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, 2008
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.) |
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777 Post Oak Boulevard, Suite 500 Houston, Texas |
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(Address of principal executive offices) |
(Zip Code) |
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Registrants 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:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 7.01 REGULATION FD DISCLOSURE.
On the 5th day of May, 2008, Comfort Systems USA, Inc., a Delaware corporation (the Company), a leading provider of commercial/industrial heating, ventilation and air conditioning services, posted to the Investor section of its Internet website (www.comfortsystemsusa.com) an investor presentation slideshow. The Company intends to use this presentation in making presentations to analysts, potential investors, and other interested parties.
The information included in the investor presentation includes financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). The Companys management uses these non-GAAP measures in its analysis of the Companys performance. The Company believes that the presentation of certain non-GAAP measures provides useful supplemental information that is essential to a proper understanding of the operating results of the Companys core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The information in this Form 8-K being furnished under Item 7.01 shall not be deemed to be filed for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the Exchange Act), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The investor presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the Companys expectations and involve risks and uncertainties that could cause the Companys actual results to differ materially from those set forth in the statements. These risks are discussed in the Companys filings with the Securities and Exchange Commission, including an extensive discussion of these risks in the Companys Annual Report on Form 10-K for the year ended December 31, 2007.
A copy of the presentation is furnished herewith as Exhibit 99.1
The following Exhibits are included herein:
Exhibit 99.1 Slideshow presentation dated May 5, 2008.
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.
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COMFORT SYSTEMS USA, INC. |
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By: |
/s/ Trent T. McKenna |
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Trent T. McKenna |
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Vice President and General Counsel |
Date: May 6, 2008 |
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2
EXHIBIT INDEX
Exhibit |
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Exhibit Title or Description |
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99.1 |
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Slideshow presentation dated May 5, 2008. |
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Exhibit 99.1
As of May 5, 2008 |
2 This presentation 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, national or regional weakness in non-residential construction activity, difficulty in obtaining or increased costs associated with bonding, shortages of labor and specialty building materials, the use of incorrect estimates for bidding a fixed price contract, undertaking contractual commitments that exceed our labor resources, retention of key management, the Companys backlog failing to translate into actual revenue or profits, errors in the Companys percentage of completion method of accounting, the result of competition in the Companys markets, seasonal fluctuations in the demand for HVAC 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 and other risks detailed in the Companys reports filed with the Securities and Exchange Commission. Important factors that could cause actual results to differ are discussed under Item 1A. Company Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2007. These forward-looking statements speak only as of the date of this filing. Comfort Systems USA, Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Comfort Systems USA, Inc.s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Safe Harbor Statement |
3 To be the nations premier HVAC and mechanical systems installation and services provider. Vision |
4 Mission To provide the best value HVAC and mechanical systems installation and service, principally in the mid-market commercial, industrial, and institutional sectors, while caring for our customers, employees and the environment and realizing superior returns for our stockholders. |
5 Act with honesty and integrity. Show respect for all stakeholders. Exceed customer expectations. Seek win-win solutions. Demonstrate spirit, drive, and teamwork. Pursue innovation. Achieve premier safety performance. Commit to energy efficiency. Communicate openly.....and often. Impact our communities positively. Values |
6 Comfort Systems USA National Commercial, Industrial, Institutional HVAC/Piping/Plumbing Strong balance sheet Substantial continuing growth 59% new construction; 41% service, repair, retrofit Revenue run rate $1.2 billion |
7 Comfort Today Over $20M $10M - $20M Under $10M Comfort Systems USA Multi-Family Comfort Systems USA National Accounts ANNUAL REVENUES Region 3 Region 1 Region 2 |
8 What We Do Commercial HVAC Quality People. Building Solutions. Applied Systems Piping Service, Repair, Retrofit |
9 Long Term Industry Growth The Dodge Index for Nonresidential Building Construction 2000=100 Building comfort a necessity Mechanical equipment requires service, repair, replacement Increasing technical content and building automation Energy efficiency and IAQ emerging Outsourcing Commercial, Industrial, Institutional HVAC A $40B+ Industry D R I V E R S 80 100 120 140 160 180 200 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 4% |
10 Industry Trend Toward Service & Replacement (Recurring Revenue) 5+ million commercial buildings (DOE) Recurring service 20 year replacement cycle Inventory of future business OEMs note significant deferred maintenance & replacement over recent years Source: The Trane Company NEW CONSTRUCTION 70% 30% 0% 50% 100% 1980 Share of Industry Revenues Time 70% 30% SERVICE & REPLACEMENT |
11 13% 28% 59% Revenues by Activity New Construction/ Installation Replacement Service and Maintenance Q1 2008 |
12 0 2,000 4,000 0-1M 1-5M 5-10M 10-15M 15+M PROJECT SIZE # OF PROJECTS (As of March 31, 2008) Diverse Project Mix Average Project Size $450,000 Average Project Length 6-9 months Value of Projects >$1M $1,136.2M Value of Projects <$1M $723.8M 3,861 238 46 12 6 TOTAL PROJECTS = 4,163 |
13 Healthcare Education Government Manufacturing Office Building Multi-Family Retail/Restaurants Distribution Other Residential 13% 12% 13% 15% 15% 7% 1% 12% 1% 2% Top Ten Customers Diverse End-Use Base Served by 10 different Comfort operating units Largest customer = less than 4% of revenues Lodging & Entertainment Q1 2008 4% 5% Religious & Not-for-Profit |
14 Diverse End-Use Base Omni Orlando Resort at Championsgate Orlando, Florida Navy Federal Credit Union Pensacola, Florida University Hospital Little Rock, Arkansas University United Methodist Church Syracuse, New York |
15 Competitive Advantages High quality operations Ability to leverage and proliferate technical expertise Ability to collaborate on large jobs and share labor Energy efficiency services National multi-location service capability Purchasing economics Bonding and insurance |
16 Financial Overview |
17 Capital Structure Management $ Revenue Revenues 298 854 1370 1591 1546 2,000 1,500 1,000 500 0 819 Acquisition Phase and Industry Growth 785 820 1057 900 400 300 200 $ Debt Debt EBITDA 0.6 346 275 205 15 10 4.0 3.0 2.0 1.0 3.6 3.9 2.7 0.7 9 0.3 0.0 0.0 80 100 120 140 160 180 200 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Sharpest downturn in 30 years Best-ever industry growth History Financial Nonresidential Construction Spending (FW Dodge) 9/11/01 Dec 06 0.0 0 100 0 Sale of Assets 2000 2001 2002 1997 1998 1999 2003 2004 2005 2006 May 00 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 0 Sale of Assets 1110 2007 Dec 07 0.03 0 |
18 Backlog (in millions) Note: Excludes all divested and discontinued operations Backlog remains strong Multi-family backlog has decreased from a year ago All other categories have continued to grow 811.3 786.7 680.6 818.5 720 700.5 653.8 678.9 690.0 726.7 634.1 618.7 569.1 0 200 400 600 800 1000 Mar. 05 Jun. 05 Sept. 05 Dec. 05 Mar. 06 Jun. 06 Sept. 06 Dec. 06 Mar. 07 Jun. 07 Sept. 07 Dec. 07 Mar. 08 |
19 0.0 5.0 10.0 15.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Safe employees Valued by customers Lost time injury rate is 66% less than industry average Claims cost per payroll dollar down from 4.6% to 1.7% We can build a culture OSHA Recordable Rate Source: Bureau of Labor Statistics, Standard Industry Classification (SIC) Code 20 1710 Specialty Trades Contractors HVAC and Plumbing & North American Industry Classification System (NAICS) Code 23822 Safety 55% Difference 20% Difference Industry Average Comfort Systems USA Our safety record is no accident. |
20 1Q YTD 4Q 08 07 07 06 Financial Profile Ongoing Operations Revenues $ 295.7 $ 249.6 $ 1,109.5 $ 1,056.5 Adjusted EBITDA $ 15.3 $ 3.7 $ 56.8 $ 49.6 % Revenue 5.2% 1.5% 5.1% 4.7% Operating Income $ 12.8 $ 2.2 $ 49.9 $ 44.5 % Revenue 4.3% 0.9% 4.5% 4.2% Net Income - Continuing Ops $ 8.2 $ 1.8 $ 32.5 $ 28.7 % Revenue 2.8% 0.7% 2.9% 2.7% Diluted EPS - Continuing Ops.$ 0.20 $ 0.04 $ 0.79 $ 0.70 Free Cash Flow $ (3.7) $ (15.3) $ 72.8 $ 17.1 Debt $ 14.5 $ 0.0 Cash $ 88.6 $ 69.0 Backlog. $ 811.3 $ 700.5 |
21 Revenues $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 2003 2004 2005 2006 2007 Revenues |
22 Operating Margins (a) Annual Operating Margin 0% 1% 2% 3% 4% 5% 6% 2003 2004 2005 2006 2007 (a) This table includes non-GAAP financial information as the information provided excludes goodwill impairment charges of $2.7 million, $0.6 million and $33.9 million for 2003, 2004 and 2005, respectively. No goodwill impairment charge was recorded for 2006 and 2007. |
23 Adjusted EBITDA Continuing Operations $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2003 2004 2005 2006 2007 $25.5 (millions) $39.3 $49.6 $17.9 $56.8 |
24 Strong Cash Flows Funds From Operations (a) $ 83.6 $ 24.7 $37.4 CapEx, Net (b) (10.8) (7.6) (5.4) Free Cash Flow $ 72.8 $ 17.1 $ 32.0 (a) Funds From Operations is defined as net cash provided by operating activities adjusted by taxes paid related to the sale of businesses of $7.0 million in 2006. (b) CAPEX, Net represents capital expenditures net of proceeds from the sale of assets ($ in millions) 2007 2006 2005 |
25 Financial Strengths Market share up revenue and profit performance better than industry Commitment to cost containment $88.6 million cash at 3/31/08; substantial credit capacity if needed Positive free cash flow for nine calendar years |
26 Profile For Growth TIME EARNINGS Service ACQUISITIONS INCREMENTAL SERVICE GROWTH CURRENT OPERATIONS (CONSTRUCTION AND SERVICE) Energy Efficiency Commercial HVAC |
27 Operations Increase Productivity Education Leadership Project Managers Superintendents Service Sales Service Operations Craft Best Practices Project Management Estimating Cooperation with suppliers Prefabrication New materials and methods |
28 Job Loop Project Estimating Post-Project Review We review projects and apply what we have learned to improve our performance. Project Pricing Project Qualification Project Management |
29 The only things that evolve by themselves in an organization are disorder, friction and malperformance. -Peter Drucker |
30 Service Increase Service* Grow Maintenance Base Education Employees and Customers Higher margin opportunity Recurring revenue National accounts $2.50+ of repair and replacement for every $1.00 of maintenance Target Retrofit Projects Energy Efficiency IAQ * Maintenance, service, repair, retrofit |
31 Select Customers ® *Trademarks and logos are the property of their respective owners. |
32 Energy Efficiency-Retrofitting HVAC Green not a fad Energy costs drive need for efficiency HVAC 30% - 65 % electric usage Energy Star (Dept. of Energy/EPA) / LEED2 (USGBC3) 2- 4 year pay outs depending on electric rates, usage, age 1. FMI projects $21.2 MMM of new non-reconstruction in 2008 will use green building principles. 2. Leadership Energy and Environmental Design 3. United States Green Building Council |
33 Growth Internal More of what we do best Service Energy efficiency Step Out Growth Start ups in new geographies New locations for existing companies Techs on their own Targeted acquisitions Best non-union HVAC oriented mechanical in new area |
34 $20 million in revenue Construction and service In a growing market where we are not now Company that has performed well in the past and has continuing demonstrable upside Organizational structure capable of sustaining/improving the company Ownership/management that wants to stay on to operate company The Ideal Candidate |
35 Atlanta, GA (Service) Boise, ID Charleston, SC Columbia/Florence, SC Dallas/Fort Worth, TX El Paso, TX Ft. Lauderdale, FL Los Angeles, CA Nashville, TN Target Cities (Listed Alphabetically) Norfolk, VA Omaha, NE PA/NJ Portland, OR Richmond, VA San Antonio, TX Savannah, GA Spartanburg/Greenville, SC Tampa, FL |
36 Outlook Long-Term $40+ billion fragmented industry HVAC is a basic necessity Commercial construction continuing Growing installed base for recurring maintenance, service, repair and retrofit Scale opportunities service, purchasing, prefab, bonding, best practices Diverse customer base and geography Energy efficiency and IAQ Financially and operationally sound continuing to grow organically and by acquisition |
37 What We Do |
C O N T A C T: Bill George Executive Vice President and CFO 1-800-723-8431 bgeorge@comfortsystemsusa.com www.comfortsystemsusa.com |