10-QPeriod: Q1 FY2012

COMFORT SYSTEMS USA INC Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 2, 2012For Securities:FIX

Summary

Comfort Systems USA, Inc. (FIX) reported its first quarter 2012 financial results, indicating a revenue increase of 16.8% to $329.4 million compared to the prior year period. This growth was driven by a combination of same-store revenue increases and the acquisition of Environmental Air Systems (EAS) in late 2011. Despite the revenue growth, the company experienced a net loss attributable to Comfort Systems USA, Inc. of $1.0 million for the quarter, a slight improvement from a net loss of $5.2 million in the first quarter of 2011. This loss was influenced by factors such as increased selling, general, and administrative expenses and a job write-down on a project. The company maintains a solid backlog of $622.0 million, though it saw a slight sequential decrease. Management is focusing on execution, cost control, and efficient project performance to navigate continued weakness in the nonresidential construction sector.

Financial Highlights

51 data points
Beta

Revenue

$326.90M

13.1% Gross Margin

Net Income

-$1.03M

-0.3% Net Margin

EPS (Diluted)

$-0.03

Total Assets

$576.06M

Cash & Equivalents

$27.87M

Free Cash Flow

-$21.91M

Financial Statements
Beta
Revenue$326.90M
Cost of Revenue$283.97M
Gross Profit$42.93M
SG&A Expenses$46.05M
Operating Income-$3.00M
Interest Expense$397K
Net Income-$1.03M
EPS (Basic)$-0.03
EPS (Diluted)$-0.03
Shares Outstanding (Basic)37.06M
Shares Outstanding (Diluted)37.06M

Key Highlights

  • 1Revenue increased by 16.8% year-over-year to $329.4 million, driven by same-store growth (9.0%) and the EAS acquisition (7.8%).
  • 2Net loss attributable to the company improved to $1.0 million ($0.03 per share) from $5.2 million ($0.14 per share) in the prior year's quarter.
  • 3Gross profit increased by 24.9% to $42.7 million, with gross profit margin improving from 12.1% to 13.0%.
  • 4Selling, General, and Administrative (SG&A) expenses increased by 8.8% to $46.4 million, but decreased as a percentage of revenue from 15.1% to 14.1%.
  • 5The company ended the quarter with a backlog of $622.0 million, a slight decrease from the prior quarter but a slight increase year-over-year.
  • 6Cash used in operating activities was $19.8 million, and the company reported a negative free cash flow of $21.5 million for the quarter.
  • 7Comfort Systems USA, Inc. reported compliance with all financial covenants under its credit facility.

Frequently Asked Questions

The primary driver for the revenue increase was a combination of a 9.0% increase in same-store revenue, largely attributed to the manufacturing sector and a large data center project, and the impact of the Environmental Air Systems (EAS) acquisition, which contributed approximately 7.8% to the revenue growth.

Management expects continued weakness in the nonresidential construction sector to impact activity levels. The primary emphasis for the remainder of 2012 will be on execution, cost controls, and efficient project and service performance. Despite economic conditions, the company anticipates modest levels of profitability for the full year.

The company has generated positive free cash flow for many years and expects to maintain sufficient liquidity. As of March 31, 2012, they had no outstanding borrowings under their $125 million credit facility, $79.3 million in available credit, and modest overall indebtedness. They are in compliance with all financial covenants.

Yes, the company mentions potential risks including challenging surety market conditions which could affect their ability to secure bonding, and ongoing legal and regulatory claims arising in the normal course of business. They have accrued for probable losses where estimable but acknowledge inherent uncertainties.