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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 MARCH 31, 1997
COMMISSION FILE NUMBER
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 MARCH 31, 1997
----- --------------
COMMON STOCK, $.01 PAR VALUE 5,542,978
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THIS IS PAGE 1 OF 14 PAGES.
INDEX TO EXHIBITS IS ON PAGE 12.
<PAGE>
KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
PAGE NO.
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PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet - 3
March 31, 1997 and December 31, 1996
Condensed Consolidated Statement of Operations 4
Three months ended March 31, 1997 and 1996
Condensed Consolidated Statement of Cash Flows - 5
Three months ended March 31, 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
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PART II OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 11
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<PAGE>
<TABLE>
<CAPTION>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
MARCH 31, 1997 DECEMBER 31, 1996
ASSETS -------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,430 $ 4,464
Accounts receivable, less allowance
for doubtful accounts of $170 at
March 31, 1997 and December 31, 1996 10,467 11,705
Retainage receivable 6,073 5,552
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,490 1,640
Prepaid expenses and other
560 416
Total current assets -------- ------
25,020 23,777
Property and equipment, net of accumulated
depreciation of $833 and $752 at
March 31, 1997 and December 31, 1996,
respectively 608 651
Other assets:
Goodwill, net of accumulated amortization
of $750 and $712 at March 31, 1997
and December 31, 1996, respectively 4,240 4,278
Other 7 28
$29,875 $28,734
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,390 $8,602
Retainage payable 3,346 3,472
Accrued payroll and related benefits 1,408 916
Accrued expenses 275 345
Billings in excess of costs and estimated
earnings on uncompleted contracts 4,211 4,860
Total current liabilities 18,630 18,195
Long term liabilities, including deferred
taxes of $166 206 -
------ ------
Total liabilities: $18,836 18,195
Stockholders' equity:
Common stock, $.01 par value;
25,000,000 shares authorized;
5,542,978 shares issued and
outstanding at March 31, 1997 and
December 31, 1996 55 55
Additional paid-in capital 9,961 9,961
Retained earnings 1,023 523
----- -----
Total stockholders' equity 11,039 10,539
$ 29,875 $28,734
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS THREE MONTHS
ENDED MARCH 31, 1997 ENDED MARCH 31, 1996
-------------------- --------------------
<S> <C> <C>
Revenues
Contracts $19,936 $8,630
Fees from sellers 137 158
Interest 46 49
------- ------
20,119 8,837
Direct costs 18,386 8,135
Gross profit 1,733 702
Selling, general and
administrative expenses 995 1,139
Interest 6 2
------ -----
Profit/(Loss) before
provision for income taxes 732 (439)
Provision for income taxes 232 (205)
------ ------
Net profit/(Loss) $500 $(234)
Net profit/(loss) per
common share $.09 $( .04)
Weighted average common
shares outstanding 5,713,074 5,579,438
========= =========
Fully diluted profit/(loss)
per common share $.09 $( .04)
Fully diluted average
common shares 5,713,074 5,677,299
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------------- -------------------
<S> <C> <C>
Cash flows from operating
activities:
Net Income (loss) $500 $(234)
Adjustments to reconcile
net income to cash provided
by operating activities:
Depreciation and amortization 119 111
Changes in operating assets
and liabilities:
Accounts and retainage
receivable 717 67
Costs and estimated earnings in
excess of billings on uncompleted
contracts 150 (299)
Prepaid expenses and other (123) (135)
Accounts and retainage payable 662 694
Accrued salaries and related
benefits 492 (521)
Accrued expenses (70) (336)
Due to contractor - (1,264)
Billings in excess of costs and
estimated earnings on
uncompleted contracts (649) (315)
Net cash used in operating activities 1,798 (2,232)
Cash flows from investing activities:
Increase in long term liabilities 206 -
Purchase of property and equipment (38) (60)
------ -------
Net cash used in investing activities
168 (60)
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Cash flows from financing activities:
Sale of stock - 450
Net cash provided by financing
activities 0 450
Net increase in cash and cash
equivalents 1,966 (1,842)
Cash and cash equivalents,
beginning of period 4,464 5,124
----- ------
Cash and cash equivalents,
end of period $6,430 3,282
------ ------
</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 March 31, 1997 and 1996 and the results of operations and cash
flows for the three-month periods then ended. Because of the nature of
construction, operating results of the Company on a quarterly basis may not be
indicative of operating results for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Total revenue for the first quarter increased 128% to $20,119,000, compared
to $8,837,000 for the first quarter of 1996. There was a net profit of $500,000,
compared to a loss of $234,000 for the same period in 1996.
Revenues in the first quarter of 1997 increased due to the work completed
on new projects the Company received in 1996, in particular the Chiller Plant at
the Memorial Sloan-Kettering Cancer Center which accounted for 29% of revenue in
the first quarter of 1997. This project which, based on its size would normally
be expected to take two years, is expected to be completed in a six-month
period.
The Company's revenue was depressed during the first quarter of 1996 by the
late start of new construction contracts partially due to the unusually severe
winter weather. Also, during the first quarter of 1996 substantially all of the
Company's projects were either in the start-up or completion stages, which tend
to be more overhead intense.
COST OF SALES
Cost of sales increased by $10,251,000 or 126% to $18,386,000 from
$8,135,000 as a result of the increase in sales revenue noted above.
GROSS PROFIT
Gross profit increased by 147% or $1,031,000, from $702,000 in the first
quarter of 1996 to $1,733,000 in the first quarter of 1997. The gross profit
margin for 1997 was 8.6% as compared to 8.0% for 1996.
SELLING GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") decreased from
$1,139,000 for the first quarter of 1996 to $995,000 in the first quarter of
1997, a decrease of $144,000 (12.6%). In the first quarter of 1997, SG&A
expenses were 4.9% of revenue as compared to 12.9% of revenue for the first
quarter of 1996. While SG&A expenses generally increase as volume increases, the
Company has made an effort to keep these expenses at a minimum. Most of these
expenses are not volume driven, so as volume increases, they become a lower
percentage of revenue.
PROVISION FOR TAXES
The 1997 tax provision is net of a $105,000 tax credit for the deferred
taxes not previously recorded. Had this credit not been recorded, the provision
for taxes would have been 46% of taxable income, a percentage consistent with
prior periods.
NET PROFIT/(LOSS)
Net profit for the first quarter of 1997 was $500,000 compared to a net
loss of ($234,000) in the first quarter of 1996, as a result of all the items
previously mentioned.
Profit for the first quarter of 1996 was the result of reduced revenue,
partially caused by the unusually severe weather in the Northeast.
LIQUIDITY AND CASH FLOW
For the first quarter of 1996 cash used in operations was $2,232,000 which
was offset by $450,000 received from the sale of stock. For the same period in
1997 the cash generated by operations was $1,798,000. The cash flow for the
first quarter of 1996 was affected by startup costs on the Co-Op City project
which contains a large proportion of labor relative to materials and mechanical
equipment. These costs are included in the requisition prepared at the end of
each month and are not reimbursed for several months thereafter.
Generally an increase in sales volume requires additional outlay of cash in
order to finance the resulting increase in accounts receivable; however, the
company was able to negotiate favorable collection terms on some of its new
projects. As a result, cash of $717,000 was generated from a reduction of
accounts and retainage receivable, while at the same time another $662,000 was
generated from an increase in accounts and retainage payable and $492,000 from
an increase in salaries and related benefits payable.
While no significant capital improvements are projected over the next year,
cash may be required for the start up of additional new projects and for
acquisitions. While the company has not identified any specific acquisition and
there is no guarantee it will find any suitable acquisitions, management is in
the process of reviewing acquisition opportunities.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no outstanding 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
None.
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 has negotiated an increased banking facility with Fleet Bank of
$3,000,000, comprised of a three-year revolving credit of $2,000,000 and a
$1,000,000 line of credit. Borrowings are at 1% above the bank's prime rate. The
facility contains certain operating and financial covenants. Under the Revolving
Credit Agreement, acquisitions must be approved by the Bank. As of April 30,
1997, the Company has not used any of its borrowing capacity.
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: May 2, 1996 ---------------------------
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
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1
Statement regarding Computation of
Per Share Earnings 13
27 Financial Data Schedule 14
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<PAGE>
<TABLE>
<CAPTION>
KSW, INC.
STATEMENT REGARDING COMPUTATION
OF NET EARNINGS (LOSS) PER SHARE
Three Months Ended
MARCH 31
1997 1996 1996
---- ---- ----
PRIMARY and
FULLY DILUTED PRIMARY FULLY DILUTED
------------- -------- -------------
<S> <C> <C> <C>
Net earnings/(loss) $ 500,000 $(234,000) $(234,000)
=========== =========== ==========
Weighted average shares
outstanding during the period 5,542,978 5,400,026 5,400,026
Common and common stock
equivalent shares using the
treasury stock method 170,096 179,412 277,273
-------- -------- -------
Total shares outstanding for
purposes of calculating primary
and fully diluted earnings
(loss) per share 5,713,074 5,579,438 5,677,299
========= ========= =========
Primary earnings (loss) per
common and common equivalent
share $.09 $(.04)
======== =========
Fully diluted earnings (loss)
per common and common
equivalent share $.09 $(.04)
======== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 6,430
<SECURITIES> 0
<RECEIVABLES> 10,637
<ALLOWANCES> 170
<INVENTORY> 0
<CURRENT-ASSETS> 25,020
<PP&E> 1,441
<DEPRECIATION> 833
<TOTAL-ASSETS> 29,875
<CURRENT-LIABILITIES> 18,630
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 10,984
<TOTAL-LIABILITY-AND-EQUITY> 29,875
<SALES> 0
<TOTAL-REVENUES> 20,119
<CGS> 18,386
<TOTAL-COSTS> 19,381
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 732
<INCOME-TAX> 232
<INCOME-CONTINUING> 500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 500
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
