KSW Reports

KSW, Inc. (Nasdaq¹: KSW) is the HVAC contractor we discussed in a recent post ("Revisiting Return on Invested Capital" -- see also the comments, which include color from KSW's CFO and corporate counsel). Today it reported a solid second quarter. From the company's release:

Financial Highlights for the quarter ended June 30, 2008 include:

Financial Highlights for the quarter ended June 30, 2008 include:

* Total revenue increased 13.9% in second quarter 2008 to $22 million as compared to $19.3 million in second quarter 2007;

* Net income in second quarter 2008 was $1.1 million, or $0.17 per basic and fully diluted shares, up from $860,000, or $0.14 per basic and fully diluted shares in the same period of the prior year;

* Backlog set a record at $139.1 million as of June 30, 2008;

* As of June 30, 2008, cash, cash equivalents and marketable equity securities totaled $17.9 million;

* On April 30, 2008, the Company’s Board of Directors declared a cash dividend of 20 cents per share. The aggregate amount of the dividend was $1.26 million, and was paid on June 17, 2008 to shareholders of record as of May 26, 2008.

Financial Highlights for the six months ended June 30, 2008 include:

* Total revenues increased by $5.2 million, or 13.9%, to $42.5 million, as compared to $37.3 million for the six months ended June 30, 2007;

* Net income rose to $1.9 million, or $0.31 per share-basic and $0.30 per share-diluted, as compared to net income of $1.76 million, or $0.29 per share-basic and $0.28 per share-diluted for the six months ended June 30, 2007;

* Since January 1, 2008, KSW has been awarded $70 million in new contracts.

KSW is one of the companies I had in mind when I wrote this recent post, "Why Worry About Small, Thinly-Traded Stocks?", particularly the part where I questioned the conventional wisdom about risk (i.e., large is less risky than small, etc.). KSW may be a micro cap, but it seems to have a lot less risk than many much larger companies. This is a $31 million market cap company with no debt and nearly $18 million in cash, and a backlog of business about 1.75x its revenue over the last twelve months. As with many companies, KSW's business can be vulnerable to weakness in the overall economy, but the size of its backlog -- and the amount it increased by in the first half of this year -- are encouraging. Other risks plaguing many larger companies don't affect KSW directly. Since it isn't a consumer business, the weakness of the U.S. consumer doesn't affect it directly; since it is self-financing (KSW's general counsel mentioned to me on Friday that the company has never borrowed money), it isn't affected directly by the credit crisis², etc.

After cash and stock dividends over the last year and a half, my average cost on KSW is about $5.80 per share, so I'm down on this one, but I am content to hold it.

¹KSW recently switched its listing to the Nasdaq from the American Stock Exchange, and was allowed to keep its three-letter symbol.

²Of course, the credit crunch can of course affect KSW indirectly, if a lack of financing prevents its clients from initiating construction projects. So far, thankfully, that hasn't been the case.