Comfort Systems USA Reports Third Quarter Results; Significant Increase in Backlog to Another Record - Higher Quarterly Earnings.HOUSTON Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. Economy The fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; -- Comfort Systems USA Inc. (NYSE NYSE See: New York Stock Exchange :FIX), a leading provider of commercial, industrial and institutional 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 $3,490,000 or $0.09 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 Sept. 30, 2004, as compared to net income of $175,000 or $0.00 per diluted share, in the third quarter of 2003. Prior year earnings included charges related to both discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and 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). . Income from 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 for the third quarter of 2003 was $2,595,000 or $0.07 per diluted share. Current quarter income reflects a 34.5% gain over this amount. Excluding 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. and the effect of divested units not reported as discontinued operations, net income from ongoing operations for the third quarter of 2003 was $3,220,000 or $0.08 per diluted share. Current quarter income reflects an increase of 8.4% over this amount. The Company reported revenues from continuing operations of $211,530,000 in the current quarter, an increase of 1.8% as compared to $207,740,000 in 2003. The Company also reported free cash flow of $4,158,000 in the current quarter as compared to negative free cash flow of $6,943,000 in 2003. Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. as of Sept. 30, 2004, was a record $516,344,000, up 5.7% from $488,584,000, the previous record as of June June: see month. 30, 2004, and up 17.4% from $439,632,000 on a same-store basis as of Sept. 30, 2003. Bill Murdy, Comfort Systems USA's 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, "Comfort continued its positive progress this quarter, although at a slower pace in earnings than we are capable of. Among the factors reducing our income were increased costs associated with operational consolidation in certain of our Western operations, an uncharacteristically un·char·ac·ter·is·tic adj. Unusual or atypical: an uncharacteristic display of anger. un down quarter at one of our Southeast Southeast or south east is the ordinal direction halfway between south and east. It the opposite of northwest. Southeast or South East can refer to: Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and and Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). operations. We estimate that these factors decreased our earnings by at least $0.04 per share this period. While we never expect a quarter to be challenge-free, we believe this set of factors is largely nonrecurring Non`re`cur´ring a. 1. Nonrecurrent; as, the costs of a layoff are considered as a nonrecurring expense s>. . And we believe our results, which show modest improvement even with these setbacks, reflect underlying strength across our operations." Murdy added, "This strength could be seen in our significant improvement in backlog, during a quarter in which increased seasonal activity usually reduces backlog. This improvement was driven by new business bookings, which continued at solid levels in October October: see month. . We see continuing improvement in industry activity levels, and we believe our operations are capitalizing on this in their markets." The Company reported net income from continuing operations for the nine months ended Sept. 30, 2004, of $8,805,000 or $0.22 per diluted share as compared to $902,000 or $0.02 per diluted share in 2003. Excluding charges for restructuring, debt cost writeoff writeoff A reduction to zero in the value of an asset carried on a firm's financial statement. Companies often hesitate to make writeoffs because profits reported to stockholders are reduced. and divested units not reported in discontinued operations, net income from ongoing operations was $4,023,000 or $0.11 per diluted share for the nine months ended Sept. 30, 2003. The Company reported revenues of $608,279,000 from continuing operations for the first nine months of 2004, as compared to $585,808,000 in 2003. Excluding divested units not reported in discontinued operations, same-store revenues were up 4.6% from $581,767,000 in 2003. Murdy continued, "We continued our steady strengthening of our balance sheet this quarter, with a significant increase in free cash flow over last year's third quarter, and cash-net-of-debt position that has now grown to over $11 million. With an industry environment that we believe is stable to improving, we believe we are well positioned to finish out 2004 with growing operating results, and move into 2005 with good prospects for ongoing growth." As previously announced, the Company will host a conference call to discuss its financial results and position in more depth on Wednesday Wednesday: see week. , Nov. 3, 2004, at 10:00 a.m. Central 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 1-712-271-3364. A replay of the entire call will be available until 6:00 p.m. Central time, Wednesday, Nov. 10, 2004, by calling 1-402-998-0719. Comfort Systems USA is a premier provider of business solutions addressing workplace comfort, with 60 locations in 49 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, national and regional weakness in non-residential construction activity, 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, shortages of labor and specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. 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 . , seasonal fluctuations in the demand for HVAC systems and the use of incorrect Incorrect means to not be correct and may also refer to:
--Financial table follows -
Comfort Systems USA Inc.
Consolidated Statements of Operations
for the Three Months and Nine Months Ended
September 30, 2004 and 2003
(in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
September 30,
----------------------------------
2004 % 2003 %
-------- ------ --------- -------
Revenues $211,530 100.0% $207,740 100.0%
Cost of services 178,250 84.3% 172,900 83.2%
--------- ---------
Gross profit 33,280 15.7% 34,840 16.8%
SG&A 26,687 12.6% 27,825 13.4%
Restructuring charges - - 949 0.5%
--------- ---------
Income from operations 6,593 3.1% 6,066 2.9%
Interest expense, net 334 0.2% 1,078 0.5%
Other expense (income) 135 0.1% (42) -
Write-off of debt costs - - - -
--------- ---------
Income before taxes 6,124 2.9% 5,030 2.4%
Income taxes 2,634 2,435
--------- ---------
Income from continuing operations 3,490 1.6% 2,595 1.2%
Discontinued operations:
Operating income, net of income
tax expense of $0, $229, $27 and
$454 - 353
Estimated loss on disposition,
including income tax expense of
$0, $43, $235 and $274 - (2,773)
--------- ---------
Net income (loss) $3,490 $175
========= =========
Income (loss) per share:
Basic-
Income from continuing
operations $ 0.09 $0.07
Discontinued operations -
Income from operations - 0.01
Estimated loss on disposition - (0.08)
--------- ---------
Net income (loss) $0.09 $0.00
========= =========
Diluted-
Income from continuing operations $0.09 $0.07
Discontinued operations-
Income from operations - 0.01
Estimated loss on disposition - (0.08)
--------- ---------
Net income (loss) $0.09 $0.00
========= =========
Shares used in computing income
(loss) per share:
Basic 38,418 37,713
Diluted 39,455 38,454
Nine Months Ended
September 30,
---------------------------------
2004 % 2003 %
-------- ------ --------- -------
Revenues $608,279 100.0% $585,808 100.0%
Cost of services 511,854 84.1% 490,079 83.7%
--------- ---------
Gross profit 96,425 15.9% 95,729 16.3%
SG&A 79,459 13.1% 86,999 14.9%
Restructuring charges - - 3,223 0.6%
--------- ---------
Income from operations 16,966 2.8% 5,507 0.9%
Interest expense, net 1,113 0.2% 2,672 0.5%
Other expense (income) 405 0.1% 105 -
Write-off of debt costs - - 823 0.1%
--------- ---------
Income before taxes 15,448 2.5% 1,907 0.3%
Income taxes 6,643 1,005
--------- ---------
Income from continuing operations 8,805 1.4% 902 0.2%
Discontinued operations:
Operating income, net of income tax
expense of $0, $229, $27 and $454 39 715
Estimated loss on disposition,
including income tax expense of
$0, $43, $235 and $274 (137) (3,685)
--------- ---------
Net income (loss) $8,707 $(2,068)
========= =========
Income (loss) per share:
Basic-
Income from continuing
operations $0.23 $0.02
Discontinued operations -
Income from operations - 0.02
Estimated loss on disposition - (0.09)
--------- ---------
Net income (loss) $0.23 $(0.05)
========= =========
Diluted-
Income from continuing operations $0.22 $0.02
Discontinued operations-
Income from operations - 0.02
Estimated loss on disposition - (0.09)
--------- ---------
Net income (loss) $0.22 $(0.05)
========= =========
Shares used in computing income
(loss) per share:
Basic 38,298 37,659
Diluted 39,457 38,081
Note 1: The diluted earnings per share data presented above reflects
the dilutive effect, if any, of stock options, warrants and
contingently issuable restricted stock which were outstanding during
the periods presented.
Supplemental Information Relating to Earnings (Loss) Per Share
(amounts in thousands, except for per share amounts) (unaudited)
Three Months Ended Three Months Ended
September 30, 2004 September 30, 2003
------------------------- -------------------------
Income Income
from from
continuing continuing
operations Income operations Income
(after per (after per
tax) Shares share tax) Shares share
---------- ------- ------ ---------- ------- ------
Basic earnings per
share $3,490 38,418 $0.09 $2,595 37,713 $0.07
Adjustment to
income from
continuing
operations
(after tax):
Remove mark-to-
market increase
in the amount of
warrant and put
obligation
(after tax) - (a) - (a)
Adjustments to
shares:
Effect of shares
issuable under
stock option plans 998 516
Effect of shares
issuable related
to warrant - (a) - (a)
Effect of
contingently
issuable
restricted
shares 39 225
---------- ------- ------ ---------- ------- ------
Diluted earnings
per share $3,490 39,455 $0.09 $2,595 38,454 $0.07
========== ======= ====== ========== ======= ======
Nine Months Ended Nine Months Ended
September 30, 2004 September 30, 2003
-------------------------- -------------------------
Income Income
from from
continuing continuing
operations Income operations Income
(after per (after per
tax) Shares share tax) Shares share
---------- -------- ------ ---------- ------- ------
Basic earnings per
share $8,805 38,298 $0.23 $902 37,659 $0.02
Adjustment to
income from
continuing
operations
(after tax):
Remove mark-to-
market increase
in the amount
of warrant and
put obligation
(after tax) - (a) - (a)
Adjustments to
shares:
Effect of shares
issuable under
stock option
plans 1,108 197
Effect of shares
issuable related
to warrant - (a) - (a)
Effect of
contingently
issuable
restricted
shares 51 225
---------- -------- ------ ---------- ------- ------
Diluted earnings
per share $8,805 39,457 $0.22 $902 38,081 $0.02
========== ======== ====== ========== ======= ======
(a) Exclusion of the mark-to-market adjustment to the amount of the
warrant and put obligation for this period would increase earnings
per share, or be anti-dilutive. In accordance with generally
accepted accounting principles, this anti-dilutive impact is excluded
from determining diluted earnings (loss) per share. The warrant was
exercised, and the related put rights terminated, in October, 2004.
As a result of this exercise, both basic and diluted shares
outstanding will increase by approximately 408,000 shares during the
fourth quarter of 2004, and mark-to-market adjustments in our
Statement of Operations in connection with this warrant and put
obligation will discontinue.
Supplemental Non-GAAP Information Relating to Ongoing Operations
(unaudited)
Three Months Ended
September 30,
---------------------------------
2004 % 2003 %
--------- ------ --------- ------
Revenues $211,530 $207,740
Divested units not reflected in
discontinued operations - (4)
--------- ---------
Revenues from ongoing operations 211,530 100.0% 207,736 100.0%
--------- ---------
Cost of services 178,250 172,900
Divested units not reflected in
discontinued operations - (9)
--------- ---------
Cost of services from ongoing
operations 178,250 84.3% 172,891 83.2%
--------- ---------
Gross profit from ongoing operations 33,280 15.7% 34,845 16.8%
--------- ---------
Selling, general and administrative
expenses 26,687 27,825
Divested units not reflected in
discontinued operations - (11)
--------- ---------
Selling, general and administrative
expenses from ongoing operations 26,687 12.6% 27,814 13.4%
--------- ---------
Operating income from ongoing
operations, excluding restructuring
charges 6,593 3.1% 7,031 3.4%
--------- ---------
Interest expense, net 334 0.2% 1,078 0.5%
Other expense (income) 135 0.1% (42) -
--------- ---------
Income from ongoing operations
before income taxes, excluding
restructuring charges and the write-
off of debt costs 6,124 5,995
Income tax expense 2,634 2,775
--------- ---------
Income from ongoing operations
(after tax), excluding restructuring
charges and the write-off of debt
costs $ 3,490 1.6% $3,220 1.6%
========= =========
Income from continuing operations
(after tax) $3,490 $2,595
Divested units not reflected in
discontinued operations (after tax) - 8
Restructuring charges (after tax) - 617
Write-off of debt costs (after tax) - -
--------- ---------
Income from ongoing operations
(after tax), excluding restructuring
charges and the write-off of debt
costs $3,490 1.6% $3,220 1.6%
========= =========
Diluted earnings per share - income
from ongoing operations (after
tax), excluding restructuring charges
and the write-off of debt costs $0.09 $0.08
Nine Months Ended
September 30,
---------------------------------
2004 % 2003 %
--------- ------ --------- ------
Revenues $608,279 $585,808
Divested units not reflected in
discontinued operations - (4,041)
--------- ---------
Revenues from ongoing operations 608,279 100.0% 581,767 100.0%
--------- ---------
Cost of services 511,854 490,079
Divested units not reflected in
discontinued operations - (4,046)
--------- ---------
Cost of services from ongoing
operations 511,854 84.1% 486,033 83.5%
--------- ---------
Gross profit from ongoing operations 96,425 15.9% 95,734 16.5%
--------- ---------
Selling, general and administrative
expenses 79,459 86,999
Divested units not reflected in
discontinued operations - (754)
--------- ---------
Selling, general and administrative
expenses from ongoing operations 79,459 13.1% 86,245 14.8%
--------- ---------
Operating income from ongoing
operations, excluding restructuring
charges 16,966 2.8% 9,489 1.6%
--------- ---------
Interest expense, net 1,113 0.2% 2,672 0.5%
Other expense (income) 405 0.1% 105 -
--------- ---------
Income from ongoing operations
before income taxes, excluding
restructuring charges and the write-
off of debt costs 15,448 6,712
Income tax expense 6,643 2,689
--------- ---------
Income from ongoing operations
(after tax), excluding restructuring
charges and the write-off of debt
costs $8,805 1.4% $4,023 0.7%
========= =========
Income from continuing operations
(after tax) $8,805 $902
Divested units not reflected in
discontinued operations (after tax) - 491
Restructuring charges (after tax) - 2,095
Write-off of debt costs (after tax) - 535
--------- ---------
Income from ongoing operations
(after tax), excluding restructuring
charges and the write-off of debt
costs $8,805 1.4% $4,023 0.7%
========= =========
Diluted earnings per share - income
from ongoing operations (after
tax), excluding restructuring charges
and the write-off of debt costs $0.22 $0.11
Note 1: Operating results from ongoing operations, excluding
restructuring charges and the write-off of debt costs, is presented
because the Company believes it reflects the results of the core
ongoing operations of the Company, and because we believe it is
responsive to frequent questions we receive about the Company from
third parties. However, this measure is not considered a primary
measure of an entity's financial results under generally accepted
accounting principles, and accordingly, this amount should not be
considered an alternative to operating results as determined under
generally accepted accounting principles and as reported by the
Company.
Note 2: The bottom two calculations in the above table show income
from ongoing operations (after tax) and related earnings per share
information excluding divested units not reflected in discontinued
operations, restructuring charges and the write-off of debt costs. The
tax rate on these items was computed using the pro forma effective tax
rate of the Company exclusive of these charges.
Supplemental Non-GAAP Information - Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ---------------------------
2004 % 2003 % 2004 % 2003 %
------- ---- ------- ---- -------- ---- -------- ----
Net income
(loss) $3,490 $175 $8,707 $(2,068)
Discontinued
operations - 2,420 98 2,970
Income taxes 2,634 2,435 6,643 1,005
Write-off of debt
costs - - - 823
Other expense
(income) 135 (42) 405 105
Interest expense,
net 334 1,078 1,113 2,672
Depreciation 1,315 1,289 3,617 3,979
Divested units
not reflected in
discontinued
operations - 16 - 759
Restructuring
charges - 949 - 3,223
------- ------- -------- --------
EBITDA $7,908 3.7% $8,320 4.0% $20,583 3.4% $13,468 2.3%
======= ======= ======== ========
Note 1: The Company defines earnings before interest, taxes,
depreciation and amortization (EBITDA) as net income (loss), excluding
discontinued operations, income taxes, write-off of debt costs, other
expense (income), interest expense, net, depreciation, divested units
not reflected in discontinued operations, and restructuring charges.
EBITDA may be defined differently by other companies. EBITDA is
presented because it is a financial measure that is frequently
requested by third parties. However, EBITDA is not considered under
generally accepted accounting principles as a primary measure of an
entity's financial results, and accordingly, EBITDA should not be
considered an alternative to operating income, net income, or cash
flows as determined under generally accepted accounting principles and
as reported by the Company.
Comfort Systems USA Inc.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2004 2003
------------- ------------
(unaudited)
Cash and cash equivalents $20,493 $10,129
Accounts receivable, net 176,227 167,567
Costs and estimated earnings in excess of
billings 22,825 16,162
Other current assets 25,945 29,644
------------- ------------
Total current assets 245,490 223,502
Property and equipment, net 12,529 13,223
Goodwill 103,470 103,470
Other noncurrent assets 9,262 10,915
------------- ------------
Total assets $370,751 $351,110
============= ============
Current maturities of long-term debt $2,076 $1,594
Accounts payable 58,894 58,516
Billings in excess of costs and estimated
earnings 35,213 29,657
Other current liabilities 53,235 49,532
------------- ------------
Total current liabilities 149,418 139,299
Long-term debt 7,273 8,809
Other long-term liabilities 2,800 2,342
------------- ------------
Total liabilities 159,491 150,450
Total equity 211,260 200,660
------------- ------------
Total liabilities and equity $370,751 $351,110
============= ============
Selected Cash Flow Data (in thousands) (unaudited):
---------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2004 2003 2004 2003
---------- -------- --------- --------
Cash flow from operating
activities $5,121 $(6,437) $12,781 $5,143
Cash flow from investing
activities $(807) $(510) $(1,631) $(5,096)
Cash flow from financing
activities $(526) $3,352 $(793) $1,669
Cash flow from operating
activities $5,121 $(6,437) $12,781 $5,143
Taxes paid related to the sale
of businesses - - - 10,371
Purchases of property and
equipment (963) (714) (3,180) (2,661)
Proceeds from sales of property
and equipment - 208 283 319
---------- -------- --------- --------
Free cash flow $4,158 $(6,943) $9,884 $13,172
========== ======== ========= ========
Note 1: Free cash flow is defined as cash flow from operating
activities excluding items related to sales of businesses, less
customary capital expenditures, plus the proceeds from asset sales.
Free cash flow may be defined differently by other companies. Free
cash flow is presented because it is a financial measure that is
frequently requested by third parties. However, free cash flow is not
considered under generally accepted accounting principles as a primary
measure of an entity's financial results, and accordingly, free cash
flow should not be considered an alternative to operating income, net
income, or cash flows as determined under generally accepted
accounting principles and as reported by the Company.
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