- -----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 0-27290
KSW, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-3191686
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
37-16 23RD STREET, LONG ISLAND CITY, NEW YORK 11101
--------------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
718-361-6500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO__
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
OUTSTANDING
CLASS SEPTEMBER 30, 1997
COMMON STOCK, $.01 PAR VALUE 5,497,978
------------------------------------------------------------------------
THIS IS PAGE 1 OF 13 PAGES.
INDEX TO EXHIBITS IS ON PAGE 11.
<PAGE>
KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PAGE NO.
------------------------------------------------------------------------
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet - 3
September 30, 1997 and December 31, 1996
Condensed Consolidated Statements of Operation - 4
Nine months and three months ended September 30, 1997
and 1996
Condensed Consolidated Statements of Cash Flows - 5
Nine months ended September 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operation
------------------------------------------------------------------------
PART II OTHER INFORMATION
Item 1 Legal Proceedings 9
Item 2 Change in Securities 9
Item 3 Defaults Upon Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6. Exhibits and Reports on Form 8-K. 9
------------------------------------------------------------------------
SIGNATURES 10
INDEX TO EXHIBITS 11
------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS September 30, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 570 $ 4,464
Accounts receivable, less allowance
for doubtful accounts of $100 and $170 at
September 30, 1997 and December 31, 1996,
respectively 11,236 11,705
Retainage receivable 7,927 5,552
Costs and estimated earnings in excess of
billings on uncompleted contracts 886 1,640
Prepaid expenses and other receivables 736 416
Total current assets21,355 23,777
Property and equipment, net of accumulated
depreciation of $994 and $752 at
September 30, 1997 and December 31, 1996,
respectively 571 651
Other assets:
Goodwill, net of accumulated amortization
of $866 and $752 at September 30, 1997
and December 31, 1996, respectively 4,164 4,278
Other 8 28
Total assets $ 26,098 $ 28,734
========== =========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Account payable $ 7,852 $ 8,602
Retainage payable 3,741 3,472
Accrued payroll and related benefits 1,061 916
Accrued expenses 281 345
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,006 4,860
---------- ---------
Total current liabilities 14,941 18,195
Long-term liabilities 192 0
---------- ---------
Total liabilities 15,133 18,195
---------- ---------
Stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 5,497,978 and 5,542,978 shares
issued and outstanding at September 30, 1997
and December 31, 1996, respectively 55 55
Additional paid-in capital 9,812 9,961
Retained earnings 1,098 523
---------- ---------
Total stockholders' equity 10,965 10,539
Total liabilities and stockholders' equity $ 26,098 $ 28,734
=========== =========
</TABLE>
<PAGE>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30,1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues
Contracts $52,181 $29,672 $15,299 $10,834
Fees from Sellers 474 689 307 167
Interest 110 83 16 18
------- ------- ------- -------
52,765 30,444 15,622 11,019
Direct costs 48,895 27,872 14,445 10,011
------- ------- ------- -------
Gross profit 3,870 2,572 1,177 1,008
Selling, general
and administrative expenses 2,968 2,992 1,048 995
Interest 29 8 12 4
------- ------- ------- -------
Profit/(loss) before provision
for income taxes 873 (428) 117 9
Provision for income taxes 296 (201) 54 4
------- ------- ------- -------
Net profit/ (loss) $577 $ (227) $63 $ 5
======= ======= ======= =======
Net profit/(loss) per
common share .10 (.04) .01 0
======= ======= ======= =======
Weighted average common
shares outstanding 5,761,035 5,604,347 5,819,334 5,580,769
========= ========= ========= =========
Fully diluted profit/(loss)
per common share .10 (.04) .01 0
========= ========= ========= =========
Fully diluted average
common shares 5,890,632 5,604,347 5,890,632 5,580,769
========= ========= ========= =========
</TABLE>
<PAGE>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended NineMonths Ended
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net gain/(loss) $ 575 $ (227)
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 356 333
Changes in operating assets and liabilities:
Accounts and retainage receivable (1,906) (4,505)
Costs and estimated earnings in
excess of billings on uncompleted
contracts 754 (490)
Prepaid expenses and other receivables (320) (368)
Accounts and retainage payable (481) 1,987
Accrued salaries and related benefits 145 (221)
Accrued expenses ( 64) (403)
Due to contractor -- (1,264)
Billings in excess of costs and
estimated earnings on uncompleted
contracts (2,854) 1,553
------ ------
Net cash provided by/(used in)
operating activities (3,795) (3,605)
------ ------
Cash flows from investing activities:
Purchase of property and equipment (162) (176)
Other assets 20 23
Other liabilities 192 --
------ -----
Net cash used in investing activities 50 (153)
------ -----
Cash flows from financing activities:
Sale of stock - 450
Repurchase of stock (149) (126)
Capital lease obligations - 28
------ -----
Net cash provided by financing activities (149) 352
------ -----
Net increase/(decrease) in cash and cash
equivalents (3,894) (3,406)
Cash and cash equivalents,
beginning of period 4,464 5,124
Cash and cash equivalents,
end of period $ 570 $ 1,718
======= ========
</TABLE>
<PAGE>
KSW, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position of
the Company as of September 30, 1997 and December 31, 1996 and the results of
operations and cash flows for the nine and three month periods ended September
30, 1997 and 1996. Because of the possible fluctuations in the marketplace in
the construction industry, operating results of the Company on a quarterly basis
may not be indicative of operating results for the full year.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995 which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
economic conditions, competition in the geographic and business areas in which
the Company conducts its operations, fluctuations in interest rates, credit
quality and government regulation.
RESULTS OF OPERATIONS
REVENUES
Total revenues for the third quarter increased by 42% to
$15,622,000, compared to $11,019,000 for the third quarter of 1996 primarily
due to an increase in the number of large projects undertaken by the Company
compared to the same period in 1996. Revenues for the first three quarters of
1997 increased by 73% to $52,765,000, compared to $30,444,000 for the same
period in 1996.
COST OF SALES
Cost of sales for the third quarter increased by $4,434,000 or 44%
to $14,445,000 from $10,011,000 as a result of the increase in sales revenues
noted above. Cost of sales for the first three quarters of 1997 increased by
75% to $48,895,000, compared to $27,872,000 for the same period in 1996.
GROSS PROFIT
Gross profit increased by 17% or $169,000 from $1,008,000 in the
third quarter of 1996 to $1,177,000 in the third quarter of 1997. This was
primarily due to the sales volume increase noted above. The gross profit
percentage decreased from 9.1% for the third quarter of 1996 to 7.5% for the
same quarter of 1997 due to approximately $900,000 of additional costs on a
project nearing completion. These adjustments were the result of project
conditions which differed substantially from those anticipated when the
project was awarded. KSW has submitted proposals seeking reimbursement for a
portion of these costs but has not booked any increase in revenue. It is too
early to determine the extent to which KSW might recover these additional
costs, but KSW has a contractual right to recover these costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") increased from
$995,000 for the third quarter of 1996 to $1,048,000 in the third quarter of
1997, an increase of $53,000 (5%). For the nine months ended September 30,
1997, SG&A expenses decreased $24,000 (1%) despite a 73% increase in revenue.
PROVISION FOR TAXES
Provision for taxes for the nine months ended September 30, 1997 was
34% of income/(loss) before taxes compared to 47% for the same period in 1996
due to a $105,000 tax credit for deferred taxes not previously recorded. Had
this credit not been recorded in 1997 the tax provision would have been
comparable to the tax provision for the same period in 1996.
NET GAIN
The net profit for the third quarter of 1997 was $63,000 compared to
the net profit of $5,000 for the third quarter of 1996 primarily due to the
sales volume increase noted above. For the first nine months of 1997 there was a
net profit of $577,000 compared to a net loss of ($227,000) for the same period
in 1996.
LIQUIDITY AND CASH FLOW
For the first nine months of 1997 cash used by operations was
$3,795,000. For the same period in 1996 the cash used in operations was
$3,605,000. The cash flow for the first three quarters of 1997 was affected by
a 73% increase in revenues in 1997 which required additional financing for
accounts receivable.
While no significant capital improvements are projected over the
next year, cash will be needed to fund start-up costs for new projects.
The Company has a $3,000,000 credit facility with Fleet Bank, which
the Company believes should be sufficient to fund the Company's working
capital needs.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material lawsuits to which the Company or its
subsidiary is a party. Neither the Company nor its subsidiary is a party to
any regulatory investigation or inquiry with any governmental agency.
ITEM 2. CHANGE IN SECURITIES
On August 5, 1997, the Board of Directors approved a resolution
authorizing the Company to repurchase up to 10% of the Company's common stock
over the next two years. In the third quarter, the Company repurchased and
retired 55,000 shares of common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The Company is in negotiations with Con Edison Solutions, the energy
services subsidiary of Con Edison toward forming a joint venture in which the
Company will provide Trade Management services on energy related projects. The
Company expects an agreement to be concluded within the fourth quarter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KSW, INC.
Date: November 7, 1997 /S/ ROBERT BRUSSEL
Robert Brussel
Chief Financial Officer
(Principal Financial and
Accounting Officer and
Duly Authorized Officer)
<PAGE>
KSW, INC.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
11 Statement Regarding Computation of Per Share
Earnings 12
27 Financial Data Schedule 13
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
KSW, INC.
STATEMENT REGARDING COMPUTATION
OF NET EARNINGS (LOSS) PER SHARE
NINE MONTHS ENDED
THREE MONTHS ENDED
SEPTEMBER 30,1997 SEPTEMBER 30,1996
SEPTEMBER 30,1997 SEPTEMBER 30,1996
<S> <C> <C> <C> <C>
Net earnings/(loss) $ 577,000 ($227,000) $ 63,000 $ 5,000
============ =========== ============ ============
PRIMARY EARNINGS/(LOSS) PER SHARE
Weighted average shares
outstanding during the
period 5,542,061 5,435,176 5,542,061 5,435,176
Common and common stock
equivalent shares using the
treasury stock method 218,974 169,171 277,273 145,593
--------- --------- --------- ---------
Total shares outstanding for
purposes of calculating
primary earnings/(loss)
per share 5,761,035 5,604,347 5,819,334 5,580,769
========= ========= ========= =========
Primary earnings/(loss) per
common and common
equivalent share .10 (.04) .01 0
== ==== === ==
FULLY DILUTED EARNINGS/(LOSS) PER SHARE
Weighted average shares
outstanding during the period 5,542,061 5,435,176 5,542,061 5,435,176
Common & Common Stock
equivalent shares using the
treasury stock method 348,571 169,171 348,571 145,593
------------ --------- --------- --------
Total shares outstanding for
purposes of calculating
fully diluted earnings/(loss)
per share 5,890,632 5,604,347 5,890,632 5,580,769
========= ========= ========= =========
Fully diluted earnings/(loss) per
common and common
equivalent share .10 (.04) .01 0
=== ==== === ==
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001004125
<NAME> KSW INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 570
<SECURITIES> 0
<RECEIVABLES> 11,336
<ALLOWANCES> 100
<INVENTORY> 0
<CURRENT-ASSETS> 21,355
<PP&E> 1,565
<DEPRECIATION> 994
<TOTAL-ASSETS> 26,098
<CURRENT-LIABILITIES> 14,941
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 10,910
<TOTAL-LIABILITY-AND-EQUITY> 26,098
<SALES> 0
<TOTAL-REVENUES> 52,765
<CGS> 48,895
<TOTAL-COSTS> 51,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 873
<INCOME-TAX> 296
<INCOME-CONTINUING> 577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 577
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
