Ecology & Environment's third-quarter profits plunged by 57 percent from a year ago, when the Lancaster-based environmental services firm's earnings were inflated by a big tax settlement in Kuwait.
But the tax settlement masked otherwise stable results from E&E's business, which was able to keep its operating profits flat despite a 12 percent drop in revenues stemming from temporary project delays and funding woes by its customers.
That performance -- and the improvement in sales and profits from the quarter that ended in late January -- is building optimism among E&E's top executives, who predicted earlier this year that business would rebound from a weak start as 2010 unfolded.
E&E's profits dropped to $747,000, or 18 cents per share, from $1.7 million, or 42 cents per share, a year earlier, when the favorable tax settlement in Kuwait added 24 cents per share to the company's earnings.
Excluding that tax settlement, E&E's operating profits were virtually unchanged.
The company's sales slipped to $33.4 million during the quarter that ended at the beginning of May, down from $38 million a year ago as customers put off work on some projects and ran into financing difficulties on others.
But E&E was able to maintain its operating profits, mainly by cutting its subcontracting costs by more than half, which offset increased spending on marketing and business development initiatives.
E&E executives said Wednesday they believe business has begun to pick up, citing the improvement in sales and earnings from the quarter that ended in late January.
"The improvement from last quarter in revenue and net income has been important," said Kevin Neumaier, E&E's president and chief executive officer. "It is showing that we have gotten past the slowdown that occurred at the start of the second quarter."
Neumaier also said E&E's efforts to seek out new business and the increase in recent months in bidding activity also is beginning to bring in additional revenue, including a pair of contracts signed in March with the U.S. Navy that could bring in a total of $50 million in sales.
Neumaier said he was optimistic about the current quarter, as well as the fiscal year that begins in August.