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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): NOVEMBER 12, 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 (I.R.S. Employer Identification No.)
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
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ITEM 7(c) EXHIBITS
The following Exhibits are included herein:
Exhibit 99 Press Release of Comfort Systems USA, Inc. dated November
12, 2003, reporting Comfort's financial results for the third 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 November 12, 2003,
reporting Comfort's financial results for the third 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: November 14, 2003
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EXHIBIT INDEX
Exhibit
Number Description
99 Press Release of Comfort System USA, Inc. dated November 12,
2003, reporting Comfort's financial results for the thrid
quarter of 2003.
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Exhibit 99
(COMFORT SYSTEMS USA, INC. 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 THIRD QUARTER RESULTS
SEQUENTIAL OPERATING INCOME AND MARGIN GROWTH
CONTINUED COST CONTAINMENT
HOUSTON, TX -- NOVEMBER 12, 2003 -- COMFORT SYSTEMS USA, INC. (NYSE:
FIX), a leading provider of commercial, industrial and institutional heating,
ventilation and air conditioning ("HVAC") services, today announced net income
of $175,000 or $0.00 per diluted share, for the quarter ended September 30,
2003, as compared to net income of $3,740,000 or $0.10 per diluted share, in the
third quarter of 2002. Net income from continuing operations for the quarter was
$2,806,000 or $0.07 per diluted share in the third quarter of 2003. Excluding
the restructuring charges, net income from continuing operations was $3,423,000
or $0.09 per diluted share for the quarter as compared to $3,581,000 or $0.09
per diluted share in the third quarter of 2002. The Company reported revenues
from continuing operations of $210,198,000 in the current quarter as compared to
$212,071,000 in 2002.
Bill Murdy, Comfort Systems USA's Chairman and CEO, said, "Our third
quarter reflected another period of steady progress for Comfort Systems USA.
While industry activity levels were still restrained, our same-store revenues
during the quarter increased 1.3% year-over-year, our best top-line comparison
over the past two and a half years of very difficult industry conditions. In
addition, excluding a modest restructuring charge, operating margins were up
from the second quarter and virtually unchanged from last year's third quarter.
This reflects our best year-over-year margin comparison in over a year, as our
diligent cost containment kept pace with continuing gross margin pressure."
The Company reported net income from continuing operations of
$1,336,000 or $0.04 per diluted share for the first nine months of 2003 as
compared to net income from continuing operations of $4,578,000 or $0.12 per
diluted share for the first nine months of 2002. Excluding restructuring charges
in both years, and a nonrecurring credit for a favorable receivables settlement
in 2002, net income from continuing operations was $3,431,000 or $0.09 per
diluted share for the first nine months of 2003 as compared to $5,279,000 or
$0.14 per diluted share for the same period in 2002. The Company reported
revenues of $592,029,000 from continuing operations for the current year to
date, as compared to $609,836,000 in 2002.
Murdy continued, "We continue to see signs of improving conditions in
our industry. Recent economic and industry measures have taken positive turns,
and commentary from the major industry manufacturers is cautiously optimistic,
including continuing recognition of the build-up of deferred maintenance and
replacement needs in the installed HVAC base. Based on
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these trends, our 2004 planning and budgeting work, and our ongoing focus on
improving operating execution, we continue to expect that our 2004 results will
be significantly better than 2003."
The Company will host a conference call to discuss its financial
results and position in more depth on Wednesday, November 12, 2003 at 10:00 a.m.
Central Time. The call-in number for this conference call is 1-630-395-0024. A
replay of the entire call will be available until 6:00 p.m. Central Time,
Wednesday, November 19, 2003 by calling 1-402-998-1545.
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 -
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Comfort Systems USA, Inc.
Consolidated Statements of Operations
For the Three Months and Nine Months Ended September 30, 2003 and 2002
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------- -------------------------------------------
2003 % 2002 % 2003 % 2002 %
--------- ----- --------- ------ --------- ----- ---------- -----
Revenues $ 210,198 100.0% $ 212,071 100.0% $ 592,029 100.0% $ 609,836 100.0%
Cost of services 174,771 83.1% 172,726 81.4% 494,873 83.6% 502,552 82.4%
--------- --------- --------- ---------
Gross profit 35,427 16.9% 39,345 18.6% 97,156 16.4% 107,284 17.6%
SG&A 28,064 13.4% 31,665 14.9% 87,712 14.8% 93,876 15.4%
Restructuring charges 949 0.5% -- -- 3,223 0.5% 1,878 0.3%
--------- --------- --------- ---------
Income from operations 6,414 3.1% 7,680 3.6% 6,221 1.1% 11,530 1.9%
Interest expense, net 1,078 0.5% 947 0.4% 3,495 0.6% 3,919 0.6%
Other expense (income) (42) -- (116) (0.1)% 105 -- (1,232) (0.2)%
--------- --------- --------- ---------
Income before taxes 5,378 2.6% 6,849 3.2% 2,621 0.4% 8,843 1.5%
Income taxes 2,572 3,268 1,285 4,265
--------- --------- --------- ---------
Income from continuing operations 2,806 1.3% 3,581 1.7% 1,336 0.2% 4,578 0.8%
Discontinued operations:
Operating income (loss), net of
applicable income tax benefit
(expense) of $92, $91, $(174)
and $1,655 142 159 281 353
Estimated loss on disposition,
including income tax expense
of $43, $0, $274 and $25,887 (2,773) -- (3,685) (11,156)
--------- --------- --------- ---------
Income (loss) before cumulative
effect of change in accounting
principle 175 3,740 (2,068) (6,225)
Cumulative effect of change in
accounting principle, net of
income tax benefit of $26,317 -- -- -- (202,521)
--------- --------- --------- ---------
Net income (loss) $ 175 $ 3,740 $ (2,068) $(208,746)
========= ========= ========= =========
Income (loss) per share:
Basic-
Income from continuing
operations $ 0.07 $ 0.10 $ 0.04 $ 0.12
Discontinued operations -
Income (loss) from operations -- -- 0.01 0.01
Estimated loss on disposition (0.07) -- (0.10) (0.29)
Cumulative effect of change in
accounting principle -- -- -- (5.37)
--------- --------- --------- ---------
Net income (loss) $ -- $ 0.10 $ (0.05) $ (5.53)
========= ========= ========= =========
Diluted -
Income from continuing
operations $ 0.07 $ 0.09 $ 0.04 $ 0.12
Discontinued operations -
Income (loss) from operations -- 0.01 0.01 --
Estimated loss on disposition (0.07) -- (0.10) (0.29)
Cumulative effect of change in
accounting principle -- -- -- (5.30)
--------- --------- --------- ---------
Net income (loss) $ -- $ 0.10 $ (0.05) $ (5.47)
========= ========= ========= =========
Shares used in computing income
(loss) per share:
Basic 37,713 37,834 37,659 37,736
Diluted 38,454 38,131 38,081 38,192
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.
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Supplemental Information (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------- --------------------------------------------
% of % of % of % of
2003 Revenues 2002 Revenues 2003 Revenues 2002 Revenues
--------- -------- --------- -------- --------- -------- --------- --------
Income from operations $ 6,414 $ 7,680 $ 6,221 $ 11,530
Restructuring charges 949 -- 3,223 1,878
Kmart reserve reversal -- -- -- (800)
--------- --------- --------- ---------
Income from operations,
excluding restructuring
charges and Kmart reserve
reversal $ 7,363 3.5% $ 7,680 3.6% $ 9,444 1.6% $ 12,608 2.1%
Net income (loss) $ 175 $ 3,740 $ (2,068) $(208,746)
Cumulative effect of change in
accounting principle -- -- -- 202,521
Discontinued operations 2,631 (159) 3,404 10,803
Income taxes 2,572 3,268 1,285 4,265
Other expense (income) (42) (116) 105 (1,232)
Interest expense, net 1,078 947 3,495 3,919
Depreciation 1,293 1,677 3,996 4,948
Restructuring charges 949 -- 3,223 1,878
Kmart reserve reversal -- -- -- (800)
--------- --------- --------- ---------
EBITDA $ 8,656 4.1% $ 9,357 4.4% $ 13,440 2.3% $ 17,556 2.9%
Income from continuing
operations (after tax) $ 2,806 $ 3,581 $ 1,336 $ 4,578
Restructuring charges (after tax) 617 -- 2,095 1,221
Kmart reserve reversal (after tax) -- -- -- (520)
--------- --------- --------- ---------
Income from continuing operations
(after tax), excluding
restructuring charges and Kmart
reserve reversal $ 3,423 1.6% $ 3,581 1.7% $ 3,431 0.6% $ 5,279 0.9%
Diluted earnings per share-income
from continuing operations
(after tax), excluding
restructuring charges
and Kmart reserve reversal $ 0.09 $ 0.09 $ 0.09 $ 0.14
Note 1: Income 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 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.
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COMFORT SYSTEMS USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2003 2002
------------- -------------
(unaudited)
Cash and cash equivalents $ 7,820 $ 6,017
Accounts receivable, net 170,737 166,274
Costs and estimated earnings in
excess of billings 16,520 17,811
Assets related to discontinued 1,405 7,221
operations
Other current assets 26,791 30,391
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Total current assets 223,273 227,714
Property and equipment, net 14,054 15,972
Goodwill 109,471 109,471
Other noncurrent assets 11,298 13,378
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Total assets $ 358,096 $ 366,535
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Current maturities of long-term debt $ 4,385 $ 1,780
Accounts payable 57,528 56,330
Billings in excess of costs and
estimated earnings 29,313 26,633
Liabilities related to discontinued
operations 672 1,723
Other current liabilities 48,910 61,187
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Total current liabilities 140,808 147,653
Long-term debt, net of discount 10,732 10,604
Other long-term liabilities 3,365 3,192
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Total liabilities 154,905 161,449
Total equity 203,191 205,086
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Total liabilities and equity $ 358,096 $ 366,535
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Selected Cash Flow Data (in thousands) (unaudited):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
Cash flow from operating activities $ (6,437) $ 12,114 $ 5,143 $ 13,807
Cash flow from investing activities $ (510) $ (844) $ (5,096) $ 151,785
Cash flow from financing activities $ 3,352 $ (13,269) $ 1,669 $ (165,592)
Cash flow from operating activities $ (6,437) $ 12,114 $ 5,143 $ 13,807
Taxes paid related to the sale of businesses -- -- 10,371 --
Purchases of property and equipment (714) (974) (2,661) (4,044)
Proceeds from sales of property and equipment 208 196 319 1,330
------------- ------------- ------------- -------------
Free cash flow $ (6,943) $ 11,336 $ 13,172 $ 11,093
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 to be 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.
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