EX-99.1 2 a06-17408_1ex99d1.htm EX-99

Exhibit 99.1

 

 

CONTACT:

William George

 

 

Chief Financial Officer

777 Post Oak Blvd, Suite 500

 

(713) 830-9600

Houston, Texas 77056

 

 

713-830-9600

FOR IMMEDIATE RELEASE

 

Fax 713-830-9696

 

COMFORT SYSTEMS USA REPORTS SECOND QUARTER RESULTS

 

—    Net Income Increases 69.3% on Strong Revenues    —

 

Houston, TX – August 2, 2006 – 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 of $7,921,000 or $0.19 per diluted share, for the quarter ended June 30, 2006, as compared to net income of $4,678,000 or $0.12 per diluted share, in the second quarter of 2005. Excluding the write off of debt costs, net income from continuing operations was $5,362,000 or $0.13 per diluted share for the quarter ended June 30, 2005.

 

Bill Murdy, Comfort Systems USA’s Chairman and CEO, said, “We are pleased with our strong second quarter results and with the strength and improvement our operations continue to demonstrate. Significant increases in profits and revenues in our second quarter build solidly on our strong first quarter, and they add to our optimism about the future.”

 

The Company reported revenues from continuing operations of $264,390,000 in the current quarter, an increase of 15.2% as compared to $229,547,000 in 2005. The Company also reported free cash flow of $6,762,000 in the current quarter as compared to free cash flow of $10,808,000 in 2005. Backlog as of June 30, 2006 was $689,993,000, as compared to $726,726,000, as of March 31, 2006 on a same store basis. Backlog as of June 30, 2005 was $618,717,000 on a same store basis.

 

The Company reported net income for the six months ended June 30, 2006 of $12,248,000 or $0.30 per diluted share as compared to net income of $5,207,000 or $0.13 per diluted share in 2005. The Company reported net income from continuing operations for the six months ended June 30, 2006 of $12,251,000 or $0.30 per diluted share as compared to net income from continuing operations of $6,163,000 or $0.15 per diluted share. Excluding the write off of debt costs, net income from continuing operations was $6,642,000 or $0.17 per diluted share for the six months ended June 30, 2005. The Company reported revenues of $500,775,000 from continuing operations for the first six months of 2006, as compared to $423,647,000 in 2005.

 

Murdy continued, “Net income essentially doubled for the first half of 2006 as compared to the first half of 2005. Our recent very high backlog levels continued, although we experienced a decrease in backlog levels in our multi-family residential activities this quarter that resulted in a sequential decrease in total backlog, while total backlog was up significantly from the same quarter a year ago. The decrease in multi-family residential backlog more than accounted for the drop in total backlog, and thus backlog levels for commercial work actually increased during the second quarter.”

 

Bill Murdy concluded, “In recent years Comfort Systems USA has successfully executed a strategy of developing our team members and strengthening our core operations. Although we continue our focus on improving existing operations, we are also concentrating on making prudent investments in growth. With a strong balance sheet and continued strength in our core operations, we look forward to a busy and successful third quarter and year.”

 


 

As previously announced, the Company will host a conference call to discuss its financial results and position in more depth on Thursday, August 3, 2006 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-210-234-0008. A replay of the entire call will be available until 6:00 p.m. Central Time, Thursday, August 10, 2006 by calling 1-402-220-0275.

 

Comfort Systems USAÒ is a premier provider of business solutions addressing workplace comfort, with 57 locations in 51 cities around the nation. For more information, visit the Company’s website at www.comfortsystemsusa.com.

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act 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, retention of key management, national or regional weakness in non-residential construction activity, difficulty in obtaining or increased costs associated with bonding, shortages of labor and specialty building materials, seasonal fluctuations in the demand for HVAC systems and the use of incorrect estimates for bidding a fixed price contract, the Company’s backlog failing to translate into actual revenue or profits, errors in the Company’s percentage of completion method of accounting, the result of competition in the Company’s markets, 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 the Company’s reports filed with the Securities and Exchange Commission. Important factors that could cause actual results to differ are discussed under “Item 1A. Company Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. These forward-looking statements speak only as of the date of this release. Comfort Systems USA, Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Comfort Systems USA, Inc.’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

– Financial table follows –

 


 

Comfort Systems USA, Inc.

Consolidated Statements of Operations

For the Three Months and Six Months Ended June 30, 2006 and 2005

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2006

 

%

 

2005

 

%

 

2006

 

%

 

2005

 

%

 

Revenues

 

$

264,390

 

100.0

%

$

229,547

 

100.0

%

$

500,775

 

100.0

%

$

423,647

 

100.0

%

Cost of services

 

221,926

 

83.9

%

191,296

 

83.3

%

421,543

 

84.2

%

357,279

 

84.3

%

Gross profit

 

42,464

 

16.1

%

38,251

 

16.7

%

79,232

 

15.8

%

66,368

 

15.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

30,414

 

11.5

%

28,565

 

12.4

%

60,157

 

12.0

%

54,348

 

12.8

%

Gain on sale of assets

 

(49

)

—

 

(25

)

—

 

(69

)

—

 

(103

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

12,099

 

4.6

%

9,711

 

4.2

%

19,144

 

3.8

%

12,123

 

2.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense (income), net

 

(416

)

(0.2

)%

254

 

0.1

%

(907

)

(0.2

)%

501

 

0.1

%

Write off of debt costs

 

—

 

—

 

870

 

0.4

%

—

 

—

 

870

 

0.2

%

Other expense (income)

 

1

 

—

 

(65

)

—

 

(18

)

—

 

(75

)

—

 

Income before taxes

 

12,514

 

4.7

%

8,652

 

3.8

%

20,069

 

4.0

%

10,827

 

2.6

%

Income taxes

 

4,797

 

 

 

3,769

 

 

 

7,818

 

 

 

4,664

 

 

 

Income from continuing operations

 

7,717

 

2.9

%

4,883

 

2.1

%

12,251

 

2.4

%

6,163

 

1.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss, net of income tax benefit (expense) of $(6), $25, $105, and $415

 

(5

)

 

 

(342

)

 

 

(212

)

 

 

(1,093

)

 

 

Estimated gain on disposition, including income tax benefit (expense) of $209, $(82), $209, and $(82)

 

209

 

 

 

137

 

 

 

209

 

 

 

137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

7,921

 

 

 

$

4,678

 

 

 

$

12,248

 

 

 

$

5,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.19

 

 

 

$

0.12

 

 

 

$

0.31

 

 

 

$

0.16

 

 

 

Discontinued operations -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

—

 

 

 

—

 

 

 

(0.01

)

 

 

(0.03

)

 

 

Estimated gain on disposition

 

0.01

 

 

 

—

 

 

 

0.01

 

 

 

—

 

 

 

Net income

 

$

0.20

 

 

 

$

0.12

 

 

 

$

0.31

 

 

 

$

0.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.19

 

 

 

$

0.12

 

 

 

$

0.30

 

 

 

$

0.15

 

 

 

Discontinued operations -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

—

 

 

 

—

 

 

 

(0.01

)

 

 

(0.02

)

 

 

Estimated gain on disposition

 

—

 

 

 

—

 

 

 

0.01

 

 

 

—

 

 

 

Net income

 

$

0.19

 

 

 

$

0.12

 

 

 

$

0.30

 

 

 

$

0.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

40,244

 

 

 

39,173

 

 

 

40,060

 

 

 

39,082

 

 

 

Diluted

 

41,209

 

 

 

40,107

 

 

 

41,045

 

 

 

40,131

 

 

 

 

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 (unaudited):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2006

 

%

 

2005

 

%

 

2006

 

%

 

2005

 

%

 

Income from continuing operations (after tax)

 

$

7,717

 

 

 

$

4,883

 

 

 

$

12,251

 

 

 

$

6,163

 

 

 

Write off of debt costs (after tax)

 

—

 

 

 

479

 

 

 

—

 

 

 

479

 

 

 

Income from continuing operations (after tax), excluding the write off of debt costs

 

$

7,717

 

2.9%

 

$

5,362

 

2.3%

 

$

12,251

 

2.4%

 

$

6,642

 

1.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share – income from continuing operations (after tax), excluding the write off of debt costs

 

$

0.19

 

 

 

$

0.13

 

 

 

$

0.30

 

 

 

$

0.17

 

 

 

 

Note 1:  Operating results from continuing operations, excluding 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 tax rate on this item was computed using the pro forma effective tax rate of the Company exclusive of this charge.

 

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,

 

 

 

2006

 

%

 

2005

 

%

 

2006

 

%

 

2005

 

%

 

Net income

 

$

7,921

 

 

 

$

4,678

 

 

 

$

12,248

 

 

 

$

5,207

 

 

 

Discontinued operations

 

(204

)

 

 

205

 

 

 

3

 

 

 

956

 

 

 

Income taxes

 

4,797

 

 

 

3,769

 

 

 

7,818

 

 

 

4,664

 

 

 

Write off of debt costs

 

—

 

 

 

870

 

 

 

—

 

 

 

870

 

 

 

Other expense (income)

 

1

 

 

 

(65

)

 

 

(18

)

 

 

(75

)

 

 

Interest (income) expense, net

 

(416

)

 

 

254

 

 

 

(907

)

 

 

501

 

 

 

Gain on sale of assets

 

(49

)

 

 

(25

)

 

 

(69

)

 

 

(103

)

 

 

Depreciation and amortization

 

1,289

 

 

 

1,025

 

 

 

2,515

 

 

 

1,979

 

 

 

Adjusted EBITDA

 

$

13,339

 

5.0%

 

$

10,711

 

4.7%

 

$

21,590

 

4.3%

 

$

13,999

 

3.3%

 

 

Note 1:  The Company defines adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net income, excluding discontinued operations, income taxes, write off of debt costs, other expense (income), interest (income) expense, net, gain on sale of assets 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)

 

 

 

June 30,

 

December 31,

 

 

 

2006

 

2005

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

67,091

 

$

55,593

 

Accounts receivable, net

 

229,685

 

195,025

 

Receivable from sale of operations

 

—

 

23,800

 

Costs and estimated earnings in excess of billings

 

28,923

 

22,512

 

Assets related to discontinued operations

 

992

 

3,996

 

Other current assets

 

24,796

 

25,149

 

Total current assets

 

351,487

 

326,075

 

 

 

 

 

 

 

Property and equipment, net

 

14,063

 

12,705

 

Goodwill

 

62,954

 

62,954

 

Other noncurrent assets

 

6,421

 

6,949

 

 

 

 

 

 

 

Total assets

 

$

434,925

 

$

408,683

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

—

 

$

—

 

Accounts payable

 

76,231

 

71,922

 

Billings in excess of costs and estimated earnings

 

70,942

 

53,279

 

Liabilities related to discontinued operations

 

678

 

1,309

 

Other current liabilities

 

59,302

 

68,650

 

Total current liabilities

 

207,153

 

195,160

 

 

 

 

 

 

 

Long-term debt

 

—

 

—

 

 

 

 

 

 

 

Total liabilities

 

207,153

 

195,160

 

 

 

 

 

 

 

Total equity

 

227,772

 

213,523

 

 

 

 

 

 

 

Total liabilities and equity

 

$

434,925

 

$

408,683

 

 

Selected Cash Flow Data (in thousands) (unaudited):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2006

 

2005

 

2006

 

2005

 

Cash flow from operating activities

 

$

 8,586

 

$

 11,929

 

$

 (11,922)

 

$

 6,388

 

Cash flow from investing activities

 

$

(845

)

$

(203

)

$

21,810

 

$

(4,836

)

Cash flow from financing activities

 

$

989

 

$

(7,725

)

$

1,610

 

$

(7,673

)

 

 

 

 

 

 

 

 

 

 

Cash flow from operating activities

 

$

8,586

 

$

11,929

 

$

(11,922

)

$

6,388

 

Purchases of property and equipment

 

(1,994

)

(1,184

)

(4,043

)

(3,227

)

Proceeds from sales of property and equipment

 

170

 

63

 

279

 

211

 

Taxes paid related to the sale of business

 

—

 

—

 

7,020

 

—

 

Free cash flow

 

$

6,762

 

$

10,808

 

$

(8,666

)

$

3,372

 

 

Note 1:  Free cash flow is defined as cash flow from operating activities excluding items related to sale of businesses,  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.