Comfort Systems USA Reports Fourth Quarter and Full Year Results
Strong Increases in Profits and Cash Flows
HOUSTON--(BUSINESS WIRE)--Feb. 27, 2008--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 $8,681,000 or $0.21 per diluted share, for the quarter ended December 31, 2007, as compared to net income of $7,514,000 or $0.18 per diluted share, in the fourth quarter of 2006.
Bill Murdy, Comfort Systems USA's Chairman and CEO, said, "We are pleased to announce strong fourth quarter results, including a 16% increase in earnings as compared to the fourth quarter of 2006. The improvement in both revenues and earnings is thanks to the dedicated team members at our many locations. We continue to see important improvements in productivity across our operations and most are stronger and more profitable than they have ever been."
The Company reported revenues of $293,284,000 in the current quarter, as compared to $268,074,000 in 2006. The Company also reported free cash flow of $54,908,000 in the current quarter, as compared to $22,519,000 in 2006. Backlog as of December 31, 2007 was $786,673,000, compared to $818,485,000 as of September 30, 2007. Backlog as of December 31, 2006 was $653,753,000.
The Company reported net income for the year ended December 31, 2007 of $32,466,000 or $0.79 per diluted share, as compared to net income of $28,724,000 or $0.70 per diluted share in 2006. The Company also reported revenues of $1,109,534,000 for 2007, as compared to $1,056,525,000 in 2006. Free cash flow for the year ended December 31, 2007 was $72,819,000 as compared to $17,118,000 in 2006.
Murdy continued, "Free cash flow was a remarkable $55 million dollars in the fourth quarter and exceeded $72 million for 2007. Similarly, although down modestly due to seasonal variation since the end of the third quarter, backlog remains robust and was over $130 million higher at the end of 2007 than it was one year earlier. On a more sober note, our Atlas subsidiary struggled again in the fourth quarter, posting a loss of approximately $7.5 million dollars in the quarter. For the full year, Atlas lost approximately $20 million dollars, or approximately $0.27 per share on an after-tax basis, including accruals of approximately $6.2 million dollars for potential and asserted backcharges on certain projects. Although we are disappointed by these results, we have resolved issues and collected funds on many of the most troubled projects. We have changed the management at Atlas and have taken substantial steps to exit certain activities and geographic markets and Atlas will be a smaller company in 2008. We are optimistic that Atlas has weathered the storm and we are looking for substantial improvement at Atlas in 2008."
Bill Murdy concluded, "No one is certain what the economy holds for 2008 and beyond, however, our backlog and geographic diversity, expected improvement in Atlas in the upcoming year and our experience in all types of buildings and market conditions help us feel positive about the coming year. We believe that 2008 will be even more profitable than 2007 for Comfort Systems USA."
As previously announced, the Company will host a conference call to discuss its financial results and position in more depth on Thursday, February 28, 2008 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-888-713-4217 and enter 41087116 as the passcode. Participants may pre-register for the call at www.theconferencingservice.com/prereg/key.process?key=P9NX7DGQN. Pre-registrants will be issued a pin number to use when dialing into 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, March 6, 2008 by calling 1-888-286-8010 with the conference passcode of 21212628, and will also be available on our website on the next business day following the call.
Comfort Systems USA(R) is a premier provider of business solutions addressing workplace comfort, with 64 locations in 52 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, 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, the use of incorrect estimates for bidding a fixed price contract, undertaking contractual commitments that exceed our labor resources, retention of key management, 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, 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 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, 2007. 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 tables follow -
Comfort Systems USA, Inc.
Consolidated Statements of Operations
For the Three Months and Twelve Months Ended December 31, 2007 and
2006
(in thousands, except per share amounts)
Three Months Ended
December 31,
--------------------------------
(unaudited)
2007 % 2006 %
--------- ------ -------- ------
Revenues $293,284 100.0% $268,074 100.0%
Cost of services 238,756 81.4% 222,498 83.0%
--------- --------
Gross profit 54,528 18.6% 45,576 17.0%
SG&A 41,401 14.1% 34,324 12.8%
Loss (gain) on sale of assets 48 -- 29 --
--------- --------
Operating income 13,079 4.5% 11,223 4.2%
Interest income, net 855 0.3% 507 0.2%
Other income (expense) (35) -- 68 --
--------- --------
Income before income taxes 13,899 4.7% 11,798 4.4%
Income tax expense 5,218 4,299
--------- --------
Income from continuing operations 8,681 3.0% 7,499 2.8%
Discontinued operations:
Operating loss, net of income tax --
benefit of $--, $28, $--, and
$160 14
Estimated gain on disposition,
including income tax benefit --
(expense) of $--, $(141), $--,
and $68 1
--------- --------
Net income $ 8,681 $ 7,514
========= ========
Income per share:
Basic-
Income from continuing operations $ 0.21 $ 0.19
Discontinued operations -
Loss from operations -- --
Estimated gain on disposition -- --
--------- --------
Net income $ 0.21 $ 0.19
========= ========
Diluted -
Income from continuing operations $ 0.21 $ 0.18
Discontinued operations -
Loss from operations -- --
Estimated gain on disposition -- --
--------- --------
Net income $ 0.21 $ 0.18
========= ========
Shares used in computing income per
share:
Basic 40,406 40,455
Diluted 41,145 41,287
Twelve Months Ended
December 31,
-------------------------------------
2007 % 2006 %
---------- ------ ----------- -------
Revenues $1,109,534 100.0% $1,056,525 100.0%
Cost of services 912,471 82.2% 885,508 83.8%
---------- -----------
Gross profit 197,063 17.8% 171,017 16.2%
SG&A 147,158 13.3% 126,620 12.0%
Loss (gain) on sale of assets 34 -- (125) --
---------- -----------
Operating income 49,871 4.5% 44,522 4.2%
Interest income, net 2,670 0.2% 1,969 0.2%
Other income (expense) 5 -- 100 --
---------- -----------
Income before income taxes 52,546 4.7% 46,591 4.4%
Income tax expense 20,080 17,874
---------- -----------
Income from continuing
operations 32,466 2.9% 28,717 2.7%
Discontinued operations:
Operating loss, net of income --
tax benefit of $--, $28, $--,
and $160 (203)
Estimated gain on disposition,
including income tax benefit --
(expense) of $--, $(141), $--
, and $68 210
---------- -----------
Net income $ 32,466 $ 28,724
========== ===========
Income per share:
Basic-
Income from continuing
operations $ 0.80 $ 0.71
Discontinued operations -
Loss from operations -- (0.01)
Estimated gain on disposition -- 0.01
---------- -----------
Net income $ 0.80 $ 0.71
========== ===========
Diluted -
Income from continuing
operations $ 0.79 $ 0.70
Discontinued operations -
Loss from operations -- (0.01)
Estimated gain on disposition -- 0.01
---------- -----------
Net income $ 0.79 $ 0.70
========== ===========
Shares used in computing income
per share:
Basic 40,573 40,247
Diluted 41,334 41,146
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 Twelve Months Ended
December 31, December 31,
--------------------------- ---------------------------
2007 % 2006 % 2007 % 2006 %
-------- ---- -------- ---- -------- ---- -------- ----
Net income $ 8,681 $ 7,514 $32,466 $28,724
Discontinued -- --
operations (15) (7)
Income taxes 5,218 4,299 20,080 17,874
Other (income)
expense 35 (68) (5) (100)
Interest
income, net (855) (507) (2,670) (1,969)
Loss (gain) on
sale of
assets 48 29 34 (125)
Depreciation
and
amortization 1,932 1,360 6,853 5,210
-------- -------- -------- --------
Adjusted
EBITDA $15,059 5.1% $12,612 4.7% $56,758 5.1% $49,607 4.7%
======== ======== ======== ========
Note 1: The Company defines adjusted earnings before interest, taxes,
depreciation and amortization ("Adjusted EBITDA") as net income,
excluding discontinued operations, income taxes, other (income)
expense, interest income, net, loss (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)
December 31, December 31,
2007 2006
------------ ------------
Cash and cash equivalents $ 139,631 $ 90,286
Accounts receivable, net 261,402 234,763
Costs and estimated earnings in excess of
billings 18,463 23,680
Assets related to discontinued operations -- 221
Other current assets 31,127 28,326
------------ ------------
Total current assets 450,623 377,276
Property and equipment, net 21,442 15,504
Goodwill 68,621 62,954
Other noncurrent assets 6,381 6,031
------------ ------------
Total assets $ 547,067 $ 461,765
============ ============
Current maturities of long-term debt $ -- $ --
Current maturities of note to former owner 375 --
Accounts payable 90,866 81,180
Billings in excess of costs and estimated
earnings 104,236 65,949
Other current liabilities 86,216 70,886
Liabilities related to discontinued
operations -- 450
------------ ------------
Total current liabilities 281,693 218,465
Long-term debt, net of current maturities -- --
Note to former owner, net of current
maturities 1,125 --
Other long-term liabilities 1,671 586
------------ ------------
Total liabilities 284,489 219,051
Total stockholders' equity 262,578 242,714
------------ ------------
Total liabilities and stockholders' equity $ 547,067 $ 461,765
============ ============
Selected Cash Flow Data (in thousands):
-----------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
(unaudited)
2007 2006 2007 2006
--------- -------- ---------- --------
Cash provided by (used in)
Operating activities $ 58,101 $24,100 $ 83,642 $17,734
Investing activities $ (6,080) $(1,509) $(18,132) $17,721
Financing activities $(10,117) $(1,223) $(16,165) $ (762)
Free cash flow:
Cash from operating
activities $ 58,101 $24,100 $ 83,642 $17,734
Purchases of property and
equipment (3,262) (1,630) (11,088) (8,113)
Proceeds from sales of
property and equipment 69 49 265 477
Taxes paid related to the -- -- --
sale of businesses 7,020
--------- -------- ---------- --------
Free cash flow $ 54,908 $22,519 $ 72,819 $17,118
========= ======== ========== ========
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.
CONTACT:
Comfort Systems USA, Inc., Houston
William George, 713-830-9600
Chief Financial Officer
SOURCE:
Comfort Systems USA, Inc.