UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the year ended December 31, 2011
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ______________
to ______________
Commission file number: 001-32865
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KSW, INC.
(Exact Name of Registrant as Specified in
its Charter)
Delaware
(State or Other Jurisdiction
of Incorporation or Organization)
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11-3191686
(I.R.S. Employer
Identification No.)
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37-16 23rd
Street
, Long Island City, New York
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11101
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s telephone number, including
area code:
(718) 361-6500
Securities registered pursuant to Section
12(b) of the Act:
TITLE OF EACH CLASS
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NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK
$.01 par value
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NASDAQ GLOBAL MARKET
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Securities
registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the Registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
x
Indicate by check mark if the
Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
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No
x
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 if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
x
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of
“large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large Accelerated Filer
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Accelerated Filer
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Non-Accelerated Filer
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Smaller Reporting Company
x
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Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of Exchange Act). Yes
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No
x
The aggregate market value of the voting
and non-voting common equity held by non-affiliates of the Registrant on June 30, 2011 was $22,116,783 (based on a price of $ 3.92
per share).
As of March 30, 2012, there were 6,366,625
shares of Common Stock, $.01 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
The Registrant’s definitive proxy
statement to be filed with the Securities and Exchange Commission (the “Commission”) pursuant to Regulation 14A within
120 days after the end of the Registrant’s last fiscal year is incorporated by reference into Part III of this Annual Report
on Form 10-K.
FORWARD-LOOKING STATEMENTS
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2
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PART I
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3
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ITEM 1.
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BUSINESS
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3
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ITEM 1A.
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RISK FACTORS
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9
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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11
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ITEM 2.
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PROPERTIES
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11
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ITEM 3.
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LEGAL PROCEEDINGS
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11
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ITEM 4.
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MINE SAFETY DISCLOSURES
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11
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EXECUTIVE OFFICERS OF THE REGISTRANT
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12
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PART II
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13
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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13
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ITEM 6.
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SELECTED FINANCIAL DATA
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14
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ITEM 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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15
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ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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25
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ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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25
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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25
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ITEM 9A.
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CONTROLS AND PROCEDURES
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26
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ITEM 9B.
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OTHER INFORMATION
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27
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PART III
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27
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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27
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ITEM 11.
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EXECUTIVE COMPENSATION
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27
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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28
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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28
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ITEM 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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28
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PART IV
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28
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ITEM 15.
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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28
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SIGNATURES
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31
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FORWARD LOOKING STATEMENTS
Certain statements contained under “Item
1 - Business”, “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and elsewhere in this Form 10-K regarding matters that are not historical facts, 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”, “may”, “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 to differ materially
from any expected results, performance or achievements discussed or implied by such forward-looking statements. Many of the risks,
uncertainties and other important factors that could cause actual results to differ materially from expectations of the Company
are described under “Item 1A - Risk Factors” in this Form 10-K. All written and oral forward-looking statements attributable
to the Company or persons acting on behalf of the Company are qualified in their entirety by such factors.
There is no assurance that any of the actions,
events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on the Company’s
results of operations or financial condition. Because of these uncertainties, you should not put undue reliance on any forward-looking
statements. Other than as required by applicable law, the Company disclaims any obligation to update or to announce publicly the
result of any revisions to any of the forward-looking statements to reflect future events or developments.
PART I
ITEM
1.
BUSINESS
General.
KSW, Inc., a Delaware corporation (the “Company” or “KSW”), furnishes and installs heating, ventilating
and air conditioning (“HVAC”) systems and process piping systems for institutional, industrial, commercial, high-rise
residential and public works projects. The Company does not actively pursue projects under $3,000,000. The Company also serves
as a mechanical trade manager, performing project management services relating to the mechanical trades. The Company conducts operations
through its wholly-owned subsidiary, KSW Mechanical Services, Inc. (“KSW Mechanical”). The Company’s common stock
is traded on the Nasdaq Global Market Exchange (“NASDAQ”) under the symbol “KSW”.
The Company was able
to weather the recent recession by focusing on the public and institutional construction sectors. The Company has completed its
work at the 9-11 Memorial, and has substantially completed its work at the new World Trade Center Chiller Plant. The Company continues
to work on public projects such as the boiler replacement at Kingsborough Community College, the new chiller plant for the United
Nations and on institutional projects such as the Mount Sinai Center for Science and Medicine.
During the past year,
the Company has seen a revival in parts of the private sector, specifically hotels and luxury apartment buildings, and has been
able to utilize value engineering to secure several large projects. As 2012 progresses, there are opportunities to obtain additional
new private sector projects. Many of these projects are being developed by developers for whom the Company has successfully worked
for in the past.
The Company’s
primary strategic objectives are to increase its revenues and profitability in its present business. While cash reserves are important
in this economic climate, the Company may look to expand its business into new geographic areas in the Northeastern United States
or acquire businesses which would be complementary to its current line of business. The Company may also pursue acquisitions outside
its current lines of business for greater diversification.
On private projects,
the Company provides value engineering assistance, whereby the Company uses its experienced staff to recommend economical changes
to streamline HVAC and process piping systems. These changes reduce costs, but still yield the same results as the original plans.
The Company’s ability to provide this service is widely recognized in the industry and has resulted in the Company’s
ability to secure projects without competitive bidding. The Company believes that this service may provide additional opportunities
in the future, as lending for private construction becomes more available. Many of the Company’s current projects are for
repeat customers who recognize the benefits of the Company’s value engineering services. Certain governmental agencies have
begun to incorporate value engineering provisions in their bid documents.
The Company’s
management pioneered the concept of managing the mechanical trade portion of large construction projects. On larger complex projects
(generally those having a mechanical portion valued at over $10,000,000), it is often beneficial for a construction manager
to
lock in the costs of the mechanical portion of the contract prior to completion of the contract documents. By engaging the services
of a trade manager, the Company believes owners can more accurately evaluate design alternatives so that the completed construction
documents balance costs and project objectives. As a mechanical trade manager, the Company performs a construction manager function
for the mechanical trade portion of a project. The Company divides the mechanical portion of the contract into bid packages for
subcontractors and equipment, negotiates subcontracts and coordinates the work. The Company believes that this coordination provides
a significant benefit in keeping a project on schedule and within budget.
As a mechanical trade
manager, the Company may subcontract parts of a large project to different subcontractors, thereby increasing competition on projects
and reducing costs by allowing smaller contractors to compete for the subcontract work. On some projects, the Company may self-perform
a portion of the work for a fixed price. The Company believes customers benefit by having a single source responsible for the cost,
coordination and progress of the mechanical portion of the projects. Although trade management is typically available only on large
jobs, the Company believes there is opportunity for expanding this line of business.
On trade management
projects, the Company may provide a guaranteed maximum price (“GMP”) to its customer for its scope of responsibility.
The Company controls the GMP by obtaining price quotes from potential suppliers and subcontractors, requiring payment or performance
bonds from major subcontractors and adding a contingency allowance to these price quotes before the Company submits its GMP. The
Company also works to control costs because it is a mechanical contractor and can perform some of the guaranteed work on its own
should bid prices exceed its estimate. These costs are subject to certain risk factors discussed in “Item 1A – Risk
Factors”.
While trade management
projects may provide a net profit margin lower than that for construction projects, the Company believes there is generally less
risk associated with trade management projects because there is a contingency fund, which can be drawn from if necessary. A contingency
fund is a line item which the Company includes in the GMP to account for any contingencies the Company may not have anticipated
in estimating the GMP. In the event the Company’s costs exceed the relevant line items quoted in the GMP, the Company may
draw from the contingency fund to cover such expenses. The Company is at risk for any costs in excess of the GMP. There is no assurance
that potential cost overruns will not exceed this contingency.
The Company purchases
steel products from local, national and international distributors. The Company includes allowances in its estimates for future
escalations in steel prices due to market conditions. When market conditions have indicated a price increase, the Company has in
the past entered into agreements locking in prices with its suppliers to purchase steel products at fixed dollar amounts for extended
time periods. At December 31, 2011, the Company does not have any agreements to lock in steel prices. When steel product prices
do not fluctuate, the Company purchases these products on a price in effect basis. The current prices for steel are fluctuating,
and the Company is attempting to lock in prices for the length of each project, which may or may not be possible.
Operations.
For
all projects, the Company develops a comprehensive project budget using what it believes is a proven cost estimating system. Projects
are divided into phases and line items indicating separate labor, equipment, material, subcontractor and overhead cost estimates.
As a project progresses, the Company’s project managers are responsible for planning, scheduling and overseeing operations
and reviewing project costs compared to the estimates. These costs are tracked on a monthly basis. The Company’s costs have
been and may in the future be impacted by lower than expected labor productivity and higher than expected material costs.
The Company continues
to bid on public projects. It has received letters of approval as an authorized bidder by various government agencies, including
the Metropolitan Transportation Authority, the New York City Transit Authority, the New York City Health and Hospitals Corporation,
the New York City School Construction Authority, the New York City Housing Authority, the Port Authority of New York and New Jersey
and the New York State Dormitory Authority.
Markets.
The Company competes for business primarily in the New York City metropolitan area. However, the Company has performed work
outside of that area in the past.
Backlog.
The Company had a backlog (anticipated revenue from the uncompleted portions of awarded contracts) totaling approximately $86,300,000
as of December 31, 2011, compared to approximately $64,000,000 as of December 31, 2010.
A portion of the Company’s
anticipated revenue in any year is not reflected in its backlog at the start of the year because some projects are awarded and
performed in the same year. The Company believes that approximately $14,000,000 of the existing backlog at December 31, 2011, is
not reasonably expected to be completed during the 2012 fiscal year. The schedule for each project is different and subject to
change due to circumstances outside the control of the Company. Accordingly, it is not reasonable to assume that the performance
of backlog will be evenly distributed throughout a year. The Company believes that its backlog is firm, notwithstanding provisions
contained in the contracts which allow customers to modify or cancel the contracts at any time, subject to certain conditions,
including reimbursement of costs incurred in connection with the contracts and the possible payment of cancellation fees.
The Company is actively
seeking new contracts to add to its backlog. Management believes that its value engineering services will continue to assist the
Company in obtaining new contracts.
Competition.
On public works projects, the Company competes by submitting a sealed bid to the public entity. The project is typically awarded
to the lowest responsible bidder. On private projects, the Company and its competitors negotiate with the developer, or its construction
manager, on the costs of the mechanical work required.
The mechanical contracting
market is highly competitive. There are many larger regional and national companies with resources greater than those of the Company.
However, some of these large competitors are unfamiliar with the New York City metropolitan area. On private and institutional
projects, the Company believes it competes favorably with such companies because of its reputation in the New York City area and
its knowledge of the local labor force
and its ability to value engineer projects. There are also many smaller contractors and
subcontractors in the New York City metropolitan area, who may also compete for work. The Company believes there are barriers to
entry for smaller competitors, including bonding requirements, and relationships with subcontractors, suppliers and unions.
Regulations.
The construction industry is subject to various governmental regulations from local, state and federal authorities, such as the
Occupational Safety and Health Administration (“OSHA”) and environmental agencies. The Company is also governed by
state and federal requirements regarding the handling and disposal of lead paint, but the financial impact of complying with such
requirements cannot be predicted at this time because it varies from project to project. The Company must also comply with regulations
as to the use and disposal of solvents and hazardous wastes which compliance is a normal part of its operations. The Company does
not perform asbestos abatement, but has occasionally subcontracted that part of a contract to duly licensed asbestos abatement
companies with the Company being named as an additional insured on the asbestos abatement company’s liability insurance policy.
The Company has not incurred any liability for violations of environmental laws.
Employees.
At December 31, 2011 the Company had approximately 41 full-time office and project support employees. The Company also employs
field employees, who are union workers. The number of field union workers employed varies at any given time, depending on the number
and types of ongoing projects and the scope of projects under contract. The Company hires union labor for specific work assignments
and can reduce the number of union workers hired at will with no penalty.
The Company pays benefits
to union employees through payments to trust funds established by the unions. The Company’s obligation is to pay a percentage
of the wages of union workers to these trust funds. The Company is not liable for under funding of these union plans. The Company
provides its full-time office employees, not subject to collective bargaining agreements, with medical insurance benefits and a
discretionary matching 401(k) plan. In 2011, the Company matched 25% of its employees’ yearly 401(k) contributions.
Dependence Upon
Customers.
At any given time, a material portion of the Company’s contract revenue may be generated from a single
customer through one large contract or various contracts. The Company’s customer base can vary each year based on the nature
and scope of the projects undertaken in that year.
For the year ended
December 31, 2011, work under contracts with Lend Lease (US) Construction LMB, Inc., Port Authority of New York and New Jersey,
through the Company’s Joint Venture at the World Trade Center, and Tishman Construction, constituted 58%, 9%, and 7% of the
Company’s total revenues, respectively.
For the year ended
December 31, 2010, work under contracts with Tishman Construction, Lend Lease (US) Construction LMB, Inc., Port Authority of New
York and New Jersey, through the Company’s Joint Venture at the World Trade Center, and Genesys Engineering, P.C. constituted
27%, 21%, 20%, and 10% of the Company’s total revenues, respectively.
Historically, a portion
of the Company’s revenue has been generated from contracts with federal, state and local governmental authorities. The Company’s
current revenue and backlog
does not include any contracts directly with these governmental authorities, although the Company is
part of a Joint Venture that is completing performance of a contract with the Port Authority of New York and New Jersey to construct
a chiller plant at the World Trade Center site.
As is customary and
required in the industry, the Company is often requested to provide a surety bond. The Company’s ability to obtain bonding,
and the amount of bonding required, is solely at the discretion of the surety and is primarily based upon the Company’s net
worth, working capital, the number and size of projects under construction and the surety’s relationship with management.
The larger the project and/or the number of projects under contract, the greater the requirements are for net worth and working
capital. The Company generally pays a fee to the bonding company of an amount approximately 1% of the amount of the contract to
be performed. Since inception, the Company has neither been denied any request for payment or performance bonds, nor has a bonding
company been required to make a payment on any bonds issued for the Company. At December 31, 2011, approximately $34,200,000 of
the Company’s backlog was bonded.
Joint Venture.
During the third quarter of 2009, a Joint Venture in which the Company and Five Star Electric Corporation each have a 50
percent ownership interest was awarded a $46 million contract for the construction of a chiller plant at the World Trade Center
site.
The work covered by
the Joint Venture is made up of three components, (1) a mechanical segment performed by the Company, (2) an electrical segment
performed by the Company’s joint venture partner and (3) a general construction segment. The Joint Venture has issued three
contracts, (1) to the Company to perform the mechanical work, (2) to the Company’s partner to perform the electrical work
and (3) to a construction manager to perform the general construction work as an agent for the Joint Venture, on a reimbursable
cost plus fee basis.
The Company has provided
a guaranteed maximum price for the mechanical segment of the contract, and its joint venture partner has provided a guaranteed
maximum price for the electrical segment of the contract. The Company shares joint venture profits/losses derived from the general
construction segment equally with its joint venture partner.
If the other partner
is unable to complete its contractual obligations, the Company would be fully liable to do so under the Joint Venture’s contract
with the Port Authority of New York and New Jersey. The Company and its partner are also jointly and severally liable to the bonding
company that issued the payment and performance bond for the Joint Venture. Circumstances that could lead to a loss under the joint
venture agreement beyond the Company’s stated ownership interest include the other partner’s inability to contribute
additional funds to the Joint Venture in the event the project incurs a loss, additional costs that the Company could incur should
the partner fail to provide the services and resources toward project completion that it committed to provide in the joint venture
agreement, and the partner’s failure to pay its subcontractors and suppliers. On July 1, 2011, Five Star Electric Corporation
was acquired by Tutor Perini Corporation, which is listed on the New York Stock Exchange (NYSE:TPC).
The Company uses a
combination of the proportionate consolidation method and the equity method to account for its interest in the Joint Venture. The
Company records the assets,
liabilities, revenues and costs of revenues associated with the mechanical segment of the contract
as gross amounts, in the financial statements (i.e. using the proportionate consolidation method), as it would any other contract
with a third party. The Company records its 50% share of the revenues and costs of revenues associated with the general construction
segment of the contract as gross amounts in the consolidated statement of income and records its portion of the assets and liabilities
as a net amount in the consolidated balance sheet (i.e. using the equity method), under the caption “Advances to and earnings
from joint venture”. The joint venture partner is responsible for the electrical portion of the contract, and the Company
is not recognizing any portion of that part of the joint venture contract in its financial statements.
In order to ensure
that the Company’s unconsolidated Joint Venture was properly capitalized, the Company and its partner were billing the Joint
Venture only for the costs incurred on their respective portions of the joint venture contract. The decision to bill the Joint
Venture only for the costs incurred on the project did not have a significant impact on the Company’s liquidity.
The project is nearing
completion. During the year ended December 31, 2011, the Company and its joint venture partner have each received distributions
of $1,400,000 in excess of their costs. As cash is received, the Joint Venture will continue to make additional distributions to
each partner of a portion of the difference between each partner’s adjusted subcontract and the amounts paid to each partner.
Since the Company is
currently billing the Joint Venture for its costs related to the performance of the mechanical portion of the Joint Venture contract,
and the agreed upon profit distribution, this transaction increases amounts the Company records in its consolidated balance sheets
under the caption “Costs and estimated earnings in excess of billings on uncompleted contracts”.
During the quarter
ended June 30, 2011, the Joint Venture terminated its contract with the construction manager which had been responsible for the
general construction segment. The Company hired certain employees of this construction manager to continue to perform certain of
the general construction tasks. The Company is also funding, on a cost reimbursable basis, other general construction costs on
behalf of the Joint Venture. These costs are included in the Company’s consolidated financial statements as advances to the
Joint Venture. These advances to the Joint Venture are repaid monthly.
The Company does not
believe that the termination of its construction manager has had any effect on the ability of the Company to complete its contract
obligations, and will not have a material effect on the overall profitability of the project.
Other Matters.
The Company does not own any patents or patent rights. The Company’s business is not subject to large seasonal variations.
The Company did not expend funds for research and development during 2011 and 2010 and anticipates no research and development
expenses in 2012.
ITEM 1A. RISK
FACTORS
The Company is subject
to a variety of risks, including the risks described below as well as adverse business conditions. The risks and uncertainties
described below are not the only ones facing the Company. Additional risks and uncertainties, not known or described below, which
have not been determined to be material may also impair the Company’s business operations. You should carefully consider
the risks described below together with all other information in this report, including information contained in the “Forward-Looking
Statements,” “Business”, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and “Quantitative and Qualitative Disclosure about Market Risk” sections. If any of the following
risks occur, the Company’s financial condition and results of operations could be adversely affected. Such events may cause
actual results to differ materially from expected and historical results, and the trading price of the Company’s stock could
decline.
The economic
downturn, specifically in the New York City metropolitan area, has resulted in a decrease in construction spending in the private
and public sectors in the market the Company serves. In the past, the Company has experienced several projects placed on hold
or terminated. Current or future projects could be delayed or cancelled, which would reduce the Company’s future revenues.
The Company’s
success depends on attracting and retaining qualified personnel in a competitive environment. The single largest factor in the
Company’s ability to profitably execute its work is its ability to attract, develop and retain qualified personnel. The
Company’s success in attracting qualified personnel is dependent on the resources available, the impact of general economic
conditions on the labor supply, and the ability to provide competitive compensation.
The Company
has a written employment agreement with Floyd Warkol, its Chairman and CEO, which expires on December 31, 2013. The Company maintains
a $3,000,000 insurance policy on the life of its CEO, with proceeds payable to the Company. The Company has no other current employment
or non-competition agreements with senior management. Because the Company relies on senior management’s relationships with
its customers and in the construction industry in New York City, the failure to retain senior management would have a material
adverse effect on the Company’s business.
The Company’s
continued ability to obtain bonding is critical to its ability to bid on most public work and on certain private projects. The
surety’s provision of bonding pursuant to its arrangement with the Company is solely at the surety’s discretion, and
the arrangement with the surety is an at-will arrangement subject to termination. The Company’s inability to obtain surety
bonds as needed could have a material adverse effect on the Company.
The Company
has in the past experienced erosion in gross profit margins due to lower than anticipated labor productivity and higher labor
costs related to shortages of skilled labor and unforeseen jobsite conditions. There can be no assurance that these factors will
not affect productivity and profitability in the future.
The Company
has in the past experienced significant increases in the cost of steel piping materials, which is the primary material used by
the Company on projects. Future increases may impact the Company’s profit margins to the extent the Company is not able
to pass such increased costs on to its customers or lock-in prices under long-term purchase agreements.
The Company
relies on a relatively small number of customers for a significant share of its revenues. The loss of business from any of these
significant customers could have a material adverse effect on the Company’s business and its operating results.
The Company
faces intense competition due to the highly competitive nature of the mechanical contracting market that could limit its ability
to increase its market share and its revenues.
During the
construction period, owners or general contractors may require the Company to perform certain work which is a change to or in
addition to the original contract. Such work often requires months to obtain formal change orders (including dollar amounts).
Change orders are often the subject of dispute and sometimes litigation. The failure of an owner or general contractor to issue
change orders or make payments could delay receipt of receivables and require litigation to collect sums due the Company.
Slow receipt
of collections may also result from financial difficulties of a general contractor or an owner. The Company’s inability
to collect its contract balance on a project could have a material adverse effect on its operating results.
Although the
Company’s operations are not directly affected by inflation, both New York City and New York State have large debt service
burdens. Inflationary pressures historically have tended to result in a reduction in capital spending by both state and local
agencies; such capital expenditure reductions in turn could have a negative impact on the Company’s revenues.
Failure of
the Company’s subcontractors or providers of equipment to perform as anticipated could have a negative impact on the Company’s
results. The Company subcontracts a portion of its contracts to specialty subcontractors, and the Company is ultimately responsible
for the successful completion of their work. The Company also utilizes equipment manufacturers and suppliers which are responsible
for delivering specified products on a timely basis. Although the Company utilizes highly respected companies and sometime requires
performance bonds, there is no guarantee that the Company will not incur a material loss due to performance issues related to
these arrangements.
Accounting for contract
related revenues and costs as well as other cost items requires management to make a variety of significant estimates and assumptions.
Although the Company believes it has sufficient experience and processes to enable it to formulate appropriate assumptions and
produce reliable estimates, these assumptions and estimates may change significantly in the future, and these changes could have
a material adverse effect on the Company’s financial position and results of operations.
ITEM 1B. UNRESOLVED
STAFF COMMENTS
Not Applicable.
ITEM
2.
PROPERTIES
The Company leases
office and warehouse space in Long Island City, New York, consisting of 18,433 square feet. The lease had an initial annual base
rent of $173,000, with yearly rent increases of approximately 2%. The base rent in 2012 will be approximately $227,000 for the
year. The lease is a triple net lease, and thus the Company will pay any increases in real estate taxes over base year taxes, maintenance,
insurance and utilities. The current lease expires on June 30, 2014.
The Company also owns
and occupies a building and a storage yard in Bronx, New York, consisting of a 14,000 square foot building, including 4,000 square
feet of offices and a 10,000 square foot fabrication shop. It also owns and occupies an adjacent 5,000 square foot storage yard.
At December 31, 2011, the Company had an outstanding mortgage payable secured by this property totaling $994,000.
The properties are well maintained, adequate
and suitable for their purposes.
ITEM
3.
LEGAL PROCEEDINGS
There are no
material pending legal proceedings to which the Company is a party, except the case of
KSW Mechanical Services, Inc. v.
Pavarini McGovern, LLC, et. al.,(PMG)
, Supreme Court, N.Y. County, which is an action to recover KSW’s contract
balance of $529,000, plus delay and impact costs of $160,000, from PMG, the construction manager on the 45
th
Street Hotel project. PMG and the owner of the project (“Owner”) have been in litigation and in alternative
dispute resolution proceedings over monetary issues unrelated to the Company’s work. The construction manager has cited
these disputes with the Owner as the basis for failing to pay the Company’s contract balance. There are a total of
eight actions instituted by various parties, including the Company, arising from the project. These actions have been
consolidated for trial. The actions are now in the discovery stage. On April 5, 2011, the Owner filed a voluntary petition
under Chapter 11 of the Bankruptcy Code. The Owner has filed a Plan of Reorganization which does not impair the rights of
mechanic’s lienors such as the Company. Under the Plan, which was approved by the Bankruptcy Court, $11,000,000 is set
aside for the payment of mechanics lienors such as the Company. The Company believes that the receivable recorded on its
books should be collected.
ITEM
4.
MINE SAFETY DISCLOSURES
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of the Company serve at the pleasure
of the Board of Directors. The name, age and offices held by each of the executive officers of the Company as of December 31, 2011
were as follows:
Name
|
Age
|
Title
|
Floyd Warkol
|
64
|
Chief Executive Officer, President, Secretary and Chairman of the Board of Directors
|
Richard W. Lucas
|
45
|
Chief Financial Officer
|
James F. Oliviero
|
65
|
General Counsel
|
Vincent Terraferma
|
61
|
Chief Operating Officer of KSW Mechanical
|
Mr. Floyd Warkol has
been employed as Chairman of the Board since December 1995 and as President, Secretary and Chief Executive Officer of the Company
and as Chairman and Chief Executive Officer of KSW Mechanical since January 1994.
Mr. Richard W. Lucas
has been employed as the Chief Financial Officer of the Company and KSW Mechanical since August 2002. Since February 2006, Mr.
Lucas has been a Director of KSW Mechanical.
Mr. James F. Oliviero
has been employed as General Counsel of the Company and KSW Mechanical since February 1998.
Mr. Vincent Terraferma
has been employed as Chief Operating Officer of KSW Mechanical since January 2003. From December 1995 to December 2002, he was
KSW Mechanical’s Executive Vice President.
PART II
ITEM
5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Since November 2007,
the Company’s Common Stock has been quoted on the NASDAQ Stock Market LLC’s Global Market under the symbol “KSW”.
Prior to November 2007, the Company’s Common Stock was quoted on the American Stock Exchange.
At March 30, 2012,
the Company had 6,419,325 shares of common stock issued and 6,366,625 shares of common stock outstanding, which were held by approximately
3,200 shareholders of record based on shareholder lists provided by the Company’s stock transfer agent and Broadridge Financial
Solutions, Inc.
On August 9, 2011,
the Company’s Board of Directors declared a cash dividend of $.15 per share. The aggregate amount of the dividend was $955,000,
and was paid on August 29, 2011 to stockholders of record as of August 23, 2011.
On November 29, 2010,
the Company’s Board of Directors declared a cash dividend of $.07 per share. The aggregate amount on the dividend was $445,000,
and was paid on December 20, 2010 to stockholders of record as of December 14, 2010.
On March 9, 2010, the
Company’s Board of Directors declared a cash dividend of $.10 per share. The aggregate amount of the dividend was $628,000,
and was paid on May 24, 2010 to stockholders of record as of April 26, 2010.
The following information
on high and low bid data is provided for 2011 and 2010 based on intraday quotations:
|
|
2011
|
|
|
2010
|
|
Quarter
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
$
|
3.94
|
|
|
$
|
3.32
|
|
|
$
|
4.15
|
|
|
$
|
3.51
|
|
Second
|
|
$
|
4.64
|
|
|
$
|
3.37
|
|
|
$
|
3.87
|
|
|
$
|
3.00
|
|
Third
|
|
$
|
4.15
|
|
|
$
|
3.04
|
|
|
$
|
3.21
|
|
|
$
|
2.65
|
|
Fourth
|
|
$
|
3.39
|
|
|
$
|
2.91
|
|
|
$
|
3.68
|
|
|
$
|
3.00
|
|
These
prices represent bid prices, which are prices paid by broker dealers, and do not include retail markups, markdowns or broker dealer
commissions.
On December 19, 2008,
the Company announced that its Board of Directors had approved a stock repurchase program that authorized the Company to buy up
to $1,000,000 of its Common Stock through open market purchases in compliance with Rule 10b-18 under the Exchange Act through June
30, 2009. Under this stock repurchase program, the Company purchased a total of 52,700 common shares at a cost of $140,000.
ITEM
6.
SELECTED FINANCIAL DATA
The following information
for the years ended December 31, 2011, 2010 and 2009 is derived from the consolidated financial statements audited by BDO USA,
LLP, which are included elsewhere herein, or in prior years’ annual reports on Form 10-K, and should be read in conjunction
with such financial information.
The following information
for the years ended December 31, 2008 and 2007 is derived from and qualified in its entirety to, the consolidated financial statements
audited by J.H. Cohn LLP. Each of the previously mentioned consolidated financial statements is included elsewhere herein, or in
prior years’ annual reports on Form 10-K, and should be read in conjunction with such financial information.
|
|
As Of And For The Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands, except share and per share amounts)
|
Income Statement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
69,281
|
|
|
$
|
76,294
|
|
|
$
|
64,494
|
|
|
$
|
93,027
|
|
|
$
|
77,266
|
|
Costs of revenues
|
|
|
61,850
|
|
|
|
67,927
|
|
|
|
57,484
|
|
|
|
80,910
|
|
|
|
66,771
|
|
Gross profit
|
|
|
7,431
|
|
|
|
8,367
|
|
|
|
7,010
|
|
|
|
12,117
|
|
|
|
10,495
|
|
Selling, general and administrative expenses
|
|
|
4,799
|
|
|
|
4,863
|
|
|
|
4,964
|
|
|
|
5,283
|
|
|
|
4,427
|
|
Operating income
|
|
|
2,632
|
|
|
|
3,504
|
|
|
|
2,046
|
|
|
|
6,834
|
|
|
|
6,068
|
|
Other income
|
|
|
50
|
|
|
|
61
|
|
|
|
34
|
|
|
|
370
|
|
|
|
682
|
|
Income before provision for income taxes
|
|
|
2,682
|
|
|
|
3,565
|
|
|
|
2,080
|
|
|
|
7,204
|
|
|
|
6,750
|
|
Provision for income taxes
|
|
|
1,132
|
|
|
|
1,597
|
|
|
|
810
|
|
|
|
2,965
|
|
|
|
3,088
|
|
Net income
|
|
|
1,550
|
|
|
|
1,968
|
|
|
|
1,270
|
|
|
|
4,239
|
|
|
|
3,662
|
|
Net income per share –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
.24
|
|
|
|
.31
|
|
|
|
.20
|
|
|
|
.68
|
|
|
|
.59
|
|
Diluted
|
|
|
.24
|
|
|
|
.31
|
|
|
|
.20
|
|
|
|
.67
|
|
|
|
.59
|
|
Number of shares used in earnings per share computation
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,366,625
|
|
|
|
6,305,517
|
|
|
|
6,240,256
|
|
|
|
6,278,555
|
|
|
|
6,162,034
|
|
Diluted
|
|
|
6,373,828
|
|
|
|
6,318,349
|
|
|
|
6,283,540
|
|
|
|
6,334,329
|
|
|
|
6,242,607
|
|
Dividends per share
|
|
|
.15
|
|
|
|
.17
|
|
|
|
.10
|
|
|
|
.20
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
41,496
|
|
|
$
|
41,561
|
|
|
$
|
40,537
|
|
|
$
|
50,499
|
|
|
$
|
40,937
|
|
Working capital
|
|
|
20,988
|
|
|
|
20,347
|
|
|
|
19,087
|
|
|
|
18,331
|
|
|
|
16,822
|
|
Current liabilities
|
|
|
17,899
|
|
|
|
18,479
|
|
|
|
18,632
|
|
|
|
29,251
|
|
|
|
23,548
|
|
Long-term liabilities
|
|
|
936
|
|
|
|
994
|
|
|
|
1,054
|
|
|
|
1,118
|
|
|
|
-
|
|
Stockholders’ equity
|
|
|
22,661
|
|
|
|
22,088
|
|
|
|
20,851
|
|
|
|
20,130
|
|
|
|
17,389
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current ratio
|
|
|
2.17:1
|
|
|
|
2.10:1
|
|
|
|
2.02:1
|
|
|
|
1.63:1
|
|
|
|
1.71:1
|
|
ITEM
7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion
and analysis explains the general financial condition and the results of operations of the Company for the years ended December
31, 2011 and 2010 including:
• factors that
affect its business;
• its earnings
and costs in the periods presented;
• changes in earnings
and costs between periods;
• sources of earnings;
and
• impacts of these
factors on its overall financial condition.
As you read this discussion
and analysis, please refer to the Company’s audited consolidated financial statements and the notes thereto for the years
ended 2011 and 2010 included elsewhere in this report.
Overview
The Company, through
its wholly-owned subsidiary, furnishes and installs HVAC systems and process piping systems for institutional, industrial, commercial,
high-rise residential and public works projects. The Company does not actively pursue projects under $3,000,000. Some larger company
projects involve multi-year contracts, which can account for more than 10% of the Company’s revenue in any given year. The
Company also serves as a mechanical trade manager, performing project management services relating to the mechanical trades.
The Company obtains
projects through both competitive and negotiated bidding processes submitted to public entities, project owners or construction
managers, many with whom the Company has long standing commercial relationships.
On publicly funded
projects, the Company competes by submitting a sealed bid to the public entity. The project is typically awarded to the lowest
responsible bidder. On private projects, the Company and its competitors negotiate with the developer, or its construction manager,
on the costs of the mechanical work required.
On private projects,
the Company is awarded many of its contracts by providing value engineering assistance, whereby the Company recommends changes
to project plans, subject to the approval of the design professional. This assistance reduces costs and yields the same results
as the original designs. As a result, the Company has historically obtained most of its contracts without being required to participate
in a competitive bidding process. The Company has also been able to incorporate value engineering provisions on some public contract
bids. The Company continues to pursue trade management contracts with large institutional builders, such as hospitals.
The Company’s
profitability is dependent on its ability to competitively bid on projects in the public sector, continue to maintain its commercial
relationships and provide quality services necessary to obtain projects. The Company’s costs of revenues include field labor,
equipment,
material, subcontractor and overhead costs. Overhead costs include project supervision and drafting salaries, as well
as insurance costs. The Company must control costs of revenues by having the ability to manage material costs, purchase equipment
at or below original estimated amounts and control labor costs throughout the duration of each project.
The
majority of the Company’s contracts are awarded on a fixed-price basis. Subcontractor and equipment purchases are awarded
on a fixed-price basis, near the time the Company’s contract is awarded.
The
Company purchases steel products from local, national and international distributors. The Company includes allowances in its estimates
for future escalations in steel prices due to market conditions. When market conditions have indicated a price increase, the Company
has in the past entered into agreements locking in prices with its suppliers to purchase steel products at fixed dollar amounts
for extended time periods. When steel product prices do not fluctuate, the Company purchases these products on a price in effect
basis. The current prices for steel are fluctuating, and the Company is attempting to lock in prices for the length of each project,
which may or may not be possible.
The Company was able
to weather the recent recession by focusing on the public and institutional construction sectors. The Company has completed its
work at the 9-11 Memorial, and has substantially completed its work at the new World Trade Center Chiller Plant. The Company continues
to work on public projects such as the boiler replacement at Kingsborough Community College, the new chiller plant for the United
Nations and on institutional projects such as the Mount Sinai Center for Science and Medicine.
During the past year,
the Company has seen a revival in parts of the private sector, specifically hotels and luxury apartment buildings, and has been
able to utilize value engineering to secure several large projects. As 2012 progresses, there are opportunities to obtain additional
new private sector projects. Many of these projects are being developed by developers for whom the Company has successfully worked
for in the past.
For the year ended
December 31, 2011, the Company’s earnings were a result of revenues, gross profit earned from projects, decreased selling,
general and administrative expenses and a decrease in other income, as compared to the year ended December 31, 2010.
The Company’s
revenues for 2011 decreased by 9.2% as compared to revenues in 2010.
During mid-2011, the
Company was awarded new private sector contracts totaling $36,000,000, which included three residential buildings at Gotham West
in Manhattan, a 41 story apartment building in Long Island City, N.Y. and a Manhattan Hotel. These projects did not start until
the fourth quarter of 2011, which contributed to the lower revenue in 2011, as compared to 2010.
The gross profit for
2011 was lower than 2010 as a result of the lower revenues.
The Company’s
selling, general and administrative expenses decreased in 2011, as compared to 2010, primarily as a result of overhead costs associated
with trade management contracts being directly charged to these projects instead of selling general and administrative expenses.
The Company’s
other income was lower in 2011 as compared to 2010, primarily as a result of a decrease in earnings from investments.
Management believes
that the future success of the Company lies in its ability to obtain new projects, maintain proper cost controls related to this
work, pursue new trade management contracts and continue controlling office expenditures. The Company is dependant on outside factors
such as the general health of the New York City metropolitan area economy, lending institutions willingness to make loans, and
continued low interest rates, all of which contribute to the strength of the building industry and the type of projects the Company
has the ability to obtain. The Company must also continue to obtain surety bonds, when required on projects. The Company’s
management has experience in expanding into new geographic areas; however, to date the Company has conducted its operations primarily
in the New York metropolitan area.
Results of Operations
The following table
sets forth the amounts and the percentage of total revenues of certain items of the Company’s consolidated statements of
operations for the periods indicated (dollar amounts in thousands):
|
|
2011
|
|
|
2010
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Revenues
|
|
$
|
69,281
|
|
|
|
100.0
|
|
|
$
|
76,294
|
|
|
|
100.0
|
|
Costs of revenues
|
|
|
61,850
|
|
|
|
89.3
|
|
|
|
67,927
|
|
|
|
89.0
|
|
Gross profit
|
|
|
7,431
|
|
|
|
10.7
|
|
|
|
8,367
|
|
|
|
11.0
|
|
Selling, general and administrative expenses
|
|
|
4,799
|
|
|
|
6.9
|
|
|
|
4,863
|
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
2,632
|
|
|
|
3.8
|
|
|
|
3,504
|
|
|
|
4.6
|
|
Other income
|
|
|
50
|
|
|
|
.0
|
|
|
|
61
|
|
|
|
.1
|
|
Income before provision for income taxes
|
|
|
2,682
|
|
|
|
3.8
|
|
|
|
3,565
|
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
1,132
|
|
|
|
1.6
|
|
|
|
1,597
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,550
|
|
|
|
2.2
|
|
|
$
|
1,968
|
|
|
|
2.6
|
|
Year Ended December 31, 2011 compared to Year Ended December
31, 2010
Revenues
Revenues decreased
by $7,013,000, or (9.2)%, to $69,281,000 for the year ended December 31, 2011, from $76,294,000 for the year ended December 31,
2010. Revenues for the fourth quarter of 2011 were $19,132,000, an increase of $1,855,000, or 10.7%, from $17,277,000 in the fourth
quarter of 2010.
During mid-2011, the
Company was awarded new private sector contracts totaling $36,000,000, which included three residential buildings at Gotham West
in Manhattan, a 41 story apartment building in Long Island City, New York and a Manhattan Hotel. These projects did not start until
the fourth quarter of 2011, which contributed to the lower revenue in 2011, as compared to 2010.
The fourth quarter
start of these new projects was the primary reason for the increase in revenues in the fourth quarter of 2011, as compared to 2010.
At December 31, 2011,
the Company had backlog of approximately $86,300,000.
Approximately $14,000,000
of the December 31, 2011 backlog is not reasonably expected to be completed in the 2012 fiscal year. New contracts secured by the
Company during 2012 will also increase 2012 revenues. The amounts of backlog not reasonably expected to be completed in 2012 is
subject to various uncertainties and risks. The Company is actively seeking new projects to add to its backlog.
During the year ended
December 31, 2011, the Company had 58%, 9%, and 7% of revenues, respectively, from its three largest customers. The Company bids
on large multi-year contracts, which can account for more than 10% of its contract revenue in any given year.
Costs of Revenues
Costs of revenues decreased
by $6,077,000, or (8.9)%, to $61,850,000 for the year ended December 31, 2011, from $67,927,000 for the year ended December 31,
2010. Costs of revenues for the fourth quarter of 2011 were $17,005,000, an increase of $1,574,000, or 10.2%, from $15,431,000
for the fourth quarter of 2010. Costs of revenues include subcontractor costs, field labor, material, equipment and overhead expenses.
Overhead costs include project supervision and drafting salaries as well as insurance costs. Higher revenues generally require
higher expenditures of costs, but high revenues allow the Company to allocate the cost of project supervision and drafting salaries
over multiple projects and more effectively utilize its experienced field labor personnel. The changes in cost of revenues were
primarily associated with the changes in revenues.
One component of the
cost of revenues is steel products such as pipe, valves and fittings which the Company typically installs on its projects. The
Company purchases steel products from local, national and international distributors. The Company includes allowances in its estimates
for future escalations in steel prices due to market conditions. When market conditions indicated a price increase, the Company
has in the past entered into agreements locking in prices with its suppliers to purchase steel products at fixed dollar amounts
for extended time periods. When steel product prices do not fluctuate, the Company purchases these products on a price in effect
basis. The current prices for steel are fluctuating, and the Company is attempting to lock in prices for the length of each project,
which may or may not be possible.
Gross Profit
For the year ended
December 31, 2011, the Company had a gross profit of $7,431,000 or 10.7% of revenues, as compared to $8,367,000 or 11.0% of revenues
for the year ended December 31, 2010. In the fourth quarter of 2011, the gross profit was $2,127,000 or 11.1% of revenues, as compared
to $1,846,000 or 10.7% of revenues for the fourth quarter of 2010.
The overall changes
in gross profit for 2011, as compared to 2010, were a result of the changes in revenues.
Selling, General and Administrative
Expenses
For the year ended
December 31, 2011, selling, general and administrative (“SG&A”) expenses decreased by $64,000, or (1.3)%, to $4,799,000
from $4,863,000 for the year ended December 31, 2010. In the fourth quarter of 2011, SG&A expenses were $1,111,000, an increase
of $73,000, or 7.0%, from $1,038,000 for the fourth quarter of 2010.
The decrease in SG&A
expenses in 2011 as compared to 2010, was primarily a result of overhead costs associated with trade management contracts being
directly charged to these projects instead of selling general and administrative expenses.
SG&A expenses for
the fourth quarter of 2011, as compared to 2010, was higher primarily due to an increase in employment costs, related to the new
projects, and a real estate tax assessment.
Other Income
Other income for the
year ended December 31, 2011 decreased $11,000, or (18.0)%, to $50,000, as compared to other income of $61,000 for the year ended
December 31, 2010.
Interest income for
the year ended December 31, 2011 was $108,000, as compared to $121,000 for the year ended December 31, 2010. Interest expense for
the year ended December 31, 2011 was $58,000, as compared to $60,000 for the year ended December 31, 2010.
Provision for Income Taxes
The income tax expense
for the year ended December 31, 2011 was $1,132,000, or 42.2% of income before the provision for income taxes, compared to $1,597,000,
or 44.8% of income before the provision for income taxes for the year ended December 31, 2010.
During 2011, the Company
received a federal income tax refund which reduced the provision for income taxes.
Net Income
As a result of all
the items above, the Company reported net income of $1,550,000, or $.24 per share-basic and diluted, for the year ended December
31, 2011.
As a result of all the items above, the Company reported net income of $1,968,000 or $.31 per share-basic and diluted,
for the year ended December 31, 2010.
Liquidity and Capital
Resources
General
The Company’s
principal capital requirement is to fund its work on construction projects. Projects are billed on a monthly basis based on the
work performed to date. These project
billings, less a withholding of retention which is received as the project nears completion,
are collectible based on the respective contract terms. The Company has historically relied primarily on internally generated funds.
The Company has not relied on bank borrowings to finance its operations since July 2003. The Company has a line of credit, which
is subject to certain conditions. See the discussion of the Company’s Credit Facility below.
As of December 31,
2011, the Company’s cash and cash equivalents balances totaled $14,211,000, a decrease of $734,000 from the $14,945,000 balance,
at December 31, 2010.
As of December 31,
2011, the Company held marketable securities totaling $2,854,000, an increase of $1,229,000 from the $1,625,000 balance at December
31, 2010.
Net cash provided
by Operating Activities
Net cash provided by
operating activities was $1,628,000 and $1,092,000 for the years ended December 31, 2011 and 2010, respectively.
Cash received from
customers is calculated as follows: contract revenues for the period, less unconsolidated joint venture billings during the period,
plus the differences between the account balances at the beginning balance sheet date and the ending balance sheet date of accounts
receivable, retainage receivable, costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess
of estimated earnings on uncompleted contracts. Cash received from customers for the year ended December 31, 2011 decreased 13.0%,
as compared to the same period in 2010. This decrease is primarily a result of the decrease in contract revenue. Interest income
decreased in 2011 as compared to 2010. These receipts were reduced by amounts paid to fund project costs, SG&A costs, interest
expense and income taxes. Since revenues decreased, payments for project costs also decreased. Payments of corporate income taxes
decreased by $897,000 in 2011, as compared to 2010. All of the above contributed to the increase in cash provided by operations
in 2011 as compared to 2010.
In order to ensure
that the Company’s unconsolidated Joint Venture was properly capitalized, the Company and its partner were billing the Joint
Venture only for the costs incurred on their respective portions of the joint venture contract. The decision to bill the Joint
Venture only for the costs incurred on the project did not have a significant impact on the Company’s liquidity.
Since
the
project is near completion and the Joint Venture has determined that it will not incur any unaccounted for costs, it will continue
to make additional distributions to each partner of a portion of the difference between each partner’s adjusted subcontract
and the amounts paid to each partner to date.
Cash (used in) provided
by Investing Activities
Net cash used in investing
activities was $1,349,000 for the year ended December 31, 2011. Net cash provided by investing activities was $943,000 for the
year ended December 31, 2010.
The Company purchased
marketable securities of $1,811,000 and $549,000, during 2011 and 2010, respectively. The Company received proceeds on the sales
of marketable securities of $526,000 and $1,564,000 in 2011 and 2010, respectively. The Company purchased property and equipment
totaling $1,000 and $89,000 in 2011 and 2010, respectively.
In addition, during
the year ended December 31, 2011, the Company had net advances to its Joint Venture, totaling $63,000. During 2010, this Joint
Venture repaid advances totaling $17,000.
Cash used in Financing
Activities
Net cash used in financing
activities was $1,013,000 and $828,000 during 2011 and 2010, respectively.
No individuals exercised
stock options during the year ended December 31, 2011.
During the year ended
December 31, 2010, an executive, the estate of a former director and an employee exercised options to purchase an aggregate of
131,500 shares of the Company’s common stock, contributing cash proceeds of $208,000 to the Company.
The Company presents
excess tax benefits resulting from the exercise of stock, in the statement of cash flows as a part of cash flows from financing
activities. Excess tax benefits represent tax benefits related to exercised options in excess of the associated deferred tax assets
for such options. As of December 31, 2010, $97,000 of excess tax benefits had been classified as an operating cash outflow and
a financing cash inflow.
On August 9, 2011,
the Company’s Board of Directors declared a cash dividend of $.15 per share. The aggregate amount of this dividend was $955,000,
and it was paid on August 29, 2011 to stockholders of record as of August 23, 2011.
On March 9, 2010, the
Company’s Board of Directors declared a cash dividend of $.10 per share. The aggregate amount of the dividend was $628,000,
and it was paid on May 24, 2010 to stockholders of record as of April 26, 2010.
On November 29, 2010,
the Company’s Board of Directors declared a cash dividend of $.07 per share. The aggregate amount on the dividend was $445,000,
and it was paid on December 20, 2010 to stockholders of record as of December 14, 2010.
The Company repaid
principal payments on its mortgage payable totaling $58,000 and $60,000 during the years ended December 31, 2011 and 2010, respectively.
Credit
Facility
The Company has a line
of credit facility from Bank of America, N.A., which provides for borrowings for working capital purposes up to $2,000,000. This
facility is secured by the Company’s assets and is guaranteed by the Company’s subsidiary, KSW Mechanical Services,
Inc. On February 23, 2012, the Company and Bank of America, N.A. agreed to extend the working capital credit facility through March
31, 2013. There were no borrowings against this facility during 2011 and 2010.
Under this facility,
advances bear interest, based on the Company’s option, at either the bank’s prime lending rate (3.25% at December 31,
2011) or the London Interbank Offered Rate (“LIBOR”) (. 26% at December 31, 2011) plus two percent per annum.
Payment may be accelerated
by certain events of default such as unfavorable credit factors, the occurrence of a material adverse change in the Company’s
business, properties or financial condition, a default in payment under the credit facility, impairment of security, bankruptcy,
or the Company ceasing operations or being unable to pay its debts. The line of credit must be paid in full at the end of the term.
The Company currently
has no significant capital expenditure commitments.
Surety
On some of its projects,
the Company is required to provide a surety bond. The Company’s ability to obtain bonding, and the amount of bonding available,
is solely at the discretion of the surety and is primarily based upon the Company’s net worth, working capital, the number
and size of projects under construction and the surety’s relationship with management. The Company is contingently liable
to the surety under a general indemnity agreement. The Company agrees to indemnify the surety for any payments made on contracts
of suretyship, guaranty or indemnity as a result of the Company not having the financial capacity to complete projects. Management
believes the likelihood of the surety having to complete projects is remote. The contingent liability is the cost of completing
all bonded projects, which is an undeterminable amount because it is subject to bidding by third parties. Management believes that
all contingent liabilities will be satisfied by the Company’s performance on the specific bonded contracts involved. The
surety provides bonding solely at its discretion, and the arrangement with the surety is an at-will arrangement subject to termination.
As of December 31,
2011, approximately $34,200,000 of the Company’s backlog of approximately $86,300,000 was bonded. The Company provides its
surety with a detailed schedule of backlog on a quarterly basis. The Company believes its bonding limits are sufficient based on
the Company’s revenue, volume and size of the Company’s bonded contracts.
Critical Accounting Policies and Estimates
The Company’s
consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting periods.
The Company continually
evaluates the accounting policies and estimates it uses to prepare the consolidated financial statements. In general, management’s
estimates are based on historical experience, on information from third party professionals and on various other
assumptions that
are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
The Company believes
the following accounting policies represent critical accounting policies. Critical accounting policies are those that are most
important to the portrayal of a company’s financial condition and results and that require management’s most difficult,
subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods. For a discussion of the Company’s significant accounting policies, including
those that do not require management to make difficult, subjective, or complex judgments or estimates, see Note 2
to the
Company’s consolidated financial statements included elsewhere herein.
Accounting for revenue recognition for
construction contracts
The Company recognizes
revenue for long-term construction contracts not yet completed using the percentage-of-completion method, measured by the percentage
of total costs incurred to date as compared to total estimated costs at the completion of each contract. When the Company bids
on projects, a comprehensive budget is prepared dividing the project into line items indicating separate labor, equipment, material,
subcontractor and overhead cost estimates. As projects progress, the Company’s project managers plan, schedule and oversee
operations and review project costs compared to the estimates. Management reviews on a bi-weekly basis the progression of the contract
with the project manager. An analysis is prepared and reviewed monthly by management comparing the costs incurred to the budgeted
amounts. The results of these procedures help update the anticipated total costs at completion, based on facts and circumstances
known at the time. Any revisions in cost and profit estimates are reflected in the accounting period in which the facts which require
the revisions become known. These estimates are subject to revisions due to unanticipated increases in labor, material and equipment
costs as well as project scope changes. The Company receives change orders for project scope changes. For some project cost overruns,
the Company can make a claim to the project owner or general contractor to seek reimbursement of these overruns. In the past, the
Company has been successful in the pursuit of such claims. Such claims are not recorded on the books until they are acknowledged
by the owner or contractor.
Accounts and retainage receivable
Judgment is required
to estimate the collectibility of accounts and retainage receivable. The Company has in the past established an allowance for uncollectible
trade accounts and retainage receivable based upon historical collection experience and management’s periodic evaluation
of the collectibility of outstanding accounts and retainage receivable on an account-by-account basis. Accounts receivable and
contract retentions are due based on contract terms. Amounts are deemed delinquent when they are not received within their contract
terms. Delinquent receivables are written-off based on individual credit evaluation and specific circumstances of the customer.
During the years ended
December 31, 2011 and 2010, the Company did not write off any receivables and therefore did not record an allowance for uncollectible
trade accounts and retainage receivable at December 31, 2011 and 2010.
Accounting for income taxes
Judgment is required
in developing the Company’s provision for income taxes, including the determination of deferred tax assets and valuation
allowances that might be required against the deferred tax assets and liabilities. The Company’s consolidated balance sheets
at December 31, 2011 and 2010 include deferred tax assets totaling $268,000 and $209,000, respectively.
Accounting for share-based compensation
Since January 1, 2006,
the Company has accounted for share-based compensation using the Black-Scholes option – pricing model, which requires the
input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock
options before exercising them (“expected term”), the estimated volatility of the Company’s common stock price
over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”).
Changes in the subjective assumptions can materially affect the estimate of fair value share–based compensation and the related
amount recognized in the consolidated statements of income.
NEW ACCOUNTING PRONOUNCEMENTS
The Company follows
accounting standards set by the Financial Accounting Standards Board, commonly referred to as the “FASB.” The FASB
sets generally accepted accounting principles (GAAP) that the Company follows to ensure its consistent reporting of financial condition,
results of operations, and cash flows. References to GAAP issued by the FASB are the
FASB Accounting Standards Codification,
sometimes referred to as the Codification or ASC.
Currently, there are
no new accounting pronouncements which would materially affect the Company, except for the following:
In June 2011, the FASB
issued ASU No. 2011-05,
Comprehensive Income (Topic 220)
:
Presentation of Comprehensive Income
. This ASU allows an
entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05
eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’
equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income
or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively.
The amendments are effective for the Company for fiscal years, and interim periods within those years, beginning after December
15, 2011. Also, ASU 2011-12 defers portions of ASU No. 2011-05 that relate to the presentation of reclassification adjustments.
Except for the presentation requirement, the
adoption of this ASU will not have a material impact on the Company’s consolidated
financial statements.
CONTRACTUAL OBLIGATIONS
As of December 31,
2011, outstanding contractual obligations were as follows:
Payments Due by Period
Contractual
Obligations
|
|
Total
|
|
|
Less
than
1
year
|
|
|
1-3
years
|
|
|
4-5
years
|
|
|
After
5
years
|
|
Long- term debt (a)
|
|
$
|
994,000
|
|
|
$
|
58,000
|
|
|
$
|
116,000
|
|
|
$
|
116,000
|
|
|
$
|
704,000
|
|
Operating leases (b)
|
|
|
575,000
|
|
|
|
227,000
|
|
|
|
348,000
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
$
|
1,569,000
|
|
|
$
|
285,000
|
|
|
$
|
464,000
|
|
|
$
|
116,000
|
|
|
$
|
704,000
|
|
|
(a)
|
The long-term debt is related to the financing of the purchase of a pipe fabrication shop and adjacent
yard located in Bronx, N.Y. These amounts above are future principal maturities of this mortgage payable and do not include interest.
|
|
(b)
|
The Company is currently obligated to pay monthly rental payments of approximately $19,000 on its
lease for office space in Long Island City, New York. The current lease expires in June 2014. The Company has an option to cancel
on six month notice.
|
OFF -BALANCE SHEET ARRANGEMENTS
No disclosures are
required pursuant to Item 303 (a) (4) of Regulation S-K.
ITEM
7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not
utilize futures, options or other derivative instruments other than an interest rate swap on its mortgage payable with Bank of
America, N.A. Because the mortgage is a variable rate mortgage, the Company used an interest rate swap instrument to fix the interest
rate that the Company pays at 5% over the term of the mortgage.
As of December 31,
2011, the Company had $2,854,000 in marketable securities.
ITEM
8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required
by this item, including the consolidated financial statements and related notes, is incorporated herein by reference to pages F-1
through F-34 of this Annual Report on Form 10-K.
ITEM
9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A
.
CONTROLS
AND PROCEDURES
The Company carried
out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of December 31, 2011. Based on that evaluation, its Chief Executive Officer and Chief
Financial Officer concluded that, the Company’s disclosure controls and procedures were effective as of December 31, 2011.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANICAL REPORTING
The Company’s
management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). The Company’s internal control over financial reporting
is a process designed with the participation of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting
purposes in accordance with accounting principles generally accepted in the United States of America.
The Company’s
internal control over financial reporting includes policies and procedures that: (a) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the Company’s transactions and dispositions of assets; (b) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America, and that the Company’s receipts and expenditures are being
made only in accordance with authorizations of its management and Board of Directors; and (c) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a
material effect on the Company’s financial statements.
Because of its inherent
limitations, the Company’s disclosure controls and procedures may not prevent or detect misstatements. A control system,
no matter how well conceived and operated, can only provide reasonable, not absolute, assurance that the control system objectives
are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree
of compliance with the policies or procedures may deteriorate.
As of December 31,
2011, the Company’s management conducted an evaluation of the effectiveness of the Company’s internal control over
financial reporting. Based on this assessment, management determined that, as of December 31, 2011, the Company’s internal
control over financial reporting was effective.
There have been no
changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act), during the quarter ended
December 31, 2011, that have materially affected or are reasonably likely to materially
affect the Company’s internal control over financial reporting.
This annual report
does not include an attestation report of the Company’s independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered
public accounting firm.
ITEM 9B.
OTHER
INFORMATION
None.
PART III
ITEM
10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Other than information
with respect to the Company’s executive officers, which is set forth after Item 4 of Part I of this Form 10-K, and information
regarding the Company’s Code of Ethics, as set forth below, the information required to be disclosed pursuant to Item 10
is incorporated in its entirety herein by reference to the Company’s definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
CODE OF ETHICS
The Company has adopted
a written Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to its principal executive officer,
principal financial and accounting officer, directors, officers and employees. Copies of the Company’s Code of Ethics will
be provided free of charge upon written request directed to the Company’s Director of Investor Relations, at 37-16 23
rd
Street, Long Island City, New York 11101.
ITEM
11.
EXECUTIVE COMPENSATION
The information required
to be disclosed pursuant to Item 11 is incorporated in its entirety herein by reference to the Company’s definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last
fiscal year.
ITEM
12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required
to be disclosed pursuant to Item 12 is incorporated in its entirety herein by reference to the Company’s definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last
fiscal year.
ITEM
13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
a. The information
required to be disclosed pursuant to Item 13 is incorporated in its entirety herein by reference to the Company’s definitive
proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s
last fiscal year.
b. Any transaction
required to be disclosed under this item must be approved by the Board of Directors as being in the Company’s best interest.
ITEM
14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required
to be disclosed pursuant to Item 14 is incorporated in its entirety herein by reference to the Company’s definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last
fiscal year.
PART IV
ITEM
15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report:
1. and 2. Financial
statements and financial statement schedules.
See Index to
Consolidated Financial Statements on page F-1 of this Form 10-K.
No.
|
Description
|
3.1
|
Amended and Restated Articles of Incorporation of KSW, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-8 (No. 333-217350), filed with the Commission on February 13, 1997).
|
|
|
3.2
|
Amended and Restated By-Laws of KSW, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-8 (No. 333-217350), filed with the Commission on February 13, 1997).
|
|
|
10.1
|
Form of Modification of Lease Agreement dated as of May 1, 1998 by and between KSW, Inc, Irvjoy Partners, L.P. and I BLDG Co., Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (Commission File No. 001-32865), filed with the Commission on March 30, 1999).
|
|
|
10.2
|
1995 Stock Option Plan of KSW, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (Commission File No. 001-32865), filed with the Commission on November 24, 1995).
|
|
|
10.3
|
Employment Agreement, dated September 12, 2005 by and between the Company, KSW Mechanical Services, Inc. and Floyd Warkol (incorporated herein by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K (Commission File No. 001-32865), filed with the Commission on September 12, 2005).
|
|
|
10.4
|
Amendatory Employment Agreement, dated as of March 6, 2007, by and between the Company, KSW Mechanical Services, Inc., and Floyd Warkol (incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Commission on March 14, 2007).
|
|
|
10.5
|
Line of Credit Agreement Letter, dated March 14, 2006, between KSW, Inc. and Bank of America, N.A. together with forms of a Line of Credit Note, Rider to Line of Credit Note, a pledge security agreement and guaranty (incorporated herein by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December 3, 2005, filed with the Commission on March 16, 2006).
|
|
|
10.6
|
Line of Credit Agreement Letter, dated March 8, 2007, between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Commission on March 14, 2007).
|
|
|
10.7
|
Line of Credit Agreement Letter, dated January 28, 2008, between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Commission on March 25, 2009).
|
|
|
10.8
|
Line of Credit Agreement Letter, dated January 26, 2009, between KSW,
Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.8 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2008, filed with the Commission on March 25, 2009).
|
10.9
|
KSW, Inc. 2007 Stock Option Plan (incorporated herein by reference to Appendix E to the Company’s definitive proxy statement on Schedule 14A for the 2008 annual meeting of stockholders, filed with the Commission on April 4, 2008).
|
|
|
10.10
|
Line of Credit Agreement Amendment No. 1, dated January 15, 2010 between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Commission on March 19, 2010).
|
|
|
10.11
|
Line of Credit Agreement Amendment No. 2, dated January
14, 2011 between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 2010, filed with the Commission on March 22, 2011).
|
|
|
10.12
|
Line of Credit Agreement Amendment No. 3, dated February 23, 2012 between KSW, Inc. and Bank of America, N.A.
|
|
|
10.13
|
Amendatory Employment Agreement, dated as of November 13, 2008, by and between the Company, KSW Mechanical Services, Inc., and Floyd Warkol.
|
|
|
10.14
|
Second Amendatory Employment Agreement, dated as of September 25, 2009, by and between the Company, KSW
Mechanical Services, Inc., and Floyd Warkol.
|
|
|
10.15
|
Third Amendatory Employment Agreement, dated as of January 1, 2012, by and between the Company, KSW Mechanical Services, Inc., and Floyd Warkol.
|
|
|
11.1
|
Statement Regarding Computation of Net Earnings Per Share.
|
|
|
21.1
|
Subsidiaries of Registrant
|
|
|
23.1
|
Consent of BDO USA, LLP
|
|
|
31.1
|
Certification of Chief Executive Officer required by Rule 13a-14(a).
|
|
|
31.2
|
Certification of Chief Financial Officer required by Rule 13a-14(a).
|
|
|
32.1
|
Certification of Chief Executive Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.
|
|
|
32.2
|
Certification of Chief Financial Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.
|
|
|
101.INS
|
XBRL Instance Document.
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema.
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase.
|
SIGNATURES
Pursuant to the requirements
of Section 13 of 15(d) 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.
|
|
|
|
|
|
|
By:
|
/s/ Floyd Warkol
|
|
|
|
Floyd Warkol
|
|
|
|
President, Chief Executive Officer,
|
|
|
|
Secretary and Chairman of the Board of
|
|
|
|
Directors (Principal Executive Officer)
|
|
|
|
March 30, 2012
|
|
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
|
/s/ Floyd Warkol
|
|
|
Floyd Warkol
|
|
|
President, Chief Executive Officer,
|
|
|
Secretary and Chairman of the Board of
|
|
|
Directors (Principal Executive Officer)
|
|
|
March 30, 2012
|
|
|
|
|
|
/s/ Stanley Kreitman
|
|
|
Stanley Kreitman
|
|
|
Director
|
|
|
March 30, 2012
|
|
|
|
|
|
/s/ Edward T. LaGrassa
|
|
|
Edward T. LaGrassa
|
|
|
Director
|
|
|
March 30, 2012
|
|
|
|
|
|
/s/ Warren O. Kogan
|
|
|
Warren O. Kogan
|
|
|
Director
|
|
|
March 30, 2012
|
|
|
|
|
|
/s/ John A. Cavanagh
|
|
|
John A. Cavanagh
|
|
|
Director
|
|
|
March 30, 2012
|
|
|
|
|
|
/s/ Richard W. Lucas
|
|
|
Richard W. Lucas
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer and
|
|
|
Principal Accounting Officer)
|
|
|
March 30, 2012
|
|
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
Report of Independent Registered Public
Accounting
Firm
|
F-2
|
|
|
Consolidated Financial Statements:
|
|
|
|
Consolidated Balance Sheets
|
F-3-4
|
|
|
Consolidated Statements of Income
|
F-5
|
|
|
Consolidated Statements of Comprehensive Income
|
F-6
|
|
|
Consolidated Statements of Stockholders’ Equity
|
F-7
|
|
|
Consolidated Statements of Cash Flows
|
F-8-9
|
|
|
Notes to Consolidated Financial Statements
|
F-10-34
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Board of Directors and Stockholders
KSW, Inc. and Subsidiaries
Long Island City, New York
We
have audited the accompanying consolidated balance sheets of
KSW, Inc. and Subsidiaries
as of December 31, 2011 and 2010 and the related consolidated statements of income, comprehensive income, stockholders’ equity,
and cash flows for the years ended December 31, 2011 and 2010. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted
our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of
KSW, Inc. and Subsidiaries
at December 31, 2011 and 2010, and the results
of their operations and their cash flows for the years ended December 31, 2011 and 2010
,
in conformity with accounting principles
generally accepted in the United States of America.
/s/
BDO USA, LLP
New York, New York
March 30, 2012
KSW, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
ASSETS
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,211
|
|
|
$
|
14,945
|
|
Marketable securities
|
|
|
2,854
|
|
|
|
1,625
|
|
Accounts receivable
|
|
|
14,076
|
|
|
|
13,700
|
|
Retainage receivable
|
|
|
3,982
|
|
|
|
4,081
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
2,958
|
|
|
|
3,714
|
|
Prepaid income taxes
|
|
|
-
|
|
|
|
165
|
|
Prepaid expenses and other receivables
|
|
|
11
|
|
|
|
191
|
|
Advances to and earnings from joint venture
|
|
|
645
|
|
|
|
281
|
|
Deferred income taxes
|
|
|
150
|
|
|
|
124
|
|
Total current assets
|
|
|
38,887
|
|
|
|
38,826
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
2,459
|
|
|
|
2,614
|
|
Deferred income taxes
|
|
|
118
|
|
|
|
85
|
|
Other
|
|
|
32
|
|
|
|
36
|
|
Total assets
|
|
$
|
41,496
|
|
|
$
|
41,561
|
|
(continued)
KSW, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONCLUDED)
DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
2011
|
|
|
2010
|
|
LIABILITIES
AND
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Current portion of mortgage payable
|
|
$
|
58
|
|
|
$
|
58
|
|
Accounts payable
|
|
|
12,770
|
|
|
|
10,641
|
|
Retainage payable
|
|
|
2,320
|
|
|
|
2,349
|
|
Accrued payroll and benefits
|
|
|
544
|
|
|
|
957
|
|
Accrued expenses
|
|
|
14
|
|
|
|
489
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
2,072
|
|
|
|
3,985
|
|
Income taxes payable
|
|
|
121
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
17,899
|
|
|
|
18,479
|
|
|
|
|
|
|
|
|
|
|
Mortgage payable, net of current portion
|
|
|
936
|
|
|
|
994
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
18,835
|
|
|
|
19,473
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock:
$.01 par value, 1,000,000 shares authorized, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock: $.01 par value, 25,000,000 shares authorized, 6,419,325 issued and 6,366,625 outstanding
|
|
|
64
|
|
|
|
64
|
|
Additional paid-in capital
|
|
|
13,642
|
|
|
|
13,634
|
|
Retained earnings
|
|
|
9,278
|
|
|
|
8,683
|
|
Accumulated other comprehensive loss
|
|
|
(183
|
)
|
|
|
(153
|
)
|
Treasury stock at cost, 52,700 shares
|
|
|
(140
|
)
|
|
|
(140
|
)
|
Total stockholders’ equity
|
|
|
22,661
|
|
|
|
22,088
|
|
Total liabilities and stockholders’ equity
|
|
$
|
41,496
|
|
|
$
|
41,561
|
|
See notes to consolidated financial statements.
KSW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share and per
share data)
________________________________________________
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
69,281
|
|
|
$
|
76,294
|
|
Costs of revenues
|
|
|
61,850
|
|
|
|
67,927
|
|
Gross profit
|
|
|
7,431
|
|
|
|
8,367
|
|
Selling, general and administrative expenses
|
|
|
4,799
|
|
|
|
4,863
|
|
Operating income
|
|
|
2,632
|
|
|
|
3,504
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
108
|
|
|
|
121
|
|
Interest expense
|
|
|
(58
|
)
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
50
|
|
|
|
61
|
|
Income before provision for income taxes
|
|
|
2,682
|
|
|
|
3,565
|
|
Provision for income taxes
|
|
|
1,132
|
|
|
|
1,597
|
|
Net income
|
|
$
|
1,550
|
|
|
$
|
1,968
|
|
Basic earnings per common share
|
|
$
|
.24
|
|
|
$
|
.31
|
|
Diluted earnings per common share
|
|
$
|
.24
|
|
|
$
|
.31
|
|
Weighted average common shares outstanding –
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,366,625
|
|
|
|
6,305,517
|
|
Diluted
|
|
|
6,373,828
|
|
|
|
6,318,349
|
|
Cash dividend declared and paid per share
|
|
$
|
.15
|
|
|
$
|
.17
|
|
See notes to consolidated financial statements.
KSW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands)
________________________________________________
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,550
|
|
|
$
|
1,968
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
Net unrealized holding
(losses) gains arising during the year
|
|
|
(56
|
)
|
|
|
36
|
|
Income tax (benefit) provision related to items of other comprehensive income (loss)
|
|
|
(26
|
)
|
|
|
16
|
|
Other comprehensive (loss) income, net of income tax (benefit) provision
|
|
|
(30
|
)
|
|
|
20
|
|
Total comprehensive income
|
|
$
|
1,520
|
|
|
$
|
1,988
|
|
See notes to consolidated financial statements.
KSW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands,
except share data)
_______________________________________________
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Retained
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Treasury
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income(Loss)
|
|
|
Stock
|
|
|
Total
|
|
Balances, January 1, 2010
|
|
|
6,287,825
|
|
|
$
|
63
|
|
|
$
|
13,313
|
|
|
$
|
7,788
|
|
|
$
|
(173
|
)
|
|
$
|
(140
|
)
|
|
$
|
20,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,968
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,968
|
|
Exercise of employee stock options
|
|
|
131,500
|
|
|
|
1
|
|
|
|
207
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
208
|
|
Cash dividend paid - $.10 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(628
|
)
|
|
|
|
|
|
|
|
|
|
|
(628
|
)
|
Cash dividend paid - $.07 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(445
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(445
|
)
|
Tax benefits from exercise of stock
options
|
|
|
-
|
|
|
|
-
|
|
|
|
97
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
97
|
|
Amortization of share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
Net unrealized income on available-for-sale securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20
|
|
|
|
-
|
|
|
|
20
|
|
Balances, December 31, 2010
|
|
|
6,419,325
|
|
|
|
64
|
|
|
|
13,634
|
|
|
|
8,683
|
|
|
|
(153
|
)
|
|
|
(140
|
)
|
|
|
22,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,550
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,550
|
|
Cash dividend paid - $.15 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(955
|
)
|
|
|
|
|
|
|
|
|
|
|
(955
|
)
|
Amortization of share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
Net unrealized losses on available-for-sale securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
-
|
|
|
|
(30
|
)
|
Balances, December 31, 2011
|
|
|
6,419,325
|
|
|
$
|
64
|
|
|
$
|
13,642
|
|
|
$
|
9,278
|
|
|
$
|
(183
|
)
|
|
$
|
(140
|
)
|
|
$
|
22,661
|
|
See notes to consolidated
financial statements.
KSW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands)
________________________________________________
|
|
2011
|
|
|
2010
|
|
Cash flows
from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,550
|
|
|
$
|
1,968
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
160
|
|
|
|
171
|
|
Deferred income taxes
|
|
|
(33
|
)
|
|
|
2
|
|
Tax benefits from exercise of stock options
|
|
|
-
|
|
|
|
(97
|
)
|
Share-based compensation expense related to stock
options
|
|
|
8
|
|
|
|
17
|
|
Earnings from unconsolidated Joint Venture
|
|
|
(301
|
)
|
|
|
(281
|
)
|
Changes in operating assets (increase) decrease:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(376
|
)
|
|
|
(1,362
|
)
|
Retainage receivable
|
|
|
99
|
|
|
|
2,556
|
|
Costs and estimated earnings in excess of billings on
uncompleted contracts
|
|
|
756
|
|
|
|
(1,735
|
)
|
Prepaid expenses and other receivables
|
|
|
180
|
|
|
|
74
|
|
Prepaid income taxes
|
|
|
165
|
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
|
Changes in operating liabilities
increase (decrease):
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
2,129
|
|
|
|
(1,364
|
)
|
Retainage payable
|
|
|
(29
|
)
|
|
|
(1,259
|
)
|
Accrued payroll and benefits
|
|
|
(413
|
)
|
|
|
122
|
|
Accrued expenses
|
|
|
(475
|
)
|
|
|
269
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
(1,913
|
)
|
|
|
2,218
|
|
Income taxes payable
|
|
|
121
|
|
|
|
(139
|
)
|
Net cash provided by operating activities
|
|
$
|
1,628
|
|
|
$
|
1,092
|
|
(continued)
KSW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONCLUDED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands)
____________________________
|
|
2011
|
|
|
2010
|
|
Cash
flows
from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds received on sale of marketable securities
|
|
$
|
526
|
|
|
$
|
1,564
|
|
Purchases of marketable securities
|
|
|
(1,811
|
)
|
|
|
(549
|
)
|
Purchases of property and equipment
|
|
|
(1
|
)
|
|
|
(89
|
)
|
(Advances to) repayment by joint venture, net
|
|
|
(63
|
)
|
|
|
17
|
|
Net cash (used in) provided by investing activities
|
|
|
(1,349
|
)
|
|
|
943
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of employee stock options
|
|
|
-
|
|
|
|
208
|
|
Tax benefits from exercise of stock options
|
|
|
-
|
|
|
|
97
|
|
Repayment of long-term debt
|
|
|
(58
|
)
|
|
|
(60
|
)
|
Cash dividends paid
|
|
|
(955
|
)
|
|
|
(1,073
|
)
|
Net
cash
used in financing activities
|
|
|
(1,013
|
)
|
|
|
(828
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(734
|
)
|
|
|
1,207
|
|
Cash and cash equivalents, beginning of year
|
|
|
14,945
|
|
|
|
13,738
|
|
Cash and cash equivalents, end of year
|
|
$
|
14,211
|
|
|
$
|
14,945
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
58
|
|
|
$
|
60
|
|
Income taxes
|
|
$
|
899
|
|
|
$
|
1,796
|
|
See notes to consolidated financial statements.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
(1)
|
Principles of consolidation and nature of operations
|
The accompanying consolidated
financial statements as of December 31, 2011 and 2010 and for the years then ended, include the accounts of KSW, Inc. and its wholly-owned
subsidiaries, KSW Mechanical Services, Inc., and Energy Alternatives, Inc., collectively “the Company”, and have been
prepared in conformity with accounting principles generally acceptable in the United States of America. All material intercompany
accounts and transactions have been eliminated in consolidation.
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 State of New York. On larger, more complicated projects such as hospitals,
the Company serves as a mechanical trade manager, performing project management services relating to the mechanical trades. On
public works projects, the Company competes by submitting a sealed bid to the public entity. The project is typically awarded to
the lowest responsible bidder. On private projects, the Company and its competitors negotiate with the developer, or its construction
manager, on the cost of the mechanical work required.
The Company
operates as one operating segment.
|
(2)
|
Summary of significant accounting policies
|
|
(A)
|
Revenue and cost recognition
|
Revenue is primarily recognized
on the percentage-of-completion method for long-term construction contracts not yet completed, measured by the percentage of total
costs incurred to date to estimated total costs at completion for each contract. This method is utilized because management considers
the cost-to-cost method the best method available to measure progress on these contracts. Revenues and estimated total costs at
completion are adjusted monthly as additional information becomes available and based upon the Company’s internal tracking
systems. Because of the inherent uncertainties in estimating revenue and costs, it is reasonably possible that the estimates used
will change within the near term.
Contract costs include all direct
material and labor costs and those other indirect costs related to contract performance including, but not limited to, indirect
labor, subcontract costs and supplies. General and administrative costs are charged to expense as incurred.
The Company has contracts that
may extend over more than one year; therefore, revisions in cost and profit estimates during the course of the work are reflected
in the accounting period in which the facts, which require the revisions, become known.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(2)
|
Summary of significant accounting policies – cont’d
|
|
(A)
|
Revenue and cost recognition – cont’d
|
Provisions for estimated losses
on uncompleted contracts are made in the period in which such losses are determined.
The Company does not record any
income from claims until the claims have been received or awarded.
Revenues recognized in excess of
amounts billed are recorded as a current asset under the caption “Costs and estimated earnings in excess of billings on uncompleted
contracts.” Billings in excess of revenues recognized are recorded as a current liability under the caption “Billings
in excess of costs and estimated earnings on uncompleted contracts.”
In accordance with construction
industry practice, the Company reports in current assets and liabilities those amounts relating to construction contracts realizable
and payable over a period in excess of one year.
Fees for the management of certain
contracts are recognized when services are provided.
|
(B)
|
Cash and cash equivalents
|
The Company considers all highly
liquid instruments with original maturities of three months or less to be cash equivalents. At December 31, 2011 and 2010, cash
equivalents consisted of Canadian time deposits and money market accounts.
|
(C)
|
Marketable securities
|
Marketable securities, which could
consist of Canadian time deposits, certificates of deposit accounts, equity securities and mutual funds, are classified as “available-for-sale”
securities and are stated at fair market value based on quoted market prices. Realized gains and losses, determined using the specific
identification method, are included in earnings. Unrealized holding gains and losses are reported as comprehensive income (loss)
in a separate component of stockholders’ equity.
|
(D)
|
Accounts and retainage receivable
|
Accounts and retainage receivable
from furnishing and installing heating, ventilating and air conditioning systems and process piping systems are based on contracted
prices. The Company may establish an allowance for uncollectible trade accounts and retainage receivable based upon historical
collection experience and management’s
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(2)
|
Summary of significant accounting policies – cont’d
|
|
(D)
|
Accounts and retainage receivable – cont’d
|
periodic evaluation of the collectability
of outstanding accounts and retainage receivable on an account-by-account basis. Accounts receivable and contract retentions are
due based on contract terms. Amounts are deemed delinquent when they are not received within their contract terms. Delinquent receivables
are written-off based on individual credit evaluation and specific circumstances of the customer.
Financial instruments, which potentially
expose the Company to concentrations of credit risk, consist primarily of cash and trade accounts and retainage receivables.
The Company maintains its cash
accounts at balances which exceed Federally insured limits for such accounts. The Company limits its credit risk by selecting financial
institutions considered to be highly creditworthy. At December 31, 2011, amounts in excess of federally insured limits totaled
approximately $15,926.
Trade accounts and retainage receivables,
at times, are due from government agencies, municipalities and private owners located in the New York metropolitan area. The Company
does not require collateral in most cases, but may file claims or statutory liens against the construction projects if a default
in payment occurs. Trade accounts and retainage receivables from the Company’s three largest customers totaled approximately
$8,395 and $10,981 at December 31, 2011 and 2010, respectively.
|
(F)
|
Property and equipment
|
Property and equipment is stated
at cost. Depreciation is computed over the estimated useful lives of the assets, generally five years, except for building and
improvements which is thirty-nine years, using the straight-line method. Leasehold improvements are amortized over the lesser of
the estimated useful lives of the assets to which they apply or the related lease term. Repairs and maintenance are charged to
operations in the period incurred.
The Company uses the asset and
liability method of accounting for income taxes in accordance with Accounting Standards. Deferred taxes are recognized for temporary
differences between the bases of assets and liabilities for financial statement and income tax purposes. The temporary differences
relate primarily to different accounting methods used for depreciation and amortization of property and equipment,
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(2)
|
Summary of significant accounting policies – cont’d
|
|
(G)
|
Income taxes – cont’d
|
and unrealized gains and losses
on marketable securities. A valuation allowance is recorded for deferred tax assets when it is more likely than not that some or
all of the deferred tax assets will not be realized through future operations.
Basic earnings per share is computed
by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect,
in periods in which they have a dilutive effect, the effect of common shares issuable upon the exercise of stock options. The difference
between reported basic and diluted weighted average common shares results from the assumption that all dilutive stock options outstanding
were exercised.
The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates, and such differences could be material.
All share based payments to employees
and non-employee directors, including grants of stock options, are recognized in the financial statements based on the award’s
fair value at the date of grant.
The Company uses the Black-Scholes
option – pricing model, which requires the input of subjective assumptions. These assumptions include estimating the length
of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility
of the Company’s common stock price over the
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(2)
|
Summary of significant accounting policies – cont’d
|
|
(J)
|
Stock options – cont’d
|
expected term and the number of
options that will ultimately not complete their vesting requirements (“forfeitures”). Changes in the subjective assumptions
can materially affect the estimate of fair value of share-based compensation and consequently, the related amount recognized on
the consolidated statements of income.
|
(K)
|
Financial instruments
|
Disclosures of estimated fair value
were determined by management, using available market information and appropriate valuation methodologies. Considerable judgment
is necessary to interpret market data and develop estimated fair values.
Accordingly,
the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial
instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated
fair value amounts.
Cash equivalents,
marketable securities, receivables, payables and other amounts arising out of normal contract activities, including retentions,
which may be settled beyond one year, reasonably approximate their fair values.
The fair value
of the Company’s mortgage payable, which is not traded in the market, is estimated by considering the Company’s credit
rating, current rates available to the Company for debt of the same remaining maturity and the terms of the debt.
Disclosure about
fair value of financial instruments is based on pertinent information available to management as of the balance sheet date.
|
(L)
|
Impact of recently issued and adopted accounting standards
|
The Company follows accounting
standards set by the Financial Accounting Standards Board, commonly referred to as the “FASB.” The FASB sets generally
accepted accounting principles (GAAP) that the Company follows to ensure its consistent reporting of financial condition, results
of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are to the
FASB Accounting Standards
Codification,
sometimes referred to as the Codification or ASC. There were no recently issued accounting standards which materially
affect the Company, except for the following:
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(2)
|
Summary of significant accounting policies – cont’d
|
|
(L)
|
Impact of recently issued and adopted accounting standards – cont’d.
|
In June 2011, the FASB issued ASU
No. 2011-05,
Comprehensive Income (Topic 220)
:
Presentation of Comprehensive Income
. This ASU allows an entity the
option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates
the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.
The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when
an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively. The amendments
are effective for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2011. Also,
ASU 2011-12 defers portions of ASU No. 2011-05 that relate to the presentation of reclassification adjustments. Except for the
presentation requirement, the adoption of this ASU will not have a material impact on the Company’s consolidated financial
statements.
|
(3)
|
Marketable securities
|
The cost and fair values of the
marketable securities, classified as available-for-sale securities at December 31, 2011 and 2010, were as follows:
|
|
Cost
|
|
|
Gross
Unrealized
Holding
Gains
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Fair
Value
|
|
December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in certificates of deposit, mutual funds and marketable equity securities
|
|
$
|
3,187
|
|
|
$
|
80
|
|
|
$
|
(413
|
)
|
|
$
|
2,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in mutual funds and marketable equity securities
|
|
$
|
1,902
|
|
|
$
|
79
|
|
|
$
|
(356
|
)
|
|
$
|
1,625
|
|
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(3)
|
Marketable securities – cont’d
|
At December 31, 2011 and 2010,
gross unrealized holding losses on available-for-sale securities were $413 and $356, respectively. At December 31, 2011 and 2010,
gross unrealized holding gains on available-for-sale securities were $80 and $79, respectively. The change in net unrealized holding
losses, net of tax, was an increase of $30 and a decrease of $20 for the years ended December 31, 2011 and 2010, respectively.
FASB ASC 820-10, “Fair
Value Measurements”, establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure
fair value into three broad levels which are described below:
|
Level 1:
|
Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical
assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
|
|
Level 2:
|
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in inactive markets; or model-derived valuations in which all significant inputs are observable or can be derived
principally from or corroborated with observable market data.
|
|
Level 3:
|
Unobservable inputs are used when little or no market data is available. The fair value hierarchy
gives the lowest priority to Level 3 inputs.
|
In determining fair value, the
Company utilizes valuation techniques that maximize the use of observable inputs to the extent possible as well as considers counterparty
credit risk in its assessment of fair value.
Financial assets carried at fair value at December
31, 2011 and 2010 are classified in the table below in one of the three categories described above.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Year ended
December
31,2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of
deposit, mutual funds and marketable equity securities
|
|
$
|
2,854
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,854
|
|
Year
ended
December 31,2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds and marketable equity securities
|
|
$
|
1,625
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,625
|
|
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(3)
|
Marketable securities – cont’d
|
Mutual funds and marketable equity securities are
valued using market prices on active markets (Level 1). Level 1 instrument valuations are obtained from real-time quotes for transactions
in active exchange markets involving identical assets.
|
(4)
|
Accounts and retainage receivable
|
|
|
2011
|
|
|
2010
|
|
Accounts and retainage receivable:
|
|
|
|
|
|
|
|
|
Billed
|
|
|
|
|
|
|
|
|
Contracts in progress
|
|
$
|
11,670
|
|
|
$
|
8,365
|
|
Completed contracts
|
|
|
2,339
|
|
|
|
4,990
|
|
Unbilled
|
|
|
67
|
|
|
|
345
|
|
|
|
$
|
14,076
|
|
|
$
|
13,700
|
|
|
|
|
|
|
|
|
|
|
Retainage receivable
|
|
$
|
3,982
|
|
|
$
|
4,081
|
|
At December 31, 2011, retained contract receivables totaling $381 were not expected to be realized
within one year.
|
(5)
|
Costs and estimated earnings on uncompleted contracts
|
Costs
and estimated earnings on uncompleted contracts consists of the following at December 31, 2011 and 2010:
|
|
2011
|
|
|
2010
|
|
Costs
incurred
on uncompleted contracts
|
|
$
|
71,468
|
|
|
$
|
59,819
|
|
Estimated earnings
|
|
|
7,131
|
|
|
|
7,516
|
|
|
|
|
78,599
|
|
|
|
67,335
|
|
Less billings to date
|
|
|
77,713
|
|
|
|
67,606
|
|
|
|
$
|
886
|
|
|
$
|
(271
|
)
|
The above amounts are included in the accompanying
consolidated balance sheets under the following captions:
|
|
2011
|
|
|
2010
|
|
Costs and estimated earnings in excess of
billings on uncompleted contracts
|
|
$
|
2,958
|
|
|
$
|
3,714
|
|
Billings in excess of costs and
estimated earnings on uncompleted contracts
|
|
|
(2,072
|
)
|
|
|
(3,985
|
)
|
|
|
$
|
886
|
|
|
$
|
(271
|
)
|
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
During the
third quarter of 2009, a Joint Venture in which the Company and Five Star Electric Corporation each have a 50 percent ownership
interest was awarded a $46 million contract for the construction of a chiller plant at the World Trade Center site.
The work covered by the Joint
Venture is made up of three components, (1) a mechanical segment performed by the Company, (2) an electrical segment performed
by the Company’s joint venture partner and (3) a general construction segment. The Joint Venture has issued three contracts,
(1) to the Company to perform the mechanical work, (2) to the Company’s partner to perform the electrical work and (3) to
a construction manager to perform the general construction work as an agent for the Joint Venture, on a reimbursable cost plus
fee basis.
The
Company has provided a guaranteed maximum price for the mechanical segment of the contract, and its joint venture partner has
provided a guaranteed maximum price for the electrical segment of the contract. The Company shares joint venture
profits/losses derived from the general construction segment equally with its joint venture partner. If the other partner is
unable to complete its contractual obligations, the Company would be fully liable to do so under the Joint Venture’s
contract with the Port Authority of New York and New Jersey. The Company and its partner are also jointly and severally
liable to the bonding company that issued the payment and performance bond for the Joint Venture. Circumstances that could
lead to a loss under the joint venture agreement beyond the Company’s stated ownership interest include the other
partner’s inability to contribute additional funds to the Joint Venture in the event the project incurs a loss,
additional costs that the Company could incur should the partner fail to provide the services and resources toward project
completion that it committed to provide in the joint venture agreement, and the partner’s failure to pay its
subcontractors and suppliers.
The Company
uses a combination of the proportionate consolidation method and the equity method to account for its interest in the Joint Venture.
The
Company records the assets, liabilities, revenues and costs of revenues associated with the mechanical segment of the
contract as gross amounts, in the financial statements (i.e. using the proportionate consolidation method), as it would any other
contract with a third party. The Company records its 50% share of the revenues and costs of revenues associated with the general
construction segment of the contract as gross amounts in the consolidated statement of income and records its portion of the assets
and liabilities as a net amount in the consolidated balance sheet (i.e. using the equity method), under the caption “Advances
to and earnings from joint venture”. The joint venture partner is responsible for the electrical portion of the contract,
and the Company is not recognizing any portion of that part of the joint venture contract in its financial statements.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(6)
|
Joint Venture – cont’d
|
In order to
ensure that the Company’s unconsolidated Joint Venture was properly capitalized, the Company and its partner were billing
the Joint Venture only for the costs incurred on their respective portions of the joint venture contract. The decision to bill
the Joint Venture only for the costs incurred on the project has not had a significant impact on the Company’s liquidity.
The project
is nearing completion. During the year ended December 31, 2011, the Company and its joint venture partner have each received distributions
of $1,400 in excess of their costs. As cash is received, the Joint Venture will continue to make additional distributions to
each partner of a portion of the difference between each partner’s adjusted subcontract and the amounts paid to each partner.
Since the Company
is currently billing the Joint Venture for its costs related to the performance of the mechanical portion of the Joint Venture
contract, and the agreed upon profit distribution, this transaction increases amounts the Company records in its consolidated balance
sheets under the caption “Costs and estimated earnings in excess of billings on uncompleted contracts”.
During the
quarter ended June 30, 2011, the Joint Venture terminated its contract with the construction manager which had been responsible
for the general construction segment. The Company hired certain employees of this construction manager to continue to perform certain
of the general construction tasks. The Company is also funding, on a cost reimbursable basis, other general construction costs
on behalf of the Joint Venture. These costs are included in the Company’s consolidated financial statements as advances to
the Joint Venture. These advances to the Joint Venture are repaid monthly.
The Company
does not believe that the termination of its construction manager has had any effect on the ability of the Company to complete
its contract obligations, and will not have a material effect on the overall profitability of the project.
As of December
31, 2011 and 2010, the Joint Venture had cash totaling approximately $3,858 and $7,084, respectively, no portion of which was included
in the Company’s cash balance in the consolidated balance sheets as of December 31, 2011 and 2010.
The following
schedule summarizes for the years ended December 31, 2011 and 2010, the amounts the Company has recorded in its consolidated balance
sheets relating to the general construction portion of the contract, under the caption “Advances to and earnings from joint
venture”:
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(6)
|
Joint Venture – cont’d
|
|
|
2011
|
|
|
2010
|
|
Balance, beginning of year
|
|
$
|
281
|
|
|
$
|
17
|
|
Current year activity:
|
|
|
|
|
|
|
|
|
Advances to joint venture
|
|
|
557
|
|
|
|
-
|
|
Repayments of joint venture advances
|
|
|
(494
|
)
|
|
|
(17
|
)
|
Net advances to joint venture
|
|
|
63
|
|
|
|
(17
|
)
|
Earnings from joint venture
|
|
|
301
|
|
|
|
281
|
|
Total current year activity
|
|
|
364
|
|
|
|
264
|
|
Balance, end of year
|
|
$
|
645
|
|
|
$
|
281
|
|
The following
schedule summarizes the joint venture financial information as of December 31, 2011 and 2010 and for the years ended December 31,
2011 and 2010:
|
|
2011
|
|
|
2010
|
|
Balance Sheet:
|
|
|
|
|
|
|
|
|
Current and Total Assets
|
|
$
|
7,484
|
|
|
$
|
11,616
|
|
|
|
|
|
|
|
|
|
|
Current and Total Liabilities
|
|
$
|
6,381
|
|
|
$
|
11,129
|
|
|
|
|
|
|
|
|
|
|
Statement of Income:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
18,440
|
|
|
$
|
22,818
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations and
|
|
|
|
|
|
|
|
|
net income
|
|
$
|
616
|
|
|
$
|
476
|
|
|
(7)
|
Property and equipment
|
Property and equipment at December
31, 2011 and 2010 consisted of the following:
|
|
2011
|
|
|
2010
|
|
Land
|
|
$
|
694
|
|
|
$
|
694
|
|
Building
|
|
|
1,718
|
|
|
|
1,718
|
|
Machinery and equipment
|
|
|
814
|
|
|
|
814
|
|
Furniture and fixtures
|
|
|
977
|
|
|
|
976
|
|
Leasehold improvements
|
|
|
851
|
|
|
|
851
|
|
|
|
|
5,054
|
|
|
|
5,053
|
|
Less accumulated depreciation and amortization
|
|
|
2,595
|
|
|
|
2,439
|
|
|
|
$
|
2,459
|
|
|
$
|
2,614
|
|
Depreciation and amortization
expense relating to property and equipment was approximately $156 and $167 for the years ended December 31, 2011 and 2010, respectively.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
During December 2008, the Company
purchased a pipe fabrication shop and an adjacent storage yard in Bronx, New York, from the Company’s Chief Executive Officer
and a charitable foundation he controls at fair market value.
The Company financed a portion
of this purchase using a $1,176 mortgage with Bank of America, N.A. This mortgage has a ten year term, with interest amortized
over twenty years, with any unpaid principal due in a balloon payment of $593 in December 2018. The mortgage payable is at a variable
interest rate, and the Company used an interest swap instrument to convert the interest rate that the Company pays to a fixed rate.
The Company has determined that the fair value of the interest rate swap was immaterial. Monthly payments are approximate $5 plus
interest at 5%. This mortgage is collateralized by the real estate.
Future principal maturities of
this mortgage payable are as follows as of December 31, 2011:
Years ending
|
|
|
|
|
December 31,
|
|
|
Amount
|
|
2012
|
|
$
|
58
|
|
2013
|
|
|
58
|
|
2014
|
|
|
58
|
|
2015
|
|
|
58
|
|
2016
|
|
|
58
|
|
Thereafter
|
|
|
704
|
|
Total
|
|
$
|
994
|
|
Costs related to obtaining the
mortgage debt are capitalized and amortized over the term of the related debt using the straight-line method. When the loan is
paid in full, any unamortized finance costs are removed from the related accounts and charged to operations. The Company incurred
costs related to the mortgage closing totaling $44. During the years ended December 31, 2011 and 2010, amortization expense charged
to operations related to these deferred mortgage costs totaled $4. At December 31, 2011 and 2010, net deferred mortgage costs totaled
$32 and $36, respectively, and are included in the consolidated balance sheets as a long term asset under the caption “Other”.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
For
the years ended December 31, 2011 and 2010 components of the provision for income taxes are as follows:
|
|
2011
|
|
|
2010
|
|
Current
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
651
|
|
|
$
|
948
|
|
State and local
|
|
|
514
|
|
|
|
647
|
|
|
|
|
1,165
|
|
|
|
1,595
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(20
|
)
|
|
|
2
|
|
State and local
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
|
(33
|
)
|
|
|
2
|
|
Totals
|
|
$
|
1,132
|
|
|
$
|
1,597
|
|
A reconciliation of the
provision for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before taxes
is as follows:
|
|
2011
|
|
|
2010
|
|
Computed tax
at
the federal statutory rate of 34%
|
|
$
|
912
|
|
|
$
|
1,212
|
|
State and local taxes, net of federal benefit
|
|
|
291
|
|
|
|
386
|
|
Other items, net
|
|
|
(71
|
)
|
|
|
(1
|
)
|
Provision for income taxes
|
|
$
|
1,132
|
|
|
$
|
1,597
|
|
The details of deferred tax assets
and liabilities at December 31, 2011 and 2010 are as follows:
|
|
2011
|
|
|
2010
|
|
Deferred income tax
assets
:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$
|
81
|
|
|
$
|
53
|
|
Unrealized losses on marketable securities
|
|
|
150
|
|
|
|
124
|
|
Other tax carryforwards
|
|
|
37
|
|
|
|
32
|
|
Deferred income tax assets, net
|
|
$
|
268
|
|
|
$
|
209
|
|
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(9)
|
Income taxes – cont’d
|
At
December 31, 2011 and 2010, the Company had net current deferred tax assets totaling $150 and $124, respectively. At December 31,
2011 and 2010, the net non-current deferred tax assets total $118 and $85, respectively.
Management
has evaluated its tax positions for the year ended December 31, 2011 and has determined that it has no uncertain tax positions
requiring financial statement recognition as of December 31, 2011.
|
(10)
|
Stockholders’ equity
|
The Company has outstanding stock
options under two plans, the KSW, Inc. 1995 Stock Option Plan (“1995 Plan”) and the KSW, Inc. 2007 Stock Option Plan
(“2007 Plan”).
In 1995, the Board of Directors
of the Company adopted the 1995 Plan. This plan enabled the Company to make incentive-based compensation awards to its employees,
officers, directors and consultants. On August 8, 2005, the Board of Directors extended the expiration date of the 526,667 outstanding
options to December 2010 from December 2005, and increased the exercise price to $1.66 from $1.50. In addition, on August 8, 2005,
the Company issued 80,000 options, at $1.66 per share, to an officer and three Directors. The plan expired December 2005; therefore,
no new options can be granted under this plan.
Accounting Standards require all
share-based payments to employees and non-employee directors, including grants of stock options, to be recognized in the financial
statements based on the awards fair value at the date of grant.
At January 1, 2010, the Company
had 145,501 outstanding options under the 1995 plan at an exercise price of $1.66.
During 2010, 131,500 options under
the 1995 plan were exercised during the year. No options were exercised during 2011. At December 31, 2011 there were 14,001 outstanding
and fully vested options under the 1995 plan.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(10)
|
Stockholders’ equity- cont’d
|
|
(A)
|
Stock option plans- cont’d
|
The 2007 Plan was adopted
and approved by the Company’s Board of Directors on May 8, 2007 and was approved by the shareholders at the May 2008
Annual Meeting of Stockholders. Pursuant to the 2007 Plan, 300,000 shares of common stock of the Company are reserved for
issuance to employees, consultants and Directors of the Company. The primary purpose of the 2007 Plan is to reward and retain
key employees and to compensate directors. Under this plan the Company has issued two Company directors options to purchase
40,000 shares of the Company’s common stock at various exercise prices. (See Note 18 (A)). At December 31, 2011, there
were 40,000 options under the 2007 plan outstanding, of which 33,333 were vested.
As of December 31, 2011, there
was approximately $3 unrecognized compensation expense related to unvested stock-based compensation awards. That cost is expected
to be recognized over the next year.
Under both
plans, options were granted to certain employees, executives and directors at prices equal to the market value of the stock
on the dates the options were issued. The options granted generally have a term of 10 years from the grant date and granted
options vest ratably over a three year period. The fair value of each option is amortized into compensation expense on a
straight-line basis between the grant date of the option and each vesting date. The Company estimates the fair value of all
stock option awards as of the date of the grant by applying the Black-Scholes pricing valuation model. The application of
this valuation model involves assumptions that are judgmental and sensitive in the determination of compensation expense
which would include the expected stock price volatility, risk-free interest rate, weighted-average expected life of the
options and the dividend yield.
Historical information is the primary
basis for the selection of the expected volatility, expected dividend yield and the expected lives of options. The risk-free interest
rate as selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(10)
|
Stockholders’ equity- cont’d
|
|
(A)
|
Stock option plans- cont’d
|
Changes that occurred in options outstanding
during 2011 and 2010 for both plans are summarized below:
|
|
2011
Number of
Shares
|
|
|
2011
Weighed
Average
Exercise
Price
|
|
|
2010
Number of
Shares
|
|
|
2010
Weighed
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
54,001
|
|
|
$
|
3.95
|
|
|
|
185,501
|
|
|
$
|
2.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
(131,500
|
)
|
|
$
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
54,001
|
|
|
$
|
3.95
|
|
|
|
54,001
|
|
|
$
|
3.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
47,334
|
|
|
$
|
4.14
|
|
|
|
40,667
|
|
|
$
|
4.39
|
|
Cash proceeds, tax benefits and
intrinsic value related to total stock options exercised under both plans during the years end December 31, 2011 and 2010, respectively,
are as follows:
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Proceeds from stock options exercised
|
|
$
|
-
|
|
|
$
|
208
|
|
|
|
|
|
|
|
|
|
|
Tax benefits related to stock options exercised
|
|
$
|
-
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of stock options exercised
|
|
$
|
-
|
|
|
$
|
216
|
|
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(10)
|
Stockholders’ equity – cont’d
|
|
(A)
|
Stock option plans- cont’d
|
The
following table summarizes information about stock options outstanding at December 31, 2011:
Exercise Price
|
|
Shares
|
|
|
Contractual Life
|
|
|
|
|
|
|
$1.58
|
|
|
14,001
|
|
|
3.6 years
|
$6.95
|
|
|
20,000
|
|
|
5.6 years
|
$2.61
|
|
|
20,000
|
|
|
7.4 years
|
Total
|
|
|
54,001
|
|
|
|
|
|
Shares
|
|
|
Average Price
|
|
|
Term in Years
|
|
|
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
54,001
|
|
|
$
|
3.95
|
|
|
|
5.7
|
|
|
$
|
39
|
|
Exercisable Options
|
|
|
47,334
|
|
|
$
|
4.14
|
|
|
|
5.5
|
|
|
$
|
34
|
|
|
(B)
|
Dividend distributions
|
On August 9, 2011, the Company’s
Board of Directors declared a cash dividend of $.15 per share. The aggregate amount of the dividend was $955 and was paid on August
29, 2011 to stockholders of record as of August 23, 2011.
On November 29, 2010, the Company’s
Board of Directors declared a cash dividend of $.07 per share. The aggregate amount on the dividend was $445, and was paid on December
20, 2010 to stockholders of record as of December 14, 2010.
On March 9, 2010, the Company’s
Board of Directors declared a cash dividend of $.10 per share. The aggregate amount on the dividend was $628 and was paid on May
24, 2010 to stockholders of record as of April 26, 2010.
The Company is authorized to issue
1,000,000 shares of preferred stock. As of December 31, 2011, no shares of preferred stock had been issued by the Company.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(10)
|
Stockholders’ equity – cont’d
|
During December 2008, the Company’s
Board of Directors authorized the purchase, through June 2009, of up to $1,000 of the Company’s common stock on the open
market. As of December 31, 2011 and 2010, the Company purchased 52,700 shares of the Company’s common stock at a total cost
of $140.
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,550
|
|
|
$
|
1,968
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic:
Weighted average shares outstanding during the year
|
|
|
6,366,625
|
|
|
|
6,305,517
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share – basic
|
|
$
|
.24
|
|
|
$
|
.31
|
|
|
|
|
|
|
|
|
|
|
Earnings per share –
diluted:
Weighted average shares outstanding during the year
|
|
|
6,366,625
|
|
|
|
6,305,517
|
|
|
|
|
|
|
|
|
|
|
Effect
of stock option dilution
|
|
|
7,203
|
|
|
|
12,832
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding for
purposes of calculating diluted earnings per share
|
|
|
6,373,828
|
|
|
|
6,318,349
|
|
|
|
|
|
|
|
|
|
|
Earnings per common shares and common share equivalent – diluted
|
|
$
|
.24
|
|
|
$
|
.31
|
|
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(12)
|
Accumulated other comprehensive income (loss)
|
At December 31, 2011 and 2010,
accumulated other comprehensive income and loss, which consists of net unrealized holding gains (losses) on available-for-sale
securities, was as follows:
|
|
2011
|
|
|
2010
|
|
Beginning balance
|
|
$
|
(153
|
)
|
|
$
|
(173
|
)
|
Current period change
|
|
|
(30
|
)
|
|
|
20
|
|
Ending balance
|
|
$
|
(183
|
)
|
|
$
|
(153
|
)
|
|
(13)
|
Commitments and contingencies
|
|
(A)
|
Performance and payment bonds
|
The Company is contingently liable
to a surety under a general indemnity agreement. The Company agrees to indemnify the surety for any payments made on contracts
of suretyship, guaranty or indemnity as a result of the Company not having the financial capacity to complete projects. Management
believes the likelihood of the surety having to complete projects is remote. The contingent liability is the cost of completing
all bonded projects, subject to bidding by third parties, which is an undeterminable amount. Management believes that all contingent
liabilities will be satisfied by performance on the specific bonded contracts involved.
|
|
The Company is obligated under an operating lease, for office space with minimum future rental
payments at December 31, 2011 as follows:
|
Years ending
|
|
|
|
December 31,
|
|
Amount
|
|
|
|
|
|
2012
|
|
$
|
227
|
|
2013
|
|
|
231
|
|
2014
|
|
|
117
|
|
Total
|
|
$
|
575
|
|
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(13)
|
Commitments and contingencies - cont’d
|
|
(B)
|
Operating lease – cont’d
|
Under
the terms of the lease agreement, the Company is obligated to pay monthly rental amounts of approximately $19, which escalates
2% each year. The Company has an option to cancel after giving the landlord six months notice.
|
|
The lease is a triple net lease which the Company pays any increases in real estate taxes over
base year taxes, maintenance, insurance and utilities. The current lease expires June 30, 2014.
|
Rent expense for the years ended
December 31, 2011 and 2010 amounted to approximately $223 and $218, respectively.
|
(C)
|
Environmental regulation
|
The Company must comply with certain
Federal, state and local regulations involving contract compliance as well as the disposal of certain toxins. In management’s
opinion, there are no environmental contingencies or violations of environmental laws or regulations, which would have a material
adverse impact on the results of operations or on the Company’s financial condition.
|
(1)
|
Other Proposals and Claims
|
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, claim recoveries 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.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(13)
|
Commitments and contingencies - cont’d
|
There are no material
pending legal proceedings to which the Company is a party, except the case of
KSW Mechanical Services, Inc. v. Pavarini
McGovern, LLC, et. al.,(PMG)
, Supreme Court, N.Y. County, which is an action to recover the Company’s contract
balance of $529, plus delay and impact costs of $160, from PMG, the construction manager on the 45
th
Street Hotel
project. PMG and the owner of the project (“Owner”) have been in litigation and in alternative dispute resolution
proceedings over monetary issues unrelated to the Company’s work. The construction manager has cited these disputes
with the Owner as the basis for failing to pay the Company’s contract balance. There are a total of eight actions
instituted by various parties, including the Company, arising from the project. These actions have been consolidated for
trial. The actions are now in the discovery stage. On April 5, 2011, the Owner filed a voluntary petition under Chapter 11 of
the Bankruptcy Code. The Owner has filed a Plan of Reorganization which does not impair the rights of mechanic’s
lienors such as the Company. Under the Plan, which was approved by the Bankruptcy Court, $11,000 is set aside for the payment
of mechanics lienors such as the Company. The Company believes that the receivable recorded on its books should be
collected.
The Company’s Chief Executive
Officer has a written employment agreement, which expires on December 31, 2013 (see Note 18(B)). This agreement provides a base
annual compensation of $450, medical insurance, disability insurance with payments equal to 60% of base compensation, a $1 million
policy of life insurance payable as directed by him and a car with a chauffeur. His estate is entitled to two months pay in the
event of his death.
For the period January 1, 2010
through December 31, 2013, see Note 18(B), he will receive a bonus equal to 9.5% of the Company’s adjusted annual profits
before taxes which are in excess of $100. For the years ended December 31, 2011 and 2010, bonus expense related to this agreement
was $272 and $366, respectively. At December 31, 2011 and 2010, accrued bonus payable included in the accompanying consolidated
balance sheets related to this agreement was approximately $122 and $216, respectively.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
The Company has a line of credit
facility from Bank of America, N.A. which provides borrowings for working capital purposes up to $2,000. There have been no borrowings
against this credit facility. This facility expires on March 31, 2012, is secured by the Company’s assets and is guaranteed
by the Company’s subsidiary, KSW Mechanical Services, Inc. (See Note 18(C)).
Advances related to the facility
in place at December 31, 2011 bear interest, based on the Company’s option, at either the bank’s prime lending rate,
or the London Interbank Offered Rate (“LIBOR”) plus two percent per annum.
The Company’s direct labor
is supplied primarily by one union through a collective bargaining agreement, which expires in June 2014. Although the Company’s
past experience was favorable with respect to resolving conflicting demands with unions, it is always possible that a protracted
conflict may occur which will impact the renewal of the collective bargaining agreements.
|
(B)
|
Contract revenue/significant customers
|
Revenues
from the Company’s largest customers were approximately 58%, 9%, and 7%, of its contract revenue in 2011; 27%, 21%, 20%,
and 10%, of its contract revenue in 2010.
|
(A)
|
Profit-sharing/401(k) plan
|
The Company sponsors a profit-sharing/401(k)
plan covering employees not covered under collective bargaining agreements who meet the age and length of service requirements
of the plan. The Company may make discretionary contributions to the plan. The total of employee contributions may not exceed Federal
government limits. The Company expensed approximately $74 and $85 as a 25% matching contribution for the years ended December 31,
2011 and 2010, respectively.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(16)
|
Retirement plans – cont’d
|
|
(B)
|
Multiemployer pension plans
|
Employees of the Company who are
parties to a collective bargaining (union) agreement are covered by union pension plans. The Company makes contributions to multiemployer
pension plans that cover its various union employees. These plans provide benefits based on union members’ earnings and periods
of coverage under the respective plans. The Company has expensed approximately $1,204 and $2,328 for the years ended December 31,
2011 and 2010, respectively, related to multiemployer pension plans for its union employees.
Under the Construction Industry
Exemption to ERISA, the Company would be liable for a withdrawal penalty only if it ceases to make contributions to the plan, but
continues to work in the same jurisdiction on a non-union basis. The Company has no intention of taking any action that would result
in a withdrawal penalty.
The Company’s participation
in significant plans is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employer Identification
Number (“EIN”) and the three digit plan number. The zone status is based on the latest information that the Company
has received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally
less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and the plans in the green zone are at least
80 percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement
plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. The “Surcharge
Imposed” column includes plans in a red zone status that are required to pay a surcharge in excess of regular contributions.
The last column lists the expiration date of the collective bargaining agreement to which the plan is subject:
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(16)
|
Retirement plans – cont’d
|
|
(B)
|
Multiemployer pension plans
|
|
|
EIN/Pension
|
|
|
Pension Protection Act
Zone Status
|
|
|
FIP/RP Status Pending/
|
|
|
Contributions
|
|
|
Surcharge
|
|
|
Collective Bargaining Agreement Expiration
|
|
Pension Fund
|
|
Plan Number
|
|
|
2011
|
|
|
2010
|
|
|
Implemented
|
|
|
2011
|
|
|
2010
|
|
|
Imposed
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steamfitters’ Industry Pension Fund
|
|
13-6149680-001
|
|
|
Yellow
|
|
|
Yellow
|
|
|
Implemented
|
|
|
$1,155
|
|
|
$2,284
|
|
|
No
|
|
|
June 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to other multiemployer pension plans
|
|
|
|
49
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
Total Contributions
|
|
|
|
$1,204
|
|
|
|
$2,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The most recent Pension Protection
Act Zone Status available in 2011 and 2010 is for the plan years ended December 31, 2010 and 2009, respectively. The zone status
is based on information received from the plan and was certified by the plan’s actuary. The Company’s yearly contribution
for 2010 represents 5.6% of total contributions made to the plan, as indicated in the plan’s 2010 annual report on Federal
Form 5500. There are no future minimum contribution requirements under the Collective Bargaining Agreement or the Plan.
At December 31, 2011, the Company
had a backlog of approximately $86,300. Backlog represents the amount of revenue the Company expects to realize from work to be
performed on uncompleted contracts in progress at year end and from contractual agreements on work which has not commenced.
|
(A)
|
Stock option issuance
|
On February 14, 2012, the Company
issued to executives and certain employees options to purchase 100,000 shares of the Company’s common stock at an exercise
price of $3.75.
KSW, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
YEARS ENDED DECEMBER 31, 2011 AND 2010
(in thousands, except share data)
____________________________
|
|
(18)
|
Subsequent events – cont’d
|
On February 14, 2012, the Company’s
Compensation Committee and the Company’s Chief Executive Officer agreed to extend this officer’s Employment Agreement
effective January 1, 2012, and expiring December 31, 2013, under the same terms as the expiring Amendatory Employment Agreement.
On February 23, 2012, the Company extended the working
capital credit facility with Bank of America, N.A for a term expiring March 31, 2013.
EXHIBIT INDEX
Exhibit No.
|
Description
|
|
|
3.1
|
Amended and Restated Articles of Incorporation of KSW, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-8 (No. 333-217350), filed with the Commission on February 13, 1997).
|
|
|
3.2
|
Amended and Restated By-Laws of KSW, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-8 (No. 333-217350), filed with the Commission on February 13, 1997).
|
|
|
10.1
|
Form of Modification of Lease Agreement dated as of May 1, 1998 by and between KSW, Inc, Irvjoy Partners, L.P. and I BLDG Co., Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (Commission File No. 001-32865), filed with the Commission on March 30, 1999).
|
|
|
10.2
|
1995 Stock Option Plan of KSW, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (Commission File No. 001-32865), filed with the Commission on November 24, 1995).
|
|
|
10.3
|
Employment Agreement, dated September 12, 2005 by and between the Company, KSW Mechanical Services, Inc. and Floyd Warkol (incorporated herein by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K (Commission File No. 001-32865), filed with the Commission on September 12, 2005).
|
|
|
10.4
|
Amendatory Employment Agreement, dated as of March 6, 2007, by and between the Company, KSW Mechanical Services, Inc., and Floyd Warkol. (incorporated herein by reference to Exhibit 10.4 to the Company’s annual report on Form 10-K for the year ended December 31, 2006, filed on March 14, 2007).
|
|
|
10.5
|
Line of Credit Agreement Letter, dated March 14, 2006, between KSW, Inc. and Bank of America,
N.A. together with forms of a Line of Credit Note, Rider to Line of Credit Note, a pledge security agreement and guaranty (incorporated
herein by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December 3, 2005, filed
with the Commission on March 16, 2006).
|
Exhibit No.
|
Description
|
|
|
10.6
|
Line of Credit Agreement Letter, dated March 8, 2007, between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Commission on March 14, 2007).
|
|
|
10.7
|
Line of Credit Agreement Letter, dated January 28, 2008, between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Commission on March 25, 2009).
|
|
|
10.8
|
Line of Credit Agreement Letter, dated January 26, 2009, between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Commission on March 25, 2009).
|
|
|
10.9
|
KSW, Inc. 2007 Stock Option Plan (incorporated herein by reference to Appendix E to the Company’s definitive proxy statement on Schedule 14A for the 2008 annual meeting of stockholders, filed with the Commission on April 4, 2008).
|
|
|
10.10
|
Line of Credit Agreement Amendment No. 1, dated January 15, 2010 between KSW, Inc. and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Commission on March 19, 2010).
|
|
|
10.11
|
Line of Credit Agreement Amendment No. 2, dated January 14, 2011 between KSW, Inc. and Bank
of America, N.A. (incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 2010, filed with the Commission on March 22, 2011).
|
|
|
10.12
|
Line of Credit Agreement Amendment No. 3, dated February 23, 2012 between KSW, Inc. and Bank of America, N.A.
|
|
|
10.13
|
Amendatory Employment Agreement, dated as of November 13, 2008, by and between the Company, KSW Mechanical Services, Inc., and Floyd Warkol.
|
|
|
10.14
|
Second Amendatory Employment Agreement, dated as of September 25, 2009, by and between the Company, KSW
Mechanical Services, Inc., and Floyd Warkol.
|
|
|
10.15
|
Third Amendatory Employment Agreement, dated as of January 1, 2012, by and between the Company, KSW Mechanical Services, Inc., and Floyd Warkol.
|
|
|
11.1
|
Statement Regarding Computation of Net Earnings Per Share.
|
|
|
21.1
|
Subsidiaries of Registrant
|
|
|
23.1
|
Consent of BDO USA, LLP
|
|
|
31.1
|
Certification of Chief Executive Officer required by Rule 13a-14(a).
|
Exhibit No.
|
Description
|
|
|
31.2
|
Certification of Chief Financial Officer required by Rule 13a-14(a).
|
|
|
32.1
|
Certification of Chief Executive Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.
|
|
|
32.2
|
Certification of Chief Financial Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.
|
|
|
101.INS
|
XBRL Instance Document.
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema.
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase.
|
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