KSW Reports Q1 Earnings

From the company's press release, after today's close ("KSW, Inc. Reports First Quarter 2009 Results"):

LONG ISLAND CITY, N.Y.--(BUSINESS WIRE)--KSW, Inc. (NASDAQ: KSW - News) today reported financial results for the first quarter of 2009.

Total revenue for the first quarter of 2009 was $19,706,000 as compared to $20,491,000 for the first quarter of 2008. Net income was $287,000 for the first quarter of 2009 as compared to net income of $840,000 for the first quarter of 2008. This represents earnings per share of $.05 per share (basic and diluted), for the first quarter of 2009 as compared to an earnings per share of $0.13 per share (basic and diluted), for the first quarter of 2008.

As of March 31, 2009, the Company’s backlog was approximately $38,300,000, which does not include the Mt. Sinai Center for Science & Medicine Project, which is currently estimated to have a value between $58 and $61 million. KSW has been notified that the Owner has approved the Company as the trade manager for the construction phase of the project. However, the final contract value has yet to be determined and contract documents have not yet been executed. The March 31, 2009 backlog also does not include two upper west side contracts, which were terminated by the Owner in March 2009. The Company, with the help of union concessions, was able to negotiate new agreements for the completion of those two projects^[1].

Chairman of the Board, Floyd Warkol, commented: “Our first quarter revenue and income were impacted by the economic recession and credit crunch, which directly resulted in the cancellation of several large projects. However, our cash position remains strong, and we have aggressively begun bidding on public sector work, where opportunities for new work should expand under the Federal Government’s stimulus program.”

I'll be interested in seeing what the company's balance sheet looks like when it files its 10-Q for the first quarter.

^[1]The press release doesn't offer a dollar amount for these two UWS projects, but I wonder if this is the $8.5 million in business KSW corporate counsel Jim Oliviero mentioned in our previous conversation, which we noted in a post at the end of March (KSW Update):

$8.5 million of [the backlog] was terminated by a developer. Oliviero explained that the developer was attempting to negotiate lower costs with the unions, and KSW was hopeful about getting the project back on the backlog if that can be done.

I left a voice mail with Oliviero today and will ask him this if I hear back from him tomorrow.

KSW Update

I spoke with Jim Oliviero today, the corporate counsel for KSW, Inc. (Nasdaq: KSW), to get some clarification on a couple of items in the 10-K the company filed earlier this week. The first item was the company's backlog. The company had a backlog of $62.5 million as of December 31st, but between then and March 6th, $8.5 million of it was terminated by a developer. Oliviero explained that the developer was attempting to negotiate lower costs with the unions, and KSW was hopeful about getting the project back on the backlog if that can be done. Another $9 million of the backlog won't be recognized as revenue until next year, as the projects its associated with won't be completed until then. So the backlog at this point represents about $45 million in potential revenue for 2009 (assuming no other projects are delayed or canceled). Revenues in 2008 were about $93 million.

I also asked Oliviero about this note on the 10-K:

In addition, at December 31, 2008, the Company held marketable securities totaling $1,223,000, a decrease from the $1,892,000 balance at December 31, 2007.

Often "marketable securities" refers to Treasuries, but in this case it refers to equity mutual funds, marked down to their value as of the end of last year. In addition, the company had cash and cash equivalents totaling $16,611,000 at the end of last year, so, given the company's current market cap of $14,840,000 it's trading for less than its cash.

U.S. Energy Corp. Update

On Monday, U.S. Energy Corp. (Nasdaq: USEG) filed its 10-K and released its highlights for 2008, most of which we noted here when they were announced individually. Today the company held its conference call. CEO Keith Larsen mentioned that the company's Gillette, WY real estate development was currently 95% occupied, and is generating $225k in rental revenue per month. He also noted that the local economy in Gillette remained strong¹, despite the national downturn. Larsen also noted that the current low oil and natural gas prices offered promising opportunities to sign new exploration and production deals.

If the conference call was any indication, investor interest in USEG, such as it was, appears to have declined significantly. This may have been the shortest quarterly conference call I have listed to, by any company. There was exactly one question (I would have asked a question², but I was listening via streaming audio on the Internet). Other signs of a decline in investor interest:

- The company's Investor Hub message board has four posts in the last four months, all by the moderator.

- The company's Yahoo! message board hasn't had a post since January 27th.

Based on its year-end balance sheet data, USEG is currently trading for less than its net cash.

The photo above comes for U.S. Energy Corp's website. You can read more details on the company's interests in Molybdenum, Oil & Natural Gas, Uranium, Geothermal, and its Gillette, WY real estate project on the projects section of the company's website.

¹As of January, according to the Bureau of Labor Statistics, Wyoming's unemployment rate was 3.7%, the lowest in the nation.

²My question would have been about what cost-cutting plans (if any) the company had in mind to get closer toward profitability from the cost side.

U.S. Energy Corp. Update

A few quick updates:

- U.S. Energy Corp. (Nasdaq: USEG) filed an 8-k and issued a press release today announcing that it had retired its $16.8 million construction loan on its Remington Village real estate project. Since it was unable to get longer-term financing in the current credit environment without paying onerous fees, since it had close to $70 million in low-yielding Treasuries, USEG management figured it was better off using some of that cash to payoff the loan. The press release also added some details about the status of the Remington Village project:

``Remington Village is an excellent asset in an economically sound area that is currently generating in excess of $200,000 per month in revenue and is expected to generate $248,000 in monthly revenues upon stabilization at 95% occupancy,'' [said USEG CEO Keith Larsen]

The project was completed ahead of schedule in early December, 2008 approximately $1.1 million under budget, and is currently 88% occupied. The Remington Village complex consists of nine 24-plexes with a mix of one, two, and three bedroom units, as well as a clubhouse and leasing office.

The Gillette, Wyoming region continues to experience solid growth following record state coal production in 2008, and attracting new residents through a number of infrastructure projects currently under development including a $40 million recreation center, an $80 million hospital renovation, a $1.4 billion mine mouth-feed coal-fired power plant and a soon to be constructed $120 million coal dewatering facility north of Gillette.

- Last week, USEG announced that it had received a scheduled $1 million milestone payment from Thomson Creek as part of the option agreement Thomson Creek signed with USEG in August to pursue development of the Lucky Jack Molybdenum project.

- Earlier this month, USEG announced that it had signed an oil & gas participation agreement with a private company to acquire a 50% working interest in a prospect in Northeastern Wyoming. In this release, USEG's CEO stated that his company's goal was to increase its production from its current level of 1,700 million cubic feet equivalent per day (MCFE/D) to 7,000 MCFE/D by the end of 2009.

The photo above, of the company's Remington Village real estate development, is from the company's website

The Hipster Premium

An article in last weekend's New York Times Real Estate section ("The Sell: Getting New Buyers Into the Pool") described the sale of a 590-square-foot one-bedroom co-op in a 120 year old building (pictured nearby) in the Williamsburg section of Brooklyn. The sale price? $450,000. According to the article, the couple that bought this co-op (pictured above) previously lived on Staten Island and had a 90 minute commute. Presumably, they worked in Midtown Manhattan (or higher up), since Downtown would be a fairly short commute via ferry from Staten Island. If that's the case, they could have had shortened their commute by moving to Hackensack, where $450k would have bought them a 1600-square-foot two-bedroom condo in a new construction building (or a house). Hackensack lacks the hipster cachet of Williamsburg though.

That hipster cachet of Williamsburg and similar Brooklyn neighborhoods is a fairly recent phenomenon. Mark Steyn's obituary for Betty Comden in last year's Atlantic ("Opting for Wit Over Sincerity") was a reminder of that. From Steyn's piece:

...Betty was a starry-eyed hick just arrived in the glittering metropolis from her dusty one-horse rural flag stop: Brooklyn. “Arriving in Manhattan from Brooklyn,” she wrote, “I felt like a kid from a small town, clutching her straw suitcases, and staring up at the Big Town for the first time. It was madly glamorous.”

It stayed that way. Comden and Green never tired of writing screen and stage valentines to “New York, New York / A helluva town”—by which they meant Manhattan. “The Bronx is up / And the Battery’s down”—and Brooklyn isn’t even on the map. As the predatory lady cab driver says to the sailors on the lam in On the Town (1944),

“I know a place across the Brooklyn Bridge where they’ll never find us.”

“Where?”

“Brooklyn.”

"Great Moments in Landlord/Tenant Relations"

A post by Megan McCardle on her Atlantic blog about her D.C. rental market travails prompted this comment from commenter "TallDave":

Pity you're not in southern Wisconsin. I'd gladly rent you a beautiful little 1900 sq ft townhouse I've been advertising for a couple months -- and, of course, you'd get my special libertarian discount.

Instead, I'll just share a "Great Moments in Landlord/Tenant Relations" story I had from a college tax teacher. A friend of her husband's had a nonpaying tenant (an old woman) in an Eastern state where it was very hard to evict people (had to go to court several times, pay a lot of money). After six months of nonpayment, he went to the tenant and told her "Look, I will give you $2,000 to move out." Her reply? "No way, if I move I'll have to start paying rent."

So the landlord is at a bar, telling this story, and there was a guy there who was due to report to prison in a week. He wanted some prison money, and so he offered to get the woman moved out for half what the landlord would have paid the woman, $1000. The landlord agrees (they make no terms as to methods, of course). So the guy breaks into her apartment, tells her she better move, and breaks her arm to prove he's serious; she moves out in terror, he pockets a grand, and the landlord gets a paying tenant.

Is this a classic failure of government regulation, or what?

USEG Reports

U.S. Energy Corp. (Nasdaq: USEG) released its 10-Q today for the quarter ending in September. A few notes on this:

- Net cash and Treasuries totaled $58.2 million¹, so given the company's current market cap of $53 million, its shares are still trading for less than its net cash and Treasuries.

- Rental revenues from the company's Gillette, WY real estate development increased $497,100 from $288,600 in the previous quarter.

- No revenues appear from the oil and gas projects yet, as the well with PetroQuest hadn't gone into production by the end of the quarter.


¹The company had a total of $74.6 million in cash and Treasuries including $4.9 million in restricted Treasuries pledged as collateral on a construction loan for the Gillette project of about $16.4 million.