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 31, 2003
COMMISSION FILE NUMBER: 1-13011
COMFORT SYSTEMS USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0526487
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
777 POST OAK BOULEVARD
SUITE 500
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 830-9600
ITEM 7(c) EXHIBITS
The following Exhibits are included herein:
Exhibit 99 Press Release of Comfort Systems USA, Inc. dated March 31,
2002, reporting Comfort's financial results for the fourth quarter of 2002 and
for the year 2002.
ITEM 12. MATERIAL INFORMATION DISCLOSURE
Attached and incorporated herein by reference as Exhibit 99 is a copy
of a press release of Comfort System USA, Inc. dated March 31, 2003, reporting
Comfort's financial results for the fourth quarter of 2002 and for the year
2002.
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/ William George
---------------------------------
William George
Senior Vice President and
General Counsel
Date: April 1, 2003
2
EXHIBIT INDEX
Exhibit
Number Description
99 Press Release of Comfort System USA, Inc. dated March 31, 2003,
reporting Comfort's financial results for the fourth quarter of
2002 and for the year 2002.
3
EXHIBIT 99
(COMFORT SYSTEMS USA LOGO)
777 Post Oak Blvd, Suite 500
Houston, Texas 77056
713-830-9600
Fax 713-830-9696
CONTACT: Gordon Beittenmiller
Chief Financial Officer
(713) 830-9600
FOR IMMEDIATE RELEASE
COMFORT SYSTEMS USA REPORTS FOURTH QUARTER FULL YEAR RESULTS
-- PROFITABLE AND POSITIVE CASH FLOW IN DIFFICULT INDUSTRY CONDITIONS --
-- STRENGTHENED MANAGEMENT TEAM --
HOUSTON, TX - MARCH 31, 2003 - COMFORT SYSTEMS USA, INC. (NYSE: FIX), a
leading provider of commercial/industrial heating, ventilation and air
conditioning ("HVAC") services, today announced a net loss of $334,000 or $0.01
per diluted share, for the quarter ended December 31, 2002, as compared to net
income of $3,091,000 or $0.08 per diluted share, in the fourth quarter of 2001.
These amounts include results of discontinued operations. Excluding these items,
net income from continuing operations for the quarter was $512,000 or $0.01 per
diluted share as compared to a loss of $1,135,000 or $0.03 per diluted share in
fourth quarter of 2001. The Company reported revenues from continuing operations
of $200,844,000 in the current quarter as compared to $215,577,000 in 2001.
Bill Murdy, Comfort Systems USA's Chairman and CEO, said, "As is well
known, 2002 was one of the worst years our industry has seen in decades. While
our performance did not meet our goals in 2002, we were pleased to post
profitable results and positive cash flow in such a challenging environment."
The Company reported a net loss for the year ended December 31, 2002 of
$209,080,000 or $5.45 per diluted share, as compared to net income of
$13,124,000 or $0.35 per diluted share, in 2001. As disclosed earlier this year,
these results include two significant charges for unusual items - one relating
to the adoption of a new accounting standard for reporting of goodwill and other
intangible assets, and another relating to the Company's sale this year of
certain operations, principally 19 units sold to Emcor Group, Inc. in March.
Excluding these items, the Company reported net income from continuing
operations of $5,479,000 or $0.14 per diluted share for 2002 as compared to a
loss of $1,033,000 or $0.03 per diluted share for 2001. The Company reported
revenues of $819,282,000 from continuing operations for 2002, as compared to
$882,861,000 in 2001.
Murdy continued, "Our sale of operations to Emcor early in 2002 enabled
us to greatly strengthen our balance sheet - an important and timely step given
the course of the economy over the past year. Reduced industry activity levels
have continued into 2003. Based on these conditions, as well as on
underperforming projects in certain of our operations, we expect to report a
loss for the first quarter of 2003 comparable to the loss from continuing
operations that we reported in first quarter of 2002. We are responding to these
challenges with significant current cost reduction initiatives and even more
intense application of operational disciplines we have been introducing over the
past year. Additionally, despite tough market conditions, we started 2003 with
7% more in backlog than we did in 2002, and backlog has held steady through the
first quarter. In view of these factors, we expect to be profitable in the
upcoming
4
second quarter and to produce positive cash flow for the year as a whole, and to
post improved operating results for 2003 as compared to 2002.
"We continue to build Comfort for the long-term, particularly through
the addition of management depth. As previously announced, Norm Chambers joined
us in the fourth quarter and fills the roles of President and Chief Operating
Officer. In the first quarter, industry veteran Chuck Diltz joined us to lead
our national service operations, and Hobart Pillsbury came on board as Comfort's
Chief Information Officer. As we strengthen our team while responding to
challenging market conditions, we believe we are positioning Comfort Systems USA
for excellent performance when activity levels rebound in our industry."
The Company will host a conference call to discuss its financial
results and position in more depth on Tuesday, April 1, 2003 at 9:00 a.m.
Central Time. The call-in number for this conference call is 1-630-395-0178. A
replay of the entire call will be available until 9:00 a.m. Central Time,
Tuesday, April 8, 2003 by calling 1-402-344-6637.
Comfort Systems USA is a premier provider of business solutions
addressing workplace comfort, with 84 locations in 57 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 declines 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.
- Financial table follows -
5
Comfort Systems USA, Inc.
Consolidated Statements of Operations
For the Three Months and Twelve Months Ended December 31, 2002 and 2001
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------------------------- --------------------------------------------
2002 % 2001 % 2002 % 2001 %
-------- ------ -------- -------- -------- -------- -------- ------
Revenues $200,844 100.0% $215,577 100.0% $819,282 100.0% $882,861 100.0%
Cost of services 167,102 83.2% 174,211 80.8% 676,268 82.5% 717,284 81.2%
-------- -------- -------- --------
Gross profit 33,742 16.8% 41,366 19.2% 143,014 17.5% 165,577 18.8%
SG&A 31,784 15.8% 36,981 17.2% 127,051 15.5% 143,675 16.3%
Goodwill amortization and
impairment 218 -- 2,059 1.0% 218 -- 8,238 0.9%
Restructuring charges -- -- -- -- 1,878 0.2% 238 --
-------- -------- -------- --------
Income from operations 1,740 0.9% 2,326 1.1% 13,867 1.7% 13,426 1.5%
Interest expense, net 978 0.5% 1,148 0.5% 4,880 0.6% 8,000 0.9%
Other income (163) (0.1%) (74) -- (1,395) (0.2%) (446) (0.1%)
-------- -------- -------- --------
Income before taxes 925 0.5% 1,252 0.6% 10,382 1.3% 5,872 0.7%
Income taxes 413 2,387 4,903 6,905
-------- -------- -------- --------
Income (loss) from continuing
operations 512 0.3% (1,135) (0.5%) 5,479 0.7% (1,033) (0.1%)
Discontinued operations:
Operating income (loss) net of
applicable income tax benefit
(expense) of $0, $(2,842) -- 4,226 (36) 14,157
$1,880 and $(9,627)
Estimated gain (loss) on
disposition, including income tax
benefit (expense) of $2,563
and $(23,324) (846) -- (12,002) --
-------- -------- -------- --------
Income (loss) before cumulative
effect of change in accounting
principle (334) 3,091 (6,559) 13,124
Cumulative effect of change in
accounting principle, net of
income tax benefit of $26,317 -- -- (202,521) --
-------- -------- -------- --------
Net income (loss) $ (334) $ 3,091 $(209,080) $ 13,124
======== ======== ========= ========
Income (loss) per share:
Basic-
Income (loss) from continuing
operations $ 0.01 $ (0.03) $ 0.15 $ (0.03)
Discontinued operations -
Income (loss) from operations -- 0.11 -- 0.38
Estimated loss on disposition (0.02) -- (0.32) --
Cumulative effect of change in
accounting principle -- -- (5.39) --
-------- -------- -------- --------
Net income (loss) $ (0.01) $ 0.08 $ (5.56) $ 0.35
======== ======== ======== ========
Diluted -
Income (loss) from continuing
operations $ 0.01 $ (0.03) $ 0.14 $ (0.03)
Discontinued operations -
Income (loss) from operations -- 0.11 -- 0.38
Estimated loss on disposition (0.02) -- (0.31) --
Cumulative effect of change in
accounting principle -- -- (5.28) --
-------- -------- -------- ---------
Net income (loss) $ (0.01) $ 0.08 $ (5.45) $ 0.35
======== ======== ======== =========
Shares used in computing income
(loss) per share:
Basic 37,636 37,510 37,605 37,436
Diluted 38,082 37,510 38,367 37,436
Income from operations $ 1,740 $ 2,326 $ 13,867 $ 13,426
Goodwill amortization and impairment 218 2,059 218 8,238
Restructuring charges -- -- 1,878 238
Kmart reserve -- 3,500 (800) 3,500
-------- --------- -------- ---------
1
Income from operations, excluding
goodwill amortization and
impairment, restructuring charges
and Kmart reserve $ 1,958 1.0% $ 7,885 3.7% $ 15,163 1.9% $ 25,402 2.9%
Income from operations $ 1,740 $ 2,326 $ 13,867 $ 13,426
Depreciation 1,439 2,285 6,428 8,009
Goodwill amortization and impairment 218 2,059 218 8,238
Restructuring charges -- -- 1,878 238
Kmart reserve -- 3,500 (800) 3,500
--------- --------- -------- --------
EBITDA, excluding goodwill
impairment, restructuring charges
and Kmart reserve $ 3,397 1.7% $ 10,170 4.7% $ 21,591 2.6% $ 33,411 3.8%
Income (loss) from continuing
operations (after tax) $ 512 $ (1,135) $ 5,479 $ (1,033)
Goodwill amortization and impairment 142 1,906 142 7,622
Restructuring charges -- -- 1,221 155
Kmart reserve -- 2,275 (520) 2,275
--------- --------- -------- --------
Income from continuing operations
(after tax), excluding goodwill
amortization and impairment,
restructuring charges and
Kmart reserve $ 654 0.3% $ 3,046 1.4% $ 6,322 0.8% $ 9,019 1.0%
Diluted earnings per share-income
from continuing operations (after
tax), excluding goodwill amortization
and impairment, restructuring charges
and Kmart reserve $ 0.02 $ 0.08 $ 0.17 $ 0.24
Note 1: The diluted earnings per share data presented above reflects the
dilutive effect, if any, of stock options, convertible notes, warrants and
contingently issuable restricted stock which were outstanding during the periods
presented. The after-tax loss related to the warrant's mark-to-market adjustment
of $117 in 2002 has been added to income (loss) from continuing operations and
net income for purposes of calculating diluted earnings per share. The shares
associated with contingently issuable restricted stock are included in diluted
earnings per share because it is probable that the performance requirement for
the issuance of these shares will be met.
Note 2: EBITDA is defined as income (loss) from operations, excluding
depreciation and amortization. EBITDA may be defined differently by other
companies. EBITDA is presented because it is a financial measure that is
frequently requested by capital market participants in evaluating the Company.
However, EBITDA is not considered under generally accepted accounting principles
as a primary measure of an entity's financial results, and accordingly, 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.
Note 3: The bottom two calculations in the above table show income (loss) from
continuing operations (after tax) and related earnings per share information
excluding goodwill amortization and impairment, restructuring charges and Kmart
reserve. The tax rate on these items was computed using the pro forma effective
tax rate of the Company exclusive of these charges.
-2-
COMFORT SYSTEMS USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
2002 2001
------------ ------------
Cash and cash equivalents $ 6,104 $ 4,156
Accounts receivable, net 168,392
175,735
Costs and estimated earnings in
excess of billings 17,964 19,413
Assets related to discontinued -- 326,076
operations
Other current assets 30,933 33,713
------------ ------------
Total current assets 223,393 559,093
Property and equipment, net 16,111 18,956
Goodwill 113,427 297,251
Other noncurrent assets 13,604 1,325
------------ ------------
Total assets $ 366,535 $ 876,625
============ ============
Current maturities of long-term debt $ 1,780 $ 2,447
Accounts payable 56,773 57,719
Billings in excess of costs and
estimated earnings 26,672 26,663
Liabilities related to discontinued
operations -- 140,474
Other current liabilities 62,428 52,727
------------ ------------
Total current liabilities 147,653 280,030
Long-term debt 10,604 179,581
Other long-term liabilities 3,192 3,193
------------ ------------
Total liabilities 161,449 462,804
Total equity 205,086 413,821
------------ ------------
Total liabilities and equity $ 366,535 $ 876,625
============ ============
Note 1: The Company's balance sheet as of December 31, 2001 included $326,076 in
assets and $140,474 of liabilities related to discontinued operations, all of
which have since been sold. Additionally, the Company reduced its yearend
goodwill asset balance related to continuing operations by $183,606 in
connection with adopting SFAS No. 142 in the first quarter of 2002; a subsequent
impairment of $218 was recorded during the fourth quarter of 2002.
Selected Cash Flow Data (in thousands):
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Cash flow from operating activities $ 283 $ 25,051 $ 14,090 $ 66,829
Cash flow from investing activities $ (1,196) $ (785) $ 150,589 $ (4,003)
Cash used in financing activities $ (3,608) $ (28,776) $ (169,200) $ (68,222)
Cash flow from operating activities $ 283 $ 25,051 $ 14,090 $ 66,829
Purchases of property and equipment (1,278) (1,336) (5,322) (5,978)
Proceeds from sales of property and
equipment 221 551 1,551 1,011
------------ ------------ ------------ ------------
Free cash flow $ (774) $ 24,266 $ 10,319 $ 61,862
Note 1: Free cash flow is defined as cash flow from operating activities less
customary capital expenditures plus the proceeds from asset sales. Free cash
flow may be defined differently by other companies. Free cash flow is presented
because it is a financial measure that is frequently requested by capital market
participants in evaluating the Company. 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.
Note 2: Cash flow information for 2001 includes the results of discontinued
operations, including the 19 operations sold to Emcor in the first quarter of
2002.
-3-
