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EX-99.2 - EX-99.2 - COMFORT SYSTEMS USA INCex-99d2.htm
8-K - 8-K - COMFORT SYSTEMS USA INCf8-k.htm

Exhibit 99.1

 

Picture 1

 

CONTACT:

William George

675 Bering Drive, Suite 400

 

Chief Financial Officer

Houston, Texas 77057

 

713-830-9600

713-830-9600

 

 

713-830-9696

 

FOR IMMEDIATE RELEASE

 

COMFORT SYSTEMS USA REPORTS THIRD QUARTER 2017 RESULTS

 

Houston, TX — October 26, 2017 — Comfort Systems USA, Inc. (NYSE: FIX), a leading provider of mechanical services including heating, ventilation, air conditioning, plumbing, piping and controls, today announced net income of $22.3 million or $0.59 per diluted share, for the quarter ended September 30, 2017, as compared to $20.5 million or $0.54 per diluted share, for the quarter ended September 30, 2016.  The Company reported revenue of $480.9 million in the current quarter, as compared to $428.8 million in 2016.  The Company reported free cash flow of $39.5 million in the current quarter, as compared to $7.3 million in 2016.  Backlog as of September 30, 2017 was $901.2 million as compared to $937.8 million as of June 30, 2017 and $719.3 million as of September 30, 2016.

 

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “We are pleased to report third quarter results marked by strong earnings and cash flow performance.  Margins continued to benefit from solid field execution, and we are reporting the highest third quarter cash flow in our history.”

 

The Company reported net income of $47.7 million or $1.27 per diluted share, for the nine months ended September 30, 2017, as compared to $48.0 million or $1.27 per diluted share, in 2016.  The Company also reported revenue of $1.33 billion, as compared to $1.24 billion in 2016.  Free cash flow for the nine months ended September 30, 2017 was $49.6 million, as compared to $33.3 million in 2016. 

 

Mr. Lane concluded, “Our backlog remains strong, as we finished our busiest quarter at same-store levels much higher than a year ago.  We feel that the environment for non-residential construction remains favorable, and our results and strong cash flow give us the confidence to continue our investments in productivity and growth.  In light of our strong backlog and the generally supportive environment in our industry, we remain optimistic about the remainder of 2017 and about our prospects for growth and profitability in 2018.”

 

As previously announced, the Company will host a webcast and conference call to discuss its financial results and position in more depth on Friday,  October 27, 2017 at 10:00 a.m. Central Time.  The call-in number for this conference call is 1-888-680-0865 and enter 89429063 as the passcode.  Participants may pre-register for the call at https://www.theconferencingservice.com/prereg/key.process?key=P3WW66FX7.  The Company anticipates that an accompanying slide presentation will also be available under the Investor tab.  Pre-registrants will be issued a pin number to use when dialing in to the live call, which will provide quick access to the conference by bypassing the operator upon connection.  The call can also be accessed on the Company’s website at www.comfortsystemsusa.com under the Investor tab.  A replay of the entire call will be available until 3:00 p.m. Central Time, Friday,  November 3, 2017 by calling 1-888-286-8010 with the conference passcode of 38729423, and will also be available on our website on the next business day following the call.

 

Comfort Systems USA® is a premier provider of business solutions addressing workplace comfort, with 109 locations in 98 cities around the nation.  For more information, visit the Company’s website at www.comfortsystemsusa.com.

 

Certain statements and information in this press release may constitute forward-looking statements regarding our future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,”


 

“could,” or other similar expressions are intended to identify forward-looking statements, which are generally not historic in nature. These forward-looking statements are based on the current expectations and beliefs of Comfort Systems USA, Inc. and its subsidiaries (collectively, the “Company”) concerning future developments and their effect on the Company. While the Company’s management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting the Company will be those that it anticipates. All comments concerning the Company’s expectations for future revenue and operating results are based on the Company’s forecasts for its existing operations and do not include the potential impact of any future acquisitions. The Company’s forward-looking statements involve significant risks and uncertainties (some of which are beyond the Company’s control) and assumptions that could cause actual future results to differ materially from the Company’s historical experience and its present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the use of incorrect estimates for bidding a fixed-price contract; undertaking contractual commitments that exceed the Company’s labor resources; failing to perform contractual obligations efficiently enough to maintain profitability; national or regional weakness in construction activity and economic conditions; financial difficulties affecting projects, vendors, customers, or subcontractors; the Company’s backlog failing to translate into actual revenue or profits; failure of third party subcontractors and suppliers to complete work as anticipated;  difficulty in obtaining or increased costs associated with bonding and insurance; impairment to goodwill; errors in the Company’s percentage-of-completion method of accounting; the result of competition in the Company’s markets; the Company’s decentralized management structure; material failure to comply with varying state and local laws, regulations or requirements; debarment from bidding on or performing government contracts; shortages of labor and specialty building materials; retention of key management; seasonal fluctuations in the demand for mechanical systems; the imposition of past and future liability from environmental, safety, and health regulations including the inherent risk associated with self-insurance; adverse litigation results; an increase in our effective tax rate; an information technology failure or cyber security breach; and other risks detailed in our reports filed with the Securities and Exchange Commission.

 

For additional information regarding known material factors that could cause the Company’s results to differ from its projected results, please see its filings with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

 

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise.

 

— Financial tables follow —

 


 

Comfort Systems USA, Inc.

Consolidated Statements of Operations

(In Thousands, Except per Share Amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

    

2017

    

%  

    

 

2016

    

%  

 

    

2017

    

%  

    

 

2016

    

%  

 

Revenue

 

$

480,851

 

100.0

%

 

$

428,760

 

100.0

%

 

$

1,326,850

 

100.0

%

 

$

1,242,240

 

100.0

%

Cost of services

 

 

379,993

 

79.0

%

 

 

335,944

 

78.4

%

 

 

1,054,300

 

79.5

%

 

 

986,496

 

79.4

%

Gross profit

 

 

100,858

 

21.0

%

 

 

92,816

 

21.6

%

 

 

272,550

 

20.5

%

 

 

255,744

 

20.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

 

66,707

 

13.9

%

 

 

61,032

 

14.2

%

 

 

196,553

 

14.8

%

 

 

180,245

 

14.5

%

Goodwill impairment

 

 

 —

 

 —

 

 

 

 —

 

 —

 

 

 

1,105

 

0.1

%

 

 

 —

 

 —

 

Gain on sale of assets

 

 

(184)

 

 

 

 

(166)

 

 

 

 

(464)

 

 

 

 

(523)

 

 

Operating income

 

 

34,335

 

7.1

%

 

 

31,950

 

7.5

%

 

 

75,356

 

5.7

%

 

 

76,022

 

6.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(945)

 

(0.2)

%

 

 

(560)

 

(0.1)

%

 

 

(2,337)

 

(0.2)

%

 

 

(1,864)

 

(0.2)

%

Changes in the fair value of contingent earn-out obligations

 

 

2,469

 

0.5

%

 

 

804

 

0.2

%

 

 

1,845

 

0.1

%

 

 

468

 

 

Other income (expense)

 

 

10

 

 

 

 

80

 

 

 

 

57

 

 

 

 

455

 

 

Income before income taxes

 

 

35,869

 

7.5

%

 

 

32,274

 

7.5

%

 

 

74,921

 

5.6

%

 

 

75,081

 

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

13,585

 

 

 

 

 

11,803

 

 

 

 

 

27,188

 

 

 

 

 

27,052

 

 

 

Net income

 

$

22,284

 

4.6

%

 

$

20,471

 

4.8

%

 

$

47,733

 

3.6

%

 

$

48,029

 

3.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.60

 

 

 

 

$

0.55

 

 

 

 

$

1.28

 

 

 

 

$

1.28

 

 

 

Diluted

 

$

0.59

 

 

 

 

$

0.54

 

 

 

 

$

1.27

 

 

 

 

$

1.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,232

 

 

 

 

 

37,360

 

 

 

 

 

37,259

 

 

 

 

 

37,380

 

 

 

Diluted

 

 

37,626

 

 

 

 

 

37,821

 

 

 

 

 

37,684

 

 

 

 

 

37,854

 

 

 

 

 


 

Supplemental Non-GAAP Information — Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) — (Unaudited) (In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

    

2017

    

%  

    

2016

    

%  

 

    

2017

    

%  

    

2016

    

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

22,284

 

 

 

$

20,471

 

 

 

 

$

47,733

 

 

 

$

48,029

 

 

 

Income taxes

 

 

13,585

 

 

 

 

11,803

 

 

 

 

 

27,188

 

 

 

 

27,052

 

 

 

Other expense (income), net

 

 

(10)

 

 

 

 

(80)

 

 

 

 

 

(57)

 

 

 

 

(455)

 

 

 

Changes in the fair value of contingent earn-out obligations

 

 

(2,469)

 

 

 

 

(804)

 

 

 

 

 

(1,845)

 

 

 

 

(468)

 

 

 

Interest expense, net

 

 

945

 

 

 

 

560

 

 

 

 

 

2,337

 

 

 

 

1,864

 

 

 

Gain on sale of assets

 

 

(184)

 

 

 

 

(166)

 

 

 

 

 

(464)

 

 

 

 

(523)

 

 

 

Goodwill impairment

 

 

 —

 

 

 

 

 —

 

 

 

 

 

1,105

 

 

 

 

 —

 

 

 

Depreciation and amortization

 

 

10,437

 

 

 

 

6,513

 

 

 

 

 

27,336

 

 

 

 

19,671

 

 

 

Adjusted EBITDA

 

$

44,588

 

9.3

%  

$

38,297

 

8.9

%

 

$

103,333

 

7.8

%  

$

95,170

 

7.7

%

 

Note:  The Company defines adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as net income including noncontrolling interests, income taxes, other expense (income), net, changes in the fair value of contingent earn-out obligations, interest expense, net, gain on sale of assets, goodwill impairment and depreciation and amortization.  Other companies may define Adjusted EBITDA differently.  Adjusted EBITDA is presented because it is a financial measure that is frequently requested by third parties.  However, Adjusted EBITDA is not considered under generally accepted accounting principles as a primary measure of an entity’s financial results, and accordingly, Adjusted 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,

 

 

 

2017

 

2016

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

29,496

 

$

32,074

 

Accounts receivable, net

 

 

390,497

 

 

318,837

 

Costs and estimated earnings in excess of billings

 

 

39,333

 

 

29,369

 

Other current assets

 

 

36,051

 

 

35,677

 

Total current assets

 

 

495,377

 

 

415,957

 

Property and equipment, net

 

 

74,883

 

 

68,195

 

Goodwill

 

 

203,771

 

 

149,208

 

Identifiable intangible assets, net

 

 

78,527

 

 

42,435

 

Other noncurrent assets

 

 

32,029

 

 

33,108

 

Total assets

 

$

884,587

 

$

708,903

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

618

 

$

600

 

Current maturities of long-term capital lease obligations

 

 

90

 

 

163

 

Accounts payable

 

 

122,203

 

 

103,440

 

Billings in excess of costs and estimated earnings

 

 

103,049

 

 

83,985

 

Other current liabilities

 

 

147,842

 

 

129,493

 

Total current liabilities

 

 

373,802

 

 

317,681

 

Long-term debt

 

 

80,951

 

 

1,955

 

Long-term capital lease obligations

 

 

33

 

 

93

 

Other long-term liabilities

 

 

17,872

 

 

12,541

 

Total liabilities

 

 

472,658

 

 

332,270

 

Total stockholders’ equity

 

 

411,929

 

 

376,633

 

Total liabilities and stockholders’ equity

 

$

884,587

 

$

708,903

 

 


 

Selected Cash Flow Data (Unaudited) (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

    

2017

    

2016

 

2017

    

2016

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

44,512

 

$

13,333

 

$

65,692

 

$

49,754

 

Investing activities

 

$

(16,155)

 

$

(6,020)

 

$

(110,906)

 

$

(74,920)

 

Financing activities

 

$

(33,326)

 

$

(20,258)

 

$

42,636

 

$

(5,961)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash from operating activities

 

$

44,512

 

$

13,333

 

$

65,692

 

$

49,754

 

Purchases of property and equipment

 

 

(5,184)

 

 

(6,353)

 

 

(16,830)

 

 

(17,257)

 

Proceeds from sales of property and equipment

 

 

179

 

 

353

 

 

784

 

 

847

 

Free cash flow

 

$

39,507

 

$

7,333

 

$

49,646

 

$

33,344

 

 

Note:  Free cash flow is defined as cash flow from operating activities less customary capital expenditures, plus the proceeds from asset sales.  Other companies may define free cash flow differently.  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.