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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, 2003
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
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(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 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 MAY 13, 2003
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COMMON STOCK, $.01 PAR VALUE 5,470,311
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THIS IS PAGE 1 OF 22 PAGES.
INDEX TO EXHIBITS IS ON PAGE 19
KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2003
TABLE OF CONTENTS
PAGE NO.
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PART 1 FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
March 31, 2003 and December 31, 2002 3
Consolidated Statements of Operations -
Three months ended March 30, 2003 and 2002 4
Consolidated Statements of Comprehensive Loss -
Three months ended March 31, 2003 and 2002 5
Consolidated Statements of Cash Flows
Three months ended March 31, 2003 and 2002 6
Notes to Consolidated Financial Statements 7
Independent Accountants' Review Report 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
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
CERTIFICATIONS 17
INDEX TO EXHIBITS 19
2
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31, 2003 December 31, 2002
-------------- -----------------
ASSETS (unaudited)
- ------
Current assets:
Cash $ 1,946 $ 2,516
Marketable securities 463 473
Accounts receivable, less allowance
for doubtful accounts of $200 at
3/31/03 and 12/31/02 5,385 6,774
Settlement receivable 850 -
Retainage receivable 2,798 2,746
Costs and estimated earnings in excess of
billings on uncompleted contracts 939 569
Prepaid expenses and other receivables 222 446
----------- -----------
Total current assets 12,603 13,524
Property and equipment, net of accumulated
depreciation of $ 1,768 and $ 1,805 at 3/31/03
and 12/31/02, respectively 214 232
Accounts receivable 1,937 1,937
Deferred income taxes and other 1,478 1,478
----------- -----------
TOTAL ASSETS $ 16,232 $ 17,171
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable $ 1,064 $ 387
Accounts payable 5,106 7,075
Retainage payable 1,617 1,317
Accrued payroll and related benefits 343 247
Accrued expenses 311 171
Billings in excess of costs and estimated
earnings on uncompleted contracts 700 832
----------- -----------
Total current liabilities 9,141 10,029
----------- -----------
Commitments and contingencies
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 3/31/03 and 12/31/02 54 54
Additional paid-in capital 9,729 9,729
Accumulated deficit (2,651) (2,593)
Accumulated other comprehensive loss:
Net unrealized holding loss on available
for sale securities (41) (48)
----------- -----------
Total stockholders' equity 7,091 7,142
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 16,232 $ 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
Ended March 31, 2003 Ended March 31, 2002
-------------------- --------------------
Revenues $ 8,078 $ 13,138
Cost of revenues 7,641 11,617
---------- ----------
Gross profit 437 1,521
Selling, general and administrative
expenses 468 1,451
---------- ----------
Operating income (loss) (31) 70
---------- ----------
Other income (expense):
Interest income (expense), net 1 -
Loss on sale of marketable securities (23) (14)
---------- ----------
Total other income (expense), net (22) (14)
---------- ----------
Income (loss) before provision for income taxes (53) 56
Provision for income taxes 5 41
---------- ----------
Income (loss) before cumulative effect of
change in accounting principle (58) 15
Cumulative effect of change in accounting for
goodwill, net of income tax benefit of $1,626 - (1,855)
---------- ----------
Net loss $ (58) $ (1,840)
========== ==========
Loss per common share basic and diluted
before effect of change in accounting
principle $ (.01) $ -
Cumulative effect of change in accounting
principle - (.34)
---------- ----------
Basic and diluted loss per common share $ (.01) $ (.34)
========== ==========
Weighted average common shares outstanding:
Basic 5,470,311 5,470,311
Diluted 5,470,311 5,470,311
See accompanying notes to consolidated financial statements.
4
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
(unaudited)
Three Months Three Months
Ended March 31, 2003 Ended March 31, 2002
-------------------- --------------------
Net loss $ (58) $ (1,840)
--------- ---------
Other comprehensive income before tax:
Net unrealized holding gains
arising during the period 35 33
Less: reclassification adjustment for
losses included in net loss (23) (14)
--------- ---------
Other comprehensive income
before tax 12 19
Income tax related to items of
other comprehensive income 5 -
--------- ---------
Other comprehensive income,
net of tax 7 19
--------- ---------
Total comprehensive loss $ (51) $ (1,821)
========= =========
See accompanying notes to consolidated financial statements
5
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
Three Months Three Months
Ended March 31, 2003 Ended March 31,2002
-------------------- -------------------
Cash flows from operating activities:
Net loss $ (58) $ (1,840)
Adjustments to reconcile net loss to cash provided by
(used in) operating activities:
Depreciation and amortization 23 31
Write off of goodwill, net - 1,855
Deferred income taxes (4) 19
Realized loss on sale of marketable
securities 23 14
Changes in operating assets and liabilities:
Accounts receivable 1,389 745
Settlement receivable (850) -
Retainage receivable (52) (264)
Costs and estimated earnings in
excess of billings on uncompleted
contracts (370) (57)
Prepaid expenses and other receivables 224 111
Accounts payable (1,969) (1,401)
Retainage payable 300 43
Accrued payroll and related benefits 96 33
Accrued expenses 140 186
Billings in excess of costs and
estimated earnings on uncompleted
contracts (132) 801
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,240) 276
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (5) (55)
Net sale (purchase) of marketable securities (2) 9
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (7) (46)
----------- -----------
Cash flows from financing activities:
Increase (decrease) in loan payable 677 (190)
Long-term liabilities - (3)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 677 (193)
----------- -----------
NET INCREASE (DECREASE) IN CASH (570) 37
Cash, beginning of period 2,516 715
----------- -----------
Cash, end of period $ 1,946 $ 752
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 12 $ 13
Income taxes $ 11 $ 22
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 processes piping systems for institutional, industrial, commercial,
high-rise residential and public works projects, primarily in the State of New
York. The Company also serves as a mechanical trade manager, performing project
management services relating to the mechanical trades and as a constructability
consultant. 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. These statements should be read in
conjunction with the 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 financial statements include all
adjustments, necessary for a fair presentation of the financial position of the
Company as of March 31, 2003 and December 31, 2002, and the results of
operations, comprehensive loss and cash flows for three month periods ended
March 31, 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.
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.
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 14 days and adjourned by the Court to May 2003
for further trial proceedings. The financial statements at March 31,
7
2003 and December 31, 2002, include approximately $1,937,000,
consisting of accounts receivable applicable to the base contract of
approximately $437,000 and unpaid final retainage billings of
approximately $1,500,000.
b. Stroock & Stroock & Lavan, LLP. On February 13, 2001, the Company
commenced an action in the Superior Court of the State of California,
County of Los Angeles against its former counsel, Stroock & Stroock &
Lavan, LLP ("Stroock") for malpractice in connection with Stroock's
representation of the Company in connection with the transactions
which form the basis for the matter involving Helionetics Creditors
Committee which was settled in May 2002. That action had claimed that
Helionetics' distribution of the Company's stock to Helionetics'
shareholders was a fraudulent conveyance. The Company's complaint
alleged malpractice in connection with Stroock's representation of the
Company and three of its directors and officers in the Helionetics
Creditors Committee Action. The Company's action sought to recoup its
legal fees paid for the distribution, the fees spent in defense of the
Helionetics Creditors Committee Action, and the $ 500,000 payment made
by the Company and its directors to settle that action (a total of
approximately $ 1,800,000), plus punitive damages. Stroock
counterclaimed against the Company and three of its directors seeking
"not less than $300,000" for legal fees allegedly earned in connection
with Stroock's representation of the Company in the Helionetics
Creditors Committee Action. After mediation, the parties executed a
settlement agreement which provides for a payment by Stroock to the
Company of $ 850,000 and dismissal of Stroock's claim for attorney
fees. The settlement payment was received on May 13, 2003. This
settlement has reduced the selling, general and administrative
expenses during the first quarter of 2003. At March 31, 2003, the
Company has recorded a $50,000 payable to two officers and directors
of the Company, who contributed to the settlement of the Helionetics
case and who are entitled to reimbursement of deferred 2002
compensation from the proceeds of the Stroock litigation.
c. 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 amounts the
Company believes it will ultimately receive 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, they 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.:
We have reviewed the accompanying consolidated balance sheet of KSW, Inc. and
Subsidiary (the "Company") as of March 31, 2003, and the related consolidated
statements of operations and comprehensive loss, and cash flows for the three
months ended March 31, 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 March 31, 2002 consolidated financial statements were
reviewed by other accountants whose report dated April 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
April 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 quarter ended March 31, 2003 decreased by 38.5% or
$5,060,000 to $ 8,078,000 as compared to $13,138,000 for the quarter ended March
31, 2002. This decline was 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
contributed to this decrease in revenue. During the quarter ended March 31,
2002, the Company obtained most of its revenues from new projects which started
during the latter part of 2001 and continued through 2002. As of March 31, 2003,
the Company had backlog of approximately $ 20,000,000 as compared to
approximately $41,000,000 as of March 31, 2002. The Company has accumulated
approximately $10,000,000 of additional backlog during the second quarter of
2003.
COST OF REVENUES
Cost of revenues for the quarter ended March 31, 2003 decreased by $3,976,000 or
34.2%, to $7,641,000 as compared to $11,617,000 for the quarter ended March 31,
2002, as a result of the decrease in revenues noted above.
GROSS PROFIT
For the quarter ended March 31, 2003, there was a gross profit of $ 437,000 or
5.4% as compared to a gross profit of $ 1,521,000 or 11.6% for the quarter ended
March 31, 2002. A large portion of the gross profit earned during the first
quarter of 2003, was attributed to trade management contracts which historically
have a lower gross profit than the Company's typical mechanical trade contract.
In addition, the delay in the start of the Company's newer projects contributed
to this decrease in gross profit.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the quarter ended
March 31, 2003, decreased by $ 983,000 or 67.7%, to $ 468,000 as compared to $
1,451,000 for the quarter ended March 31, 2002. During 2003,the Company reached
a settlement related to its legal action against Stroock & Stroock & Lavan, LLP.
, whereby Stroock has agreed to pay the Company $ 850,000 and dismiss its claim
for payment of additional legal fees. This settlement has reduced SG&A expenses
in 2003. The majority of the remaining decrease in SG&A was due to trade
management contracts. On these projects, certain adiministrative costs are job
costed instead of being carried in selling, general and administrative costs.
This decrease in overhead was offset by an increase of medical insurance costs
which were approximately $ 50,000 higher than the same period in 2002.
OTHER INCOME (EXPENSES)
Other expenses for the quarter ended March 31, 2003, increased by $ 8,000 to $
22,000 as compared to $ 14,000 for the quarter ended March 31, 2002, largely due
to realized losses on the sale of marketable securities included in the
Company's managed stock funds.
10
PROVISION FOR TAXES
The tax provision for the three months ended March 31, 2003 was $5,000 as
compared to a tax provision of $ 41,000 for the three months ended March 31,
2002. The provision 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. In addition, the tax rates in
both periods were affected by certain state and local taxes which are based on
net worth.
CHANGE IN ACCOUNTING FOR GOODWILL
The Financial Accounting Standards Board issued SFAS 142 "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 LOSS
As a result of all the items mentioned above, the Company incurred a loss of $
58,000 for the quarter ended March 31, 2003 as compared to a loss of $ 1,840,000
for the quarter ended March 31, 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. As of March
31, 2003, total cash was $ 1,946,0000, a $ 1,194,000 increase over the $752,000
reported as of March 31, 2002.
CASH PROVIDED BY (USED IN) OPERATIONS
Net cash used in operations was $ 1,240,000 for the quarter ended March 31,
2003. Net cash provided by operations was $ 276,000 for the quarter ended March
31, 2002.
The cash used in operations for the quarter ended March 31, 2003 is largely a
result of operating losses incurred during the current period as well as
reductions in accounts payable in excess of reductions in accounts receivable.
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
quarter ended March 31, 2002, is a result of net income generated as well as the
write-off of goodwill being a non-cash transaction and the Helionetics
settlement not being funded until later in 2002.
11
CASH USED IN INVESTING ACTIVITIES
Net cash used in investing activities was $7,000 during the quarter ended March
31, 2003 as compared to $ 46,000 during the quarter ended March 2002. The
majority of the change in both periods was a result of the purchases of property
and equipment of $ 5,000 and $55,000 during the quarters ended March 31, 2003
and 2002, respectively.
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Net cash provided by financing activities was $ 677,000 for the quarter ended
March 31, 2003. Net cash used in financing activities was $ 193,000 for the
quarter ended March 31, 2002. The majority of the change in both periods was a
result of the Company utilizing $ 677,000 on its line of credit during the
quarter ended March 31, 2003 and repaying $ 190,000 of its line of credit
advances during the quarter ended March 31, 2002.
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 (4.18 % at March 31, 2003). At March 31,
2003 the Company had $ 1,064,000 of outstanding borrowing against the facility.
The Company's backlog at March 31, 2003 was approximately $20,000,000 as
compared to $41,000,000 at March 31, 2002. The Company has accumulated
approximately $10,000,000 of additional backlog during the second quarter of
2003. The Company is actively seeking new contracts, but due to the September
11, 2001 attacks and the current economic conditions there are fewer contracts
to bid. The Company believes its current cash resources are adequate to fund a
moderate decrease in sales volume during the next year. However, the Company's
capital resources may not be sufficient to sustain a substantial revenue
decrease.
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 March 31,
2003, approximately $6,500,000 of the Company's approximately $20,000,000 of
backlog is 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
12
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not utilize futures, options or other derivative instruments.
As of March 31, 2003, the Company has invested $ 463,000 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 March 31,
2003 was 1.18%. 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 (4.18% at March 31, 2003). The Company
currently does not use interest rate derivative instruments to manage exposure
to interest rate changes. There was $1,064,000 outstanding debt under this
facility at March 31, 2003.
13
ITEM 4. CONTROLS AND PROCEDURES
(a) The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the
Company's filings under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the periods
specified in the rules and forms of the Securities and Exchange
Commission. Such information is accumulated and communicated to the
Company's management, including its principal executive officer and
principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating
the disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily is required to
apply judgment in evaluating disclosure controls and procedures.
Within 90 days prior to the filing date of this quarterly report on
Form 10-Q, the Company has carried out an evaluation, under the
supervision and with the participation of the Company's management,
including the Company's principal executive officer and the Company's
principal financial officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based
on such evaluation, the Company's principal executive officer and
principal financial officer concluded that the Company's disclosure
controls and procedures are effective.
(b) There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the
internal controls in connection with the preparation of this
quarterly report on Form 10-Q.
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 99.1 - 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 99.2 - 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: May 13, 2003
/s/ Richard W. Lucas
-------------------------------------------
Richard W. Lucas
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
16
CERTIFICATIONS
I, Floyd Warkol, certify that:
1. I have reviewed this quarterly report on Form 10-Q of KSW, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions to significant deficiencies and material
weaknesses.
Date: May 13, 2003
By: /s/Floyd Warkol
---------------------------------------
Floyd Warkol, Chief Executive Officer
17
CERTIFICATIONS
I, Richard W. Lucas, certify that:
1. I have reviewed this quarterly report on Form 10-Q of KSW, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions to significant deficiencies and material
weaknesses.
Date: May 13, 2003
By: /s/Richard W. Lucas
-------------------------------------------
Richard W. Lucas, Chief Financial Officer
18
KSW, INC.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
11 Statement regarding computation of loss per share 20
99.1 Certification by the Chief Executive Officer
pursuant to 18 U.S.C.ss.1350, as adopted by ss.906
of the Sarbanes-Oxley Act of 2002. 21
99.2 Certification by the Chief Financial Officer
pursuant to 18 U.S.C.ss.1350, as adopted by ss.906
of the Sarbanes-Oxley Act of 2002. 22
19