was E&E's 13th in the last 14 quarters. At the same time, the sales increase was the second straight following 10 quarters of flat or lower sales.

As was the case throughout its fiscal year, E&E's net income was hurt by lower operating margins on five regional Superfund Technical Assistance and Response Teams (START) contracts with the U.S. Environmental Protection Agency, according to Ronald L. Frank, chief financial officer.

Margins on the START pacts were hurt by some of the discounts E&E offered in contract proposals in order to win business in a highly competitive field.

The company continues to whittle away at its expenses. The fiscal fourth quarter was the 11th consecutive three-month period in which indirect operating costs decreased compared to the same quarter of the previous year.

Net income in the fiscal year fell $1.05 million to $113,000 or 3 cents per common share from $1.16 million or 29 cents per share. Net revenues dropped 4.2 percent to $58.98 million from $61.57 million.

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