Comfort Systems USA Reports Third Quarter Results and Restructuring Charges.Business Editors HOUSTON--(BUSINESS WIRE)--Nov. 14, 2000 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 September September: see month. 30, 2000, of $423,922,000 as compared to $374,815,000 in the third quarter of 1999. The Company reported a net loss of $3,689,000 or $0.10 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 $12,868,000 or $0.33 per diluted share in 1999. The third quarter results include a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta restructuring charge 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. of $10.0 million, or $0.13 per diluted share, associated primarily with 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). efforts at certain underperforming operations initially discussed in our second quarter press release. Revenues for the nine months ended September 30, 2000 were $1,191,458,000 as compared to $1,008,234,000 in 1999. The Company reported a net loss of $586,000 or $0.02 per diluted share in 2000 versus net income of $34,077,000 or $0.86 per diluted share in 1999. The nine-month results for 2000 include a $10.3 million restructuring charge as discussed above and a $5.2 million pre-tax charge relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a nonrecurring Non`re`cur´ring a. 1. Nonrecurrent; as, the costs of a layoff are considered as a nonrecurring expense s>. , noncash reduction in certain nonoperating assets and liabilities recorded in the second quarter. As announced by the Company in the second quarter, management has been performing an extensive review of its operations. As part of this ongoing review, management decided to cease operating at two operating locations, sell two smaller satellite operations, and merge one small company into a larger operation. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. revenues related to these five entities are approximately $21 million. The restructuring charges associated with these actions are primarily non-cash and include goodwill impairments of approximately $7.1 million and the writedown writedown A reduction in the value of an asset carried on a firm's financial statements. For example, the firm's accountants, believing the inventory is overvalued, may decide to take a writedown by reducing inventory valuation. of other long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets of approximately $0.9 million. The remaining restructuring items primarily include 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. Bill Murdy, Comfort Systems USA's chairman and chief executive officer said, "The Company is continuing its extensive review of its operations and activities which are not strategic. This review includes further core commercial/industrial HVAC operations as well as our expanded 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, and will likely result in decisions to cease operating at or sell additional operations. We expect this effort to be substantially complete by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. and to lead to improved operational and financial performance in 2001." In addition, two of the Company's larger operations turned in disappointing results in the third quarter due to execution shortfalls on certain sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. projects with nationally recognized companies. These
shortfalls reflect the challenges of increasing revenues when the
Company's markets are characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by scarce technical and skilled labor, pricing pressures in certain markets, and scheduling and efficiency challenges associated with the industry's high level of activity. Mr. Murdy added, "Our financial results in the third quarter highlight the need to focus on our core expertise and trim our weaker operations and non-strategic activities. We have a great team and strong customer relationships. We are enthusiastic about the opportunities and the challenges ahead for 2001 as we place greater emphasis on improved profitability and less on revenue expansion. Our increasing success in our national service efforts and energy related projects provides a growing foundation for long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. performance in our industry." Comfort Systems USA will host its quarterly conference call to discuss third quarter results on Wednesday Wednesday: see week. , November November: see month. 15 at 9 a.m. Central Standard Time. To participate in the call, dial 712/257-3323 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 6 p.m. Central Standard Time Wednesday, November 22 by calling 402/998-1191. Comfort Systems USA is a premier provider of business solutions addressing workplace comfort, environments, processes and energy services, with more than 120 locations in 87 cities around the nation. For more information, visit the Company's Web site 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, risks associated with competition, economic conditions, costs, changes in government regulations, and risks entailed in operations and growth of recently acquired or combined businesses 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 Nine Months Ended September 30, 2000 & 1999
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
--------------------
2000 % 1999 %
------ ----- ------ -----
Revenues $423,922 100.0% $374,815 100.0%
Cost of services 352,838 83.2% 298,480 79.6%
-------- --------
Gross profit 71,084 16.8% 76,335 20.4%
SG&A 58,021 13.7% 45,793 12.2%
Goodwill amortization 3,151 0.7% 2,983 0.8%
Restructuring
charges 9,959 2.3% -- --
-------- --------
Income (loss) from
operations (47) -- 27,559 7.4%
Interest expense, net 7,017 1.7% 5,056 1.3%
Other (income)
expense (588) (0.1%) (89) --
Reductions in
non-operating
assets and
liabilities, net -- -- -- --
-------- --------
Income (loss)
before taxes (6,476) (1.5%) 22,592 6.0%
Income taxes (2,787) 9,724
-------- --------
Net income (loss) $(3,689) (0.9%) $12,868 3.4%
======== ========
Net income (loss)
per share:
Basic $(0.10) $0.33
Diluted $(0.10) $0.33
Shares used
in computing net
income (loss)
per share:
Basic 37,265 39,060
Diluted 37,265 39,531
EBITDA $16,134 3.8% $33,481 8.9%
Nine Months Ended
September 30,
--------------------
2000 % 1999 %
------ ----- ------ -----
Revenues $1,191,458 100.0% $1,008,234 100.0%
Cost of services 978,869 82.2% 792,482 78.6%
-------- --------
Gross profit 212,589 17.8% 215,752 21.4%
SG&A 169,182 14.2% 133,984 13.3%
Goodwill amortization 9,483 0.8% 8,650 0.9%
Restructuring
charges 10,313 0.9% -- --
-------- --------
Income (loss) from
operations 23,611 2.0% 73,118 7.3%
Interest expense, net 19,417 1.6% 13,480 1.3%
Other (income)
expense (678) (0.1%) (192) --
Reductions in
non-operating
assets and
liabilities, net 5,190 0.4% -- --
-------- --------
Income (loss)
before taxes (318) -- 59,830 5.9%
Income taxes 268 25,753
-------- --------
Net income (loss) $(586) -- $34,077 3.4%
======== ========
Net income (loss)
per share:
Basic $(0.02) $0.88
Diluted $(0.02) $0.86
Shares used
in computing
net income (loss)
per share:
Basic 37,429 38,705
Diluted 37,429 40,335
EBITDA $52,337 4.4% $90,073 8.9%
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
nine months ended September 30, 2000 and $52 and $757 for the three
months and nine months ended September 30, 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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