EEI 2017 Annual Report

To Our Shareholders Three years ago, Ecology and Environment, Inc. embarked on strategic initiatives to prepare for future growth by aligning with new and emerging opportunities in the marketplace and reducing operating expenses. We are pleased to report that we emerged from fiscal year 2017 as a stronger, more disciplined company, focused on progress and growth, and committed to our vision of helping clients address today’s most pressing environmental challenges. We reported net earnings of $0.70 per share for fiscal year 2017, more than three times earnings of $0.21 per share reported for the prior year. Our ongoing initiatives to reduce operating expenses, coupled with a significantly lower effective tax rate for our South American operations, more than offset slight reductions in domestic and foreign revenues. Favorable resolution of long-standing contract settlement liabilities and adjustments to close out the activities of dormant subsidiaries also contributed to our results in 2017. In South America, the economic downturn that adversely affected our Brazilian subsidiary during prior years stabilized, as the continent began a slow recovery. Consequently, our Brazilian operations showed improvement in 2017 with increasing backlog and revenues. Revenues from operations in Peru also improved during the fourth quarter due to a higher volume of work, and our Chilean operations continued to perform well. Our South American presence provides geographic diversification and allows us to participate in developing and expanding markets. Our fiscal year 2017 results were encouraging. We now have a stable foundation with substantial available liquidity upon which to build, and opportunities for growth in new and exciting directions. Going forward, we see opportunity in fiscal year 2018, but we also see challenges. We expect that the trend toward longer decision-making to award new contracts and extended timeframes to fund and begin ongoing project work will continue. Board of Directors We welcomed three new independent members to our Board of Directors during fiscal year 2017: Marshall Heinberg, Justin Jacobs, and Michael El-Hillow. Each brings extensive knowledge and relevant experience in operations, investment banking, and corporate governance, which will help us to carry out our strategic objectives and achieve our long-term goals. The Board has implemented improvements to its governance structure and is committed toworking closely withmanagement to pursue paths for disciplined growth and improved profitability. It has also implemented enhanced risk management and compliance programs within the company to foster informed decision-making in support of our strategic growth initiatives. Business Objectives Our vision is to assist our clients in addressing the leading environmental challenges of our time. We have a renewed clarity of purpose, with a set of business objectives for increasing our presence in the marketplace, growing the company, and building value. One key objective is to align ourselves within market sectors where we see the greatest long-term potential for higher end consulting services while identifying and investing in newmarket sectors. We are focused on advancing areas of specialization and expertise that will create new opportunities for growth while enhancing our service offerings in existing markets. In recent years, we experienced downturns in two core business areas: oil and gas and mining, both in the U.S. and South America. We recognize the cyclical nature of these sectors and believe that over the long term they will continue to create opportunities for profitable work. Policies of the new administration in Washington focusing on energy independence, infrastructure development, and regulatory streamlining all have the potential to be catalysts for new opportunities. In the meantime, we have been laying the groundwork and making investments in a number of other sectors and service lines that we see as promising for our future over the next three to five years. This forward-looking effort is exemplified in a number of our recent projects that we believe have us on the right path.