Comfort Systems USA Reports Fourth Quarter Results; Completes 2000 Restructuring; Extends Debt Maturities.Business Editors HOUSTON--(BUSINESS WIRE)--March 27, 2001 Comfort Systems USA Inc. (NYSE NYSE See: New York Stock Exchange :FIX), a leading provider of commercial/industrial heating, ventilation ventilation, process of supplying fresh air to an enclosed space and removing from it air contaminated by odors, gases, or smoke. Proper ventilation requires also that there be a movement or circulation of the air within the space and that the temperature and and air conditioning air conditioning, mechanical process for controlling the humidity, temperature, cleanliness, and circulation of air in buildings and rooms. Indoor air is conditioned and regulated to maintain the temperature-humidity ratio that is most comfortable and healthful. ("HVAC (Heating Ventilation Air Conditioning) In the home or small office with a handful of computers, HVAC is more for human comfort than the machines. In large datacenters, a humidity-free room with a steady, cool temperature is essential for the trouble-free ") services, today announced revenues for the quarter ended Dec. 31, 2000, of $399,608,000 as compared to $361,801,000 in the fourth quarter of 1999. The Company reported a net loss of $16,267,000 or $0.44 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, as compared to a net income of $8,245,000 or $0.22 per diluted share in 1999. The fourth quarter results include pre-tax restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other nonrecurring charges Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". of $15.7 million, or $0.48 per share, associated primarily with restructuring efforts initially discussed in third and fourth quarter press releases. Revenues for the year ended Dec. 31, 2000, were $1,591,066,000 as compared to $1,370,035,000 in 1999. The Company reported a net loss of $16,853,000 or $0.45 per diluted share in 2000 versus net income of $42,322,000 or $1.09 per diluted share in 1999. The full-year results for 2000 include $31.2 million of restructuring and other nonrecurring charges before taxes as discussed further below. Restructuring and Other Nonrecurring Charges As announced by the Company early in the third quarter, management undertook an extensive review of its operations in the second half of 2000. This review was completed in the fourth quarter and resulted in restructuring and other nonrecurring charges during the quarter totaling $15.7 million before taxes, or $0.48 per share. The Company also recognized restructuring and other nonrecurring charges in the second and third quarter. For the full year, these charges total $31.2 million before taxes, or $0.66 per share. These charges relate primarily to the Company's decisions to cease operations at three locations, sell five operations and merge three companies into other units. Revenues during 2000 for these locations were $46.1 million and operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. were $17.1 million. These actions included the termination during the fourth quarter of the Company's e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. activities at its Outbound out·bound adj. Outward bound; headed away: outbound trains. Adj. 1. outbound - that is going out or leaving; "the departing train"; "an outward journey"; "outward-bound ships" Services unit. The remaining restructuring and nonrecurring items include the disposition in the second quarter of long-term receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed collateralized by the Company's stock, and various severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and lease termination costs. In the aggregate, $25.8 million, or 83%, of the total nonrecurring charges were noncash items including goodwill impairments of $11.5 million and the writedown of other long-lived assets of approximately $14.3 million. Bill Murdy, who joined Comfort Systems USA in July as chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , said, "After three years of rapid acquisition growth, the Company was due for a thorough rationalization rationalization, in psychology: see defense mechanism. of its operations to firmly focus on establishing the Company as an integrated operating entity. Challenging industry conditions during 2000 heightened the urgency for this effort." Murdy continued, "While we still have operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon where results must improve, we believe we have addressed those operations and issues requiring the most significant and conclusive Determinative; beyond dispute or question. That which is conclusive is manifest, clear, or obvious. It is a legal inference made so peremptorily that it cannot be overthrown or contradicted. action. We expect these efforts to lead to improved operational and financial performance for 2001." Extended Debt Maturities The Company also announced that it has extended the maturity of its bank credit facility to January 2003. Total capacity under the facility is the lesser of $270 million or 80% of net receivables Net Receivables A company's accounts receivable (money owed to the company) minus bad debts. Notes: If a company estimates that 2% of its sales are never going to be paid, then net receivables equals 98% (100% - 2%) of the accounts receivable. . Based on these conditions, capacity under the facility is currently $265.4 million, with borrowings currently outstanding under the facility of $223.1 million. The Company has agreed to reduce the facility's capacity to the lesser of $250 million or 80% of net receivables as of Dec. 31, 2001, and the lesser of $240 million or 80% of net receivables as of June 30, 2002. Under the facility, the Company pays a floating interest rate generally based on the London Interbank Offered Rate London Interbank Offered Rate A short-term interest rate often quoted as a 1,3,6-month rate for U.S.dollars. , or LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). , plus a spread determined by the ratio of the Company's total debt to earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
The Company also restructured a significant portion of its $50.3 million of subordinate debt See Junior debt. in connection with the extension of its bank credit facility maturity. Under this restructuring, previously scheduled subordinate debt maturities of $27.4 million in 2001 were reduced to $8.9 million, with the balance deferred until April 2003. In addition, previously scheduled maturities of $22.0 million in 2002 were reduced to $6.6 million, again with the balance deferred until April 2003. As a result, previously scheduled maturities of $0.9 million in 2003 have been increased to $34.8 million. As part of this restructuring, the Company increased the interest rate on $44.4 million of its subordinate debt to 10% per annum Per annum Yearly. beginning in March 2001. Bill Murdy noted, "This was a challenging and complex change to our capital structure. We are pleased to have the support of our bank group and subordinate debt holders for the Company's restructuring and ongoing turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. ." Operations and Outlook "Clearly 2000 was a difficult year for Comfort Systems USA, as our financial results show," said Murdy. "We faced a challenging industry environment, experienced execution shortfalls in several of our operations and confronted the urgent need to strengthen the operational integration of the Company. But we also took important steps in the right direction. Excluding restructuring and nonrecurring items, the Company achieved its goals for operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and EBITDA in the fourth quarter. In addition, we posted record free cash flow of $32.0 million for the quarter and $42.1 million for the year as a whole." Murdy continued, "We are beginning to see encouraging progress in our primary strategic initiatives. During 2000, we booked over $30 million of new energy efficiency-related business. In the first two and a half months of 2001, we have booked more than $15 million of this kind of work. California's well-publicized challenges are highlighting the importance of energy efficiency as electricity markets deregulate deregulate To reduce or eliminate control. One of the major forces in the financial markets in the 1970s and 1980s was the federal government's decision to deregulate interest rates. , and we feel we are well positioned to provide the HVAC and building automation upgrades and retrofits that can deliver significant energy savings. We have also scored notable recent successes with new national and regional accounts for multi-location service business, and with a major facility automation assignment won on the basis of the Company's manufacturer-neutral position and leadership in emerging automation technology standards." Murdy added, "Inside the Company, we have strengthened our team with new leadership at ten operations and bolstered bol·ster n. A long narrow pillow or cushion. tr.v. bol·stered, bol·ster·ing, bol·sters 1. To support or prop up with or as if with a long narrow pillow or cushion. 2. regional management. We have increased operating controls, incentives and accountability, and have begun to see results from these steps. As discussed in a separate release, we have added Rick Miller to our senior team to focus on human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. and organizational development. "We will continue our emphasis on core HVAC and controls activities and on continuing turnaround operations this year. While it appears 2001 may challenge us with slowing growth in the economy, we believe our significant 2000 restructuring work, our extension of debt maturities, and our energy, national account and automation strategies have positioned the Company for long-term growth and improved financial performance in 2001." Comfort Systems USA will host its quarterly conference call to discuss fourth quarter results on Wednesday, March 28 at 9 a.m. Central Standard Time. To participate in the call, dial 712/257-0417 ten minutes before the conference call begins and ask for the Comfort Systems USA conference. A replay of the entire call will be available until 9 a.m. Central Standard Time Wednesday, April 4 by calling 402/998-0217. Comfort Systems USA is a premier provider of business solutions addressing workplace comfort, environments, processes and energy services, with more than 125 locations in 90 cities around the nation. For more information, visit the Company's new website at www.comfortsystemsusa.com. Certain statements and answers to questions during the call may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on the current plans and expectations of Comfort Systems USA Inc. and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include, among others, the lack of a combined operating history and the difficulty of integrating acquired businesses, retention of key management, a national downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. or one or more regional downturns in construction, shortages of labor and specialty building materials Building materials used in the construction industry to create . These categories of materials and products are used by and construction project managers to specify the materials and methods used for . , difficulty in obtaining or increased costs associated with debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay , seasonal fluctuations in the demand for HVAC systems and the use of incorrect estimates for bidding a fixed price contract and other risks detailed in the Company's reports filed with the Securities and Exchange Commission. -- Financial table follows --
Comfort Systems USA Inc.
Consolidated Statements of Operations
For the Three Months and Twelve Months Ended Dec. 31, 2000 & 1999
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
December 31,
---------------------------------------
2000 % 1999 %
-------- ------ -------- ------
Revenues $399,608 100.0% $361,801 100.0%
Cost of services 327,947 82.1% 284,847 78.7%
-------- --------
Gross profit 71,661 17.9% 76,954 21.3%
SG&A 56,712 14.2% 53,787 14.9%
Goodwill amortization 3,102 0.8% 3,081 0.9%
Restructuring charges 15,031 3.8% -- --
-------- --------
Income (loss) from
operations (3,184) (0.8%) 20,086 5.6%
Interest expense, net 6,955 1.7% 5,712 1.6%
Other (income) expense (66) -- 144 --
Reductions in non-operating
assets and liabilities, net 677 0.2% -- --
-------- --------
Income (loss) before taxes (10,750) (2.7%) 14,230 3.9%
Income taxes 5,517 5,985
-------- --------
Net income (loss) $(16,267) (4.1%) $8,245 2.3%
======== ========
Net income (loss)
per share:
Basic $(0.44) $0.22
Diluted $(0.44) $0.22
Shares used in computing
net income (loss) per share:
Basic 37,301 38,111
Diluted 37,301 38,194
EBITDA $18,336 4.6% $26,186 7.2%
Twelve Months Ended
December 31,
---------------------------------------
2000 % 1999 %
---------- ------ ---------- ------
Revenues $1,591,066 100.0% $1,370,035 100.0%
Cost of services 1,306,816 82.1% 1,077,329 78.6%
---------- ----------
Gross profit 284,250 17.9% 292,706 21.4%
SG&A 225,894 14.2% 187,771 13.7%
Goodwill amortization 12,585 0.8% 11,731 0.9%
Restructuring charges 25,344 1.6% -- --
---------- ----------
Income (loss) from
operations 20,427 1.3% 93,204 6.8%
Interest expense, net 26,372 1.7% 19,192 1.4%
Other (income) expense (744) -- (48) --
Reductions in non-operating
assets and liabilities, net 5,867 0.4% -- --
---------- ----------
Income (loss) before taxes (11,068) (0.7%) 74,060 5.4%
Income taxes 5,785 31,738
---------- ----------
Net income (loss) $(16,853) (1.1%) $42,322 3.1%
========== ==========
Net income (loss)
per share:
Basic $(0.45) $1.10
Diluted $(0.45) $1.09
Shares used in computing
net income (loss) per share:
Basic 37,397 38,561
Diluted 37,397 39,699
EBITDA $70,673 4.4% $116,259 8.5%
Note 1: This table presents the results of companies acquired in
purchase transactions from their respective dates of acquisition.
Prior to their acquisition by Comfort Systems, these companies
were managed as independent companies.
Note 2: The diluted earnings per share data presented above reflects
the dilutive effect, if any, of stock options and convertible
notes which were outstanding during the periods presented. For
convertible notes that are dilutive, shares attributable to the
notes have been included in weighted shares outstanding, and
after-tax interest expense related to these notes of $0 for the
three months and twelve months ended Dec. 31, 2000 and $18 and
$766 for the three months and twelve months ended Dec. 31, 1999,
respectively, has been added back to net income for purposes of
calculating diluted earnings per share.
Note 3: EBITDA is defined as income (loss) from operations, excluding
restructuring charges, depreciation and amortization.
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