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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) July 27, 2020

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:

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

FIX

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

ITEM 2.02        Results of Operations and Financial Condition

Attached and incorporated herein by reference as Exhibit 99.1 is a copy of a press release of Comfort Systems USA, Inc. (the “Company”) dated July 27, 2020 reporting the Company’s financial results for the second quarter of 2020.

The above information and attached press release are being furnished pursuant to Item 2.02 of Form 8-K and General Instruction B.2 thereunder. The information included herein and in the attached press release shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

ITEM 8.01           Other Events

Attached and incorporated herein by reference as Exhibit 99.2 is a copy of a press release of the Company dated July 27, 2020 reporting the Company’s declaration of a quarterly dividend on the Company’s common stock to stockholders of record as of the close of business on the record date, August 14, 2020.

ITEM 9.01        Financial Statements and Exhibits

(d) The following Exhibits are included herein:

Exhibit 99.1 Press Release of Comfort Systems USA, Inc. dated July 27, 2020 reporting the Company’s financial results for the second quarter of 2020.

Exhibit 99.2 Press Release of Comfort Systems USA, Inc. dated July 27, 2020 reporting the Company’s declaration of a quarterly dividend on the Company’s common stock to stockholders of record as of the close of business on the record date, August 14, 2020.

2

EXHIBIT INDEX

Exhibit
Number

    

Exhibit Title or Description

99.1

Press Release of Comfort Systems USA, Inc. dated July 27, 2020 reporting the Company’s financial results for the second quarter of 2020.

99.2

Press Release of Comfort Systems USA, Inc. dated July 27, 2020 reporting the Company’s declaration of a quarterly dividend on the Company’s common stock to stockholders of record as of the close of business on the record date, August 14, 2020.

104

Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).

3

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.

COMFORT SYSTEMS USA, INC.

By:

/s/ Laura F. Howell

Laura F. Howell, Vice President and General Counsel

Date:      July 27, 2020

4

Exhibit 99.1

Graphic

CONTACT:

William George

675 Bering Drive, Suite 400

Chief Financial Officer

Houston, Texas 77057

713-830-9650

713-830-9600

FOR IMMEDIATE RELEASE

COMFORT SYSTEMS USA REPORTS SECOND QUARTER 2020 RESULTS

Houston, TX — July 27, 2020 — Comfort Systems USA, Inc. (NYSE: FIX) today reported results for the quarter ended June 30, 2020.

For the quarter ended June 30, 2020, net income was $39.5 million or $1.08 per diluted share, as compared to $24.2 million or $0.65 per diluted share, for the quarter ended June 30, 2019. Revenue for the second quarter of 2020 was $743.5 million compared to $650.3 million in 2019. The Company reported operating cash flows of $141.9 million in the current quarter compared to $25.6 million in 2019.

Backlog as of June 30, 2020 was $1.53 billion as compared to $1.62 billion as of March 31, 2020 and $1.50 billion as of June 30, 2019. On a same-store basis, backlog decreased from $1.50 billion as of June 30, 2019 to $1.44 billion as of June 30, 2020.

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “In spite of the challenges of the global pandemic, Comfort Systems USA achieved great earnings and extraordinary cash flow this quarter. Our earnings increased by 63% compared to the same quarter last year. Our free cash flow was also remarkably strong at more than $135 million this quarter, more than $100 million ahead of the same period in 2019. We maintained a strong backlog despite a sequential same store decrease of $133 million, or 8%, since March 31, 2020. This decrease is primarily composed of seasonal variation plus approximately $60 million of projects that we removed from backlog as a result of adverse effects relating to the pandemic. The majority of the projects we removed will likely be completed, however, we chose to remove any project that has been paused or is expected to be paused if there is no specified resumption date.”

The Company reported net income of $57.2 million, or $1.55 per diluted share, for the six months ended June 30, 2020, as compared to $44.0 million, or $1.18 per diluted share, in 2019. The Company also reported revenue of $1.44 billion for the six months ended June 30, 2020, as compared to $1.19 billion in 2019. Operating cash flow for the six months ended June 30, 2020 was $163.8 million, as compared to $26.6 million in 2019.

Mr. Lane continued, “Project work continues to be strong, and by June our service operations were near pre-pandemic levels, with strong profitability. Our service and controls companies are also helping our customers to assess and improve their internal air quality. We continue to implement social distancing and protective measures across our businesses, and our courageous and resilient employees are continuing to work hard, including on projects that are crucial to the country’s pandemic response. We also achieved better than expected profitability in our modular operations, including at our newly acquired operation TAS Energy Inc., which is off to a strong start.”

Mr. Lane concluded, “Assuming the pandemic does not materially worsen, we now expect to achieve full-year 2020 results that are at least comparable to our record results in 2019. We are very pleased with our prospects, but given uncertainties relating to the ongoing pandemic we continue to prepare for a wide range of economic circumstances over the coming quarters.”

The Company will host a webcast and conference call to discuss its financial results and position on Tuesday, July 28, 2020 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-888-713-4213, and enter 24522569 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 leading provider of commercial, industrial and institutional heating, ventilation, air conditioning and electrical contracting services, with 147 locations in 116 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; the Company’s business being negatively affected by health crises or outbreaks of disease, such as epidemics or pandemics; 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

 

Six Months Ended

 

June 30,

 

June 30,

 

(Unaudited)

 

(Unaudited)

 

    

2020

    

%  

        

2019

    

%  

 

    

2020

    

%  

        

2019

    

%  

 

Revenue

$

743,468

100.0

%

$

650,302

100.0

%

$

1,443,599

100.0

%

$

1,188,775

100.0

%

Cost of services

 

597,773

80.4

%

 

530,286

81.5

%

 

1,180,811

81.8

%

 

962,094

80.9

%

Gross profit

 

145,695

19.6

%

 

120,016

18.5

%

 

262,788

18.2

%

 

226,681

19.1

%

SG&A

 

85,045

11.4

%

 

84,506

13.0

%

 

177,969

12.3

%

 

163,411

13.7

%

Gain on sale of assets

 

(312)

 

 

(192)

 

 

(866)

 

(0.1)

%

 

(411)

 

Operating income

 

60,962

8.2

%

 

35,702

5.5

%

 

85,685

5.9

%

 

63,681

5.4

%

Interest expense, net

 

(2,526)

(0.3)

%

 

(2,983)

(0.5)

%

 

(5,079)

(0.4)

%

 

(4,020)

(0.3)

%

Changes in the fair value of contingent earn-out obligations

(3,871)

(0.5)

%

(1,762)

(0.3)

%

(1,599)

(0.1)

%

(1,920)

(0.2)

%

Other income

 

 

149

 

 

25

 

164

 

Income before income taxes

 

54,565

7.3

%

 

31,106

4.8

%

 

79,032

5.5

%

 

57,905

4.9

%

Provision for income taxes

 

15,070

 

6,933

 

21,821

 

13,866

Net income

$

39,495

5.3

%

$

24,173

3.7

%

$

57,211

4.0

%

$

44,039

3.7

%

Income per share

Basic

$

1.08

$

0.65

$

1.56

$

1.19

Diluted

$

1.08

$

0.65

$

1.55

$

1.18

Shares used in computing income per share:

Basic

 

36,581

 

36,943

 

36,628

 

36,933

Diluted

 

36,737

 

37,223

 

36,821

 

37,228


Supplemental Non-GAAP Information — Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) — (Unaudited) (In Thousands)

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

    

2020

    

%  

    

2019

    

%  

 

    

2020

    

%  

    

2019

    

%  

 

 

 

Net income

$

39,495

$

24,173

$

57,211

$

44,039

Provision for income taxes

 

15,070

 

6,933

 

21,821

 

13,866

Other income, net

 

 

(149)

 

(25)

 

(164)

Changes in the fair value of contingent earn-out obligations

3,871

1,762

1,599

1,920

Interest expense, net

 

2,526

 

2,983

 

5,079

 

4,020

Gain on sale of assets

 

(312)

 

(192)

 

(866)

 

(411)

Depreciation and amortization

 

18,083

 

14,295

 

30,774

 

25,019

Adjusted EBITDA

$

78,733

 

10.6

%  

$

49,805

 

7.7

%

$

115,593

 

8.0

%  

$

88,289

 

7.4

%

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)

    

June 30,

    

December 31,

 

2020

2019

 

(Unaudited)

 

Cash and cash equivalents

$

53,253

$

50,788

Billed accounts receivable, net

 

624,526

 

619,037

Unbilled accounts receivable, net

 

47,654

 

55,542

Costs and estimated earnings in excess of billings, net

 

23,515

 

2,736

Other current assets, net

 

43,557

 

62,081

Total current assets

 

792,505

 

790,184

Property and equipment, net

 

121,569

 

109,796

Goodwill

 

420,782

 

332,447

Identifiable intangible assets, net

 

210,164

 

159,974

Other noncurrent assets

 

130,423

 

112,611

Total assets

$

1,675,443

$

1,505,012

Current maturities of long-term debt

$

85

$

20,817

Accounts payable

 

202,075

 

196,195

Billings in excess of costs and estimated earnings

 

226,047

 

166,918

Other current liabilities

 

253,279

 

224,067

Total current liabilities

 

681,486

 

607,997

Long-term debt, net

 

231,442

 

205,318

Other long-term liabilities

 

134,082

 

106,393

Total liabilities

 

1,047,010

 

919,708

Total stockholders’ equity

 

628,433

 

585,304

Total liabilities and stockholders’ equity

$

1,675,443

$

1,505,012


Selected Cash Flow Data (Unaudited) (In Thousands)

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

    

2020

    

2019

    

2020

    

2019

 

Cash provided by (used in):

Operating activities

$

141,866

$

25,609

$

163,786

$

26,600

Investing activities

$

(99,623)

$

(201,546)

$

(115,159)

$

(211,346)

Financing activities

$

(122,256)

$

183,594

$

(46,164)

$

175,913

Free cash flow:

Cash from operating activities

$

141,866

$

25,609

$

163,786

$

26,600

Purchases of property and equipment

(7,042)

 

(6,836)

 

(14,539)

 

(15,680)

Proceeds from sales of property and equipment

 

688

 

275

 

1,378

 

632

Free cash flow

$

135,512

$

19,048

$

150,625

$

11,552

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.


Exhibit 99.2

Graphic

CONTACT:

William George

675 Bering Drive, Suite 400

Chief Financial Officer

Houston, Texas 77057

713-830-9650

713-830-9600

FOR IMMEDIATE RELEASE

COMFORT SYSTEMS USA DECLARES QUARTERLY DIVIDEND

Houston, TX — July 27, 2020 — Comfort Systems USA, Inc. (NYSE: FIX), a leading provider of commercial, industrial and institutional heating, ventilation, air conditioning and electrical contracting services, today announced that its board of directors declared a quarterly dividend of $0.105 per share on Comfort Systems USA, Inc. common stock. The dividend is payable on August 25, 2020 to stockholders of record at the close of business on August 14, 2020.

Comfort Systems USA® is a premier provider of business solutions addressing workplace comfort, with 147 locations in 116 cities around the nation. For more information, visit the Company’s website at www.comfortsystemsusa.com.