================================================================================
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): AUGUST 5, 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 of incorporation) (I.R.S. Employer Identification No.)
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 August 5,
2003, reporting Comfort's financial results for the second quarter of 2003.
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 August 5, 2003, reporting
Comfort's financial results for the second quarter of 2003.
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: August 5, 2003
-2-
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
99 Press Release of Comfort System USA, Inc. dated August 5, 2003,
reporting Comfort's financial results for the second quarter of
2003.
-3-
EXHIBIT 99
[COMFORT SYSTEMS USA LETTERHEAD]
CONTACT: Gordon Beittenmiller 777 Post Oak Blvd, Suite 500
Chief Financial Officer Houston, Texas 77056
(713) 830-9600 713-830-9600
Fax 713-830-9696
FOR IMMEDIATE RELEASE
COMFORT SYSTEMS USA REPORTS SECOND QUARTER RESULTS
SIGNIFICANT EARNINGS IMPROVEMENT FROM THE FIRST QUARTER
CONTINUED STRONG CASH FLOW
HOUSTON, TX - AUGUST 5, 2003 - COMFORT SYSTEMS USA, INC. (NYSE: FIX), a
leading provider of commercial/industrial heating, ventilation and air
conditioning ("HVAC") services, today announced net income of $2,573,000 or
$0.07 per diluted share, for the quarter ended June 30, 2003, as compared to net
income of $4,768,000 or $0.12 per diluted share, in the second quarter of 2002.
Net income from continuing operations for the quarter was $2,606,000 or $0.07
per diluted share in the second quarter of 2003 as compared to $5,103,000 or
$0.13 per diluted share in the second quarter of 2002. The Company reported
revenues from continuing operations of $202,355,000 in the current quarter as
compared to $211,500,000 in 2002.
Bill Murdy, Comfort Systems USA's Chairman and CEO, said, "Our second
quarter earnings marked a substantial improvement from the first quarter even as
difficult conditions persisted in our industry and in the general economy. We
also continued our consistent record of free cash flow performance, with another
strong showing this quarter at $13,095,000. In addition, we maintained a steady
backlog heading into the second half."
The Company reported a net loss from continuing operations of
$1,397,000 or $0.04 per diluted share for the first six months of 2003 as
compared to net income from continuing operations of $1,102,000 or $0.03 per
diluted share for the first six months of 2002. The Company reported revenues of
$384,769,000 from continuing operations for the current year to date, as
compared to $401,126,000 in 2002.
Murdy continued, "While we are pleased with our improvement in our
second quarter earnings over the first quarter and expect further improvement in
the third quarter, general industry and economic conditions have not yet
improved to the degree we and other industry participants expected earlier this
year. As a result, we now believe our full-year 2003 results will be comparable
to 2002's results, rather than higher than 2002 results as indicated in our
first quarter reports. However, we and other industry participants do continue
to expect improving conditions over the next year. This is based in part on what
is believed to be mounting maintenance and replacement needs in the broad
installed base of HVAC equipment, as it appears these activities have been
deferred by many facility owners in the difficult economy of the last couple of
years. In addition, we continue to see signs of increasing industry activity in
response to modest improvement in the general economic outlook. We believe these
indications are consistent with the traditional lag between activity levels in
our industry and overall economic activity. In view of these factors,
-4-
along with our ongoing focus on cost containment, we expect our 2004 results to
show significant improvement over the current year.
"We also want to acknowledge the superb work of the Comfort Systems USA
field and support organizations in producing profits and cash flow in what
remains a challenging operating environment. And our people once again widened
the substantial margin by which our safety record exceeds the industry average.
Their efforts are also focused on building our company as an industry leader for
the long term. The Comfort Systems USA team is the foundation of our future
success."
The Company will host a conference call to discuss its financial
results and position in more depth on Wednesday, August 6, 2003 at 10:00 a.m.
Central Time. The call-in number for this conference call is 1-210-234-0020. A
replay of the entire call will be available until 5:00 p.m. Central Time,
Wednesday, August 13, 2003 by calling 1-402-220-0305.
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,
difficulty in obtaining or increased costs associated with debt financing or
bonding, retention of key management, national and regional declines in
non-residential construction activity, 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 Six Months Ended June 30, 2003 and 2002
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------- ---------------------------------------------
2003 % 2002 % 2003 % 2002 %
-------- ------ -------- ------ -------- ------ --------- ------
Revenues $202,355 100.0% $211,500 100.0% $384,769 100.0% $ 401,126 100.0%
Cost of services 167,553 82.8% 172,986 81.8% 322,215 83.7% 332,362 82.9%
-------- -------- -------- ---------
Gross profit 34,802 17.2% 38,514 18.2% 62,554 16.3% 68,764 17.1%
SG&A 29,400 14.5% 30,480 14.4% 60,349 15.7% 62,873 15.7%
Restructuring charges 1,112 0.5% -- -- 2,274 0.6% 1,878 0.5%
-------- -------- -------- ---------
Income (loss) from operations 4,290 2.1% 8,034 3.8% (69) -- 4,013 1.0%
Interest expense, net 1,058 0.5% 1,094 0.5% 2,422 0.6% 2,963 0.7%
Other expense (income) (102) (0.1%) (804) (0.4%) 147 -- (1,116) (0.3%)
-------- -------- -------- ---------
Income (loss) before taxes 3,334 1.6% 7,744 3.7% (2,638) (0.7%) 2,166 0.5%
Income taxes 728 2,641 (1,241) 1,064
-------- -------- -------- ---------
Income (loss) from continuing
operations 2,606 1.3% 5,103 2.4% (1,397) (0.4%) 1,102 0.3%
Discontinued operations:
Operating income (loss), net of
applicable income tax benefit
(expense) of $18, $90, $(36)
and $1,813 (33) (166) 66 89
Estimated loss on disposition,
including income tax benefit
(expense) of $0, $91,
$(231) and $(25,887) -- (169) (912) (11,156)
-------- -------- -------- ---------
Income (loss) before cumulative
effect of change in accounting
principle 2,573 4,768 (2,243) (9,965)
Cumulative effect of change in
accounting principle, net of
income tax benefit of $26,317 -- -- -- (202,521)
-------- -------- -------- ---------
Net income (loss) $ 2,573 $ 4,768 $ (2,243) $(212,486)
======== ======== ======== =========
Income (loss) per share:
Basic-
Income (loss) from continuing
operations $ 0.07 $ 0.13 $ (0.04) $ 0.03
Discontinued operations -
Income (loss) from operations -- -- -- --
Estimated loss on disposition -- -- (0.02) (0.30)
Cumulative effect of change in
accounting principle -- -- -- (5.37)
-------- -------- -------- ---------
Net income (loss) $ 0.07 $ 0.13 $ (0.06) $ (5.64)
======== ======== ======== =========
Diluted -
Income (loss) from continuing
operations $ 0.07 $ 0.13 $ (0.04) $ 0.03
Discontinued operations -
Income (loss) from operations -- -- -- --
Estimated loss on disposition -- (0.01) (0.02) (0.29)
Cumulative effect of change in
accounting principle -- -- -- (5.30)
-------- -------- -------- ---------
Net income (loss) $ 0.07 $ 0.12 $ (0.06) $ (5.56)
======== ======== ======== =========
Shares used in computing income
(loss)
per share:
Basic 37,640 37,839 37,631 37,687
Diluted 37,983 38,476 38,804 38,237
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.
-6-
Supplemental Information (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------- -------------------------------------------
2003 % 2002 % 2003 % 2002 %
--------- ------ --------- ------ --------- ------ --------- ------
Income (loss) from operations $ 4,290 $ 8,034 $ (69) $ 4,013
Restructuring charges 1,112 -- 2,274 1,878
Kmart reserve reversal -- (800) -- (800)
--------- --------- --------- ---------
Income from operations, excluding
restructuring charges and Kmart
reserve reversal $ 5,402 2.7% $ 7,234 3.4% $ 2,205 0.6% $ 5,091 1.3%
Net income (loss) $ 2,573 $ 4,768 $ (2,243) $(212,486)
Cumulative effect of change in
accounting principle -- -- -- 202,521
Discontinued operations 33 335 846 11,067
Income taxes 728 2,641 (1,241) 1,064
Other expense (income) (102) (804) 147 (1,116)
Interest expense, net 1,058 1,094 2,422 2,963
Depreciation 1,387 1,683 2,723 3,294
Restructuring charges 1,112 -- 2,274 1,878
Kmart reserve reversal -- (800) -- (800)
--------- --------- --------- ---------
EBITDA $ 6,789 3.4% $ 8,917 4.2% $ 4,928 1.3% $ 8,385 2.1%
Income (loss) from continuing
operations (after tax) $ 2,606 $ 5,103 $ (1,397) $ 1,102
Restructuring charges (after tax) 723 -- 1,478 1,221
Kmart reserve reversal (after tax) -- (520) -- (520)
--------- --------- --------- ---------
Income from continuing operations
(after tax), excluding
restructuring charges and Kmart
reserve reversal $ 3,329 1.6% $ 4,583 2.2% $ 81 -- $ 1,803 0.4%
Diluted earnings per share-income
from continuing operations (after
tax), excluding restructuring
charges and Kmart reserve
reversal $ 0.09 $ 0.12 $ -- $ 0.05
Note 1: Income (loss) from operations, excluding restructuring charges and Kmart
reserve reversal is presented because the Company believes it reflects the
results of the core ongoing operations of the Company. However, this measure is
not considered a primary measure of an entity's financial results under
generally accepted accounting principles, and accordingly, this amount should
not be considered an alternative to operating income as determined under
generally accepted accounting principles and as reported by the Company.
Note 2. The Company defines earnings before interest, taxes, depreciation and
amortization (EBITDA) as net income (loss), excluding cumulative effect of
change in accounting principle, discontinued operations, income taxes, other
expense (income), interest expense, net, depreciation, restructuring charges and
Kmart reserve reversal. 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 restructuring charges and Kmart reserve reversal. The tax rate on
these items was computed using the pro forma effective tax rate of the Company
exclusive of these charges.
-7-
COMFORT SYSTEMS USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2003 2002
-------- ------------
(unaudited)
Cash and cash equivalents $ 11,415 $ 6,083
Accounts receivable, net 164,423 167,177
Costs and estimated earnings in
excess of billings 15,996 17,881
Assets related to discontinued
operations -- 2,643
Other current assets 28,032 30,759
-------- --------
Total current assets 219,866 224,543
Property and equipment, net 14,831 16,072
Goodwill 112,545 112,545
Other noncurrent assets 12,185 13,375
-------- --------
Total assets $359,427 $366,535
======== ========
Current maturities of long-term debt $ 2,166 $ 1,780
Accounts payable 64,215 56,496
Billings in excess of costs and
estimated earnings 30,271 26,672
Liabilities related to discontinued
operations -- 1,017
Other current liabilities 47,457 61,688
-------- --------
Total current liabilities 144,109 147,653
Long-term debt, net of discount 9,421 10,604
Other long-term liabilities 3,085 3,192
-------- --------
Total liabilities 156,615 161,449
Total equity 202,812 205,086
-------- --------
Total liabilities and equity $359,427 $366,535
======== ========
Selected Cash Flow Data (in thousands) (unaudited):
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Cash flow from operating activities $ 13,923 $ 10,955 $ 11,580 $ 1,693
Cash flow from investing activities $ (3,502) $ 10,130 $ (4,586) $ 152,629
Cash flow from financing activities $ (10,335) $ (18,316) $ (1,683) $(152,323)
Cash flow from operating activities $ 13,923 $ 10,955 $ 11,580 $ 1,693
Taxes paid related to the sale of
businesses -- -- 10,371 --
Purchases of property and equipment (860) (936) (1,947) (3,070)
Proceeds from sales of property and
equipment 32 963 111 1,134
--------- --------- --------- ---------
Free cash flow $ 13,095 $ 10,982 $ 20,115 $ (243)
Note 1: The Company defines free cash flow as cash flow from operating
activities less items related to certain transactions such as sales of
businesses and 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
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 2002 includes the results of discontinued
operations, including the 19 operations sold to Emcor in the first quarter of
2002.
-8-
