News

Houston, TX - November 2, 2004 - 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 $3,490,000 or $0.09 per diluted share, for the quarter ended September 30, 2004, as compared to net income of $175,000 or $0.00 per diluted share, in the third quarter of 2003. Prior year earnings included charges related to both discontinued operations and restructuring. Income from continuing operations for the third quarter of 2003 was $2,595,000 or $0.07 per diluted share. Current quarter income reflects a 34.5% gain over this amount. Excluding restructuring charges and the effect of divested units not reported as discontinued operations, net income from ongoing operations for the third quarter of 2003 was $3,220,000 or $0.08 per diluted share. Current quarter income reflects an increase of 8.4% over this amount.

The Company reported revenues from continuing operations of $211,530,000 in the current quarter, an increase of 1.8% as compared to $207,740,000 in 2003. The Company also reported free cash flow of $4,158,000 in the current quarter as compared to negative free cash flow of $6,943,000 in 2003. Backlog as of September 30, 2004 was a record $516,344,000, up 5.7% from $488,584,000, the previous record as of June 30, 2004, and up 17.4% from $439,632,000 on a same-store basis as of September 30, 2003.

Bill Murdy, Comfort Systems USA's Chairman and CEO, said, "Comfort continued its positive progress this quarter, although at a slower pace in earnings than we are capable of. Among the factors reducing our income were increased costs associated with operational consolidation in certain of our Western operations, an uncharacteristically down quarter at one of our Southeast operations, and reserves on a project where we are in discussions with the customer which we believe will lead to significantly improved recovery. In addition, our Southeast operations contended with four hurricanes this quarter, including four direct hits in our Florida and Alabama operations. We estimate that these factors decreased our earnings by at least $0.04 per share this period. While we never expect a quarter to be challenge-free, we believe this set of factors is largely nonrecurring. And we believe our results, which show modest improvement even with these setbacks, reflect underlying strength across our operations."

Murdy added, "This strength could be seen in our significant improvement in backlog, during a quarter in which increased seasonal activity usually reduces backlog. This improvement was driven by new business bookings, which continued at solid levels in October. We see continuing improvement in industry activity levels, and we believe our operations are capitalizing on this in their markets."

The Company reported net income from continuing operations for the nine months ended September 30, 2004 of $8,805,000 or $0.22 per diluted share as compared to $902,000 or $0.02 per diluted share in 2003. Excluding charges for restructuring, debt cost writeoff, and divested units not reported in discontinued operations, net income from ongoing operations was $4,023,000 or $0.11 per diluted share for the nine months ended September 30, 2003.

The Company reported revenues of $608,279,000 from continuing operations for the first nine months of 2004, as compared to $585,808,000 in 2003. Excluding divested units not reported in discontinued operations, same-store revenues were up 4.6% from $581,767,000 in 2003.

Murdy continued, "We continued our steady strengthening of our balance sheet this quarter, with a significant increase in free cash flow over last year's third quarter, and cash-net-of-debt position that has now grown to over $11 million. With an industry environment that we believe is stable to improving, we believe we are well positioned to finish out 2004 with growing operating results, and move into 2005 with good prospects for ongoing growth."

As previously announced, the Company will host a conference call to discuss its financial results and position in more depth on Wednesday, November 3, 2004 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-712-271-3364. A replay of the entire call will be available until 6:00 p.m. Central Time, Wednesday, November 10, 2004 by calling 1-402-998-0719.

Comfort Systems USA is a premier provider of business solutions addressing workplace comfort, with 60 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, the lack of a combined operating history and the difficulty of integrating formerly separate businesses, retention of key management, national and regional weakness in non-residential construction activity, difficulty in obtaining or increased costs associated with debt financing or 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 and other risks detailed in the Company's reports filed with the Securities and Exchange Commission.