Comfort Systems USA Reports Second Quarter 2012 Results

Comfort Systems USA, Inc. (NYSE: FIX), a leading provider of commercial, industrial and institutional heating, ventilation and air conditioning (“HVAC”) services, today announced net income attributable to Comfort Systems USA of $4,468,000 or $0.12 per diluted share, for the quarter ended June 30, 2012, as compared to net income attributable to Comfort Systems USA of $3,162,000 or $0.08 per diluted share, for the quarter ended June 30, 2011. The Company reported revenue of $354,750,000 in the current quarter. On a same-store basis, the Company reported revenue of $330,930,000, as compared to $312,148,000 in 2011. The Company also reported positive free cash flow of $2,641,000 in the current quarter, as compared to negative $5,787,000 in the second quarter of 2011. Backlog as of June 30, 2012 was $617,712,000 as compared to $621,987,000 as of March 31, 2012. On a same-store basis, backlog was $563,565,000 as of June 30, 2012 as compared to $621,162,000 as of June 30, 2011.

Brian Lane, Comfort Systems USA’s Chief Executive Officer, said, “During the second quarter our companies achieved improved profitability in a tough environment. Our construction and service operations continued to focus on execution. Our improved earnings and positive cash flow in the quarter are the result of the commitment and performance of our excellent workforce.”

The Company reported net income attributable to Comfort Systems USA for the six months ended June 30, 2012 of $3,439,000 or $0.09 per diluted share as compared to a net loss attributable to Comfort Systems USA of $2,008,000 or $0.05 per diluted share in the first six months of 2011. The Company also reported revenue of $684,160,000 for the first six months of 2012 . On a same store basis, the Company reported revenue of $638,258,000 as compared to $594,207,000 for the same period in 2011. Free cash flow for the six months ended June 30, 2012 was negative $18,849,000 as compared to negative free cash flow of $26,966,000 in the first six months of 2011.

Mr. Lane concluded, “Conditions remain challenging across the vast majority of our markets, especially in the continuing weak demand for new buildings. Despite these conditions, we expect positive cash performance and solid profitability as 2012 progresses. We continue to invest and we are positioned to perform when our markets strengthen.”

As previously announced, the Company will host a webcast and conference call to discuss its financial results and position in more depth on Thursday, August 2, 2012 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-888-771-4350 and enter 32963498 as the passcode. Participants may pre-register for the call at https://www.yourconferencecenter.com/confcenter/PinCode/Pin_Code.aspx?100374&o=UyfTTZxjTBSnIj. 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 6:00 p.m. Central Time, Thursday, August 9, 2012 by calling 1-888-843-7419 with the conference passcode of 9893 653#, 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 87 locations in 72 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 within the meaning 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 revenues 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; 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 HVAC 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; 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

For the Three Months and Six Months Ended June 30, 2012 and 2011

(in thousands, except per share amounts)

(unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
2012     %     2011     % 2012     %     2011     %
Revenue $ 354,750 100.0 % $ 312,148 100.0 % $ 684,160 100.0 % $ 594,207 100.0 %
Cost of services   300,238 84.6 %   264,638 84.8 %   586,904 85.8 %   512,488 86.2 %
Gross profit 54,512 15.4 % 47,510 15.2 % 97,256 14.2 % 81,719 13.8 %
 
SG&A 47,090 13.3 % 41,928 13.4 % 93,453 13.7 % 84,550 14.2 %
Gain on sale of assets   (239 ) (0.1 )%   (19 )

-
  (455 ) (0.1 )%   (104 )

-
Operating income (loss) 7,661 2.2 % 5,601 1.8 % 4,258 0.6 % (2,727 ) (0.5 )%
 
Interest expense, net (424 ) (0.1 )% (443 ) (0.1 )% (817 ) (0.1 )% (904 ) (0.2 )%
Changes in the fair value of contingent earn-out obligations

(37
)

-

584

0.2

%
(67 )

-

489

0.1

%
Other income (expense)   18

-
  (67 )

-
  70

-
  (52 )

-
 
Income (loss) before income taxes 7,218 2.0 % 5,675 1.8 % 3,444 0.5 % (3,194 ) (0.5 )%
Income tax expense (benefit)   3,171   2,513   2,065   (1,186 )
 
Net income (loss) including noncontrolling interests

4,047
1.1 % 3,162 1.0

%
1,379 0.2 % (2,008 ) (0.3 )%
 
Less: Net income (loss) attributable to noncontrolling interests  

(421

)
 

-
  (2,060 )  

-

 
 
Net income (loss) attributable to Comfort Systems USA, Inc. $ 4,468 $ 3,162 $ 3,439 $ (2,008 )
 
Loss per share attributable to Comfort Systems USA, Inc.:
Basic $ 0.12 $ 0.08 $ 0.09 $ (0.05 )
Diluted $ 0.12 $ 0.08 $ 0.09 $ (0.05 )
 
Shares used in computing loss per share:
Basic 37,166 37,630 37,111 37,584
Diluted 37,247 37,742 37,232 37,584
 

Note 1: The diluted earnings per share data presented above reflects the dilutive effect, if any, of stock options and contingently issuable restricted stock which were outstanding during the periods presented.

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

       
Three Months Ended Six Months Ended
June 30, June 30,
2012     %     2011     % 2012     %     2011     %
Net income (loss) including noncontrolling interests

$
4,047 $ 3,162 $ 1,379

$
(2,008 )
Income taxes 3,171 2,513 2,065 (1,186 )
Other expense (income), net (18

)
67 (70 ) 52
Changes in the fair value of contingent earn-out obligations 37 (584

)
67 (489

)
Interest expense, net 424 443 817 904
Gain on sale of assets (239 ) (19 ) (455 ) (104 )
Depreciation and amortization   5,012   4,713   10,149   9,532
Adjusted EBITDA $ 12,434 3.5 % $ 10,295 3.3 % $ 13,952 2.0 % $ 6,701 1.1 %
 

Note 1: The Company defines adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as net income (loss), excluding discontinued operation, income taxes, other (income) expense, 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 (loss), net income (loss), 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)
 
June 30, December 31,
2012 2011
(unaudited)
 
Cash and cash equivalents $ 28,811 $ 51,237
Accounts receivable, net 285,333 267,060
Costs and estimated earnings in excess of billings 31,079 27,163
Other current assets   45,018   41,822
Total current assets 390,241 387,282
Property and equipment, net 42,251 42,013
Goodwill 114,593 107,093
Identifiable intangible assets, net 49,206 48,349
Other noncurrent assets   8,330   6,329
Total assets $ 604,621 $ 591,066
 
Current maturities of long-term debt $ 300 $ 300
Current maturities of notes to former owners 332 332
Accounts payable 109,833 114,255
Billings in excess of costs and estimated earnings 73,686 71,730
Other current liabilities   91,695   91,354
Total current liabilities 275,846 277,971
Long-term debt, net of current maturities 20,400 2,400
Notes to former owners, net of current maturities 8,249 12,349
Other long-term liabilities   19,281   15,240
Total liabilities 323,776 307,960
Comfort Systems USA, Inc. stockholders’ equity 264,390 264,591
Noncontrolling interests   16,455   18,515
Total stockholders’ equity   280,845   283,106
Total liabilities and stockholders’ equity $ 604,621 $ 591,066
 

Selected Cash Flow Data (in thousands) (unaudited):
       
Three Months Ended Six Months Ended
June 30, June 30,
2012     2011 2012     2011
Cash provided by (used in):
Operating activities $ 6,793 $ (4,377 ) $ (13,023 ) $ (23,443 )
Investing activities $ (16,326 ) $ (1,892 ) $ (17,976 ) $ (3,766 )
Financing activities $ 10,471 $ (7,266 ) $ 8,573 $ (9,036 )
 
Free cash flow:
Cash from operating activities $ 6,793 $ (4,377 ) $ (13,023 ) $ (23,443 )
Purchases of property and equipment (4,494 ) (1,544 ) (6,588 ) (3,904 )
Proceeds from sales of property and equipment   342   134   762   381
 
Free cash flow $ 2,641 $ (5,787 ) $ (18,849 ) $ (26,966 )
 

Note 1: 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.

Copyright Business Wire 2010

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