0001035983false00010359832021-02-252021-02-25

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) February 25, 2021

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 February 25, 2021 reporting the Company’s financial results for the fourth quarter and full year 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 February 25, 2021 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, March 12, 2021.

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 February 25, 2021 reporting the Company’s financial results for the fourth quarter and full year of 2020.

Exhibit 99.2 Press Release of Comfort Systems USA, Inc. dated February 25, 2021 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, March 12, 2021.

2

EXHIBIT INDEX

Exhibit
Number

    

Exhibit Title or Description

99.1

Press Release of Comfort Systems USA, Inc. dated February 25, 2021 reporting the Company’s financial results for the fourth quarter and full year of 2020.

99.2

Press Release of Comfort Systems USA, Inc. dated February 25, 2021 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, March 12, 2021.

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:      February 25, 2021

4

Exhibit 99.1

Graphic

CONTACT:

William George, CFO (713-830-9650)

675 Bering Drive, Suite 400

Julie Shaeff, CAO (713-830-9687)

Houston, Texas 77057

ir@comfortsystemsusa.com

713-830-9600

FOR IMMEDIATE RELEASE

COMFORT SYSTEMS USA REPORTS FOURTH QUARTER AND FULL YEAR 2020 RESULTS

Houston, TX — February 25, 2021 — Comfort Systems USA, Inc. (NYSE: FIX) today reported results for the fourth quarter and annual period ended December 31, 2020.

For the quarter ended December 31, 2020, net income was $42.8 million, or $1.17 per diluted share, as compared to $34.1 million, or $0.92 per diluted share, for the quarter ended December 31, 2019. Earnings per diluted share for the fourth quarter of 2020 included an $0.18 benefit from changes in value of earnout accruals. Revenue for the fourth quarter of 2020 was $699.0 million compared to $719.6 million in 2019. The Company reported operating cash flow of $70.1 million in the current quarter compared to $42.3 million in 2019.

Backlog as of December 31, 2020 was $1.51 billion as compared to $1.43 billion as of September 30, 2020 and $1.60 billion as of December 31, 2019. On a sequential basis, our same-store backlog increased from $1.43 billion as of September 30, 2020 to $1.44 billion as of December 31, 2020. On a same-store basis, backlog decreased from $1.60 billion as of December 31, 2019 to $1.23 billion as of December 31, 2020.

The Company reported net income of $150.1 million, or $4.09 per diluted share, for the twelve months ended December 31, 2020, as compared to $114.3 million, or $3.08 per diluted share, in 2019. Earnings per diluted share for the third quarter of 2020 included a $0.17 benefit from a discrete tax item. The Company also reported revenue of $2.86 billion for the twelve months ended December 31, 2020, as compared to $2.62 billion in 2019. Operating cash flow for the twelve months ended December 31, 2020 was $286.5 million, as compared to $142.0 million in 2019.

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “Thanks to the commitment and resilience of our people, we were able to overcome unprecedented challenges during 2020, and we are delighted to report record earnings and cash flow. We are deeply grateful for the courage and perseverance that our field employees continue to demonstrate as essential workers during the pandemic.”

Mr. Lane continued, “Our backlog strengthened slightly this quarter, but it continues to reflect some delays in bookings that are likely to result in modest headwinds in same-store revenue in 2021, particularly during the first half of the year. We are encouraged to report good ongoing bidding activity, and we currently foresee that our service operations will enter 2021 with pre-pandemic volumes and profitability.”

Mr. Lane concluded, “Although we continue to expect sporadic air pockets resulting from delays in project bookings and starts, we are increasingly optimistic about 2021. We currently anticipate our full-year 2021 results are likely to be similar to, but somewhat lower than, the record results that we achieved in 2020. We continue to prepare for a wide range of potential circumstances in nonresidential construction in the coming quarters; however, we now expect good overall trends, especially in our industrial, technology and manufacturing markets, and we also feel that we are geographically concentrated in markets with comparatively strong prospects. We look forward to 2021, and we are confident that we can achieve solid profitability and cash flow during the coming year.”

The Company will host a webcast and conference call to discuss its financial results and position on Friday, February 26, 2021 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-888-713-4218, and the passcode is 47939960. 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 139 locations in 114 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 applicable securities laws and regulations. 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 or material increases to the cost thereof; retention of key management; seasonal fluctuations in the demand for mechanical and electrical 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; a material information technology failure or a material cyber security breach; risks associated with acquisitions; our ability to manage growth and geographically-dispersed operations; our ability to obtain financing on acceptable terms; 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

 

Twelve Months Ended

 

December 31,

 

December 31,

 

(Unaudited)

 

 

    

2020

    

%  

        

2019

    

%  

 

    

2020

    

%  

        

2019

    

%  

 

Revenue

$

698,961

100.0

%

$

719,584

100.0

%

$

2,856,659

100.0

%

$

2,615,277

100.0

%

Cost of services

 

561,962

80.4

%

 

587,024

81.6

%

 

2,309,676

80.9

%

 

2,113,334

80.8

%

Gross profit

 

136,999

19.6

%

 

132,560

18.4

%

 

546,983

19.1

%

 

501,943

19.2

%

SG&A

 

88,920

12.7

%

 

86,588

12.0

%

 

357,777

12.5

%

 

340,005

13.0

%

Gain on sale of assets

 

(202)

 

 

(582)

 

(0.1)

%

 

(1,445)

 

(0.1)

%

 

(1,701)

 

(0.1)

%

Operating income

 

48,281

6.9

%

 

46,554

6.5

%

 

190,651

6.7

%

 

163,639

6.3

%

Interest expense, net

 

(1,477)

(0.2)

%

 

(2,376)

(0.3)

%

 

(8,282)

(0.3)

%

 

(9,093)

(0.3)

%

Changes in the fair value of contingent earn-out obligations

7,295

1.0

%

933

0.1

%

9,119

0.3

%

(2,991)

(0.1)

%

Other income

 

42

 

20

 

 

52

 

187

 

Income before income taxes

 

54,141

7.7

%

 

45,131

6.3

%

 

191,540

6.7

%

 

151,742

5.8

%

Provision for income taxes

 

11,301

 

11,079

 

41,401

 

37,418

Net income

$

42,840

6.1

%

$

34,052

4.7

%

$

150,139

5.3

%

$

114,324

4.4

%

Income per share

Basic

$

1.18

$

0.93

$

4.11

$

3.10

Diluted

$

1.17

$

0.92

$

4.09

$

3.08

Shares used in computing income per share:

Basic

 

36,358

 

36,743

 

36,542

 

36,854

Diluted

 

36,561

 

37,015

 

36,738

 

37,131


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

Three Months Ended

 

Twelve Months Ended

 

December 31,

 

December 31,

 

    

2020

    

%  

    

2019

    

%  

 

    

2020

    

%  

    

2019

    

%  

 

 

 

Net income

$

42,840

$

34,052

$

150,139

$

114,324

Provision for income taxes

 

11,301

 

11,079

 

41,401

 

37,418

Other income, net

 

(42)

 

(20)

 

(52)

 

(187)

Changes in the fair value of contingent earn-out obligations

(7,295)

(933)

(9,119)

2,991

Interest expense, net

 

1,477

 

2,376

 

8,282

 

9,093

Gain on sale of assets

 

(202)

 

(582)

 

(1,445)

 

(1,701)

Depreciation and amortization

 

14,505

 

13,129

 

60,629

 

51,572

Adjusted EBITDA

$

62,584

 

9.0

%  

$

59,101

 

8.2

%

$

249,835

 

8.7

%  

$

213,510

 

8.2

%

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)

    

December 31,

    

December 31,

 

2020

2019

 

 

Cash and cash equivalents

$

54,896

$

50,788

Billed accounts receivable, net

 

619,544

 

619,037

Unbilled accounts receivable, net

 

45,596

 

55,542

Costs and estimated earnings in excess of billings, net

 

18,622

 

2,736

Other current assets, net

 

73,194

 

62,081

Total current assets

 

811,852

 

790,184

Property and equipment, net

 

117,206

 

109,796

Goodwill

 

464,392

 

332,447

Identifiable intangible assets, net

 

231,807

 

159,974

Other noncurrent assets

 

132,098

 

112,611

Total assets

$

1,757,355

$

1,505,012

Current maturities of long-term debt

$

$

20,817

Accounts payable

 

204,145

 

196,195

Billings in excess of costs and estimated earnings

 

226,237

 

166,918

Other current liabilities

 

262,522

 

224,067

Total current liabilities

 

692,904

 

607,997

Long-term debt, net

 

235,733

 

205,318

Other long-term liabilities

 

132,289

 

106,393

Total liabilities

 

1,060,926

 

919,708

Total stockholders’ equity

 

696,429

 

585,304

Total liabilities and stockholders’ equity

$

1,757,355

$

1,505,012


Selected Cash Flow Data (Unaudited) (In Thousands)

Three Months Ended

 

Twelve Months Ended

 

December 31,

 

December 31,

 

    

2020

    

2019

    

2020

    

2019

 

Cash provided by (used in):

Operating activities

$

70,110

$

42,313

$

286,510

$

142,028

Investing activities

$

(77,288)

$

(8,397)

$

(207,802)

$

(224,450)

Financing activities

$

(8,466)

$

(23,491)

$

(74,600)

$

87,590

Free cash flow:

Cash from operating activities

$

70,110

$

42,313

$

286,510

$

142,028

Purchases of property and equipment

(4,672)

 

(9,109)

 

(24,131)

 

(31,750)

Proceeds from sales of property and equipment

 

380

 

712

 

2,270

 

2,159

Free cash flow

$

65,818

$

33,916

$

264,649

$

112,437

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, CFO (713-830-9650)

675 Bering Drive, Suite 400

Julie Shaeff, CAO (713-830-9687)

Houston, Texas 77057

ir@comfortsystemsusa.com

713-830-9600

FOR IMMEDIATE RELEASE

COMFORT SYSTEMS USA INCREASES QUARTERLY DIVIDEND

Houston, TX — February 25, 2021 — 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 $0.115 per share, which is a $0.005 increase from the Company’s most recent dividend, on Comfort Systems USA, Inc. common stock. The dividend is payable on March 23, 2021 to stockholders of record at the close of business on March 12, 2021.

Comfort Systems USA® is a premier provider of business solutions addressing workplace comfort, with 139 locations in 114 cities around the nation. For more information, visit the Company’s website at www.comfortsystemsusa.com.