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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, 2000
Commission File Number 0-27290
KSW, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
11-3191686 (I.R.S. Employer Identification Number) |
| 37-16 23rd Street, Long Island City, New York (Address of principal executive offices) |
11101 (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:
| Class Common stock, $.01 par value |
Outstanding March 31, 2000 5,468,644 |
This is page 1 of 14 pages.
Index to exhibits is on page 12.
KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
| Page No. |
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
| Consolidated Balance Sheet - March 31, 2000 and December 31, 1999 |
3 |
| Consolidated Statements of Operation - Three months ended March 31, 2000 and 1999 |
4 |
| Consolidated Statements of Cash Flow - Three months ended March 31, 2000 and 1999 |
5 |
| Notes to Consolidated Financial Statements | 6 |
| Independent Accountants' Review Report | 7 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
8 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
9 |
PART II OTHER INFORMATION
| Item 1 | Legal Proceedings | 10 |
| Item 2 | Changes in Securities and Use of Proceeds | 10 |
| Item 3 | Defaults Upon Senior Securities | 10 |
| Item 4 | Submission of Matters to a Vote of Security Holders | 10 |
| Item 5 | Other Information | 10 |
| Item 6 | Exhibits and Reports on Form 8-K | 10 |
| SIGNATURES | 11 |
| INDEX TO EXHIBITS | 12 |
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 2000 Dec. 31, 1999
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 6,288 $ 6,651
Accounts receivable, less allowance
for doubtful accounts of $200 at
3/31/00 and 12/31/99 11,414 10,606
Retainage receivable 3,987 4,122
Costs and estimated earnings in excess of
billings on uncompleted contracts 550 338
Prepaid expenses and other 306 218
-------- --------
Total current assets 22,545 21,935
Property and equipment, net of accumulated
depreciation of $1,539 and $1,494 at 3/31/00
and 12/31/99 respectively 384 384
Other Assets:
Goodwill, net of accumulated amortization
of $1,209 and $1,170 at 3/31/00 and 12/31/99 3,781 3,820
Other 8 8
-------- --------
Total Assets $26,718 $26,147
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable $ 7,070 $ 6,270
Retainage payable 1,688 1,774
Accrued payroll and related benefits 905 1,165
Accrued expenses 431 369
Billings in excess of costs and estimated
earnings on uncompleted contracts 4,953 5,334
---------- ---------
Total current liabilities 15,047 14,912
Long-term liabilities 63 40
------- --------
Total liabilities 15,110 14,952
---------- ----------
Stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 5,468,644 shares issued
and outstanding at March 31, 2000 and
December 31, 1999 54 54
Additional paid-in capital 9,726 9,726
Retained earnings 1,828 1,415
--------- -------
Total stockholders' equity 11,608 11,195
--------- -------
Total Liabilities and Stockholders' Equity $ 26,718 $26,147
========= =======
See Accountants' review report and notes to Consolidated Financial Statements
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATION
(in thousands, except share and per share data)
(unaudited)
Three Months Three Months
Ended March 31, Ended March 31,
---------------- ---------------
2000 1999
---- ----
Revenues:
Contracts $ 12,038 $ 8,904
Fees 3 12
Interest 80 12
----------- -----------
12,121 8,928
Direct costs 10,206 7,874
----------- -----------
Gross profit 1,915 1,054
Selling, general and administrative expenses 1,164 920
Interest 8 7
----------- -----------
Income before provision for income taxes 743 127
Provision for income taxes 330 40
----------- -----------
Net income $ 413 $ 87
=========== ===========
Net income per common share - basic $ .08 $ .02
=========== ===========
Net income per common
share - diluted $ .07 $ .02
=========== ===========
Weighted average common
shares outstanding - basic 5,468,644 5,468,644
=========== ===========
Weighted average common
shares outstanding diluted 5,654,834 5,468,644
=========== ===========
See Accountants' review report and notes to Consolidated Financial Statements
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
Cash flows from operating activities:
Net income $ 413 $ 87
Adjustments to reconcile net income
to cash provided by (used in) operating
activities:
Depreciation and amortization 84 84
Changes in operating assets
and liabilities:
Accounts and retainage receivable (673) (639)
Costs and estimated earnings in
excess of billings on uncompleted
contracts (212) 170
Prepaid expenses and other (88) (72)
Accounts and retainage payable 714 (339)
Accrued payroll and related benefits (260) 36
Accrued expenses 62 (4)
Billings in excess of costs and
estimated earnings on uncompleted
contracts (381) (88)
----------- ----------
Net cash used in
operating activities (341) (765)
------------ ----------
Cash flows from investing activities:
Purchase of property and equipment (45) (3)
Other liabilities 23 (10)
------------ ----------
Net cash used in investing
activities (22) (13)
------------ ----------
Net decrease in cash and cash
equivalents (363) (778)
Cash and cash equivalents, beginning of period 6,651 2,404
------------ ----------
Cash and cash equivalents, end of period $ 6,288 $ 1,626
============ ==========
See Accountants' review report and notes to Consolidated Financial Statements
KSW, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. In the opinion of the Company's Management, the accompanying consolidated 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, 2000 and December 31, 1999 and the results of operations and cash flows for the three month periods ended March 31, 2000 and 1999. 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.
2. The Company is not aware of any pending or threatened legal proceedings which could have a material adverse effect on its financial position or results of operations. The following are the material lawsuits in which the Company is a party:
| a. | Co-op City. In February, 1999 the Company sued the General Contractor and its bonding company in New York State Supreme Court, Queens County, to recover its contract balance and unpaid proposals in the sum of $5,362,290. Included is a claim for unanticipated costs incurred through 1998 in the sum of $3,252,122. The action is in the discovery stage. The court has set a discovery cut-off date of December 15, 2000 and the case may be placed on the trial calendar on January 15, 2001. While the Company and its counsel believe the lawsuit has merit, there is no guaranty the claim will ultimately be successful. |
| b. | Helionetics Creditors Committee v. Barnes, et. al. On April 26, 1999, the Company and six current or former officers and directors were named in a lawsuit in U.S. Bankruptcy Court, Central District of California, instituted by the Creditors Committee of Helionetics, Inc. The complaint alleges that the December 28, 1995 Distribution by Helionetics of KSW, Inc. stock to Helionetics' shareholders was a fraudulent conveyance, and seeks compensatory damages of $12,141,000., plus punitive damages. The December 28, 1995 Distribution of stock was described in a Form 10 Registration filed with the Securities and Exchange Commission. The Company believes that the lawsuit is totally without merit and is aggressively defending the case. |
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
KSW, Inc.
37-16 23rd Street
Long Island City, New York 11101
We have reviewed the accompanying consolidated balance sheet of KSW, Inc. and subsidiary as of March 31, 2000, and the related consolidated statements of operations, retained earnings, and cash flows for the three months then ended. These consolidated financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of KSW, Inc. and Subsidiary as of December 31, 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended not presented herein; and in our report dated February 4, 2000, we expressed an unqualified opinion on those consolidated financial statements.
MARDEN, HARRISON & KREUTER
Certified Public Accountants, P.C.
White Plains, New York
April 27, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Revenues
Total revenues for the first quarter ending March 31, 2000 increased 36% or $3,193,000 to $12,121,000, compared to $8,928,000 for the first quarter of 1999 due to the availability of work on existing projects. As of March 31, 2000 the Company had a backlog of $61,000,000 compared to $47,000,000 as of March 31, 1999.
Cost of Sales
Cost of sales for the first quarter increased by $2,332,000 or 30% to $10,206,000 from $7,874,000 as a result of the increase in revenue noted above.
Gross Profit
Gross profit increased by 82% or $861,000 from $1,054,000 in the first quarter of 1999 to $1,915,000 in the first quarter of 2000, primarily due to an increase in the profit margins on new projects. The gross profit percentage for the first quarter of 2000 was 15.8% compared to 11.8% for the first quarter of 1999.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (“SG&A ”) increased from $920,000 for the first quarter of 1999 to $1,164,000 in first quarter of 2000 which represents an increase of $244,000 or 26% due to the increase in revenue. SG &A expenses for the first quarter of 2000 were 9.6% of revenue as compared to the first quarter of 1999 which was 10.3% of revenue.
Provision for Taxes
The tax provision for the three months ended March 31, 2000 was $330,000 as compared to a $40,000 for the same period in 1999, due to the profits for the respective periods. The company also had an $18,000 benefit in the first quarter of 1999 due to the over accrual of tax provisions in 1998.
Net Income
The net income for the first quarter of 2000 was $413,000 compared to $87,000 for the first quarter of 1999 due to the items mentioned above.
Liquidity and Cash Flow
For the first three months of 2000, cash used by operations was $341,000. For the same period in 1999 the cash used by operations was $765,000. The cash flow for the first quarter for 2000 was the result of the increase in sales volume which resulted in increased accounts and retainage receivable.
While no significant capital improvements are projected over the next year, cash may be needed to fund the start-up costs for new projects or acquisitions. The Company has not used any portion of its revolving credit of $2,000,000 in the year 2000 and believes the credit facility will be adequate to fund any expansion for the remainder of the year.
Forward-Looking Statements
All statements contained herein and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" that are not historical facts, including but not limited to statements regarding the Company's current business strategy, and plans for future development and operations are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties, many of which are not within the control of the Company. Actual results may differ materially. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which statements are made pursuant to the Private Litigation Reform Act of 1995 and as such, speak only as of the date made.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company's market risk exposure with respect to financial instruments depends upon changes in the "prime rate" in the United States. We may borrow up to $2,000,000 under our credit facility. Amounts outstanding under the credit facility bear interest at the bank's prime rate plus 1.00%. At March 31, 2000, there were no amounts outstanding under the credit facility. The Company currently does not use interest rate derivative instruments to manage exposure to interest rate charges.
PART II - Other Information
Item 1. Legal Proceedings
See Note 2 to the Notes To Consolidated Financial Statements.
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
None.
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) The Company did not file any Current Reports on Form 8-K during the first quarter of 2000.
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 10, 2000 |
| /s/ Robert Brussel |
| Robert Brussel |
| Chief Financial Officer |
| (Principal Financial and Accounting Officer and Duly Authorized Officer |
KSW, INC.
INDEX TO EXHIBITS
| Exhibit Number |
|
Sequentially Numbered Page |
| 11 | Statement Regarding Computation of Per Share Earnings |
13 |
| 27 | Financial Data Schedule |
14 |
|
|