EEI 2017 Form 10-K

Table of Contents Results of Operations We report segment information based on the geographic location of EEI and its principal operating subsidiaries. Management generally assesses operating performance and makes strategic decisions for the following groups of entities, each of which is deemed to be a business segment for financial reporting purposes: · EEI and its subsidiaries located in the U.S.; · Subsidiaries located in South America; and · Other foreign subsidiaries The following tables and commentary address our results of operations within these three business segments. Revenue, net Revenue, net and revenue, net less subcontract costs, by business entity, are summarized in the following table. Fiscal Year Ended July 31, 2017 2016 2015 (in thousands) Revenue, net, by business segment: EEI and its subsidiaries located in the U.S. $ 82,094 $ 83,095 $ 88,715 Subsidiaries located in South America: Walsh Peru, S.A. Ingenieros y Cientificos Consultores (“Walsh Peru”) 6,253 9,718 22,797 Gestion Ambiental Consultores S.A. (“GAC”) 7,666 7,530 6,545 E&E Brasil 8,241 5,009 8,010 Other 248 465 868 22,408 22,722 38,220 Total $ 104,502 $ 105,817 $ 126,935 Revenue, net less subcontract costs, by business segment: EEI and its subsidiaries located in the U.S. $ 69,104 $ 69,724 $ 73,264 Subsidiaries located in South America: Walsh Peru 4,321 6,675 16,447 GAC 5,907 6,237 5,849 E&E Brasil 6,581 4,235 7,353 Other 210 396 695 17,019 17,543 30,344 Total $ 86,123 $ 87,267 $ 103,608 Revenue, net represents gross revenue recognized for the services provided to our clients, adjusted for the impacts of cost overruns or settlements recorded upon completion and close out of a project. Revenue, net less subcontract costs is a key metric utilized by management for operational monitoring and decision-making. References to “revenues” in the following commentary refer to revenue, net less subcontract costs from the table above. Fiscal Year 2017 Versus 2016 The Company records an allowance for project disallowances in other accrued liabilities for potential disallowances resulting from government audits. During fiscal year 2017, as a result of final settlements of allowances originally recorded in prior years, the Company reduced its allowance for project disallowances by $1.1 million, which was recorded as an addition to revenue, net on the consolidated statement of operations. During fiscal year 2017, the Company completed a review of historical project activity recorded in certain subsidiaries that have been dormant for several years. During fiscal year 2017, as a result of this review, the Company reversed $0.7 million of amounts previously recorded as reserves against contract receivables. The resulting increases to revenue, net for fiscal year 2017 were corrections of amounts recorded prior to the fiscal years presented in the accompanying financial statements. During fiscal year 2017, the Company reversed $0.6 million of amounts previously recorded as liabilities to subcontractors that were no longer deemed to be necessary to record on the Company’s consolidated balance sheet. These amounts were associated with fully-reserved contract receivable balances that were written-off during fiscal year 2017. This adjustment was recorded as a $0.6 million decrease to subcontract costs on the consolidated statement of operations for the fiscal year ended July 31, 2017. Excluding the above adjustments, which did not result from normal, recurring operations, fiscal year 2017 revenues from EEI and its U.S. subsidiaries decreased 4% from the prior year, primarily due to a lower average selling rate per hour of service charged to our clients. General competitive pricing pressure continues to have a negative impact on revenues for many of our domestic market sectors. To a lesser degree, a reduction in the volume of hours charged to clients, particularly in the energy and mining market sectors, also contributed to the overall decrease in revenues. During fiscal year 2016, we recorded $0.5 million of revenues from our Kentucky-based subsidiary that was sold during the first quarter of fiscal year 2016, which also contributed to comparatively lower revenues from U.S. subsidiaries during the current fiscal year. 21