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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 JUNE 30, 2003
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
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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 BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER
(AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).
YES NO X
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
OUTSTANDING AT
CLASS AUGUST 12, 2003
----- ---------------
COMMON STOCK, $.01 PAR VALUE 5,470,311
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KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 2003
---------------------------
TABLE OF CONTENTS
PAGE NO.
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PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - 3
June 30, 2003 and December 31, 2002
Consolidated Statements of Operations - 4
Six and three months ended June 30, 2003
and 2002
Consolidated Statements of Comprehensive Income (Loss) -
Six and three months ended June 30, 2003 and 2002 5
Consolidated Statements of Cash Flows
Six months ended June 30, 2003 and 2002 6
Notes to Consolidated Financial Statements 7
Independent Accountants' Review Report 9
Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 14
Market Risk
Item 4. Controls and Procedures 14
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PART II OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities and Use of Proceeds 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
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SIGNATURE 16
INDEX TO EXHIBITS 17
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
June 30, 2003 December 31, 2002
------------- -----------------
ASSETS (unaudited)
- ------
Current assets:
Cash $ 1,282 $ 2,516
Marketable securities 539 473
Accounts receivable, less allowance
for doubtful accounts of $200 at
6/30/03 and 12/31/02 6,568 6,774
Retainage receivable 2,676 2,746
Costs and estimated earnings in excess of
billings on uncompleted contracts 719 569
Prepaid expenses and other receivables 599 446
--------- ---------
Total current assets 12,383 13,524
Property and equipment, net of accumulated
depreciation of $ 1,790 and $ 1,805 at 6/30/03
and 12/31/02, respectively 191 232
Accounts receivable 1,937 1,937
Deferred income taxes and other 1,470 1,478
--------- ---------
TOTAL ASSETS $15,981 $17,171
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable $ 514 $ 387
Accounts payable 5,888 7,075
Retainage payable 1,214 1,317
Accrued payroll and related benefits 261 247
Accrued expenses 376 171
Billings in excess of costs and estimated
earnings on uncompleted contracts 734 832
--------- ---------
Total current liabilities 8,987 10,029
--------- ---------
Commitments and contingencies (Note 3)
Stockholders' equity:
Preferred stock, 1,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.01 par value; 25,000,000 shares
authorized; 5,470,311 shares issued
and outstanding at 6/30/03 and 12/31/02 54 54
Additional paid-in capital 9,729 9,729
Accumulated deficit (2,796) (2,593)
Accumulated other comprehensive income (loss):
Net unrealized holding income (loss) on available
for sale securities 7 (48)
--------- ---------
Total stockholders' equity 6,994 7,142
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,981 $ 17,171
========= =========
See accompanying notes to consolidated financial statements.
3
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
Three Months Three Months Six Months Six Months
Ended June 30, 2003 Ended June 30, 2002 Ended June 30, 2003 Ended June 30, 2002
------------------- ------------------- ------------------- -------------------
Revenues $10,192 $ 14,756 $18,270 $ 27,894
Cost of revenues 9,610 13,408 17,251 25,025
---------- ---------- ---------- ----------
Gross profit 582 1,348 1,019 2,869
Selling, general and administrative
expenses 714 1,022 1,182 2,473
---------- ---------- ---------- ----------
Operating income (loss) (132) 326 (163) 396
---------- ---------- ---------- ----------
Other expense:
Interest expense, net (25) (1) (24) (1)
Loss on sale of marketable securities (16) (33) (39) (47)
---------- ---------- ---------- ----------
Total other expense, net (41) (34) (63) (48)
---------- ---------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes (173) 292 (226) 348
Provision (benefit) for income taxes (28) 146 (23) 187
---------- ---------- ---------- ----------
Income (loss) before cumulative effect of
change in accounting principle
(145) 146 (203) 161
Cumulative effect of change in accounting for
goodwill, net of income tax benefit of
$1,659 - - - (1,855)
---------- ---------- ---------- ----------
Net income (loss) $ (145) $ 146 $ (203) $ (1,694)
---------- ---------- ---------- ----------
Income (loss) per common share basic and
diluted before effect of change in
accounting principle $ (.03) $ .03 $ (.04) $ .03
Cumulative effect of change in accounting
principle - - - (.34)
---------- ---------- ---------- ----------
Basic and diluted income (loss) per common
share $ (.03) $ .03 $ (.04) $ (.31)
========== ========== ========== ==========
Weighted average common shares outstanding:
Basic
5,470,311 5,470,311 5,470,311 5,470,311
Diluted
5,470,311 5,470,311 5,470,311 5,470,311
See accompanying notes to consolidated financial statements.
4
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
(unaudited)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------- -------------- ------------- --------------
Net income (loss) $ (145) $ 146 $ (203) $(1,694)
-------- -------- -------- --------
Other comprehensive income (loss) before tax:
Net unrealized holding gains (losses)
arising during the period 105 (15) 140 18
Less: reclassification adjustment for losses
included in net income (loss) (16) (33) (39) (47)
-------- -------- -------- --------
Other comprehensive income (loss)
before tax 89 (48) 101 (29)
Income tax related to items of
other comprehensive income (loss) (41) - (46) -
-------- -------- -------- --------
Other comprehensive income (loss),
net of tax 48 (48) 55 (29)
-------- -------- -------- --------
Total comprehensive income (loss) $ (97) $ 98 $ (148) $(1,723)
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
5
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
Six Months Six Months
Ended June 30, 2003 Ended June 30,2002
------------------- ------------------
Cash flows from operating activities:
Net loss $ (203) $ (1,694)
Adjustments to reconcile net loss to cash provided by
(used in) operating activities:
Depreciation and amortization 46 63
Write off of goodwill, net - 1,855
Deferred income taxes (46) 164
Realized loss on sale of marketable
securities 39 46
Changes in operating assets and liabilities:
Accounts receivable 206 2,730
Retainage receivable 70 (134)
Costs and estimated earnings in
excess of billings on uncompleted
contracts (150) (487)
Prepaid expenses and other receivables (153) (101)
Other 8 -
Accounts payable (1,187) (1,273)
Retainage payable (103) 538
Accrued payroll and related benefits 14 (218)
Accrued expenses 205 137
Billings in excess of costs and
estimated earnings on uncompleted
contracts (98) 529
------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,352) 2,155
------- -------
Cash flows from investing activities:
Purchase of property and equipment (5) (57)
Net sale (purchase) of marketable securities (4) (6)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (9) (63)
------- -------
Cash flows from financing activities:
Increase (decrease) in loan payable 127 (190)
Long-term liabilities - (6)
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
127 (196)
------- -------
NET INCREASE (DECREASE) IN CASH
(1,234) 1,896
Cash, beginning of period 2,516 715
------- -------
Cash, end of period $1,282 $2,611
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 26 $ 18
Income taxes $ 23 $ 23
See accompanying notes to consolidated financial statements.
6
KSW, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Nature of Operations and Basis of Presentation
----------------------------------------------
The Company furnishes and installs heating, ventilating and air conditioning
systems and process piping systems for institutional, industrial, commercial,
high-rise residential and public works projects, primarily in the New York
Metropolitan area. The Company also serves as a mechanical trade manager,
performing project management services relating to the mechanical trades. For
reporting purposes, the Company considers itself to be one operating segment.
The unaudited consolidated financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and note disclosures required by accounting principles
generally accepted in the United States of America. These statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-K for the year ended December 31, 2002. In the
opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments, necessary for a fair presentation of the
financial position of the Company as of June 30, 2003 and December 31, 2002, and
the results of operations and comprehensive income (loss) for six and three
month periods ended June 30, 2003 and 2002 and cash flows for the six months
ended June 30, 2003 and 2002. 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.
Certain amounts in the 2002 unaudited consolidated financial statements have
been reclassified for comparative purposes to conform with the 2003
presentation. These reclassifications did not affect net income or working
capital as previously reported.
2. Significant Accounting Policies
-------------------------------
The significant accounting policies followed by the Company and its subsidiary
in preparing its consolidated financial statements are set forth in Note 2 to
such consolidated financial statements included in Form 10-K for the year ended
December 31, 2002. The Company has made no significant changes to these policies
during 2003.
7
3. Contingencies
-------------
Except as listed below, 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
$5,770,919. Included in that sum is a claim for unanticipated costs
incurred through 1998 in the sum of $3,662,734, which amount has not
been reflected as a claim receivable in the Company's financial
statements because it is the policy of the Company not to record
income from claims until the claims have been received or awarded. The
defendant has asserted counterclaims totaling $6,269,000, which the
Company believes lack merit. While the Company and its counsel believe
its lawsuit has merit, there is no guaranty of a favorable outcome.
This case was tried for 19 days and adjourned by the Court to
September 2003 for further trial proceedings. The financial statements
at June 30, 2003 and December 31, 2002, include accounts receivable of
approximately $1,937,000 related to this project, consisting of
accounts receivable of approximately $437,000 and unpaid final
retainage billings of approximately $1,500,000.
b. Other Proposals and Claims. During the ordinary and routine course of
its work on construction projects, the Company may incur expenses for
work outside the scope of its contractual obligations, for which the
owner or general contractor agrees that the Company will be entitled
to additional compensation, but where there is not yet an agreement on
price. The Company's financial statements include the Company's
estimates of amounts it believes will be ultimately received on these
authorized proposals. Also during the course of its work on
construction projects, the Company may incur expenses for work outside
the scope of its contractual obligations, for which no acknowledgment
of liability exists from the owner or general contractor for such
additional work. These claims may include change proposals for extra
work or requests for an equitable adjustment to the Company's contract
price due to unforeseen disruptions to its work. In accordance with
accounting principles generally accepted in the United States of
America for the construction industry, until written acknowledgment of
the validity of the claims are received, these claims are not
recognized in the accompanying financial statements. No accruals have
been made in the accompanying consolidated financial statements
related to these proposals for which no acknowledgment of liability
exists. While the Company has been generally successful in obtaining a
favorable resolution of such claims, there is no assurance that the
Company will be successful in the future.
8
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
KSW, Inc. and Subsidiary
We have reviewed the accompanying consolidated balance sheet of KSW, Inc. and
Subsidiary (the "Company") as of June 30, 2003, and the related consolidated
statements of operations, comprehensive income (loss) for the three-month and
six-month periods ended June 30, 2003 and the statement of cash flows for the
six months ended June 30, 2003. 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
statements 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 auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we were not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of KSW,
Inc. and Subsidiary as of December 31, 2002, and the related consolidated
statements of operations, comprehensive loss, stockholders' equity and cash
flows for the year then ended (not presented herein); and in our report dated
February 19, 2003, we expressed an unqualified opinion on those consolidated
financial statements. The June 30, 2002 consolidated financial statements were
reviewed by other accountants whose report dated July 30, 2002 stated that they
were not aware of any material modifications that should be made to the
consolidated financial statements.
/s/ Rosen Seymour Shapss Martin & Company LLP
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
July 23, 2003
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
- ---------------------
Revenues
Total revenues for the second quarter ended June 30, 2003 decreased by
$4,564,000 or 30.9% to $10,192,000 as compared to $14,756,000 for the quarter
ended June 30, 2002. During the six months ended June 30, 2003, revenues
decreased $9,624,000 or 34.5% to $18,270,000 compared to $27,894,000 for the six
months ended June 30, 2002. These declines were primarily a result of market
conditions which were impacted by a slower economy and the attacks on September
11, 2001, causing fewer contracts to be bid. The majority of the Company's new
projects in 2003, which were originally projected to be underway during the
early part of January 2003, did not commence until the latter half of the first
quarter of 2003, which also contributed to this decrease in revenue. During the
quarter ended June 30, 2003, the revenue earned from these new projects was a
result of the early stages of construction for such projects. During the period
ended June 30, 2002, the Company obtained most of its revenues from new projects
which started during the latter part of 2001 and continued through 2002 for such
projects. As of June 30, 2003, the Company had backlog of approximately
$27,400,000 as compared to approximately $28,000,000 as of June 30, 2002. The
Company is actively seeking new contracts to add to its backlog.
Cost of Revenues
Cost of revenues for the quarter ended June 30, 2003 decreased by $3,798,000 or
28.3%, to $9,610,000 as compared to $13,408,000 for the quarter ended June 30,
2002, as a result of the decrease in revenues noted above. Cost of revenues for
the six months ended June 30, 2003 decreased $7,774,000 or 31.06% to $17,251,000
as compared to $25,025,000 for the six months ended June 30, 2002 as a result of
the decrease in revenues noted above.
Gross Profit
For the quarter ended June 30, 2003, there was a gross profit of $582,000 or
5.7% as compared to a gross profit of $1,348,000 or 9.1% for the quarter ended
June 30, 2002. For the six months ended June 30, 2003, there was a gross profit
of $1,019,000 or 5.6% as compared to a gross profit of $2,869,000 or 10.3% for
the six months ended June 30, 2002. These declines during the three and six
month periods ended June 30, 2003, were primarily a result of reduced revenues
caused by the delayed start of newer projects, resulting in a larger portion of
the Company's revenues being earned on trade management contracts than in prior
periods. These trade management projects have a lower profit margin than typical
mechanical trade contracts because certain administrative expenses are job
costed. During the three and six month periods ended June 30, 2002, the majority
of the gross profit was earned by mechanical trade contracts on which work
commenced in the latter part of 2001 as opposed to trade management contracts.
10
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for the second quarter
ended June 30, 2003, decreased by $308,000 or 30.1%, to $714,000 as compared to
$1,022,000 for the quarter ended June 30, 2002. SG & A expenses for the six
month period ended June 30, 2003 decreased $1,291,000 or 52.2% to $1,182,000 as
compared to $2,473,000 for the six months ended June 30, 2002. During the three
and six months ended June 30, 2003 and 2002, legal costs decreased by $105,000
and $960,000, respectively. During the six months ended June 30, 2003, legal
costs were related to the Stroock & Stroock & Lavan, LLP ("Stroock") lawsuit as
well as the Co-Op City litigation. During the six months ended June 30, 2003,
the Company reached a settlement related to its legal action against Stroock &
Stroock & Lavan, LLP., whereby Stroock paid the Company approximately $850,000
and dismissed its counterclaim for payment of additional legal fees. This
settlement reduced SG&A expenses during the six months ended June 30, 2003.
During the six months ended June 30, 2002, legal costs were in connection with
the Helionetics Creditors Committee lawsuit and the Co-Op City lawsuit. In
addition, medical costs decreased approximately $130,000 for the six month
period ended June 30, 2003, in comparison to the same period in 2002. The
majority of the remaining decrease in SG&A during the three and six month
periods ended June 30, 2003 and 2002 was due to trade management contracts. On
these projects, certain administration costs are job costed instead of being
carried in selling, general and administrative costs.
Other Expense
Other expense for the quarter ended June 30, 2003, increased by $ 7,000 to $
41,000 as compared to $34,000 for the quarter ended June 30, 2002, largely due
to realized losses on the sale of marketable securities included in the
Company's managed stock funds and interest related to the Company's utilization
of its line of credit facility during the period. Other expense for the six
months ended June 30, 2003, increased $15,000 to $63,000 as compared to $48,000
for the six months ended June 30, 2002 for the same reasons.
Provision for Income Taxes
The income tax benefit for the quarter ended June 30, 2003 was $28,000 as
compared to a tax provision of $146,000 for the quarter ended June 30, 2002. The
income tax benefit for the six months ended June 30, 2003 was $23,000 as
compared to a tax provision of $187,000. The tax benefit for 2003 differs from
the Company's effective income tax rate primarily due to a deferred income tax
valuation allowance against the tax benefit applicable to the current period
loss, as well as reversal of deferred taxes associated with the net unrealized
holding gains (losses) on available for sale marketable securities. In addition,
the tax rates in both periods were affected by certain state and local taxes
which are based on net worth.
11
Change in Accounting for Goodwill
The Financial Accounting Standards Board issued SFAS 142 entitled "Goodwill and
Other Intangible Assets" which became effective on January 1, 2002. In
accordance with this pronouncement goodwill would no longer be amortized, but
tested each year for impairment. Since the goodwill applied to the entire
Company as a whole and the fair value of the Company as represented by its
market capitalization was significantly below its net worth including the
goodwill, the goodwill of $3,514,000 ($1,855,000 net of taxes), was written off
during the first quarter of 2002.
Net Income (Loss)
As a result of all the items mentioned above, the Company incurred a loss of
$145,000 for the quarter ended June 30, 2003 as compared to net income of
$146,000 for the quarter ended June 30, 2002. For the six months ended June 30,
2003, the net loss was $203,000 as compared to a net of $1,694,000 for the
period ended June 30, 2002.
Liquidity and Capital Resources
The Company's principal capital requirements have been to fund working capital
needs. The Company has historically relied primarily on internally generated
funds and bank borrowings to finance its operations and expansion.
Cash provided by (used in) operations
Net cash used in operations was $1,352,000 for the six months ended June 30,
2003. Net cash provided by operations was $2,155,000 for the six months ended
June 30, 2002.
The cash used in operations for the six months ended June 30, 2003 is a result
of reductions in accounts payable in excess of reductions in accounts receivable
as well as operating losses incurred during the current period. In addition,
during the period the Company incurred costs associated with the start-up costs
of its new contracts. The cash provided by operations for the six months ended
June 30, 2002, is a result of operating income during the period, improved
collections of receivables and the write-off of goodwill being a non-cash
transaction.
Cash used in investing activities
Net cash used in investing activities was $9,000 during the six months ended
June 30, 2003 as compared to $63,000 during the six months ended June 30, 2002.
The majority of the change in both periods was a result of the purchase of
property and equipment totaling $6,000 and $57,000 during the period ended June
30, 2003 and 2002, respectively.
Cash provided by (used in) financing activities
Net cash provided by financing activities was $127,000 for the six months ended
June 30, 2003. Net cash used in financing activities was $196,000 for the six
months ended June 30, 2002. The majority of the change in both periods was a
result of the Company utilizing $127,000 on its line of credit during the
quarter ended June 30, 2003 and repaying $190,000 of its line of credit advances
during the six months ended June 30, 2002.
12
The Company currently has a $2,000,000 line of credit with Merrill Lynch, which
expires on December 31, 2003. The line of credit calls for borrowing at 3% over
the 30-Day Dealer Commercial Paper Rate (1.0 % at June 30, 2003). At June 30,
2003 the Company had $514,000 of outstanding borrowing against the facility.
The Company's backlog at June 30, 2003 was approximately $27,400,000 compared to
$28,000,000 at June 30, 2002. The Company is actively seeking new contracts.
The Company's current bonding limits are also sufficient given the volume and
size of the Company's contracts. The Company's surety may require that the
Company maintain certain tangible net worth levels and may require additional
guarantees if the Company should desire increased bonding limits. At June 30,
2003, approximately $15,300,000 of the Company's approximately $27,400,000 of
backlog was bonded.
The Company believes its current cash resources are adequate to fund its working
capital requirements in the next year. However, the Company's capital resources
may not be sufficient to sustain a substantial decline in revenue. The Company's
management has had experience in expanding into new geographic areas with the
Company's predecessors; however, to date the Company has conducted its
operations primarily in the New York City metropolitan area.
The Company currently has no significant capital expenditure commitments.
Forward-Looking Statements
- --------------------------
Certain statements contained in this report are not historical facts, and
constitute "forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995). These forward looking statements
generally can be identified as statements that include phrases such as
"believe", "expect", "anticipate", "intend", "plan", "foresee", "likely", "will"
or other similar words or phrases. Such forward-looking statements concerning
management's expectations, strategic objectives, business prospects, anticipated
economic performance and financial condition, and other similar matters involve
known and unknown risks, uncertainties and other important factors that could
cause the actual results, performance or achievements of results to differ
materially from any future results, performance or achievements discussed or
implied by such forward-looking statements. This document describes factors that
could cause actual results to differ materially from expectation of the Company.
All written and oral forward-looking statements attributable of the Company or
persons acting on behalf of the Company are qualified in their entirety by such
factors. Such risks, uncertainties, and other important factors include, among
others: low labor productivity and shortages of skilled labor, recent federal
government tariff increases on foreign steel imports, economic downturn,
reliance on certain customers, competition, ability to obtain bonding,
inflation, the adverse effect of the attack of September 11, 2001 on public
budgets and insurance costs, the availability of private funds for construction,
and other various matters, many of which are beyond the Company's control and
other factors as are described at the end of "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" of the Company's
Form 10-K for the fiscal year ended December 31, 2002. Forward-looking
statements speak only as of the date of the document in which they are made. The
Company disclaims any obligation or undertaking to provide any updates or
revisions to any forward-looking statement to reflect any change in the
Company's expectations or any change in events, conditions or circumstances on
which the forward-looking statement is based.
13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company does not utilize futures, options or other derivative instruments.
As of June 30, 2003, the Company has invested $539,000 in managed stock funds
selected by Merrill Lynch.
The Company's market risk exposure with respect to financial instruments depends
upon changes in the "30-Day Dealer Commercial Paper Rate" which at June 30, 2003
was 1.0 %. 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 (4.0% at June 30, 2003). The Company
currently does not use interest rate derivative instruments to manage exposure
to interest rate changes. There was $514,000 outstanding debt under this
facility at June 30, 2003.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
The Company's management evaluated, with the participation of the Company's
principal executive and principal financial officers, the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), as of June 30, 2003. Based on their evaluation, the Company's principal
executive and principal financial officers concluded that the Company's
disclosure controls and procedures were effective as of June 30, 2003.
There has been no change in the Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the Company's fiscal quarter ended June 30, 2003, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
14
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
See Note 3 to Consolidated Financial Statements.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
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 AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Statement regarding computation of loss per share
Exhibit 31.1 - Certification by the Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 - Certification by the Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 - Certification by the Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2 - Certification by the Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
None.
15
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: August 12, 2003
/s/ Richard W. Lucas
--------------------------------------------
Richard W. Lucas
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
16
KSW, INC.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- -------------
11 Statement regarding computation of income (loss) per share 18
31.1 Certification by the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification by the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. 20
32.1 Certification by the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted by Section 906 of the Sarbanes-Oxley
Act of 2002. 21
32.2 Certification by the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted by Section 906 of the Sarbanes-Oxley
Act of 2002. 22
17