News

Houston, TX – February 27, 2006 – Comfort Systems USA, Inc. (NYSE: FIX), a leading provider of commercial, industrial and institutional heating, ventilation and air conditioning (“HVAC”) services, today announced that, after excluding both a noncash goodwill impairment and a gain from the sale of certain discontinued operations, net income from continuing operations in the fourth quarter of 2005 was $6,232,000 or $0.15 per diluted share as compared to $4,190,000 or $0.10 per diluted share in 2004. Including both the fourth quarter noncash goodwill impairment and a gain from the sale of certain discontinued operations, the Company reported a net loss of $17,564,000 or $0.44 per diluted share, for the quarter ended December 31, 2005, as compared to net income of $2,006,000 or $0.05 per diluted share, in the fourth quarter of 2004. Finally, including the noncash goodwill impairment but excluding amounts relating to discontinued operations in both the current and prior year, the loss from continuing operations in the fourth quarter of 2005 was $27,723,000 or $0.70 per diluted share as compared to income of $3,553,000 or $0.09 per diluted share in 2004. Both the current and prior year fourth quarters included noncash goodwill impairment charges of $33,877,000 and $637,000, respectively, resulting from an annual review of goodwill amounts that were recorded with respect to certain operations that were purchased during the late 1990s.

Bill Murdy, Comfort Systems USA's Chairman and CEO, said, “Our operations demonstrated the strongest fourth quarter earnings that we have experienced in many years, with earnings per share from operations, excluding a noncash goodwill impairment, having increased by 50%. When combined with our greatly improved results through the first nine months of last year, 2005 marked a significant increase in our profitability and is a testament to the dedication and competence of our employees and operations. Free cash flow was also very strong, with over $21 million during the fourth quarter. We ended the year with no debt and with over $55 million in cash and equivalents. This strong cash performance further strengthens our balance sheet and provides additional liquidity that we will seek to invest in further growth.”

“We announced separately today that our Board of Directors has increased our quarterly dividend from $0.025 in the fourth quarter of 2005 to $0.035 for the first quarter of 2006. We are pleased to be able to provide further tangible returns to our shareholders while maintaining a strong cash reserve to invest in our growth initiatives.”

“As previously announced, during the fourth quarter we closed the sale of two of our controls subsidiaries, resulting in an after-tax gain of $9.8 million, which was reported as discontinued operations, and which provided cash proceeds net of transaction costs of $22.9 million. Because the purchase price was funded in the first week of 2006, the cash from that transaction did not appear in the year-end cash balances.”

Murdy continued, “We recorded a noncash goodwill impairment charge in the fourth quarter. This charge related to our conclusion that profit levels at certain of our operations do not justify maintaining goodwill assets that were recorded based on the purchase price at the time they were acquired six to eight years ago. The accounting rules relating to goodwill that went into effect in 2002 require annual evaluations and, where warranted, impairments to carried goodwill amounts for businesses whose value has declined. The rules require us to evaluate our goodwill at each individual reporting unit, but they only permit impairments and thus they do not allow us to write up goodwill for strong operations. As a result, an impairment of certain values may occur even when the overall results and value of an entity are increasing substantially.”

The Company reported revenues from continuing operations of $234,967,000 in the current quarter as compared to $199,653,000 in 2004. The Company also reported free cash flow of $21,952,000 in the current quarter as compared to free cash flow of $11,847,000 in 2004. Backlog as of December 31, 2005 was $681,668,000 as compared to $635,313,000 as of September 30, 2005 on a same-store basis.

The Company's annual results included the following items:

• Noncash impairment of $33.9 million, mentioned above, resulting from an assessment of goodwill assets carried for certain of its subsidiaries.
• Net gain associated with discontinued operations of $10.0 million resulting primarily from the previously announced sale of two controls subsidiaries.

Including the noncash goodwill impairment charge, the Company reported a net loss for the year ended December 31, 2005 of $6,226,000 or $0.16 per diluted share as compared to net income of $10,713,000 or $0.27 per diluted share in 2004. Excluding discontinued operations, the net loss was $16,374,000 or $0.42 per diluted share as compared to net income of $11,356,000 or $0.29 per diluted share. Excluding goodwill impairments in both years, and excluding a charge in 2005 to write off certain deferred debt costs, net income from continuing operations was $18,060,000 or $0.45 per diluted share for the twelve months ended December 31, 2005 compared to $11,993,000 or $0.30 per diluted share in 2004.

The Company reported revenues of $899,531,000 from continuing operations for 2005 as compared to $778,621,000 in 2004, an increase of 15.5%. Free cash flow for 2005 was $31,954,000 as compared to $21,731,000 in 2004.

Bill Murdy further noted, “Earnings per share from continuing operations, net of our goodwill impairment and the write off of certain debt costs, increased from $0.30 to $0.45 from 2004 to 2005, which, with our outstanding cash flows gave us the confidence to increase our dividend by 40% this quarter. We believe that our improvement results from strengthening our core business operations, improved industry conditions, and strong operational execution. As we begin a new year, we feel that industry activity indicators remain strong, and we are optimistic that through a continuing focus on execution we can deliver another strong year and improve our year-over-year results in 2006.” As previously announced, the Company will host a conference call to discuss its financial results and position in more depth on Tuesday, February 28, 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, Tuesday, March 7, 2006 by calling 1-203-369-3720.

Comfort Systems USA® is a premier provider of business solutions addressing workplace comfort, with 55 locations in 49 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, and other risks detailed in the Company's reports filed with the Securities and Exchange Commission. 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 forwardlooking 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.