Summary
Comfort Systems USA, Inc. reported its second quarter 2011 financial results, showing a significant increase in revenue driven by both organic growth and the acquisition of ColonialWebb. While revenue is up, gross profit saw a slight decline as a percentage of revenue due to pricing pressures and the close-out of profitable jobs in the prior year. Selling, General, and Administrative (SG&A) expenses also increased, but on a same-store basis excluding amortization, they decreased, indicating effective cost management. The company experienced a net loss for the six-month period ending June 30, 2011, primarily due to increases in SG&A and a prior year gain on discontinued operations, but a net income was reported for the second quarter. Financially, the company maintains a strong liquidity position with no outstanding borrowings on its revolving credit facility and substantial cash balances. However, cash flow from operations turned negative for both the quarter and the year-to-date period, largely due to increased investments in working capital. The company expects industry activity to remain flat over the next twelve months and is focusing on execution, cost control, and efficient project performance to maintain profitability. Investors should note the ongoing pricing competition and potential impacts from surety market conditions.
Financial Highlights
50 data points| Revenue | $306.42M |
| Cost of Revenue | $264.64M |
| Gross Profit | $47.90M |
| SG&A Expenses | $41.93M |
| Operating Income | $6.82M |
| Interest Expense | $466K |
| Net Income | $3.16M |
| EPS (Basic) | $0.08 |
| EPS (Diluted) | $0.08 |
| Shares Outstanding (Basic) | 37.63M |
| Shares Outstanding (Diluted) | 37.74M |
Key Highlights
- 1Revenue increased by 25.1% to $312.1 million for Q2 2011 compared to Q2 2010, driven by both same-store growth (8.2%) and the ColonialWebb acquisition (16.9%).
- 2Gross profit margin declined from 16.8% in Q2 2010 to 15.2% in Q2 2011, primarily attributed to a difficult pricing environment and the wrap-up of profitable projects in the prior year.
- 3Selling, General & Administrative (SG&A) expenses increased by 17.7% year-over-year, but on a same-store basis excluding amortization, they decreased by 3.9%, highlighting cost control efforts.
- 4The company reported a net income of $3.2 million for Q2 2011, a significant improvement from the $2.0 million net loss for the six-month period ended June 30, 2011, which was impacted by a prior year gain on discontinued operations.
- 5Cash flow from operations was negative for both Q2 2011 ($4.4 million) and the year-to-date period ($23.4 million), primarily due to increased investment in working capital.
- 6Comfort Systems USA maintains a strong liquidity position with $50.1 million in cash and cash equivalents and no outstanding borrowings on its $125 million revolving credit facility as of June 30, 2011.
- 7Backlog stood at $621.2 million as of June 30, 2011, a 22.6% increase from the prior year, indicating a positive near-term revenue outlook, although new construction activity is expected to remain flat.