UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) March 17, 2010

 

Comfort Systems USA, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

1-13011

 

76-0526487

(State or other jurisdiction

 

(Commission

 

(IRS Employer

of incorporation)

 

File Number)

 

Identification No.)

 

675 Bering Drive, Suite 400
Houston, Texas

 


77057

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (713) 830-9600

 

 

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

ITEM  7.01  Regulation FD Disclosure.

 

On March 17, 2010, Comfort Systems USA, Inc., a Delaware corporation (the “Company”), a leading provider of commercial/industrial heating, ventilation and air conditioning services, posted to the “Investor” section of its website (www.comfortsystemsusa.com) an investor presentation slideshow.  The Company intends to use this presentation in making presentations to analysts, potential investors, and other interested parties.

 

A copy of the presentation is furnished herewith as Exhibit 99.1

 

The investor presentation includes financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  The Company’s management uses these non-GAAP measures in its analysis of the Company’s performance.  The Company believes that the presentation of certain non-GAAP measures provides useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses.  These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

 

The information in this report and the exhibits attached to this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, unless the Company expressly states that such information is to be considered “filed” under the Exchange Act or incorporates such information by specific reference in such a filing.  The investor presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are based on the Company’s expectations and involve risks and uncertainties that could cause the Company’s actual results to differ materially from those set forth in the statements.  These risks are discussed in the Company’s filings with the Securities and Exchange Commission, including an extensive discussion of these risks in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

 

Item 9.01               Financial Statements and Exhibits.

 

(d)               Exhibits.

 

99.1         Slideshow presentation dated March 17, 2010.

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

By:

/s/ Trent T. McKenna

 

 

Trent T. McKenna, Vice President and

 

 

General Counsel

 

 

 

Date:

March 18, 2010

 

 

 

3



 

EXHIBIT INDEX

 

Exhibit
Number

 

Exhibit Title or Description

99.1

 

Slideshow presentation dated March 17, 2010.

 

4


Exhibit 99.1

 

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 As of March 18, 2010

 


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2 This presentation 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 future events 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 use of incorrect estimates for bidding a fixed-price contract, undertaking contractual commitments that exceed our 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, our backlog failing to translate into actual revenue or profits, difficulty in obtaining or increased costs associated with bonding and insurance, impairment to goodwill, errors in our percentage-of-completion method of accounting, the result of competition in our markets, our decentralized management structure, shortages of labor and specialty building materials, retention of key management, 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 our reports filed with the Securities and Exchange Commission. A further list and description of these risks, uncertainties and other factors are discussed under "Item 1A. Company Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009." These forward-looking statements speak only as of the date of this filing. 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 our expectations with regard thereto or any change in events, developments, conditions or circumstances on which any such statement is based. Safe Harbor Statement

 


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3 To be the nation’s premier HVAC and mechanical systems installation and services provider.

 


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4 Mission To provide the best value HVAC and mechanical systems installation and service, principally in the mid-market commercial, industrial, and institutional sectors, while caring for our customers, employees and the environment and realizing superior returns for our stockholders.

 


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5 Act with honesty and integrity. Show respect for all stakeholders. Exceed customer expectations. Seek “win-win” solutions. Demonstrate spirit, drive, and teamwork. Pursue innovation. Achieve premier safety performance. Commit to energy efficiency. Communicate openly ..... and often. Impact our communities positively. Values

 


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6 Comfort Systems USA National Commercial, Industrial, Institutional HVAC/Piping/Plumbing/Energy Efficiency Strong balance sheet Substantial positive cash flow 52% new construction; 48% service, repair, retrofit 2009 Full Year Revenues $1.13 billion

 


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Comfort Systems USA’s TEAM William F. Murdy (68) Chairman/CEO Industry: 20 years CSUSA 10 years Club Quarters (CEO), Land Care (CEO), GID (CEO), Morgan Stanley Venture Capital (Pres) PRI (COO), US Army (10 years) BS-West Point, MBA-Harvard William George (45) EXVP-CFO Industry: 13 years CSUSA 13 years 1997-2005 SVP, General Counsel 1995-1997 American Medical Response – VP, General Counsel 1992-1995 Corporate Counsel, Ropes & Gray BS Econ-BYU JD-Harvard Brian Lane (53) EXVP-COO Industry: 25 years CSUSA 6 years 2002-2003 Capstone Turbine Corp.- Regional Director 2000-2002 Kvaerner-VP & General Manager 1986-2000 Halliburton – Regional Director BS-Notre Dame MBA-Boston College Thomas N. Tanner (61) SVP- Region 1 Industry: 34 years CSUSA 11 years 2004 SVP-Operations, 2001-2003 RVP-East Region 1999-2001 Regional Controller - East Region 1980-1999 Armani Plumbing & Mechanical Woodcock & Assoc., ABJ Fire Protection Co. VP, CFO BA - Syracuse Dean Tillison (60) SVP - Region 2 Industry: 37 years CSUSA 13 years 1972-1990 Fred Hayes Mechanical Contractors Vice President, SRVP, President/Owner BS-Tennessee Licensed HVAC contractor in NC, TN & VA Charles Diltz (56) SVP - Region 3 Industry: 26 years CSUSA 7 years 2001-2002 Goodman-Distribution - President 1999-2001 Indoor Comfort-EXVP, COO 1995-1999 York Vice President BSBA Ohio State University MBA-University of Dayton Brewster Earle (52) VP Energy Services Industry: 29 years CSUSA 7 years 2001-2003 Healthcare Services Johnson Controls 1996-2001 NE Utilities – Account Executive MBA-Rensselaer BS - University of Connecticut Kim Cotter (41) SVP Service Operations Industry: 20 years CSUSA 5 Years 2001-2006 Carrier Commercial - Service Area Manager, Service Manager BA-Bowling Green HVAC Ohio Contractor’s License 7

 


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8 Comfort Today Over $20M $10M - $20M Comfort Systems USA Energy Services Comfort Systems USA National Accounts ANNUAL REVENUES Region 3 Region 1 Region 2

 


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9 What We Do Commercial HVAC Building comfort a “necessity” Mechanical equipment – requires service, repair, replacement Increasing technical content and building automation Energy efficiency and Indoor Air Quality (IAQ) emerging Outsourcing D R I V E R S Commercial, Industrial, Institutional HVAC – A $40B+ Industry Applied Systems Energy Efficiency Piping

 


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10 Industry Trend Toward Service & Replacement (Recurring Revenue) 5+ million commercial buildings (DOE) Recurring service 20 year replacement cycle “Inventory” of future business OEMs note significant deferred maintenance & replacement over recent years Source: The Trane Company NEW CONSTRUCTION 70% 30% 0% 50% 100% 1980 Share of Industry Revenues Time 70% 30% SERVICE & REPLACEMENT

 


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11 15% 33% 52% Revenues by Activity New Construction/Installation Replacement Service and Maintenance 2009 YTD

 


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12 PROJECT SIZE # OF PROJECTS (As of December 31, 2009) Diverse Project Mix Average Project Size $420,000 Average Project Length 6-9 months Value of Projects >$1M $1,286.0M Value of Projects <$1M $638.8M 4,242 241 53 19 6 TOTAL PROJECTS = 4,561 0 1,100 2,200 3,300 4,400 0-1M 1-5M 5-10M 10-15M 15+M

 


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13 Healthcare Education Government Manufacturing Office Building Multi-Family Retail/Restaurants Other Residential 23% 14% 12% 11% 9% 8% 12% 1% 2% Top 20 Customers Diverse End-Use Base Served by 14 different Comfort operating units Largest customer = less than 2% of revenues Lodging & Entertainment 2009 YTD 6% 2% Religious & Not-for-Profit

 


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14 Diverse End-Use Base Omni Orlando Resort at ChampionsGate Orlando, Florida University Hospital Little Rock, Arkansas Arboretum Elementary School Waunakee, Wisconsin Iowa Renewal Energy Washington, Iowa

 


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15 Competitive Advantages High quality operations Ability to leverage and proliferate technical expertise Ability to collaborate on large jobs and share labor Energy efficiency services National multi-location service capability Purchasing economics Balance sheet strength Bonding and insurance Strong safety record

 


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16 Lost Time Injury Rate is 77% less than industry average WC claims cost per payroll dollar down from 3.5% to <1% Achieved 96.7% training completed OSHA Incident Rate is 47% less than industry average OSHA Recordable Rate Source: Bureau of Labor Statistics, Standard Industry Classification (SIC) Code 20 1710 – Specialty Trades Contractors – HVAC and Plumbing & North American Industry Classification System (NAICS) Code 23822 Safety 47% Difference 20% Difference Industry Average (October 2008 – latest available data) Comfort Systems USA (January 2010 data) Our safety record is no accident. 0.0 5.0 10.0 15.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

 


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17 854 1,370 1,591 1,546 820 1057 900 346 275 205 History – Financial Nonresidential Construction Spending (FW Dodge) 9/11/01 1110 298 854 1,370 1,591 1,546 785 767 883 1,048 1,102 1,322 Revenues Sale of Assets Acquisition Phase and Industry Growth $ Revenue Capital Management Structure $ Debt Debt –TTM EBITDA Sale of Assets 1,129 819 0 500 1,000 1,500 2,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

 


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18 Financial Overview

 


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19 Financial Profile ($ in millions, except per share amounts) 4Q 2009 $256.7 $Revenues YTD 2009 2008 2009 2008 $327.9 $1,128.9 $1,321.8 $15.5  Adjusted EBITDA (*) $23.6 $70.0 $91.7 % Revenue 6.0% 7.2% 6.2% 6.9% Operating Income $11.8 $20.5 56.6 $79.4 $ % Revenue .4.6% 6.2% 5.0% 6.0% Net Income - Continuing Operations $7.5 $12.7 34.6 $49.8 $ % Revenue 2.9% 3.9% 3.1% 3.8% Diluted EPS - Continuing Operations $0.20 $0.32 0.90 $1.24 $Free Cash Flow  $6.7 $32.1 45.6 $68.9 $ Debt $7.6  $10.7 Cash $127.9 $117.0 Backlog $550.2 $751.6 * See Slide 39 for GAAP Reconciliation to Adjusted EBITDA

 


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20 Revenues Revenues (in millions) Note: Excludes all divested and discontinued operations $883 $1,048 $1,102 $1,322 $1,129 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 2005 2006 2007 2008 2009

 


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21 Operating Margins (a) Annual Operating Margin This table includes non-GAAP financial information as the information provided excludes goodwill impairment charges of $33.9 million for 2005. No goodwill impairment charge was recorded for 2006, 2007, 2008 or 2009. 0% 1% 2% 3% 4% 5% 6% 7% 2005 2006 2007 2008 2009

 


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22 Backlog (in millions) Note: Excludes all divested and discontinued operations $0 $200 $400 $600 $800 $1,000 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09

 


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23 Strong Cash Flows (in millions) 2009 2008 2007 Cash From Operating Activities $54.3 $82.9 $83.6 Purchases Of Property and Equipment (9.5) (14.6) (11.1) Proceeds From Sales Of Property and Equipment 0.8 0.6 0.3 Free Cash Flow $45.6 $68.9 $72.8 Year Ended December 31,

 


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24 Financial Strengths Market share up – revenue and profit performance better than industry Commitment to cost containment $127.9 million cash at 12/3/09; substantial credit capacity if needed Positive free cash flow for eleven calendar years

 


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25 Profile For Growth T I M E E A R N I N G S Service ACQUISITIONS INCREMENTAL SERVICE GROWTH CURRENT OPERATIONS (CONSTRUCTION AND SERVICE) ENERGY EFFICIENCY Commercial HVAC ACQUISITIONS

 


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26 Operations Increase Productivity Education Leadership Project Managers Superintendents Service Sales Service Operations Craft Safety Best Practices Project Management Estimating Cooperation with suppliers Prefabrication New materials and methods

 


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27 Job Loop Project Estimating Post-Project Review We review projects and apply what we have learned to improve our performance. Project Pricing Project Qualification Project Management

 


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28 The only things that evolve by themselves in an organization are disorder, friction and malperformance. -Peter Drucker

 


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29 Service Increase Service* Grow Maintenance Base Education Employees and Customers Higher margin opportunity Recurring revenue National accounts $2.50+ of repair and replacement for every $1.00 of maintenance Target Retrofit Projects Energy Efficiency Indoor Air Quality (IAQ) * Maintenance, service, repair, retrofit

 


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30 National Account Customers *Trademarks and logos are the property of their respective owners.

 


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31 Energy Efficiency-Retrofitting HVAC Green Is Part Of Our Business Energy costs drive need for efficiency HVAC 30% - 65 % electric usage Energy Star (Dept. of Energy/EPA) / LEED (USGBC) 2- 4 year pay outs depending on electric rates, usage, age, incentives Use Our Energy to Save Yours! ™

 


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32 Growth Internal More of what we do best Service Energy efficiency Step Out Growth New locations for existing companies Techs “on their own” Targeted acquisitions Best HVAC oriented mechanical in new area

 


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33 $20 million + in revenue Construction and service In a growing market in new area Company that has performed well in the past and has continuing demonstrable upside Organizational structure capable of sustaining/improving the company Ownership/management that wants to stay on to operate company The Ideal Candidate

 


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34 Boise, ID Charleston, SC Columbia/Florence, SC Dallas/Fort Worth, TX El Paso, TX Ft. Lauderdale, FL Los Angeles, CA Norfolk, VA Target Markets (Listed Alphabetically) Omaha, NE Portland, OR Richmond, VA San Antonio, TX Savannah, GA Spartanburg/Greenville, SC Tampa, FL

 


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35 Outlook Long-Term $40+ billion fragmented industry HVAC is a basic necessity Commercial construction continuing Growing installed base for recurring maintenance, service, repair and retrofit Scale opportunities – service, purchasing, prefab, bonding, best practices Diverse customer base and geography Energy efficiency and Indoor Air Quality Financially and operationally sound – continuing to grow organically and by acquisition

 


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36 What We Do

 


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37

 


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38 Appendix

 


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39 Appendix – GAAP Reconciliation To Adjusted EBITDA (in thousands) Three Months Ended Year Ended December 31, December 31, 2009 % 2008 % 2009 % 2008 % Net Income $7,602 $12,491 $34,182 $49,690 Discontinued Operations (66) 229 414 114 Income Taxes 4,144 7,796 21,437 30,866 Other Income (12) 94 (17) (64) Interest (Income) Expense, net 163 (156) 617 (1,160) (Gain) Loss on Sale of Assets (8) 21 (106) (290) Depreciation and Amortization 3,630 3,092 13,432 12,586 Adjusted EBITDA 15,453 $ 6.0% 23,567 $7.2% 69,959 $6.2% $91,742 6.9% 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, interest (income) expense, net, (gain) loss 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.

 


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C O N T A C T: Bill George Executive Vice President and CFO 1-800-723-8431 bgeorge@comfortsystemsusa.com www.comfortsystemsusa.com