Ecology & Environment's first-quarter profits slid by 5 percent as a more than $800,000

gain from the sale of land near its Lancaster headquarters helped offset a 26 percent drop in

its operating profits.

The lower earnings came at a time when the Lancaster environmental services firm's revenues

rose by 17 percent, but a more than doubling of the company's subcontracting costs cut into

the profitability of that work, slicing three percentage points off its gross profit margin.

As a result, E&E's profits slipped to $1.4 million, or 34 cents per share, from $1.48

million, or 35 cents per share, a year earlier.

The company's revenues grew to $39.5 million during the quarter that ended in October from

$33.7 million a year earlier as sales at its Walsh Environmental subsidiary soared by 74

percent to $13.9 million.

Most of the increase in Walsh's revenues came from additional work in the environmental

cleanup and energy markets, E&E said in a filing with the Securities and Exchange Commission.

That helped offset a modest decline in work on contracts that E&E has won from various states.

Excluding the sharply rising subcontracting costs at Walsh, E&E's revenues were flat at $29

million, company officials said Wednesday.

The impact of the reduced profitability was muted because E&E netted a one-time gain of

$809,000, or 11 cents per share, from the sale of 16.5 acres of land at its Walden Avenue

headquarters site.