Exhibit 99.1

 

Picture 1

 

CONTACT:

William George

675 Bering Drive, Suite 400

 

Chief Financial Officer

Houston, Texas 77057

 

713-830-9650

713-830-9600

 

FOR IMMEDIATE RELEASE

 

COMFORT SYSTEMS USA REPORTS THIRD QUARTER 2018 RESULTS

 

Houston, TX — October 25, 2018 — Comfort Systems USA, Inc. (NYSE: FIX), a leading provider of mechanical services including heating, ventilation, air conditioning, plumbing, piping and controls, today announced net income of $38.5 million or $1.02 per diluted share, for the quarter ended September 30, 2018, as compared to $22.3 million or $0.59 per diluted share, for the quarter ended September 30, 2017.   The Company reported revenue of $594.5 million in the current quarter, as compared to $480.9 million in 2017.  The Company reported free cash flow of $23.0 million in the current quarter, as compared to $39.5 million in 2017.  Backlog as of September 30, 2018 was $1.25  billion as compared to $1.23  billion as of June 30, 2018 and $901.2 million as of September 30, 2017.

 

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “Thanks to superb execution and commitment by our field teams, we are happy to report our best ever quarterly results.  These strong earnings are accompanied by extraordinary same-store revenue growth, strong cash flow, and a record year-over-year increase in same-store backlog.”

 

The Company reported net income of $87.7 million or $2.33 per diluted share, for the nine months ended September 30, 2018, as compared to $47.7 million or $1.27 per diluted share, in 2017.  Earnings in the first quarter of 2018 included a $0.07 per diluted share increase due to a discrete tax item.  Earnings in the second quarter of 2018 included an $0.08 per diluted share benefit from a legal settlement.  The Company also reported revenue of $1.59  billion, as compared to $1.33 billion in 2017.  Free cash flow for the nine months ended September 30, 2018 was $47.0 million, as compared to $49.6 million in 2017. 

 

Mr. Lane concluded, “Our pre-tax operating income for the first nine months of 2018 significantly exceeds last year’s record-setting full-year pre-tax operating income.  We are optimistic about the fourth quarter and about our 2019 prospects, and we believe that our recent and ongoing investments have positioned us to continue to capitalize on the continuing market strength in the majority of our markets.”

 

The Company will host a webcast and conference call to discuss its financial results and position on Friday,  October 26, 2018 at 10:00 a.m. Central Time.  The call-in number for this conference call is 1-866-318-8620 and enter 99721804 as the passcode.  The call and the slide presentation to accompany the remarks can be accessed on the Company’s website at www.comfortsystemsusa.com under the Investor tab.  A replay of the entire call will be available on the Company’s website on the next business day following the call.

 

Comfort Systems USA® is a premier provider of business solutions addressing workplace comfort, with 127 locations in 113 cities around the nation.  For more information, visit the Company’s website at www.comfortsystemsusa.com.

 

Certain statements and information in this press release may constitute forward-looking statements regarding our future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements, which are generally not historic in nature. These forward-looking statements are based on the current expectations and beliefs of Comfort Systems USA, Inc. and its subsidiaries (collectively, the “Company”) concerning future developments and their effect on the Company. While the Company’s management believes that these forward-looking statements are reasonable as and


 

when made, there can be no assurance that future developments affecting the Company will be those that it anticipates. All comments concerning the Company’s expectations for future revenue and operating results are based on the Company’s forecasts for its existing operations and do not include the potential impact of any future acquisitions. The Company’s forward-looking statements involve significant risks and uncertainties (some of which are beyond the Company’s control) and assumptions that could cause actual future results to differ materially from the Company’s historical experience and its present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the use of incorrect estimates for bidding a fixed-price contract; undertaking contractual commitments that exceed the Company’s labor resources; failing to perform contractual obligations efficiently enough to maintain profitability; national or regional weakness in construction activity and economic conditions; financial difficulties affecting projects, vendors, customers, or subcontractors; the Company’s backlog failing to translate into actual revenue or profits; failure of third party subcontractors and suppliers to complete work as anticipated;  difficulty in obtaining or increased costs associated with bonding and insurance; impairment to goodwill; errors in the Company’s percentage-of-completion method of accounting; the result of competition in the Company’s markets; the Company’s decentralized management structure; material failure to comply with varying state and local laws, regulations or requirements; debarment from bidding on or performing government contracts; shortages of labor and specialty building materials; retention of key management; seasonal fluctuations in the demand for mechanical 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; an increase in our effective tax rate; an information technology failure or cyber security breach; and other risks detailed in our reports filed with the Securities and Exchange Commission.

 

For additional information regarding known material factors that could cause the Company’s results to differ from its projected results, please see its filings with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

 

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise.

 

— Financial tables follow —

 


 

Comfort Systems USA, Inc.

Consolidated Statements of Operations

(In Thousands, Except per Share Amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

    

2018

    

%  

        

 

2017

    

%  

 

    

2018

    

%  

        

 

2017

    

%  

 

Revenue

 

$

594,536

 

100.0

%

 

$

480,851

 

100.0

%

 

$

1,594,520

 

100.0

%

 

$

1,326,850

 

100.0

%

Cost of services

 

 

466,668

 

78.5

%

 

 

379,993

 

79.0

%

 

 

1,266,416

 

79.4

%

 

 

1,054,300

 

79.5

%

Gross profit

 

 

127,868

 

21.5

%

 

 

100,858

 

21.0

%

 

 

328,104

 

20.6

%

 

 

272,550

 

20.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

 

75,297

 

12.7

%

 

 

66,707

 

13.9

%

 

 

216,528

 

13.6

%

 

 

196,553

 

14.8

%

Goodwill impairment

 

 

 —

 

 —

 

 

 

 —

 

 —

 

 

 

 —

 

 —

 

 

 

1,105

 

0.1

%

Gain on sale of assets

 

 

(219)

 

 

 

 

(184)

 

 —

 

 

 

(630)

 

 

 

 

(464)

 

 

Operating income

 

 

52,790

 

8.9

%

 

 

34,335

 

7.1

%

 

 

112,206

 

7.0

%

 

 

75,356

 

5.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(1,127)

 

(0.2)

%

 

 

(945)

 

(0.2)

%

 

 

(2,548)

 

(0.2)

%

 

 

(2,337)

 

(0.2)

%

Changes in the fair value of contingent earn-out obligations

 

 

434

 

0.1

%

 

 

2,469

 

0.5

%

 

 

493

 

 

 

 

1,845

 

0.1

%

Other income (expense)

 

 

39

 

 

 

 

10

 

 —

 

 

 

4,062

 

0.3

%

 

 

57

 

 

Income before income taxes

 

 

52,136

 

8.8

%

 

 

35,869

 

7.5

%

 

 

114,213

 

7.2

%

 

 

74,921

 

5.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

13,595

 

 

 

 

 

13,585

 

 

 

 

 

26,466

 

 

 

 

 

27,188

 

 

 

Net income

 

$

38,541

 

6.5

%

 

$

22,284

 

4.6

%

 

$

87,747

 

5.5

%

 

$

47,733

 

3.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.03

 

 

 

 

$

0.60

 

 

 

 

$

2.36

 

 

 

 

$

1.28

 

 

 

Diluted

 

$

1.02

 

 

 

 

$

0.59

 

 

 

 

$

2.33

 

 

 

 

$

1.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,294

 

 

 

 

 

37,232

 

 

 

 

 

37,236

 

 

 

 

 

37,259

 

 

 

Diluted

 

 

37,667

 

 

 

 

 

37,626

 

 

 

 

 

37,634

 

 

 

 

 

37,684

 

 

 

 


 

Supplemental Non-GAAP Information — Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) — (Unaudited) (In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

    

2018

    

%  

    

2017

    

%  

 

    

2018

    

%  

    

2017

    

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

38,541

 

 

 

$

22,284

 

 

 

 

$

87,747

 

 

 

$

47,733

 

 

 

Provision for income taxes

 

 

13,595

 

 

 

 

13,585

 

 

 

 

 

26,466

 

 

 

 

27,188

 

 

 

Other expense (income), net

 

 

(39)

 

 

 

 

(10)

 

 

 

 

 

(4,062)

 

 

 

 

(57)

 

 

 

Changes in the fair value of contingent earn-out obligations

 

 

(434)

 

 

 

 

(2,469)

 

 

 

 

 

(493)

 

 

 

 

(1,845)

 

 

 

Interest expense, net

 

 

1,127

 

 

 

 

945

 

 

 

 

 

2,548

 

 

 

 

2,337

 

 

 

Gain on sale of assets

 

 

(219)

 

 

 

 

(184)

 

 

 

 

 

(630)

 

 

 

 

(464)

 

 

 

Goodwill impairment

 

 

 —

 

 

 

 

 —

 

 

 

 

 

 —

 

 

 

 

1,105

 

 

 

Depreciation and amortization

 

 

11,010

 

 

 

 

10,437

 

 

 

 

 

30,732

 

 

 

 

27,336

 

 

 

Adjusted EBITDA

 

$

63,581

 

10.7

%  

$

44,588

 

9.3

%

 

$

142,308

 

8.9

%  

$

103,333

 

7.8

%

 

Note:  The Company defines adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as net income,  provision for income taxes, other expense (income), net, changes in the fair value of contingent earn-out obligations, interest expense, net, gain on sale of assets, goodwill impairment and depreciation and amortization.  Other companies may define Adjusted EBITDA differently.  Adjusted EBITDA is presented because it is a financial measure that is frequently requested by third parties.  However, Adjusted EBITDA is not considered under generally accepted accounting principles as a primary measure of an entity’s financial results, and accordingly, Adjusted 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)

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2018

 

2017

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,248

 

$

36,542

 

Billed accounts receivable, net

 

 

497,861

 

 

382,867

 

Unbilled accounts receivable

 

 

40,251

 

 

 —

 

Costs and estimated earnings in excess of billings

 

 

11,008

 

 

30,116

 

Other current assets

 

 

31,311

 

 

39,832

 

Total current assets

 

 

599,679

 

 

489,357

 

Property and equipment, net

 

 

102,960

 

 

87,591

 

Goodwill

 

 

231,190

 

 

200,584

 

Identifiable intangible assets, net

 

 

98,712

 

 

76,044

 

Other noncurrent assets

 

 

27,399

 

 

27,544

 

Total assets

 

$

1,059,940

 

$

881,120

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

3,279

 

$

613

 

Accounts payable

 

 

150,880

 

 

132,011

 

Billings in excess of costs and estimated earnings

 

 

131,152

 

 

106,005

 

Other current liabilities

 

 

160,535

 

 

135,099

 

Total current liabilities

 

 

445,846

 

 

373,728

 

Long-term debt

 

 

93,672

 

 

59,926

 

Other long-term liabilities

 

 

27,655

 

 

29,521

 

Total liabilities

 

 

567,173

 

 

463,175

 

Total stockholders’ equity

 

 

492,767

 

 

417,945

 

Total liabilities and stockholders’ equity

 

$

1,059,940

 

$

881,120

 

 


 

Selected Cash Flow Data (Unaudited) (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

    

2018

    

2017

 

2018

    

2017

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

30,484

 

$

44,512

 

$

68,002

 

$

65,692

 

Investing activities

 

$

(59,139)

 

$

(16,155)

 

$

(86,269)

 

$

(110,906)

 

Financing activities

 

$

19,902

 

$

(33,326)

 

$

973

 

$

42,636

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash from operating activities

 

$

30,484

 

$

44,512

 

$

68,002

 

$

65,692

 

Purchases of property and equipment

 

 

(7,936)

 

 

(5,184)

 

 

(22,059)

 

 

(16,830)

 

Proceeds from sales of property and equipment

 

 

416

 

 

179

 

 

1,077

 

 

784

 

Free cash flow

 

$

22,964

 

$

39,507

 

$

47,020

 

$

49,646

 

 

Note:  Free cash flow is defined as cash flow from operating activities less 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 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.


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