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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 SEPTEMBER 30, 2000
COMMISSION FILE NUMBER 0-27290
KSW, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-3191686
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(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
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(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 OUTSTANDING
----- SEPTEMBER 30, 2000
COMMON STOCK, $.01 PAR VALUE 5,468,644
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THIS IS PAGE 1 OF 15 PAGES.
INDEX TO EXHIBITS IS ON PAGE 13
<PAGE>
KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2000
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TABLE OF CONTENTS
PAGE NO.
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PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - 3
September 30, 2000 and December 31, 1999
Consolidated Statements of Operation - 4
Nine months and three months ended September 30, 2000
and 1999
Consolidated Statements of Cash Flows - 5
Nine months ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements 6
Independent Accountants' Review Report 7
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 10
Market Risk
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PART II OTHER INFORMATION
Item 1 Legal Proceedings 11
Item 2 Changes in Securities and Use of Proceeds 11
Item 3 Defaults Upon Senior Securities 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 11
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SIGNATURES 12
INDEX TO EXHIBITS 13
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2
<PAGE>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, 2000 Dec. 31, 1999
------------------ -------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,404 $ 6,651
Accounts receivable, less allowance
for doubtful accounts of $200 at
9/30/00 and 12/31/99 10,367 10,606
Retainage receivable 3,982 4,122
Costs and estimated earnings in excess of
billings on uncompleted contracts 414 338
Prepaid expenses and other receivables 259 218
------- -------
Total current assets 22,426 21,935
Property and equipment, net of accumulated
depreciation of $1,610 and $1,494 at 9/30/00
and 12/31/99 respectively 365 384
Other Assets:
Goodwill, net of accumulated amortization of $1,285
and $1,170 at 9/30/00 and 12/31/99 respectively 3,705 3,820
Other 8 8
------- -------
TOTAL ASSETS $26,504 $26,147
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable $ 6,421 $ 6,270
Retainage payable 1,838 1,774
Accrued payroll and related benefits 1,155 1,165
Accrued expenses 332 369
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,120 5,334
------- -------
Total current liabilities 14,866 14,912
Long-term liabilities 59 40
------- -------
Total liabilities 14,925 14,952
------- -------
Stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 5,468,644 shares issued
and outstanding at 9/30/00 and 12/31/99 54 54
Additional paid-in capital 9,726 9,726
Retained earnings 1,799 1,415
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Total stockholders' equity 11,579 11,195
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,504 $26,147
======= =======
</TABLE>
See Accountants' review report and notes to Consolidated Financial Statements
3
<PAGE>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months Three Months Three Months
Ended 9/30/00 Ended 9/30/99 Ended 9/30/00 Ended 9/30/99
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Contracts $ 37,785 $ 31,005 $ 11,084 $ 14,395
Fees 46 221 30 190
Interest 236 61 68 38
---------- ----------- ----------- -----------
38,067 31,287 11,182 14,623
Cost of Sales 33,749 26,963 10,491 12,320
---------- ----------- ----------- -----------
GROSS POFIT 4,318 4,324 691 2,303
Selling, general and administrative
expenses 3,587 3,097 1,256 1,230
Interest 20 20 7 7
---------- ----------- ----------- -----------
Profit/(Loss) before provision for 711 1,207 (572) 1,066
income taxes
Provision/(benefit) for income 327 540 (257) 492
taxes ---------- ----------- ----------- -----------
NET PROFIT/(LOSS) $ 384 $ 667 $ (315) $ 574
========== =========== =========== ===========
Net Profit/(loss) per common share $ 0.07 $ 0.12 $ (0.06) $ 0.10
- basic ========== =========== =========== ===========
Weighted Average Common $5,468,644 $ 5,468,644 $ 5,468,644 $ 5,468,644
Shares outstanding - basic ========== =========== =========== ===========
Net Profit/(loss) per common share $ .07 $ 0.12 $ (0.06) $ 0.10
- diluted ========== =========== =========== ===========
Weighted average common
shares outstanding diluted 5,656,976 5,468,644 5,654,834 5,468,644
========== =========== =========== ===========
</TABLE>
See Accountant's review report and notes to consolidated Financial Statements
4
<PAGE>
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended 9/30/00 Ended 9/30/99
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 384 $ 667
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 250 239
Changes in operating assets
and liabilities:
Accounts and retainage receivable 379 (7,746)
Costs and estimated earnings in
excess of billings on uncompleted
contracts (76) (125)
Prepaid expenses and other (41) 223
Accounts and retainage payable 215 3,831
Accrued payroll and related benefits (10) 371
Accrued expenses (37) 66
Billings in excess of costs and
estimated earnings on uncompleted
contracts (214) 3,845
------- -------
Net cash provided by
operating activities 850 1,371
------- -------
Cash flows from investing activities:
Purchase of property and equipment (116) (80)
Other Assets 0 300
Other liabilities 19 (9)
------- -------
Net cash used in investing
activities (97) 211
------- -------
Net increase in cash and cash
equivalents 753 1,582
Cash and cash equivalents, beginning of period 6,651 2,404
------- -------
Cash and cash equivalents, end of period $ 7,404 $ 3,986
======= =======
</TABLE>
See Accountants' review report and notes to Consolidated Financial Statements
5
<PAGE>
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 September 30, 2000 and December 31, 1999 and the results of
operations and cash flows for the three and nine month periods ended September
30, 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 other than (b) below. 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 ordered that the case be placed on the trial
calendar by March 23, 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 $10,890,000.
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 without
merit and is aggressively defending the case.
6
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
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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 September 30, 2000, and the related consolidated statements of
operations for the three month and nine month periods then ended and
consolidated statements of cash flows for the nine 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
October 25, 2000
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
REVENUES
Total revenues for the third quarter of 2000 decreased by $3,441,000 or 24% to
$11,182,000 from $14,623,000 for the third quarter of 1999. During the first
nine months of 2000, revenues increased by $6,780,000 or 22% to $38,067,000 from
$31,287,000 for the first nine months of 1999. The decrease in revenues for the
third quarter was due to a delay in starting several new projects which were
scheduled to start in the second quarter but were delayed until the beginning of
the fourth quarter. The increase for the first nine months was because revenues
were low in the first half of 1999. Backlog at September 30, 2000 was
$62,000,000 as compared to a backlog of $64,000,000 at September 30, 1999.
COST OF SALES
Cost of sales for the third quarter of 2000 decreased by $1,829,000 or 15% to
$10,491,000 from $12,320,000 for the third quarter of 1999. Cost of sales for
the first nine months of 2000 increased by $6,786,000 or 25% to $33,749,000 from
$26,963,00 for the first nine months of 1999. The increase/decrease were due to
the respected increase/decrease in sales revenues noted above.
GROSS PROFIT
Gross profit for the third quarter of 2000 decreased by $1,612,000 or 70% to
$691,000 from $2,303,000 in the third quarter of 1999. During the first nine
months of 2000 gross profit decreased by $6,000 to $4,318,000 compared to
$4,324,000 for the first nine months of 1999. Gross profit percentage for the
third quarter of 2000 declined to 6.2% as compared to 15.7% for the third
quarter of 1999. Gross profit percentage for the first nine months of 2000 was
11.3% as compared to 13.8% for the first nine months of 1999. The decline in
gross profit during the third quarter of 2000 was due to lower than expected
productivity and higher labor costs due to full employment in the industry and
the competition for the limited workforce available. The company is currently
factoring these additional labor costs into its bidding process for new
projects.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the third quarter of
2000 increased by $26,000 or 2% to $1,256,000 from $1,230,000 for the third
quarter of 1999. The SG&A expense for 2000 includes an additional $280,000 of
legal fees accrued for the Co-Op City and Helionetics legal proceedings (see
Notes To Consolidated Financial Statements). For the nine months ended September
30, 2000, SG&A expenses increased by $490,000 or 16% from $3,097,000 in 1999 to
$3,587,000 for the first nine months of 2000 due to increased volume and the
additional legal fees noted above. For the first nine months of 2000 the SG&A
was 9.4% of revenue versus 9.9% of revenue for 1999.
PROVISION FOR TAXES
The tax benefit for the three months ended September 30, 2000 was $257,000 as
compared to a provision of $492,000 for the same period in 1999, due to the
profit/(loss) for respective periods. The tax provision for the nine months
ended September 30, 2000 was $327,000 compared to $540,000 for the same period
in 1999, due to the profit for the respective periods. In all periods the tax
provision was approximately 45% of the profit/(loss) before provision for income
taxes.
NET PROFIT/(LOSS)
The net loss for the third quarter of 2000 was $315,000 compared to a profit of
$574,000 for the third quarter of 1999 due to the items mentioned above. For the
nine months ended September 30, 2000 there was a net profit of $384,000 compared
to net profit of $667,000 for the same period in 1999.
LIQUIDITY AND CASH FLOW
For the first nine months of 1999, cash provided by operations was $850,000. For
the same period in 1999 the cash provided by operations was $1,371,000. The
positive cash flow for both periods was due to the profit for the period as well
as more effective collection of receivables.
While no significant capital improvements are projected over the next year, cash
may be needed to fund the start-up costs for new projects. The Company has not
used any portion of its revolving credit of $2,000,000 with Merril Lynch for the
year 2000 and believes the credit facility will be adequate to fund any
expansion for the remainder of the year.
9
<PAGE>
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 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 30 day dealer commercial paper rate. The Company may borrow
up to $2,000,000 under its credit facility. Amounts outstanding under the credit
facility bear interest at 3% over the 30 day dealer commercial paper rate. The
Company currently does not use interest rate derivative instruments to manage
exposure to interest rate charges.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 2 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.
(a) Exhibits
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
11
<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 9, 2000
/s/ Robert Brussel
-------------------------------------------
Robert Brussel
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
12
<PAGE>
KSW, INC.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
11 Statement Regarding Computation of Per Share Earnings 14
27 Financial Data Schedule 15
13
