01—Abstract
Summary
Summary of the 10-K filed February 28, 2014. Cited figures are marked; the original filing is the authoritative source.
Comfort Systems USA, Inc. (FIX) reported for the fiscal year ending December 31, 2013, a substantial increase in revenue to $1,357.3 milliona, a 2.0% rise from the previous year, driven by strong performance in its Arizona and EAS operations.
This revenue growth, coupled with improved operational efficiencies and market conditions, led to a significant increase in gross profit, up 15.5% to $239.9 millionb, resulting in a gross profit margin of 17.7%. The company's net income attributable to common stockholders also saw a substantial improvement, reaching $27.3 million, a significant turnaround from the loss reported in 2011 and a notable increase from $13.5 million in 2012. This performance reflects the company's successful strategy of focusing on core competencies, achieving operating efficiencies, and leveraging its resources across its 36 operating units in 79 cities.
Despite a competitive market and economic uncertainties, Comfort Systems demonstrated strong liquidity, with $52.1 millionc in cash and cash equivalents and no outstanding borrowings on its $175 million revolving credit facility as of year-end 2013. The company generated $38.4 million in cash flow from operating activities, indicating robust cash generation capabilities.
Key risk factors identified include the cyclical nature of the construction industry, potential cost overruns on contracts, and reliance on third-party subcontractors and suppliers. However, the company's diversified customer base, strong backlog, and focus on both installation and maintenance/repair services position it well to navigate these challenges and pursue future growth opportunities.
02—Key points
Key Highlights
- Revenue increased by 2.0% to $1,357.3 million in 2013, primarily due to growth in Arizona and EAS operations, offsetting a decline in Virginia.
- Gross profit significantly improved by 15.5% to $239.9 million, with gross profit margin increasing from 15.6% to 17.7%, driven by improved profitability and market conditions.
- Net income attributable to Comfort Systems USA, Inc. rose to $27.3 million in 2013, up from $13.5 million in 2012, indicating improved operational performance.
- The company maintained strong liquidity, ending 2013 with $52.1 million in cash and cash equivalents and no borrowings on its $175 million credit facility.
- Cash flow from operating activities was robust at $38.4 million in 2013, supporting free cash flow of $22.1 million.
- Backlog was $603.6 million as of December 31, 2013, a slight decrease from the prior year, reflecting ongoing industry conditions.
- Comfort Systems is focused on improving execution, cost control, and project/service performance, with an outlook for comparable profitability in 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Comfort Systems USA kept $0.02.
- Revenue$1.36B100.0%
- Cost of revenue−$1.12B82.3%
- Gross profit$239.9M17.7%
- Operating costs−$193.6M14.3%
- Operating income$46.3M3.4%
- Interest, other & tax−$19.0M1.4%
- Net income$27.3M2.0%
Where FY2013 revenue went
$1.36B- Cost of revenue: $1.12B, 82% of revenue
- SG&A: $194.2M, 14% of revenue
- Net income: $27.3M, 2.0% of revenue
- Interest, other & tax: $19.0M, 1.4% of revenue
Kept 2.0% as net incomeNet income $27.3M · 2.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $1.36B$1.33B | +2.0% |
| Cost of Revenue | $1.12B$1.12B | −0.5% |
| Gross Profit | $239.88M$207.62M | +15.5% |
| SG&A Expenses | $194.21M$185.81M | +4.5% |
| Operating Income | $46.26M$22.30M | +107.4% |
| Interest Expense | $1.35M$1.59M | −15.3% |
| Net Income | $27.27M$13.46M | +102.5% |
| EPS (Basic) | $0.73$0.36 | +102.8% |
| EPS (Diluted) | $0.73$0.36 | +102.8% |
| Shares Outstanding (Basic) | 37.24M37.11M | +0.4% |
| Shares Outstanding (Diluted) | 37.54M37.26M | +0.7% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Comfort Systems USA's revenue growth in 2013?
Revenue increased by 2.0% to $1,357.3 million in 2013. This growth was primarily driven by the strong performance of its Arizona operation, which contributed $23.5 million, and its EAS operation, which contributed $47.3 million. These increases were partially offset by lower revenue in the Virginia-based operation, which had completed a significant data center project in the prior year.
How did Comfort Systems USA manage its profitability and gross margins in 2013?
The company achieved a significant improvement in gross profit, which increased by 15.5% to $239.9 million. This led to an expansion of gross profit margin from 15.6% in 2012 to 17.7% in 2013. This improvement was attributed to better profitability across most operations, particularly EAS, improved market conditions in Arizona, and a favorable accounting adjustment from a prior period. The company also benefited from a claim settlement related to a data center project.
What is Comfort Systems USA's financial health and liquidity position as of December 31, 2013?
Comfort Systems USA demonstrated strong financial health and liquidity. As of December 31, 2013, the company had $52.1 million in cash and cash equivalents. Importantly, it had no outstanding borrowings on its $175 million revolving credit facility and maintained $126.9 million in available credit. The company generated $38.4 million in cash flow from operating activities, reflecting its ability to convert earnings into cash.
What are the key risks that Comfort Systems USA highlighted in its 2013 10-K filing?
The company identified several key risks for investors. These include the cyclical nature of the construction industry and its dependency on construction activity levels, the risk of cost overruns on its contracts which are largely fixed-price, the company's reliance on third-party subcontractors and suppliers, and potential difficulties in obtaining surety bonds. Additionally, the company noted risks related to its decentralized operating model, potential goodwill impairment charges, and the use of the percentage-of-completion accounting method, which can lead to revenue and profit adjustments.
06—Continue