News Release

Printer Friendly Version View printer-friendly version
<< Back
Comfort Systems USA Reports Third Quarter 2019 Results

HOUSTON--(BUSINESS WIRE)--Oct. 24, 2019-- Comfort Systems USA, Inc. (NYSE: FIX), a leading provider of commercial, industrial and institutional heating, ventilation, air conditioning and electrical contracting services, today announced net income of $36.2 million or $0.98 per diluted share, for the quarter ended September 30, 2019, as compared to $38.5 million or $1.02 per diluted share, for the quarter ended September 30, 2018. The Company reported revenue of $706.9 million in the current quarter, as compared to $594.5 million in 2018. The Company reported free cash flow of $67.0 million in the current quarter, as compared to $23.0 million in 2018. Backlog as of September 30, 2019 was $1.61 billion as compared to $1.50 billion as of June 30, 2019 and $1.25 billion as of September 30, 2018. On a same-store basis, backlog increased from $1.25 billion as of September 30, 2018 to $1.33 billion as of September 30, 2019.

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “This quarter our teams across the United States achieved very good operating results, strong backlog growth and truly remarkable free cash flow. Backlog has continued to strengthen both sequentially and year-over-year, which is especially encouraging during a busy third quarter. Cash flow was outstanding this quarter, far exceeding any previous third quarter performance. We are also happy to report that our newest acquisition, Walker Engineering, contributed strongly to our earnings and cash performance, exceeding our expectations.”

The Company reported net income of $80.3 million, or $2.16 per diluted share, for the nine months ended September 30, 2019, as compared to $87.7 million, or $2.33 per diluted share, in 2018. Earnings in the first quarter of 2018 included a $0.07 per diluted share increase due to a discrete tax item. Earnings in the second quarter of 2018 included an $0.08 per diluted share benefit from a legal settlement. The Company also reported revenue of $1.90 billion for the nine months ended September 30, 2019, as compared to $1.59 billion in 2018. Free cash flow for the nine months ended September 30, 2019 was $78.5 million, as compared to $47.0 million in 2018.

Mr. Lane concluded, “Our markets remain strong, and we continue to invest, especially in our industry leading workforce. We expect continued strength and strong profitability as we close out the year and look forward to 2020.”

The Company will host a webcast and conference call to discuss its financial results and position on Friday, October 25, 2019 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-866-515-2907, and enter 18336151 as the passcode. The call and the slide presentation to accompany the remarks can be accessed on the Company’s website at www.comfortsystemsusa.com under the Investor tab. A replay of the entire call will be available on the Company’s website on the next business day following the call.

Comfort Systems USA® is a premier provider of business solutions addressing workplace comfort, with 129 locations in 111 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)

 

 

 

2019

 

%

 

 

2018

 

%

 

 

2019

 

%

 

 

2018

 

%

 

Revenue

 

$

706,918

 

100.0

%

 

$

594,536

 

100.0

%

 

$

1,895,693

 

100.0

%

 

$

1,594,520

 

100.0

%

Cost of services

 

 

564,216

 

79.8

%

 

 

466,668

 

78.5

%

 

 

1,526,310

 

80.5

%

 

 

1,266,416

 

79.4

%

Gross profit

 

 

142,702

 

20.2

%

 

 

127,868

 

21.5

%

 

 

369,383

 

19.5

%

 

 

328,104

 

20.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

 

90,006

 

12.7

%

 

 

75,297

 

12.7

%

 

 

253,417

 

13.4

%

 

 

216,528

 

13.6

%

Gain on sale of assets

 

 

(708)

 

(0.1)

%

 

 

(219)

 

 

 

 

(1,119)

 

(0.1)

%

 

 

(630)

 

 

Operating income

 

 

53,404

 

7.6

%

 

 

52,790

 

8.9

%

 

 

117,085

 

6.2

%

 

 

112,206

 

7.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(2,697)

 

(0.4)

%

 

 

(1,127)

 

(0.2)

%

 

 

(6,717)

 

(0.4)

%

 

 

(2,548)

 

(0.2)

%

Changes in the fair value of contingent earn-out obligations

 

 

(2,004)

 

(0.3)

%

 

 

434

 

0.1

%

 

 

(3,924)

 

(0.2)

%

 

 

493

 

 

Other income (expense)

 

 

3

 

 

 

 

39

 

 

 

 

167

 

 

 

 

4,062

 

0.3

%

Income before income taxes

 

 

48,706

 

6.9

%

 

 

52,136

 

8.8

%

 

 

106,611

 

5.6

%

 

 

114,213

 

7.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

12,473

 

 

 

 

 

13,595

 

 

 

 

 

26,339

 

 

 

 

 

26,466

 

 

 

Net income

 

$

36,233

 

5.1

%

 

$

38,541

 

6.5

%

 

$

80,272

 

4.2

%

 

$

87,747

 

5.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.98

 

 

 

 

$

1.03

 

 

 

 

$

2.18

 

 

 

 

$

2.36

 

 

 

Diluted

 

$

0.98

 

 

 

 

$

1.02

 

 

 

 

$

2.16

 

 

 

 

$

2.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

36,805

 

 

 

 

 

37,294

 

 

 

 

 

36,891

 

 

 

 

 

37,236

 

 

 

Diluted

 

 

37,051

 

 

 

 

 

37,667

 

 

 

 

 

37,170

 

 

 

 

 

37,634

 

 

 

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,

 

 

 

2019

 

%

 

2018

 

%

 

 

2019

 

%

 

2018

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

36,233

 

 

 

$

38,541

 

 

 

 

$

80,272

 

 

 

$

87,747

 

 

 

Provision for income taxes

 

 

12,473

 

 

 

 

13,595

 

 

 

 

 

26,339

 

 

 

 

26,466

 

 

 

Other expense (income), net

 

 

(3)

 

 

 

 

(39)

 

 

 

 

 

(167)

 

 

 

 

(4,062)

 

 

 

Changes in the fair value of contingent earn-out obligations

 

 

2,004

 

 

 

 

(434)

 

 

 

 

 

3,924

 

 

 

 

(493)

 

 

 

Interest expense, net

 

 

2,697

 

 

 

 

1,127

 

 

 

 

 

6,717

 

 

 

 

2,548

 

 

 

Gain on sale of assets

 

 

(708)

 

 

 

 

(219)

 

 

 

 

 

(1,119)

 

 

 

 

(630)

 

 

 

Depreciation and amortization

 

 

13,424

 

 

 

 

11,010

 

 

 

 

 

38,443

 

 

 

 

30,732

 

 

 

Adjusted EBITDA

 

$

66,120

 

9.4

%

$

63,581

 

10.7

%

 

$

154,409

 

8.1

%

$

142,308

 

8.9

%

Note: The Company defines adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as net income, provision for 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,

 

 

 

2019

 

2018

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,363

 

$

45,620

 

Billed accounts receivable, net

 

 

607,061

 

 

481,366

 

Unbilled accounts receivable

 

 

49,926

 

 

37,180

 

Costs and estimated earnings in excess of billings

 

 

6,121

 

 

10,213

 

Other current assets

 

 

46,931

 

 

35,321

 

Total current assets

 

 

750,402

 

 

609,700

 

Property and equipment, net

 

 

108,129

 

 

99,618

 

Goodwill

 

 

332,200

 

 

235,182

 

Identifiable intangible assets, net

 

 

166,736

 

 

95,275

 

Other noncurrent assets

 

 

109,993

 

 

22,789

 

Total assets

 

$

1,467,460

 

$

1,062,564

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

13,847

 

$

3,279

 

Accounts payable

 

 

176,624

 

 

176,167

 

Billings in excess of costs and estimated earnings

 

 

167,097

 

 

130,986

 

Other current liabilities

 

 

220,164

 

 

156,626

 

Total current liabilities

 

 

577,732

 

 

467,058

 

Long-term debt

 

 

228,167

 

 

73,639

 

Other long-term liabilities

 

 

103,931

 

 

23,820

 

Total liabilities

 

 

909,830

 

 

564,517

 

Total stockholders’ equity

 

 

557,630

 

 

498,047

 

Total liabilities and stockholders’ equity

 

$

1,467,460

 

$

1,062,564

 

Selected Cash Flow Data (Unaudited) (In Thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

73,115

 

$

30,484

 

$

99,715

 

$

68,002

 

Investing activities

 

$

(4,707)

 

$

(59,139)

 

$

(216,053)

 

$

(86,269)

 

Financing activities

 

$

(64,832)

 

$

19,902

 

$

111,081

 

$

973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash from operating activities

 

$

73,115

 

$

30,484

 

$

99,715

 

$

68,002

 

Purchases of property and equipment

 

 

(6,961)

 

 

(7,936)

 

 

(22,641)

 

 

(22,059)

 

Proceeds from sales of property and equipment

 

 

815

 

 

416

 

 

1,447

 

 

1,077

 

Free cash flow

 

$

66,969

 

$

22,964

 

$

78,521

 

$

47,020

 

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.

Source: Comfort Systems USA, Inc.

William George
Chief Financial Officer
713-830-9650