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, 1996
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 March 31, 1996
Common stock, $.01 par value 5,500,026
KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS Page No.
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet - 3
March 31, 1996 and December 31, 1995
Condensed Consolidated Statements of Operation 4
Three months ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows - 5
Three months ended March 31, 1996 and 1995
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 10
Item 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 11
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 1996 December 31, 1995
ASSETS
Current assets:
Cash and cash equivalents $ 3,282 $ 5,124
Accounts receivable, less allowance
for doubtful accounts of $300 at
March 31, 1996 and December 31, 1995 4,209 4,783
Retainage receivable 3,862 3,355
Costs and estimated earnings in excess of - -
billings on uncompleted contracts 1,812 1,513
Prepaid expenses and other 593 455
------ ------
Total current assets 13,758 15,230
Property and equipment, net of accumulated
depreciation of $537 and $464 at
March 31, 1996 and December 31, 1995
respectively 720 733
Other Assets:
Goodwill, net of accumulated amortization
of $597 and $559 at March 31, 1996 and
December 31, 1995, respectively 4,393 4,43l
Other 34 37
----- -----
Total Assets $ 18,905 $ 20,431
------------- --------------
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Account payable $ 4,240 $ 3,561
Retainage payable 3,350 3,335
Accrued payroll and related benefits 450 971
Accrued expenses 203 539
Due to contractor - 1,264
Billings in excess of costs and estimated
earnings on uncompleted contracts 317 632
----- ------
Total current liabilities 8,560 10,302
----- ------
Stockholders' equity:
Common stock, $.01 par value; 25,000,000 shares
authorized; 5,500,026 and 5,200,026 shares issued
and outstanding at March 31, 1996 and December
31, 1995, respectively 55 52
Additional paid-in capital 9,897 9,450
Retained earnings 393 627
----- -----
Total stockholders' equity 10,345 10,129
-------------- ------------
$ 18,905 $ 20,341
-------------- ------------
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Three Months
Ended March 31, 1996 Ended March 31, 1995
Revenues
Contracts $ 8,630 $ 6,660
Fees from Sellers 158 785
Interest 49 48
----- -------
8,837 7,493
Direct costs 8,135 6,713
----- -----
Gross profit 702 780
Selling, general and administrative expenses 1,139 927
Interest 2 0
----- --------
Loss before provision for income taxes (439) (147)
Provision for income taxes (205) ( 69)
------ ------
Net loss $ (234) $ ( 78)
===== ======
Net loss per common share $ ( .04) $ ( .01)
====== =======
Weighted average common shares outstanding 5,579,438 7,800,000
Fully diluted loss per common share $ ( .04) $ ( .01)
====== ======
Fully diluted average common shares 5,677,299 7,800,000
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Three Months
Ended March 31, 1996 Ended March 31, 1995
Cash flows from operating activities:
Net loss $ (234) $ (78)
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 111 92
Changes in operating assets
and liabilities:
Accounts and retainage receivable 67 ( 4,350)
Costs and estimated earnings in
excess of billings on uncompleted
contracts (299) (577)
Prepaid expenses and other (135) (94)
Accounts and retainage payable 694 2,815
Accrued salaries and related benefits (521) (514)
Accrued expenses (336) 46
Due to contractor (1,264) (413)
Billings in excess of costs and
estimated earnings on uncompleted
contracts (315) 1,530
------------ --------
Net cash used in operating activities (2,232) (1,543)
------------ --------
Cash flows from investing activities:
Receivable from Helionetics (815)
Purchase of property and equipment ( 60) ( 29)
------------ ---------
Net cash used in investing activities ( 60) (844)
------------ ---------
Cash flows from financing activities:
Sale of stock 450
----------- --------
Net cash provided by financing activities 450 0
----------- ---------
Net increase in cash and cash equivalents (1,842) (2,387)
Cash and cash equivalents, beginning of period 5,124 4,840
------------ ---------
Cash and cash equivalents, end of period $ 3,282 $ 2,453
------------ ---------
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, 1996 and 1995 and the results of operations and cash
flows for the three month periods then ended. Because of the possible seasonal
effect of weather conditions on the schedule of construction projects, 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 18% to $8,837,000, compared
to $7,493,000 for the first quarter of 1995. There was a net loss of $234,000,
as compared to a loss of $78,000 for the same period in 1995.
Revenue for 1995 included fees on contracts which KSW completed for another
Company, but not the costs associated with those contracts. If the costs for
those contracts had been included, revenue for the first quarter of 1995 would
have been $1,046,000 higher. These contracts were substantially completed by the
end of 1995.
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. During April 1996, the Company successfully negotiated
approximately $30 million in new work for which formal contracts have not yet
been executed.
Cost of Sales
Cost of sales increased by $1,422,000 or 21% to $8,135,000 from $6,713,000
as a result of the increase in sales revenue of 18% noted above. The percentage
increase was greater than the sales increase because during the first quarter
1995, the Company had a greater amount of fee income from a subcontract to
complete projects for another corporation, which was at a substantially higher
gross profit margin.
Gross Profit
Gross profit decreased by 10% ($78,000) from $780,000 in the first quarter
of 1995 to $702,000 in the first quarter of 1996. This was because 1995 included
a substantially greater amount of fee income from a subcontract agreement which
was at a high gross profit margin, as well as substantially more fees from
collections of receivable from customers of the corporation noted above.
The majority of the subcontract work completed for the corporation noted
above has been completed and while it is expected that KSW will continue to
receive fee income from collections of their receivables in 1996, the overall
gross profit percentage is expected to decrease in 1996 due to the lower amount
of anticipated fees in relation to revenues. The Company believes this should be
offset, however, by volume increases as the new projects that the Company has
been awarded are started and profits are generated.
Selling General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased from
$927,000 for the first quarter of 1995 to $1,139,000 in the first quarter of
1996, an increase of $212,000. In the first quarter of 1996, SG&A expenses were
12.9% of revenue as compared to 12.4% of revenue for the first quarter of 1995.
The increase was due to additional costs associated with being a separately
listed public company, in addition to the normal costs associated with higher
volume.
Provision for Taxes
Provision for taxes in both periods remained at 47% of net income (loss),
the same effective rate as for the year 1995.
Net Loss
Net loss for the first quarter of 1996 was ($234,000) compared to a net
loss of ($78,000) in the first quarter of 1995. Management attributes the first
quarter results primarily to the late start of new projects due to the unusually
severe winter weather.
Liquidity and Cash Flow
For the first quarter of 1995 cash used in operations was $1,543,000. For
the same period in 1996 the cash used in operations was $2,232,000 which was
offset by $450,000 received from the sale of stock. The cash flow for the first
quarter of 1995 was affected by a delay in receiving change orders on the
Kennedy Airport project, which was settled in the third quarter, and resulted in
a positive cash flow from operations of $997,000 for the nine months ending
September 30, 1995. 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. This negative cash flow should gradually reverse
itself over the three (3) year life of the project.
While no significant capital improvements are projected over the next year,
cash will be needed to fund the start-up costs of several new large projects
which the Company has successfully negotiated but for which contracts have not
yet been executed. The Company is negotiating a $2.5 million unsecured line of
credit with its bank which management expects to be in place during the second
quarter of 1996. The Company believes this line of credit will be sufficient to
fund the Company's working capital needs.
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 applied for listing on the NASDAQ Smallcap Market. The
NASDAQ Listing Qualifications Committee has indicated no concerns which could
bar the Company's listing, but has denied the Company's request for listing at
this time based upon its failure to satisfy the minimum bid requirements. The
Company was invited to re-apply for listing at such time as it meets all
criteria necessary for initial inclusion, and has established a bid price at or
above $3 in bonafide market conditions.
Item 6. Exhibits and Reports on Form 8-K
None.
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 13, 1996 /s/ Robert Brussel
Robert Brussel
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
KSW, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
Statement regarding Computation of Per Share Earnings