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):  May 5, 2004

 

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 May 3, 2004, reporting Comfort’s financial results for the for the first quarter of 2004.

 

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 May 3, 2004, reporting Comfort’s financial results for the first quarter of 2004.

 

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:     May 5, 2004

 

2

 

EXHIBIT INDEX

 

Exhibit Number		Description
99		Press Release of Comfort System USA, Inc. dated May 3, 2004, reporting Comfort’s financial results for the first quarter of 2004.

 

3

Exhibit 99

 

 

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 FIRST QUARTER RESULTS

 

Significant Revenue and Income Improvement

 

Backlog Increases to Record Level

 

Houston, TX – May 3, 2004 – 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 $1,043,000 or $0.03 per diluted share, for the quarter ended March 31, 2004, as compared to a net loss of $4,816,000 or $0.13 per diluted share, and a net loss from continuing operations of $4,131,000 or $0.11 per diluted share, in the first quarter of 2003.  Excluding restructuring charges, the write-off of debt costs, and the effect of divested units not included in discontinued operations, the net loss from ongoing operations in the first quarter of 2003 was $2,381,000 or $0.07 per diluted share.

 

Bill Murdy, Comfort Systems USA’s Chairman and CEO, said, “We are pleased to report noticeably improved results for our first quarter, typically the period of our lowest seasonal activity levels of the year.  We posted year-over-year gains at every major line of the income statement, as challenging industry conditions eased some, and as our productivity and execution efforts began to show results.  Consistent with improving activity levels in our markets, and effective business development at our operations, our backlog increased 17% from yearend to a record $473 million.”

 

The Company reported revenues from continuing operations of $193,223,000 in the current quarter as compared to $179,664,000 in 2003.  Excluding the effect of units divested in 2003 not included in discontinued operations, revenues at ongoing operations were $175,627,000 in the first quarter of 2003.  The Company also reported negative cash flow of $5,921,000 following very strong fourth quarter cash flow, as the Company supported renewed revenue growth.  This cash flow was funded almost entirely from existing cash balances as the Company maintained its level of debt at an all-time low.

 

Murdy continued, “Even with our strong revenue and backlog performance, our primary emphasis for 2004 remains on productivity, execution and margin performance.  As with many other industries, we have seen turbulent pricing and supply developments in the markets for certain commodities, including steel, iron, and copper.  Given that most of our costs are labor-related, and based on certain steps we have taken to address these market developments, including earlier commodity buying and protective contract provisions, we experienced no appreciable impact from these developments in the first quarter and, so far, see only a modest effect in coming quarters.  Based on these factors and ongoing improvement in industry conditions, we continue to expect that our 2004 results will be significantly better than 2003’s.”

 

 

Murdy concluded, “While it’s too soon to say our industry is on a sustained upswing, we continue to see positive signs in the marketplace, and are pleased to post results more reflective of the hard work we’ve been doing inside Comfort Systems USA.  We look forward to reporting more improvements as the year unfolds.”

 

The Company will host a conference call to discuss its financial results and position in more depth on Tuesday, May 4, 2004 at 10:00 a.m. Central Time.  The call-in number for this conference call is 1-773-756-4621.  A replay of the entire call will be available until 6:00 p.m. Central Time, Tuesday, May 11, 2004 by calling 1-402-530-7607.

 

Comfort Systems USA is a premier provider of business solutions addressing workplace comfort, with 63 locations in 51 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 –

 

 

Comfort Systems USA, Inc.

 

Consolidated Statements of Operations

For the Three Months Ended March 31, 2004 and 2003

(in thousands, except per share amounts)

 

(unaudited)

 

		Three Months Ended March 31,
		2004			%		2003			%
Revenues		$	193,223		100.0	%	$	179,664		100.0	%
Cost of services		163,017			84.4	%	152,585			84.9	%
Gross profit		30,206			15.6	%	27,079			15.1	%
SG&A		27,188			14.1	%	30,483			17.0	%
Restructuring charges		—			—		1,162			0.6	%
Income (loss) from operations		3,018			1.6	%	(4,566		)	(2.5	)%
Interest expense, net		497			0.3	%	542			0.3	%
Other expense		659			0.3	%	249			0.1	%
Write-off of debt costs		—			—		823			0.5	%
Income (loss) before taxes		1,862			1.0	%	(6,180		)	(3.4	)%
Income taxes		819					(2,049		)
Income (loss) from continuing operations		1,043			0.5	%	(4,131		)	(2.3	)%
Discontinued operations:
Operating income, net of income tax expense of $134		—					227
Estimated loss on disposition, including income tax expense of $231		—					(912		)
Net income (loss)		$	1,043				$	(4,816	)
Income (loss) per share:
Basic-
Income (loss) from continuing operations		$	0.03				$	(0.11	)
Discontinued operations -
Income from operations		—					—
Estimated loss on disposition		—					(0.02		)
Net income (loss)		$	0.03				$	(0.13	)
Diluted -
Income (loss) from continuing operations		$	0.03				$	(0.11	)
Discontinued operations -
Income from operations		—					—
Estimated loss on disposition		—					(0.02		)
Net income (loss)		$	0.03				$	(0.13	)
Shares used in computing income (loss) per share:
Basic		38,136					37,622
Diluted		39,443					38,948

 

Note 1:  The diluted earnings per share data presented above reflects the dilutive effect, if any, of stock options, warrants and contingently issuable restricted stock which were outstanding during the periods presented.

 

 

Supplemental Information Relating to Ongoing Operations (Unaudited)

 

		Three Months Ended March 31,
		2004			%		2003			%
Revenues		$	193,223				$	179,664
Divested units not reflected in discontinued operations		—					(4,037		)
Revenues from ongoing operations		193,223			100.0	%	175,627			100.0	%
Cost of services		163,017					152,585
Divested units not reflected in discontinued operations		—					(4,021		)
Cost of services from ongoing operations		163,017			84.4	%	148,564			84.6	%
Gross profit from ongoing operations		30,206			15.6	%	27,063			15.4	%
Selling, general and administrative expenses		27,188					30,483
Divested units not reflected in discontinued operations		—					(723		)
Selling, general and administrative expenses from ongoing operations		27,188			14.1	%	29,760			16.9	%
Operating income (loss) from ongoing operations, excluding restructuring charges		$	3,018		1.6	%	$	(2,697	)	(1.5	)%
Income (loss) from continuing operations (after tax)		$	1,043				$	(4,131	)
Divested units not reflected in discontinued operations (after tax)		—					460
Restructuring charges (after tax)		—					755
Write-off of debt costs (after tax)		—					535
Income (loss) from ongoing operations (after tax), excluding restructuring charges and the write-off of debt costs		$	1,043		0.5	%	$	(2,381	)	(1.4	)%
Diluted earnings per share – income (loss) from ongoing operations (after tax), excluding restructuring charges and the write-off of debt costs		$	0.03				$	(0.07	)

 

Note 1:  Operating income (loss) from ongoing operations, excluding restructuring charges is presented because the Company believes it reflects the results of the core ongoing operations of the Company, and because we believe it is responsive to frequent questions we receive about the Company from third parties.  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 bottom two calculations in the above table show income (loss) from ongoing operations (after tax) and related earnings per share information excluding divested units not reflected in discontinued operations, restructuring charges and the write-off of debt costs.  The tax rate on these items was computed using the pro forma effective tax rate of the Company exclusive of these charges.

 

Supplemental Information – Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) (Unaudited) 

 

Net income (loss)		$	1,043				$	(4,816	)
Discontinued operations		—					685
Income taxes		819					(2,049		)
Write-off of debt costs		—					823
Other expense		659					249
Interest expense, net		497					542
Depreciation		1,138					1,322
Divested operations not reflected in discontinued operations		—					707
Restructuring charges		—					1,162
EBITDA		$	4,156		2.2	%	$	(1,375	)	(0.8	)%

 

 

Note 1:  The Company defines earnings before interest, taxes, depreciation and amortization (EBITDA) as net income (loss), excluding discontinued operations, income taxes, write-off of debt costs, other expense, interest expense, net, depreciation, divested units not reflected in discontinued operations, and restructuring charges.  EBITDA may be defined differently by other companies.  EBITDA is presented because it is a financial measure that is frequently requested by third parties.  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.

 

 

Comfort Systems USA, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

		March 31, 2004			December 31, 2003
		(unaudited)
Cash and cash equivalents		$	5,119		$	10,136
Accounts receivable, net		164,529			167,939
Costs and estimated earnings in excess of billings		18,638			16,162
Other current assets		28,882			28,700
Total current assets		217,168			222,937
Property and equipment, net		13,360			13,231
Goodwill		104,034			104,034
Other noncurrent assets		10,257			10,908
Total assets		$	344,819		$	351,110
Current maturities of long-term debt		$	2,090		$	1,594
Accounts payable		55,171			58,566
Billings in excess of costs and estimated earnings		26,866			29,657
Other current liabilities		46,596			49,482
Total current liabilities		130,723			139,299
Long-term debt		8,292			8,809
Other long-term liabilities		3,053			2,342
Total liabilities		142,068			150,450
Total equity		202,751			200,660
Total liabilities and equity		$	344,819		$	351,110

 

Selected Cash Flow Data (in thousands) (unaudited):

 

		Three Months Ended March 31,
		2004			2003
Cash flow from operating activities		$	(4,733	)	$	(2,343	)
Cash flow from investing activities		$	(255	)	$	(1,084	)
Cash flow from financing activities		$	(29	)	$	8,652
Cash flow from operating activities		$	(4,733	)	$	(2,343	)
Taxes paid related to the sale of businesses		—			10,371
Purchases of property and equipment		(1,317		)	(1,087		)
Proceeds from sales of property and equipment		129			79
Free cash flow		$	(5,921	)	$	7,020

 

Note 1:  Free cash flow is defined as cash flow from operating activities excluding items related to sales of businesses, 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 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.