Comfort Systems USA Reports Fourth Quarter Results; Improved Earnings Over 2000; Seventh Consecutive Quarter of Positive Free Cash Flow.Business Editors HOUSTON--(BUSINESS WIRE)--March 5, 2002 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 net income of $3,091,000 or $0.08 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, for the quarter ended Dec. 31, 2001, as compared to a net loss of $16,267,000 or $0.44 per diluted share, in the fourth quarter of 2000. The results for the fourth quarter of 2000 included pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta 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 nonoperating asset charges of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $15.7 million. Excluding the impact of these charges, net income for the fourth quarter of 2000 would have been $1,388,000 or $0.04 per diluted share. The Company reported revenues of $377,078,000 in the current quarter as compared to $399,608,000 in 2000. Net income for the full year of 2001 was $13,124,000 or $0.35 per diluted share as compared to a loss of $16,853,000 or $0.45 per diluted share for 2000. Excluding the charges discussed above, net income for 2000 would have been $7,678,000 or $0.21 per diluted share. Revenues were $1,546,282,000 in 2001 as compared to $1,591,066,000 in 2000. On Feb. 12, 2002, the Company announced the sale of 19 operations to Emcor Group EMCOR Group NYSE: EME is a Fortune 500 company based in Norwalk, Connecticut. This company's businesses include mechanical and electrical construction, energy infrastructure, and facilities services. Inc. (NYSE:EME n. 1. An uncle. ) (Emcor), and also released preliminary fourth quarter financial information that indicated that the Company would include a reserve against its 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 from Kmart For the Australasian department store chain, see Kmart Australia. "K-Mart" is also a nickname for NBA player Kenyon Martin. Kmart is a chain of department stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Guam. Corporation in connection with that company's recent bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most filing. The Company's fourth quarter results include a reserve of $3.5 million, before taxes, against its Kmart receivables as of Dec. 31, 2001. Excluding this reserve, net income for the fourth quarter would have been $5,366,000 or $0.14 per share, and earnings before interest, taxes, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , depreciation and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) would have been $22,178,000. Bill Murdy, 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. , noted, "2001 was a year of significant progress for Comfort Systems USA. We posted increased income with and without unusual items, and we improved on our already healthy cash flow. Now with the Emcor transaction, we have established one of the strongest balance sheets among publicly held companies in our industry. We have secured our position as a premier provider of commercial/industrial HVAC services nationwide, with special capabilities in multi-location service, energy efficiency and building automation." In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with newly effective accounting standards, the operating results and disposition of the units sold to Emcor will be reported at a summary level as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. beginning in the first quarter of 2002. Information under regular income statement captions in the first quarter of 2002 will pertain to pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the . As a result, the Company also today released certain income statement information excluding the operations it sold to Emcor, as well as information further excluding all other operations it has closed or divested during the past two years. It should be noted that this information includes full actual 2001 corporate costs and reflects no estimate of any potential reductions in such costs in response to this major change in the Company. For 2001 the Company would have reported 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. of $13,225,000 excluding operations sold to Emcor as compared to an operating loss 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. of $22,117,000 in 2000. EBITDA for 2001 would have been $29,838,000 versus $20,083,000 in 2000. Operating income for 2001 excluding the restructuring and Kmart charges noted above would have been $16,963,000 and EBITDA would have been $33,338,000. Excluding 2000 restructuring charges discussed above, operating income in 2000 would have been $3,227,000. Revenues in 2001 excluding operations sold to Emcor would have been $888,396,000 versus $907,642,000 in 2000. Excluding operations sold to Emcor as well as all other operations that were sold or shut down in the past two years and which are not a part of continuing operations, operating income for 2001 would have been $15,891,000 as compared to an operating loss of $4,944,000 in 2000. EBITDA in 2001 would have been $32,311,000 versus $36,126,000 in 2000. Operating income for 2001, excluding the restructuring and Kmart charges noted above, would have been $19,629,000 and EBITDA would have been $35,811,000. Excluding 2000 restructuring charges discussed above, operating income in 2000 would have been $20,400,000. Revenues in 2001 excluding operations sold to Emcor as well as all other operations that were sold or shut down would have been $882,059,000 versus $859,632,000 in 2000. Free cash flow for the fourth quarter was $24,266,000 and for the full year $61,862,000. These results mark the Company's seventh consecutive quarter of positive free cash flow. Excluding the operations sold to Emcor, free cash flow from continuing operations with no pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma adjustments to corporate costs was approximately $26 million for 2001 and $2 million for 2000. Subsequent to the Emcor transaction and considering estimated taxes Federal and state tax laws require a quarterly payment of estimated taxes due from corporations, trusts, estates, non-wage employees, and wage employees with income not subject to withholding. , escrows and transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). associated with the transaction, the Company expects total debt to be $45 million to $55 million, and total debt to EBITDA (based on trailing twelve month results excluding all divested entities) of 1.40 to 1.80. The Company has agreed with its lenders to a reduction in its revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility to $100 million upon closing. Borrowings under the revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to are expected to be $30 million to $40 million subsequent to payment of estimated taxes and transaction costs. Based on its improved creditworthiness Creditworthiness The condition in which the risk of default on a debt obligation by that entity is deemed low. Creditworthiness Eligibility of an individual or firm to borrow money. following the Emcor transaction, the Company is currently seeking more flexible borrowing arrangements. In connection both with the reduction in its current credit facility and with the possibility that the Company may enter into new borrowing arrangements, the Company may record a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. in the first quarter of 2002 of as much as $1.2 million, before tax benefits, to write off deferred arrangement fees associated with its current credit facility. In addition, the Company expects that it will take certain steps to reduce its costs in light of the smaller size of the Company following the Emcor transaction. As a result, the Company currently expects it will record restructuring charges of not less than $1 million, before taxes, in the first quarter of 2002. In July July: see month. 2001, new standards were issued relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc accounting for goodwill. These standards take effect for the Company on Jan. 1, 2002, with early adoption not allowed. The Company has previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). the likelihood that it would record a potentially significant non-cash charge for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill under these new standards. The Company currently estimates that it will record a non-cash impairment charge to goodwill of between $240 million and $260 million, before any tax benefit, in the first quarter of 2002. In accordance with the new standards, this charge will be reflected separately from net income from continuing operations as a cumulative change in accounting principles, net of any tax benefits. Bill Murdy concluded, "We believe that no one in our industry can match Comfort Systems USA's unique combination of national commercial/industrial HVAC capability and depth of expertise in energy efficiency, multi-location service and building automation. Stronger financially than ever, we believe we are very well positioned for renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. success in a large and growing industry." The Company will host a conference call to discuss its financial results and position in more depth on Wednesday Wednesday: see week. , March 6, 2002, at 9:00 a.m. Central Standard Time. The call-in call-in adj. Being in a format such that listeners or viewers are invited to have their telephone conversations with the host or guests on a show broadcast to other listeners: a call-in radio show. n. number for this conference call is 630/395-0051. A replay of the entire call will be available until 5:00 p.m. Central Standard Time Wednesday, March 13, 2002, by calling 402/530-7905. Comfort Systems USA is a premier provider of business solutions addressing workplace comfort, environments, processes and energy services, with 84 locations in 57 cities around the nation. For more information, visit the Company's website at www.comfortsystemsusa.com. This press release contains 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 formerly separate 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 or bonding, 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 and Twelve Months Ended Dec. 31, 2001 and 2000
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
Dec. 31,
------------------------------------------------
2001 % 2000 %
--------- --------- --------- ---------
Revenues $377,078 100.0% $399,608 100.0%
Cost of
services 307,015 81.4% 327,947 82.1%
--------- ---------
Gross profit 70,063 18.6% 71,661 17.9%
SG&A 54,758 14.5% 56,712 14.2%
Goodwill
amortization 3,021 0.8% 3,102 0.8%
Restructuring
charges -- -- 15,031 3.8%
--------- ---------
Income (loss)
from operations 12,284 3.3% (3,184) (0.8%)
Interest
expense, net 4,006 1.1% 6,955 1.7%
Other (income)
expense (42) -- (66) --
Reductions in
non-operating
assets and
liabilities, net -- -- 677 0.2%
--------- ---------
Income (loss)
before taxes 8,320 2.2% (10,750) (2.7%)
Income taxes 5,229 5,517
--------- ---------
Net income (loss) $3,091 0.8% $(16,267) (4.1%)
========= =========
Net income (loss)
per share:
Basic $0.08 $(0.44)
Diluted $0.08 $(0.44)
Shares used in
computing net
income (loss)
per share:
Basic 37,510 37,301
Diluted 37,663 37,301
Income from
operations,
excluding
restructuring
charges and
Kmart reserve $15,784 4.2% $11,847 3.0%
EBITDA, excluding
restructuring
charges and
Kmart reserve $22,178 5.9% $18,336 4.6%
Net income,
excluding
restructuring
and nonrecurring
charges and
Kmart reserve $5,366 1.4% $1,388 0.3%
Diluted earnings
per share,
excluding
restructuring
and nonrecurring
charges and
Kmart reserve $0.14 $0.04
Twelve Months Ended
Dec. 31,
------------------------------------------------
2001 % 2000 %
--------- --------- --------- ---------
Revenues 1,546,282 100.0% $1,591,066 100.0%
Cost of
services 1,270,113 82.1% 1,306,816 82.1%
--------- ---------
Gross profit 276,169 17.9% 284,250 17.9%
SG&A 212,988 13.8% 225,894 14.2%
Goodwill
amortization 12,084 0.8% 12,585 0.8%
Restructuring
charges 238 -- 25,344 1.6%
--------- ---------
Income (loss)
from operations 50,859 3.3% 20,427 1.3%
Interest
expense, net 21,776 1.4% 26,372 1.7%
Other (income)
expense (573) -- (744) --
Reductions in
non-operating
assets and
liabilities, net -- -- 5,867 0.4%
--------- ---------
Income (loss)
before taxes 29,656 1.9% (11,068) (0.7%)
Income taxes 16,532 5,785
--------- ---------
Net income (loss) $13,124 0.8% $(16,853) (1.1%)
========= =========
Net income (loss)
per share:
Basic $0.35 $(0.45)
Diluted $0.35 $(0.45)
Shares used in
computing net
income (loss)
per share:
Basic 37,436 37,397
Diluted 37,499 37,397
Income from
operations,
excluding
restructuring
charges and
Kmart reserve $54,597 3.5% $45,771 2.9%
EBITDA, excluding
restructuring
charges and
Kmart reserve $79,063 5.1% $70,673 4.4%
Net income,
excluding
restructuring
and nonrecurring
charges and
Kmart reserve $15,523 1.0% $7,678 0.5%
Diluted earnings
per share,
excluding
restructuring
and nonrecurring
charges and
Kmart reserve $0.41 $0.21
Note 1: 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.
Note 2: EBITDA is defined as income from operations, excluding
depreciation and amortization.
Note 3: The bottom four lines on this table show income and
earnings per share information excluding restructuring charges and
reductions in non-operating assets and liabilities (nonrecurring
charges) recorded primarily in 2000, and $3.5 million of Kmart
receivables reserves recorded in the fourth quarter of 2001. The tax
rate on these items was computed using the pro forma effective tax
rate of the Company exclusive of these charges.
Comfort Systems USA Inc.
Consolidated Statements of Operations -- Restated Financial
Information Excluding Companies Divested
For the Twelve Months Ended Dec. 31, 2001 and 2000
(in thousands)
(Unaudited)
Excluding Companies Sold to Emcor
Twelve Months Ended
Dec. 31,
2001 % 2000 %
-----------------------------------------
Revenues $888,396 100.0% $907,642 100.0%
Cost of services 722,541 81.3% 741,491 81.7%
-------- --------
Gross profit 165,855 18.7% 166,151 18.3%
SG&A 144,094 16.2% 154,186 17.0%
Goodwill amortization 8,298 0.9% 8,738 1.0%
Restructuring charges 238 -- 25,344 2.8%
-------- --------
Income (loss) from
continuing operations $13,225 1.5% $(22,117) (2.4%)
-------- --------
Income from continuing
operations,
excluding restructuring
charges and Kmart
reserve $16,963 1.9% $3,227 0.4%
EBITDA from continuing
operations, excluding
restructuring charges
and Kmart reserve $33,338 3.8% $20,083 2.2%
Excluding Companies Sold to Emcor and Other Divestitures
Twelve Months Ended
Dec. 31,
-----------------------------------------
2001 % 2000 %
-------- -------- -------- --------
Revenues $882,059 100.0% $859,632 100.0%
Cost of services 715,554 81.1% 689,853 80.2%
-------- --------
Gross profit 166,505 18.9% 169,779 19.8%
SG&A 142,078 16.1% 140,899 16.4%
Goodwill amortization 8,298 0.9% 8,480 1.0%
Restructuring charges 238 -- 25,344 2.9%
-------- --------
Income (loss) from
continuing operations $15,891 1.8% $(4,944) (0.6%)
-------- --------
Income from continuing
operations, excluding
restructuring charges
and Kmart reserve $19,629 2.2% $20,400 2.4%
EBITDA from continuing
operations, excluding
restructuring charges
and Kmart reserve $35,811 4.1% $36,126 4.2%
Note 1: EBITDA is defined as income from operations, excluding
depreciation and amortization.
Note 2: Income from operations and EBITDA information on the
bottom two lines of each table above excludes restructuring charges
recorded in 2001 and 2000 and $3.5 million of Kmart receivables
reserves recorded in 2001.
Note 3: These tables include full actual corporate costs for 2001
and 2000 and reflect no pro forma adjustments to such corporate costs
in connection with the Company's significant reduction in size from
the sale of operations to Emcor and other divestitures.
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