Comfort Systems USA (FIX) 10-K risk factor changes: FY2016 vs FY2015

[removed: Our] [added: Our] business is subject to a variety of risks.

Our business, financial condition and results of operations could be adversely affected by the occurrence of any of these events, which could cause actual results to differ materially from expected and historical results, and the trading price of our common stock could [removed: decline.][added: decline.]

[removed: _Many] [added: Many] of the markets we do work in are currently experiencing [added: an economic downturn] or [removed: have recently experienced] [added: might in the future experience] an economic downturn that may materially and adversely affect our business because our business is dependent on levels of construction [removed: activity._][added: activity.]

[removed: _Because] [added: Because] we bear the risk of cost overruns in most of our contracts, we may experience reduced profits or, in some cases, losses under these contracts if costs increase above our [removed: estimates._][added: estimates.]

[added: If our estimates or assumptions prove to be inaccurate, if circumstances change in] a way that renders our assumptions and estimates inaccurate or we fail to successfully execute the work, cost overruns may occur and we could experience reduced profits or a loss for affected projects.

[removed: _Our] [added: Our] backlog is subject to unexpected adjustments and cancellations, which means that amounts included in our backlog may not result in actual revenue or translate into [removed: profits._][added: profits.]

[removed: _Intense] [added: Intense] competition in our industry could reduce our market share and our [removed: profit._][added: profit.]

We also expect increased competition from [removed: in-house] [added: in‑house] service providers, because some of our customers have employees who perform service work similar to the services we provide.

[removed: _Our] [added: Our] recent and future acquisitions may not be [removed: successful._][added: successful.]

[added: | | · | |] the assumption of material liabilities (including for [removed: environmental-related] [added: environmental‑related] costs); [added: |]

[added: | | · | |] failure of due diligence to uncover situations that could result in legal exposure or to quantify the true liability exposure from known risks; [added: |]

[added: | | · | |] the diversion of [removed: management's] [added: management’s] attention from the management of daily operations to the integration of operations; [added: |]

[added: | | · | |] difficulties in the assimilation and retention of employees, in the assimilation of different cultures and practices, in the assimilation of broad and geographically dispersed personnel and operations, and the retention of employees generally; [added: |]

[added: | | · | |] the risk of additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls; and [added: |]

[added: | | · | |] we may not be able to realize the cost savings or other financial benefits we anticipated prior to the acquisition. [added: |]

[removed: _Information] [added: Information] technology system failures, network disruptions or cyber security breaches could adversely affect our [removed: business._][added: business.]

We use sophisticated information technology systems, networks, and infrastructure in conducting some of our [removed: day-to-day] [added: day‑to‑day] operations and providing services to certain customers.

In addition, these systems, networks, and infrastructure may be vulnerable to deliberate [removed: cyber-attacks] [added: cyber‑attacks] that interfere with their functionality or the confidentiality of our information or our [removed: customers'] [added: customers’] data.

[removed: _Third] [added: Third] parties contribute significantly to our completion of many [removed: projects._][added: projects.]

We hire [removed: third-party] [added: third‑party] subcontractors to perform work and depend on [removed: third-party] [added: third‑party] suppliers to provide equipment and materials necessary to complete our projects.

[removed: _Earnings] [added: Earnings] for future periods may be impacted by impairment charges for goodwill and intangible [removed: assets._][added: assets.]

[removed: _Actual] [added: Actual] and potential claims, lawsuits and proceedings could ultimately reduce our profitability and liquidity and weaken our financial [removed: condition._][added: condition.]

These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, [removed: workers'] [added: workers’] compensation, employment [added: discrimination, breach of contract or property damage.]

[removed: _Our] [added: Our] use of the [removed: percentage-of-completion] [added: percentage‑of‑completion] method of accounting could result in a reduction or reversal of previously recorded revenue or [removed: profits._][added: profits.]

A material portion of our revenue is recognized using the [removed: percentage-of-completion] [added: percentage‑of‑completion] method of accounting, which results in our recognizing contract revenue and earnings ratably over the contract term in the proportion that our actual costs bear to our estimated contract costs.

Prior to contract completion, we may adjust our estimates on one or more occasions as a result of change orders to the original contract, collection disputes with the customer on amounts invoiced or claims against the customer for increased costs incurred by us due to [removed: customer-induced] [added: customer‑induced] delays and other factors.

As a result of the requirements of the [removed: percentage-of-completion] [added: percentage‑of‑completion] method of accounting, the possibility exists, for example, that we could have estimated and reported a profit on a contract over several periods and later determined, usually near contract completion, that all or a portion of such previously estimated and reported profits were overstated.

On a historical basis, we believe that we have made reasonably reliable estimates of the progress towards completion on our [removed: long-term] [added: long‑term] contracts.

[removed: _A] [added: A] significant portion of our business depends on our ability to provide surety bonds.

Any difficulties in the financial and surety markets may adversely affect our bonding capacity and [removed: availability._][added: availability.]

[added: Consequently, during times] when less overall bonding capacity is available in the market, surety terms have become more expensive and more restrictive.

[removed: Our surety providers are under no commitment to guarantee our access to] new bonds in the future; thus, our ability to access or increase bonding capacity is at the sole discretion of our surety providers.

[removed: _We] [added: We] are a decentralized company and place significant decision making powers with our [removed: subsidiaries'] [added: subsidiaries’] management, which presents certain [removed: risks._][added: risks.]

[removed: _Our] [added: Our] insurance policies against many potential liabilities require high deductibles, and our risk management policies and procedures may leave us exposed to unidentified or unanticipated risks.

Additionally, difficulties in the insurance markets may adversely affect our ability to obtain necessary [removed: insurance._][added: insurance.]

Although we maintain insurance policies with respect to our related exposures, these policies are subject to high deductibles; as such, we are, in effect, [removed: self-insured] [added: self‑insured] for substantially all of our typical claims.

[added: Also,] our prior casualty loss history might adversely affect our ability to procure insurance within commercially reasonable ranges.

[removed: _Failure] [added: Failure] to remain in compliance with covenants under our credit agreement, service our indebtedness, or fund our other liquidity needs could adversely impact our [removed: business._][added: business.]

Default under our credit agreement could result in (1) us no longer being entitled to borrow under the agreement; (2) termination of the agreement; (3) acceleration of the maturity of outstanding indebtedness under the agreement; and/or [removed: (4) foreclosure on any collateral securing the obligations under the agreement.]

[removed: _If] [added: If] we experience delays and/or defaults in customer payments, we could be unable to recover all [removed: expenditures._][added: expenditures.]

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Our surety providers are under no commitment to guarantee our access to

(4) foreclosure on any collateral securing the obligations under the agreement.

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objectives of the system are met.

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It is possible that following the inauguration of President Trump on January 20, 2017, legislation will be introduced and passed by the Republican-controlled Congress repealing the Affordable Care Act in whole or in part and signed into law by President Trump, consistent with statements made by him during his presidential campaign indicating his intention to do so within a short time following his inauguration.

Because of the continued uncertainty about the implementation of the Affordable Care Act, including the potential for further legal challenges or repeal of that legislation, we cannot quantify or predict with any certainty the likely impact of the Affordable Care Act or its repeal on our financial position or results of operations.

_

Further, some of the local or regional markets we do work in have yet to enter a period of sustained recovery.

If our estimates or assumptions prove to be inaccurate, if circumstances change in

discrimination, breach of contract or property damage.

Consequently, during times

Also,

project execution, leading to a potential decline in future project awards.

economic cycle may result in our incurring costs that affect our profitability.

Additionally,

which may significantly harm our business and cause our stock price to decline.

A continued increase in health care costs or additional costs incurred as a result of the Affordable Care Act could have a negative impact on our financial position and results of operations.

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in this annual report on Form [removed: 10-K.][added: 10‑K.]

Also see [removed: "Forward-Looking Statements"] [added: “Forward‑Looking Statements”] discussion.

[removed: Introduction] [added: Introduction] and [removed: Overview][added: Overview]

[removed: _Nature] [added: Nature] and Economics of Our [removed: Business_][added: Business]

Our responsibilities usually require conforming the systems to [removed: pre-established] [added: pre‑established] engineering drawings and equipment and performance specifications, which we frequently participate in establishing.

Our bid price and terms are intended to cover our estimated costs on the project and provide a profit margin to us commensurate with the value of the installed system to the customer, the risk that project costs or duration will vary from estimate, the schedule on which we will be paid, the opportunities for other work that we might forego by committing capacity to this project, and other costs that we incur [removed: more broadly] to support our operations but which are not specific to the project.

[removed: Typically] [added: Typically,] customers will seek [removed: bids] [added: pricing] from competitors for a given project.

While the criteria on which customers select [removed: the winning bid] [added: a service provider] vary widely and include factors such as quality, technical expertise, [removed: on-time] [added: on‑time] performance, [removed: post-project] [added: post‑project] support and service, and company history and financial strength, we believe that price [added: for value] is the most influential factor for most customers in choosing a mechanical installation and service provider.

Project contracts in our industry also frequently allow for a small portion of progress billings or contract price to be withheld by the customer until after we have completed the [removed: work, typically for six months.][added: work.]

We also perform some project work on a [removed: cost-plus] [added: cost‑plus] or a time and materials basis, under which we are paid our costs incurred plus an [removed: agreed-upon] [added: agreed‑upon] profit [added: margin, and such projects are sometimes subject to a guaranteed maximum cost.]

These margins are frequently less than [removed: fixed-price] [added: fixed‑price] contract margins because there is less risk of unrecoverable cost overruns in [removed: cost-plus] [added: cost‑plus] or time and materials work.

As of December 31, [removed: 2015,] [added: 2016,] we had [removed: 3,843] [added: 3,830] projects in process.

Our average project takes six to nine months to complete, with an average contract price of approximately [removed: $512,000.][added: $516,000.]

We have what we believe is a [removed: well-diversified] [added: well‑diversified] distribution of revenue across [removed: end-use] [added: end‑use] sectors that we believe reduces our exposure to negative developments in any given sector.

Because of the integral nature of HVAC and related controls systems to most buildings, we have the legal right in almost all cases to attach liens to buildings or related funding sources when we have [removed: not been fully paid for installing systems, except with respect to some government buildings.]

Taken together, projects with contract prices of $1 million or more totaled [removed: $1,565.0] [added: $1,552.1] million of aggregate contract value as of December 31, [removed: 2015,] [added: 2016,] or approximately 80%, out of a total contract value for all projects in progress of [removed: $1,966.4] [added: $1,975.0] million.

Prices to the customer are [removed: usually] based on the equipment and materials used in the service as well as technician labor time.

These agreements typically [removed: cover periods ranging from] [added: are for] one [removed: to three] [added: or more] years [removed: with thirty-] [added: and frequently contain thirty‑] to [removed: sixty-day] [added: sixty‑day] cancellation notice periods.

[removed: _Profile] [added: Profile] and Management of Our [removed: Operations_][added: Operations]

We also monitor selling, general, administrative and indirect project support expense, backlog, workforce size and mix, growth in revenue and profits, variation of actual project cost from original estimate, and overall financial performance in [added: comparison to budget and updated forecasts.]

Operational factors we emphasize include project selection, estimating, pricing, management and execution practices, labor utilization, safety, training, and the [removed: make-up] [added: make‑up] of both existing backlog as well as new business being pursued, in terms of project size, technical application and facility type, [removed: end-use] [added: end‑use] customers and industries, and location of the work.

Accordingly, we devote considerable attention to operating unit management quality, stability, and contingency planning, including related considerations of compensation, and [removed: non-competition] [added: non‑competition] protection where applicable.

[removed: _Economic] [added: Economic] and Industry [removed: Factors_][added: Factors]

[removed: While we do not have operations in all major cities of the] United States, we believe our national presence is sufficiently large that we experience trends in demand for and pricing of our services that are consistent with trends in the national nonresidential construction sector.

[removed: _Operating] [added: Operating] Environment and Management [removed: Emphasis_][added: Emphasis]

Nonresidential building construction and renovation activity, as reported by the federal government, declined [added: steeply] over the four year period from 2009 to 2012, and 2013 and 2014 activity levels were relatively stable at the low levels of the preceding years.

As a result of our continued strong emphasis on cash flow, at December 31, [removed: 2015] [added: 2016] we had [removed: modest] [added: no] indebtedness under our revolving credit [removed: facility and substantial] [added: facility, with positive] uncommitted cash balances, as discussed further in [removed: "Liquidity] [added: “Liquidity] and Capital [removed: Resources"] [added: Resources”] below.

We have a credit facility in place with considerably less restrictive terms than those of our previous facilities; this facility does not expire until [removed: October 2019.][added: February 2021.]

We have generated positive free cash flow in each of the last [removed: seventeen] [added: eighteen] calendar years and will continue our emphasis in this area.

As discussed at greater length in [removed: "Results] [added: “Results] of [removed: Operations"] [added: Operations”] below, we expect price competition to continue as our customers and local and regional competitors respond cautiously to [removed: changing] [added: improved market] conditions.

We will continue our efforts to [removed: expand and improve] [added: invest in] our service business, to [removed: find] [added: pursue] the more active sectors in our markets, and to [removed: increase] [added: emphasize] our regional and national account business.

[added: Our primary] emphasis for [removed: 2016] [added: 2017] will be on execution and cost control, but we are seeking growth based on our belief that industry conditions [removed: are beginning] [added: will continue] to [removed: improve,] [added: be strong in 2017,] and we believe that activity levels will permit us to earn improved profits while preserving and developing our workforce.

We continue to focus on project qualification, estimating, pricing and management; and we are investing in [removed: service] growth and improved performance.

[removed: _Critical] [added: Critical] Accounting [removed: Policies_][added: Policies]

As discussed elsewhere in this annual report on Form [removed: 10-K,] [added: 10‑K,] our business has two service functions: (i) installation, which we account for under the percentage of completion method, and (ii) maintenance, repair and replacement, which we account for as the services are performed, or in the case of replacement, under the percentage of completion method.

In addition, we identified other critical accounting policies related to our allowance for doubtful accounts receivable, the recording of our [removed: self-insurance] [added: self‑insurance] liabilities, valuation of deferred tax assets, accounting for acquisitions and the recoverability of goodwill and identifiable intangible assets.

These accounting policies, as well as others, are described in Note 2 to the Consolidated Financial Statements included elsewhere in this annual report on Form [removed: 10-K.][added: 10‑K.]

[removed: _Percentage] [added: Percentage] of Completion Method of [removed: Accounting_][added: Accounting]

Approximately 82% of our revenue was earned on a project basis and recognized through the percentage of completion method of accounting during [removed: 2015.][added: 2016.]

[removed: These contract costs are included in our results of operations under] the caption [removed: "Cost] [added: “Cost] of [removed: Services."] [added: Services.”] Then, as we perform under those contracts, we measure costs incurred, compare them to total estimated costs to complete the contract, and recognize a corresponding proportion of contract revenue.

not been fully paid for installing systems, except with respect to some government buildings.

A stratification of projects in progress as of December 31, 2016, by contract price, is as follows:

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| | | | | Aggregate | | |

| | | | | Contract | | |

| | | No. of | | Price Value | | |

| Contract Price of Project | | Projects | | (millions) | | |

| Under $1 million | | 3,415 | | $ | 422.9 | |

| $1 million - $5 million | | 328 | | | 744.4 | |

| $5 million - $10 million | | 59 | | | 397.4 | |

| $10 million - $15 million | | 19 | | | 235.9 | |

| Greater than $15 million | | 9 | | | 174.4 | |

| Total | | 3,830 | | $ | 1,975.0 | |

While we do not have operations in all major cities of the

During 2015 and 2016, there was an increase in overall activity levels and we currently expect that activity will continue at these improved levels during 2017.

These contract costs are included in our results of operations under

Estimated losses in excess of our deductible, which have not already been paid, are included in our accrual with a corresponding receivable from our insurance carrier.

Loss estimates associated with the larger and

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| Other | | | 1,097 | | 0.1 | % | | 76 | | — | | | 91 | | — | |

2016 Compared to 2015

During 2016, we completed one acquisition in the first quarter of 2016, known as “Shoffner”, that reports as a separate operating location in the Knoxville, Tennessee area.

In addition, we merged four operating locations into two operating locations during the first quarter, and created two operating locations out of one existing operating location.

Revenue—Revenue increased $53.8 million, or 3.4% to $1,634.3 million in 2016 compared to 2015.

The increase included a 4.6% increase related to the acquisition of Shoffner, which was partially offset by a 1.1% decrease in revenue related to same‑store activity.

The same‑store revenue decrease was primarily due to our Environmental Air Systems, LLC (“EAS”) operation ($48.0 million), which experienced decreased large project work compared to the prior year, specifically in the manufacturing sector.

This decrease was partially offset by increased activity at our Michigan operation ($16.8 million) and our Northern Texas operation ($13.1 million).

Backlog as of December 31, 2016 was $763.4 million, a 6.1% increase from September 30, 2016 backlog of $719.3 million and a 7.3% increase from December 31, 2015 backlog of $711.6 million.

The year‑over‑year backlog increase was primarily due to the acquisition of Shoffner ($35.3 million or 5.0%).

Same-store backlog increased 2.3% primarily due to increased project bookings at our New Hampshire operation ($28.1 million).

This was partially offset by the completion of project work at our EAS operation ($21.0 million).

Gross Profit—Gross profit increased $25.9 million, or 8.1%, to $344.0 million in 2016 as compared to 2015.

Additionally, gross profit was higher due to increased volumes at our Michigan operation ($3.9 million) and one of our Alabama operations ($3.3 million).

This was partially offset by a decrease at our EAS operation ($8.6 million), which has experienced a decrease in large project work when compared to the same period in 2015.

This increase was primarily due to increased compensation costs ($4.8 million), which are primarily related to an increase in operating results and expanded service activities at multiple locations.

This was offset by a decrease in bad debt expense ($1.6 million) primarily due to collections of aged receivables.

Amortization expense decreased $0.7 million during 2016 compared to the prior year.

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_

margin, although such projects are sometimes subject to a guaranteed maximum cost.

As of December 31, 2015, we had 12 projects in process with a contract price greater than $15 million, 21 projects between $10 million and $15 million, 64 projects between $5 million and $10 million, and 286 projects between $1 million and $5 million.

We will also typically use proprietary information systems to maintain information on the customer's sites and equipment, including performance and service records, and related cost data.

These systems track the status of ongoing service and installation work, and may also monitor system performance data.

Under these contractual relationships, we usually provide consolidated billing and credit payment terms to the customer.

comparison to budget and updated forecasts.

While we expect that activity levels and the underlying environment for nonresidential construction activity will remain below prior peaks, we have seen industry conditions improve during 2015.

Our primary

Therefore,

If,

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| Other income | | | 76 | | | — | | | 91 | | | — | | | 204 | | | — | |

These operations, as well as many of our other operating

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purchase of the noncontrolling interest in EAS on January 1, 2016 since the noncontrolling interest was treated as a partnership for tax purposes.

EAS was the only entity in which we reported a noncontrolling interest for financial statement purposes as of December 31, 2015.

We completed one acquisition in the first quarter of 2014.

This acquisition was not material and was "tucked-in" with existing operations.

We completed two acquisitions in the second quarter of 2014, one of which was "tucked-in" with existing operations and the second reports as a separate operating location in northern Texas.

No acquisitions were completed in the third quarter of 2014.

An immaterial acquisition was completed and "tucked-in" with existing operations in the fourth quarter of 2014.

_Revenue_—Revenue increased $53.5 million, or 3.9% to $1,410.8 million in 2014 compared to 2013.

The increase included a 0.6% increase in revenue related to same-store activity and a 3.3% increase related to the acquisition of our Northern Texas operation.

The same-store revenue increase is primarily due to our Arkansas operation ($16.1 million) and one of our Virginia operations ($12.9 million), both of which performed a significant amount of project work for the institutional sector during 2014.

This increase was partially offset by lower revenues at our Arizona operation ($23.8 million), which performed a significant amount of project work during 2013 that did not reoccur in 2014 due to its completion.

Backlog as of December 31, 2014 was $757.8 million, a 15.4% increase from September 30, 2014 backlog of $656.8 million and a 25.5% increase from December 31, 2013 backlog of $603.6 million.

The year-over-year backlog increase was primarily due to a same-store increase of 17.1% largely related to increased project bookings at many of our operating locations, including our EAS operation ($30.6 million) and one of our Maryland operations ($25.4 million).

In addition, an 8.4% increase was due to the aforementioned acquisition of our Northern Texas operation ($50.8 million) during the current year.

_Gross Profit_—Gross profit increased $9.9 million, or 4.1%, to $249.8 million in 2014 as compared to 2013.

This was partially offset by a decrease in project volumes at our Arizona operation ($4.2 million) and job underperformance at our Southern California operation ($3.9 million), which included a revision in contract estimate on a project in a loss position resulting in a $4.4 million writedown.

This increase was primarily due to higher compensation expense ($6.5 million) primarily as a result of our increased investment in service growth and information technology, higher training costs ($2.6 million) and a $1.3 million increase in bad debt expense as a result of a $0.8 million gain recorded in the prior year as a result of a receivable settlement.

Amortization expense decreased $0.2 million, or 2.4%.

However, same-store SG&A, excluding amortization, is not considered under generally accepted accounting principles to be a primary measure of an entity's financial results, and accordingly, should not be considered an alternative to SG&A as shown in our consolidated statements of operations.

| | | 2014 | | | 2013 | | |

| SG&A | | $ | 207,652 | | $ | 194,214 | |

_Goodwill Impairment_—We recorded a goodwill impairment charge of $0.7 million during the second quarter of 2014.

No goodwill impairment was recorded in 2013.

We have exposure to changes in interest rates under our revolving credit [removed: facility and the EAS credit line.][added: facility.]

The following table presents principal amounts (stated in thousands) and related average interest rates by year of maturity for our debt obligations and their indicated fair market value at December 31, [removed: 2015:][added: 2016:]

| | | [removed: Twelve] [added: Twelve] Months Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | | |

| | | [removed: 2016] [added: 2017] | | | [removed: 2017] [added: 2018] | | | [removed: 2018] [added: 2019] | | | [removed: 2019] [added: 2020] | | | [removed: 2020] [added: 2021] | | | [removed: Thereafter] [added: Thereafter] | | | [removed: Total] [added: Total] | | |

| Fixed Rate Debt | | $ | 500 | | $ | [removed: 500] [added: 875] | | $ | [removed: —] [added: 875] | | $ | — | | $ | — | | $ | — | | $ | [removed: 1,000] [added: 2,250] | |

| Average Interest Rate | | | [removed: 2.5] [added: 2.5%] | [removed: %] | | [removed: 2.5] [added: 3.0%] | [removed: %] | | [removed: —] [added: 3.0%] | | | — | | | — | | | — | | | [removed: 2.5] [added: 2.9%] | [removed: %] |

| Variable Rate Debt | | $ | [removed: —] [added: 100] | | $ | [removed: —] [added: 100] | | $ | [removed: —] [added: 105] | | $ | [removed: 10,000] [added: —] | | $ | — | | $ | — | | $ | [removed: 10,000] [added: 305] | |

[removed: The] [added: We estimate that the] weighted average interest rate applicable to the borrowings under the Facility [removed: was] [added: would be] approximately [removed: 1.7%] [added: 1.8%] as of December 31, [removed: 2015.][added: 2016.]

These assets are recognized at fair value when they are deemed to be [removed: other-than-temporarily] [added: other‑than‑temporarily] impaired.

The valuation of the [removed: Company's] [added: Company’s] contingent [removed: earn-out] [added: earn‑out] payments is determined using a probability weighted discounted cash flow method.

This analysis reflects the contractual terms of the purchase agreements (e.g., minimum and maximum payment, length of [removed: earn-out] [added: earn‑out] periods, manner of calculating any amounts due, etc.) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows and a discount rate.

The interest rate applicable to the variable rate debt was approximately 3.02% as of December 31, 2016.

_

We provide comprehensive mechanical contracting services, which principally includes heating, ventilation and air conditioning [removed: ("HVAC"),] [added: (“HVAC”),] plumbing, piping and controls, as well as [removed: off-site] [added: off‑site] construction, electrical, monitoring and fire protection.

We install, maintain, repair and replace products and systems throughout our 35 operating units in [removed: 81] [added: 84] cities and [removed: 89] [added: 91] locations throughout the United States.

Approximately 99% of our consolidated [removed: 2015] [added: 2016] revenue was derived from commercial, industrial and institutional customers and [removed: multi-family] [added: multi‑family] residential projects.

Approximately [removed: 44%] [added: 40%] of our revenue was attributable to installation services in newly constructed facilities and [removed: 56%] [added: 60%] was attributable to renovation, expansion, maintenance, repair and replacement services in existing buildings.

Our consolidated [removed: 2015] [added: 2016] revenue was derived from the following service activities, substantially all of which are in the mechanical services industry, the single industry segment we serve:

| [removed: Service Activity |] [added: Service Activity] | [removed: Percentage of Revenue] | [added: Revenue] | |

| HVAC | | [removed: | 77] [added: 75] | % |

| Plumbing | | [removed: | 14] [added: 15] | % |

| Building Automation Control Systems | | [removed: | 5] [added: 6] | % |

| Other | | [removed: |] 4 | % |

| Total | | [removed: |] 100 | % |

Our Internet address is [removed: _http://www.comfortsystemsusa.com_.][added: http://www.comfortsystemsusa.com.]

We make available free of charge on or through our website our annual report on Form [removed: 10-K,] [added: 10‑K,] quarterly reports on Form [removed: 10-Q,] [added: 10‑Q,] current reports on Form [removed: 8-K,] [added: 8‑K,] and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

[removed: Industry Overview][added: Industry Overview]

In many instances, replacing an aging [removed: building's] [added: building’s] existing systems with modern, [removed: energy-efficient] [added: energy‑efficient] systems significantly reduces a [removed: building's] [added: building’s] operating costs while improving air quality and overall system effectiveness.

[added: | | · | |] construction of and installation in new buildings, which provided approximately [removed: 44%] [added: 40%] of our revenue in [removed: 2015,] [added: 2016,] and [added: |]

[added: | | · | |] renovation, expansion, maintenance, repair and replacement in existing buildings, which provided the remaining [removed: 56%] [added: 60%] of our [removed: 2015] [added: 2016] revenue. [added: |]

[removed: _Construction,] [added: Construction,] Installation, Expansion and Renovation [removed: Services_—Construction,] [added: Services— Construction,] installation, expansion and renovation services consist of [removed: "design] [added: “design] and [removed: build"] [added: build”] and [removed: "plan] [added: “plan] and [removed: spec"] [added: spec”] projects.

In [removed: "design] [added: “design] and [removed: build"] [added: build”] projects, the commercial HVAC company is responsible for designing, engineering and installing a [removed: cost-effective, energy-efficient] [added: cost‑effective, energy‑efficient] system customized to the specific needs of the building owner.

Companies that specialize in [removed: "design] [added: “design] and [removed: build"] [added: build”] projects generally have specially trained HVAC engineers, CAD/CAM design systems and [removed: in-house sheet metal and] [added: in‑house] prefabrication capabilities.

These companies use a consultative approach with customers and tend to develop [removed: long-term] [added: long‑term] relationships with building owners and developers, general contractors, architects, consulting engineers and property managers.

[removed: "Plan] [added: “Plan] and [removed: spec"] [added: spec”] installation refers to projects in which a [removed: third-party] [added: third‑party] architect or consulting engineer designs the HVAC systems and the installation project is [removed: "put] [added: “put] out for [removed: bid."] [added: bid.”] We believe that [removed: "plan] [added: “plan] and [removed: spec"] [added: spec”] projects usually take longer to complete than [removed: "design] [added: “design] and [removed: build"] [added: build”] projects because the system design and installation process generally are not integrated, thus resulting in more frequent adjustments to the technical specifications of the project and corresponding changes in work requirements and schedules.

Furthermore, in [removed: "plan] [added: “plan] and [removed: spec"] [added: spec”] projects, the contracting company is not responsible for project design and other parties must also approve any changes, [removed: thereby increasing] [added: which increases] overall project time and cost.

[removed: _Maintenance,] [added: Maintenance,] Repair and Replacement [removed: Services_—These] [added: Services—These] services include maintaining, repairing, replacing, reconfiguring and monitoring previously installed systems and building automation controls.

The increasing complexity of these systems [removed: is leading] [added: leads] many commercial, industrial and institutional building owners and property managers to [removed: increase attention to maintenance and to] outsource maintenance and repair, often through service agreements with service providers.

[removed: State-of-the-art] [added: State‑of‑the‑art] control and monitoring systems feature electronic sensors and microprocessors.

Increasingly, mechanical systems in commercial, industrial and institutional buildings are being remotely monitored to improve energy efficiency and expedite problem diagnosis and correction, [removed: thereby allowing] [added: which can allow] us to provide maintenance and repair services at a lower cost.

[removed: Strategy][added: Strategy]

[removed: _Achieve] [added: Achieve] Excellence in Core [removed: Competencies_—We] [added: Competencies—We] have identified six core competencies that we believe are critical to attracting and retaining customers, increasing operating income and cash flow and maximizing the productivity of our increasingly valuable skilled labor force.

The six core competencies are: (i) customer cultivation and rapport, (ii) design and build expertise, (iii) [removed: estimating,] [added: effective pre-construction processes,] (iv) job and cost tracking, (v) safety, and (vi) service excellence.

[removed: _Achieve] [added: Achieve] Operating [removed: Efficiencies_—We] [added: Efficiencies—We] think we can achieve operating efficiencies and cost savings through purchasing economies, adopting [removed: "best practices"] [added: “best practices”] operating programs, and focusing on job management to deliver services in a [removed: cost-effective] [added: cost‑effective] and efficient manner.

We [removed: have placed great emphasis on] [added: emphasize] improving the [removed: "job loop"] [added: “job loop”] at our locations—qualifying, estimating, pricing and executing projects effectively and efficiently, then promptly assessing project experience for applicability to current and future projects.

We also use our combined [removed: purchasing] [added: spend] to gain [removed: volume discounts] [added: purchasing advantages] on products and services such as HVAC components, raw materials, services, vehicles, bonding, insurance and employee benefits.

[removed: _Attract,] [added: Attract,] Retain and Invest in our [removed: Employees_—We] [added: Employees—We] seek to attract and retain quality employees by providing them an enhanced career path from working for a larger company, the opportunity to realize a more stable income and attractive benefits packages.

[removed: We have increased our already substantial investments in training, including programs for] project managers, field superintendents, service managers, [added: service technicians,] sales managers, estimators, and leadership and development of key managers and leaders.

[removed: _Focus] [added: Focus] on Commercial, Industrial and Institutional [removed: Markets_—We] [added: Markets—We] primarily focus on the commercial, industrial and institutional markets, including construction, maintenance, repair and replacement services.

We believe that [removed: the commercial, industrial and institutional HVAC] [added: these complex] markets are attractive because of their growth opportunities, large and diverse customer base, attractive margins and potential for [removed: long-term] [added: long‑term] relationships with building owners, property managers, general contractors and architects.

Approximately 99% of our consolidated [removed: 2015] [added: 2016] revenue was derived from commercial, industrial and institutional customers and large [removed: multi-family] [added: multi‑family] residential projects.

[removed: _Leveraging] [added: Leveraging] Resources and [removed: Capabilities_—We] [added: Capabilities—We] believe significant operating efficiencies can be achieved by leveraging resources among our operating locations.

We opportunistically allocate our engineering, field and supervisory labor from one operation to another to more fully use our [added: employee base, meet our customers’ needs and share expertise.]

| | | | |

| --- | --- | --- | --- |

| | | Percentage of | |

| --- | --- | --- | --- |

| --- | --- | --- | --- |

We have increased our already substantial investments in training, including programs for

| | | | |

| --- | --- | --- | --- |

| Total | | 100 | % |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | Aggregate | | |

| | | | | Contract | | |

| | | No. of | | Price Value | | |

| Under $1 million | | 3,415 | | $ | 422.9 | |

| $1 million - $5 million | | 328 | | | 744.4 | |

| Total | | 3,830 | | $ | 1,975.0 | |

Strategic Service Initiative.

In many locations we have added or upgraded our capability, and we believe

Our average project takes six to nine months to complete, with an average contract price of approximately $516,000.

As of December 31, 2016, we had approximately 7,700 employees.

We provide numerous training programs for management, sales and leadership, as well

_

| | | | | |

| --- | --- | --- | --- | --- |

| ​ | ​ | ​ | ​ | ​ |

employee base, meet our customers' needs and share expertise.

| Technology | | | 7 | % |

| Distribution | | | 2 | % |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Under $1 million | | | 3,460 | | $ | 401.4 | |

| $1 million - $5 million | | | 286 | | | 638.7 | |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Total | | | 3,843 | | $ | 1,966.4 | |

We estimate the amount of time, labor, materials and equipment needed to build the specified system.

commercial, industrial and institutional customers.

If the system is not operating within the specifications set forth by the customer and cannot be remotely adjusted, a service crew is dispatched to analyze and repair the system.

with our customers by providing superior, high-quality service in a professional manner.

As of December 31, 2015, we had 7,301 employees.

refrigerants and also regulate the containment and recycling of these refrigerants.

_

[removed: Financial] [added: | [Item 8.](#ITEM8FinancialStatementsandSupplementary) | [Financial] Statements and Supplementary [removed: Data](#fa12901_item_8._financial_statements_and_supplementary_data)][added: Data](#ITEM8FinancialStatementsandSupplementary) | 39 |]

[removed: UNITED] [added: UNITED] STATES

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: Form 10-K][added: Form 10-K]

| [removed: | | ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: |]

| [removed: For] [added: For] the Fiscal Year Ended December 31, [removed: 2015 |] [added: 2016] | |

[removed: Commission] [added: Commission] file number: [removed: 1-13011][added: 1‑13011]

[removed: Comfort] [added: Comfort] Systems USA, Inc.

[removed: (Exact] [added: (Exact] name of registrant as specified in its charter)

| [removed: Delaware] [added: Delaware] (State or Other Jurisdiction of Incorporation or Organization) | [removed: | 76-0526487] [added: 76‑0526487] (I.R.S. Employer Identification No.) |

[removed: 675] [added: 675] Bering Drive

(713) [removed: 830-9600][added: 830‑9600]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | | [removed: Name] [added: Name] of Each Exchange on which [removed: Registered] [added: Registered] | [added: |]

| Common Stock, $.01 par value | | New York Stock Exchange | [added: |]

Securities registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Indicate by check mark if the registrant is a [removed: well-known] [added: well‑known] seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [removed: ý] [added: ☒] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: ý][added: ☒]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation [removed: S-T] [added: S‑T] (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best of the [removed: registrant's] [added: registrant’s] knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form [removed: 10-K] [added: 10‑K] or any amendment to this Form [removed: 10-K. o][added: 10‑K.]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a [removed: non-accelerated] [added: non‑accelerated] filer, or a smaller reporting company.

See definitions of [removed: "large] [added: “large] accelerated [removed: filer," "accelerated filer"] [added: filer,” “accelerated filer”] and [removed: "smaller] [added: “smaller] reporting [removed: company,"] [added: company,”] in Rule [removed: 12b-2] [added: 12b‑2] of the Exchange Act.

| Large accelerated filer [removed: ý |] [added: ☒] | Accelerated filer [removed: o |] [added: ☐] | [removed: Non-accelerated] [added: Non‑accelerated] filer [removed: o] [added: ☐] (Do not check if a smaller reporting company) | [removed: |] Smaller reporting company [removed: o] [added: ☐] |

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule [removed: 12b-2).][added: 12b‑2).]

The aggregate market value of the voting stock held by [removed: non-affiliates] [added: non‑affiliates] of the registrant at June 30, [removed: 2015] [added: 2016] was approximately [removed: $843.5 million,] [added: $1.19 billion,] based on the [removed: $22.95] [added: $32.57] last sale price of the [removed: registrant's] [added: registrant’s] common stock on the New York Stock Exchange on June 30, [removed: 2015.][added: 2016.]

As of February [removed: 17, 2016, 37,324,555] [added: 16, 2017, 37,209,114] shares of the [removed: registrant's] [added: registrant’s] common stock were outstanding (excluding treasury shares of [removed: 3,798,810).][added: 3,914,251).]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

The information required by Part III (other than the required information regarding executive officers) is incorporated by reference from the [removed: registrant's] [added: registrant’s] definitive proxy statement, which will be filed with the Commission not later than 120 days following December 31, [removed: 2015.][added: 2016.]

[removed: TABLE] [added: TABLE] OF CONTENTS

[removed: | [](#da12901_part_i) [Part I](#da12901_part_i) | | | | | | |][added: PART I]

| [removed: [](#da12901_item_1._business)] [Item [removed: 1.](#da12901_item_1._business) | | [](#da12901_item_1._business) [Business](#da12901_item_1._business) | |] [added: 1.](#ITEM1Business_523507)] | [removed: [2](#da12901_item_1._business)] [added: [Business](#ITEM1Business_523507)] | [added: 3] |

| [removed: [](#da12901_item_1a._risk_factors)] [Item [removed: 1A.](#da12901_item_1a._risk_factors) |] [added: 1A.](#ITEM1ARiskFactors_249924)] | [removed: [](#da12901_item_1a._risk_factors)] [Risk [removed: Factors](#da12901_item_1a._risk_factors) | | | [10](#da12901_item_1a._risk_factors)] [added: Factors](#ITEM1ARiskFactors_249924)] | [added: 9] |

| [removed: [](#de12901_item_1b._unresolved_staff_comments)] [Item [removed: 1B.](#de12901_item_1b._unresolved_staff_comments) |] [added: 1B.](#ITEM1BUnresolvedStaffComments_139610)] | [removed: [](#de12901_item_1b._unresolved_staff_comments)] [Unresolved Staff [removed: Comments](#de12901_item_1b._unresolved_staff_comments) | | | [21](#de12901_item_1b._unresolved_staff_comments)] [added: Comments](#ITEM1BUnresolvedStaffComments_139610)] | [added: 18] |

| [removed: [](#de12901_item_2._properties)] [Item [removed: 2.](#de12901_item_2._properties) | | [](#de12901_item_2._properties) [Properties](#de12901_item_2._properties) | |] [added: 2.](#ITEM2Properties_592424)] | [removed: [21](#de12901_item_2._properties)] [added: [Properties](#ITEM2Properties_592424)] | [added: 19] |

| [removed: [](#de12901_item_3._legal_proceedings)] [Item [removed: 3.](#de12901_item_3._legal_proceedings) |] [added: 3.](#ITEM3LegalProceedings_395131)] | [removed: [](#de12901_item_3._legal_proceedings)] [Legal [removed: Proceedings](#de12901_item_3._legal_proceedings) | | | [21](#de12901_item_3._legal_proceedings)] [added: Proceedings](#ITEM3LegalProceedings_395131)] | [added: 19] |

| [removed: [](#de12901_item_4._mine_safety_disclosures)] [Item [removed: 4.](#de12901_item_4._mine_safety_disclosures) |] [added: 4.](#ITEM4MineSafetyDisclosures_231930)] | [removed: [](#de12901_item_4._mine_safety_disclosures)] [Mine Safety [removed: Disclosures](#de12901_item_4._mine_safety_disclosures) | | | [21](#de12901_item_4._mine_safety_disclosures)] [added: Disclosures](#ITEM4MineSafetyDisclosures_231930)] | [added: 19] |

| [removed: [](#de12901_item_4a._executive_officers_of_the_registrant)] [Item [removed: 4A.](#de12901_item_4a._executive_officers_of_the_registrant) |] [added: 4A.](#ITEM4AExecutiveOfficersoftheRegistrant_3)] | [removed: [](#de12901_item_4a._executive_officers_of_the_registrant)] [Executive Officers of the [removed: Registrant](#de12901_item_4a._executive_officers_of_the_registrant) | | | [21](#de12901_item_4a._executive_officers_of_the_registrant)] [added: Registrant](#ITEM4AExecutiveOfficersoftheRegistrant_3)] | [added: 19] |

| [removed: [](#de12901_item_5._market_for_registrant___ite04666)] [Item [removed: 5.](#de12901_item_5._market_for_registrant___ite04666) |] [added: 5.](#ITEM5MarketforRegistrantsCommonEquityRel)] | [removed: [](#de12901_item_5._market_for_registrant___ite04666)] [Market for [removed: Registrant's] [added: Registrant’s] Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#de12901_item_5._market_for_registrant___ite04666) | | | [22](#de12901_item_5._market_for_registrant___ite04666)] [added: Securities](#ITEM5MarketforRegistrantsCommonEquityRel)] | [added: 20] |

| [removed: [](#dg12901_item_6._selected_financial_data)] [Item [removed: 6.](#dg12901_item_6._selected_financial_data) |] [added: 6.](#ITEM6SelectedFinancialData_853719)] | [removed: [](#dg12901_item_6._selected_financial_data)] [Selected Financial [removed: Data](#dg12901_item_6._selected_financial_data) | | | [25](#dg12901_item_6._selected_financial_data)] [added: Data](#ITEM6SelectedFinancialData_853719)] | [added: 22] |

| [removed: [](#dg12901_item_7._management_s_discussio__ite03668)] [Item [removed: 7.](#dg12901_item_7._management_s_discussio__ite03668) |] [added: 7.](#ITEM7ManagementsDiscussionandAnalysisofF)] | [removed: [](#dg12901_item_7._management_s_discussio__ite03668) [Management's] [added: [Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#dg12901_item_7._management_s_discussio__ite03668) | | | [25](#dg12901_item_7._management_s_discussio__ite03668)] [added: Operations](#ITEM7ManagementsDiscussionandAnalysisofF)] | [added: 22] |

10-K 1 fix-20161231x10k.htm 10-K

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| --- | --- |

| | | | |

| --- | --- | --- | --- |

Yes ☒ No ☐

Yes ☒ No ☐

| | | | |

| --- | --- | --- | --- |

Yes ☐ No ☒

| [Part I](#PARTI_635180) | | |

| [Part II](#PARTII_73993) | | |

| [Part IV](#PARTIV_441083) | | |

| [Item 16.](#ITEM16Form10KSummary) | [Form 10-K Summary](#ITEM16Form10KSummary) | 72 |

10-K 1 a2227387z10-k.htm 10-K

Use these links to rapidly review the document

[ITEM 8.

| | | |

| --- | --- | --- |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| [](#de12901_part_ii) [Part II](#de12901_part_ii) | | | | | | |

| [](#fa12901_item_8._financial_statements_and_supplementary_data) [Item 8.](#fa12901_item_8._financial_statements_and_supplementary_data) | | [](#fa12901_item_8._financial_statements_and_supplementary_data) [Financial Statements and Supplementary Data](#fa12901_item_8._financial_statements_and_supplementary_data) | | | [46](#fa12901_item_8._financial_statements_and_supplementary_data) | |

| [](#fu12901_part_iv) [Part IV](#fu12901_part_iv) | | | | | | |

_

PART I

_

As of December 31, [removed: 2015,] [added: 2016,] we owned [removed: five] [added: four] properties.

Other than these [removed: five] owned properties, we lease the real property and buildings from which we operate.

_

_

[removed: _Brian Lane,_] [added: Brian Lane,] age [removed: 58,] [added: 59,] has served as our Chief Executive Officer and President since December 2011 and as a director since November 2010.

[removed: _William George,_] [added: William George,] age [removed: 51,] [added: 52,] has served as our Executive Vice President and Chief Financial Officer since May 2005, was our Senior Vice President, General Counsel and Secretary from May 1998 to [added: May 2005, and was our Vice President, General Counsel and Secretary from March 1997 to April 1998.]

[removed: May 2005,] [added: McKenna, age 44, has served as our Senior Vice President, General Counsel] and [added: Secretary since August 2013,] was our Vice President, General Counsel and Secretary from [removed: March 1997] [added: May 2005] to [removed: April 1998.][added: August 2013, and was our Associate General Counsel from August 2004 to May 2005.]

From October 1995 to February 1997, Mr. George was Vice President and General Counsel of American Medical Response, Inc., a [removed: publicly-traded] [added: publicly‑traded] healthcare transportation company.

[removed: _Julie] [added: Julie] S.

[removed: Shaeff,_] [added: Shaeff,] age [removed: 50,] [added: 51,] has served as our Senior Vice President and Chief Accounting Officer since May 2005, was our Vice President and Corporate Controller from March 2002 to May 2005, and was our Assistant Corporate Controller from September 1999 to February 2002.

From 1996 to August 1999, Ms. Shaeff was Financial Accounting Manager—Corporate Controllers Group for [removed: Browning-Ferris] [added: Browning‑Ferris] Industries, Inc., a [removed: publicly-traded] [added: publicly‑traded] waste services company.

[removed: _Trent] [added: Trent] T.

[removed: PART] [added: PART] II

_

McKenna_, age 43, has served as our Senior Vice President, General Counsel and Secretary since August 2013, was our Vice President, General Counsel and Secretary from May 2005 to August 2013, and was our Associate General Counsel from August 2004 to May 2005.

_James Mylett,_ age 52, has served as our Senior Vice President of Service since October 2013.

Prior to joining the Company, Mr. Mylett spent fourteen years at Johnson Controls, which manufactures, installs, and services automatic temperature regulation systems for buildings.

During his time at Johnson Controls, Mr. Mylett held various positions, including that of Vice President and General Manager—North America Service Operations from August 2011 to October 2013.

From October 2010 to August 2011, he served as Vice President and General Manager—West Region, and from December 2005 to September 2010, he served as Vice President of Service and Solutions—South Region.

Previously, Mr. Mylett worked for Carrier Corporation, where he established and developed the Company's national accounts service business.

| | | [removed: High] | [added: High] | | [removed: Low] | [added: Low] | | [removed: Cash Dividends Declared] | [added: Declared] | |

As of February [removed: 17, 2016] [added: 16, 2017] there were approximately [removed: 273] [added: 263] stockholders of record of our Common Stock, and the last reported sale price on that date was [removed: $26.20] [added: $34.05] per share.

[added: In] addition, our revolving credit agreement may limit the amount of dividends we can pay at any time that our Net Leverage Ratio exceeds 1.0.

[removed: COMPARISON] [added: COMPARISON] OF 5 YEAR CUMULATIVE TOTAL RETURN*

[removed: Among] [added: Among] Comfort Systems USA, Inc., the S&P 500 Index, and the Russell 2000 Index

[removed: $100] [added: *$100] invested on [removed: 12/31/10] [added: 12/31/11] in stock or index, including reinvestment of dividends.

Copyright© [removed: 2016] [added: 2017] S&P, a division of McGraw Hill Financial.

Copyright© [removed: 2016] [added: 2017] Russell Investment Group.

[removed: Recent] [added: Recent] Sales of Unregistered [removed: Securities][added: Securities]

[removed: Issuer] [added: Issuer] Purchases of Equity [removed: Securities][added: Securities]

Since the inception of the repurchase program, the Board has approved [removed: 7.6] [added: 8.1] million shares to be repurchased.

As of December 31, [removed: 2015,] [added: 2016,] we have repurchased a cumulative total of [removed: 6.9] [added: 7.3] million shares at an average price of [removed: $11.99] [added: $13.02] per share under the repurchase program.

During the twelve months ended December 31, [removed: 2015,] [added: 2016,] we repurchased [removed: 0.3] [added: 0.5] million shares for approximately [removed: $8.3] [added: $13.1] million at an average price of [removed: $26.36] [added: $28.44] per share.

During the year ended December 31, [removed: 2015,] [added: 2016,] we purchased our common shares in the following amounts at the following [removed: weighted-average] [added: weighted‑average] prices:

| [removed: Period] | | [removed: Total] [added: Total] Number of [removed: Shares Purchased] | | [removed: | Average] [added: Average] Price [removed: Paid Per Share] | | | [removed: Total Number of Shares Purchased as Part of] Publicly Announced Plans [removed: or Programs] | | [removed: | Maximum Number of Shares that May Yet Be] Purchased Under the Plans [removed: or Programs] | | [removed: |]

| | | | | | | | | | Cash | |

| | | | | | | | | | Dividends | |

| Fourth Quarter, 2016 | | $ | 34.70 | | $ | 27.21 | | $ | 0.070 | |

| Third Quarter, 2016 | | $ | 33.48 | | $ | 26.26 | | $ | 0.070 | |

| Second Quarter, 2016 | | $ | 33.59 | | $ | 29.49 | | $ | 0.070 | |

| First Quarter, 2016 | | $ | 32.27 | | $ | 24.67 | | $ | 0.065 | |


On August 11, 2016, the Board approved an extension to the program by increasing the shares authorized for repurchase by 0.6 million shares.

| | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | Total Number of Shares | | Maximum Number of | |

| | | | | | | | Purchased as Part of | | Shares that May Yet Be | |

| Period | | Shares Purchased | | Paid Per Share | | | or Programs | | or Programs | |

| January 1 - January 31 | | 102,029 | | $ | 27.84 | | 6,984,350 | | 576,833 | |

| February 1 - February 29 | | — | | $ | — | | 6,984,350 | | 576,833 | |

| March 1 - March 31 | | — | | $ | — | | 6,984,350 | | 576,833 | |

| April 1 - April 30 | | — | | $ | — | | 6,984,350 | | 576,833 | |

| May 1 - May 31 | | 66,185 | | $ | 30.51 | | 7,050,535 | | 510,648 | |

| June 1 - June 30 | | 2,094 | | $ | 30.85 | | 7,052,629 | | 508,554 | |

| July 1 - July 31 | | 3,000 | | $ | 30.92 | | 7,055,629 | | 505,554 | |

| August 1 - August 31 | | 133,364 | | $ | 29.03 | | 7,188,993 | | 923,500 | |

| September 1 - September 30 | | 77,614 | | $ | 26.92 | | 7,266,607 | | 845,886 | |

| October 1 - October 31 | | 55,878 | | $ | 27.62 | | 7,322,485 | | 790,008 | |

| November 1 - November 30 | | 20,006 | | $ | 28.38 | | 7,342,491 | | 770,002 | |

| December 1 - December 31 | | — | | $ | — | | 7,342,491 | | 770,002 | |

| | | 460,170 | | $ | 28.44 | | 7,342,491 | | 770,002 | |

_

| Fourth Quarter, 2014 | | $ | 17.42 | | $ | 12.81 | | $ | 0.060 | |

| Third Quarter, 2014 | | $ | 16.38 | | $ | 13.55 | | $ | 0.055 | |

| Second Quarter, 2014 | | $ | 17.14 | | $ | 14.61 | | $ | 0.055 | |

| First Quarter, 2014 | | $ | 19.62 | | $ | 15.24 | | $ | 0.055 | |

In


| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| January 1 - January 31 | | | — | | $ | — | | | 6,566,368 | | | 994,815 | |

| February 1 - February 28 | | | — | | $ | — | | | 6,566,368 | | | 994,815 | |

| March 1 - March 31 | | | — | | $ | — | | | 6,566,368 | | | 994,815 | |

| April 1 - April 30 | | | 43,750 | | $ | 20.61 | | | 6,610,118 | | | 951,065 | |

| May 1 - May 31 | | | 29,283 | | $ | 21.28 | | | 6,639,401 | | | 921,782 | |

| June 1 - June 30 | | | — | | $ | — | | | 6,639,401 | | | 921,782 | |

| July 1 - July 31 | | | — | | $ | — | | | 6,639,401 | | | 921,782 | |

| August 1 - August 31 | | | 40,439 | | $ | 27.74 | | | 6,679,840 | | | 881,343 | |

| September 1 - September 30 | | | 82,361 | | $ | 27.71 | | | 6,762,201 | | | 798,982 | |

| October 1 - October 31 | | | 37,002 | | $ | 26.51 | | | 6,799,203 | | | 761,980 | |

| November 1 - November 30 | | | 4,058 | | $ | 31.38 | | | 6,803,261 | | | 757,922 | |

| December 1 - December 31 | | | 79,060 | | $ | 28.99 | | | 6,882,321 | | | 678,862 | |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| | | | 315,953 | | $ | 26.36 | | | 6,882,321 | | | 678,862 | |

| | | [removed: Year] [added: Year] Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | |

| | | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | | [removed: 2012] [added: 2013] | | | [removed: 2011] [added: 2012] | | |

| | | [removed: (in] [added: (in] thousands, except per share [removed: amounts)] [added: amounts)] | | | | | | | | | | | | | | |

| [removed: STATEMENT] [added: STATEMENT] OF OPERATIONS [removed: DATA:] [added: DATA:] | | | | | | | | | | | | | | | | |

| Revenue | | $ | [removed: 1,580,519] [added: 1,634,340] | | $ | [removed: 1,410,795] [added: 1,580,519] | | $ | [removed: 1,357,272] [added: 1,410,795] | | $ | [removed: 1,331,185] [added: 1,357,272] | | $ | [removed: 1,216,654] [added: 1,331,185] | |

| Operating income [removed: (loss)(a)] [added: (a)] | | $ | [removed: 90,044] [added: 101,569] | | $ | [removed: 42,222] [added: 90,044] | | $ | [removed: 46,258] [added: 42,222] | | $ | [removed: 22,303] [added: 46,258] | | $ | [removed: (42,641] [added: 22,303] | [removed: )] |

| Income [removed: (loss)] from continuing operations | | $ | [removed: 57,440] [added: 64,896] | | $ | [removed: 28,614] [added: 57,440] | | $ | [removed: 28,632] [added: 28,614] | | $ | [removed: 11,494] [added: 28,632] | | $ | [removed: (32,474] [added: 11,494] | [removed: )] |

| [removed: Operating income (loss),] [added: Income (loss) from discontinued operations,] net of tax | | $ | — | | $ | [removed: (15] [added: —] | [removed: )] | $ | [removed: (76] [added: (15)] | [removed: )] | $ | [removed: 355] [added: (76)] | | $ | [removed: (4,018] [added: 355] | [removed: )] |

| Net income [removed: (loss)] including noncontrolling interests | | $ | [removed: 57,440] [added: 64,896] | | $ | [removed: 28,599] [added: 57,440] | | $ | [removed: 28,556] [added: 28,599] | | $ | [removed: 11,849] [added: 28,556] | | $ | [removed: (36,492] [added: 11,849] | [removed: )] |

| Net income [removed: (loss)] attributable to Comfort Systems USA, Inc. | | $ | [removed: 49,364] [added: 64,896] | | $ | [removed: 23,063] [added: 49,364] | | $ | [removed: 27,269] [added: 23,063] | | $ | [removed: 13,463] [added: 27,269] | | $ | [removed: (36,830] [added: 13,463] | [removed: )] |

| Income [removed: (loss)] per share attributable to Comfort Systems USA, Inc.: | | | | | | | | | | | | | | | | |

| Income [removed: (loss)] from continuing operations | | $ | [removed: 1.32] [added: 1.74] | | $ | [removed: 0.61] [added: 1.32] | | $ | [removed: 0.73] [added: 0.61] | | $ | [removed: 0.35] [added: 0.73] | | $ | [removed: (0.88] [added: 0.35] | [removed: )] |

| Income (loss) from [added: discontinued] operations | | | — | | | — | | | — | | | [removed: 0.01] [added: —] | | | [removed: (0.11] [added: 0.01] | [removed: )] |

| Net income [removed: (loss)] | | $ | [removed: 1.32] [added: 1.74] | | $ | [removed: 0.61] [added: 1.32] | | $ | [removed: 0.73] [added: 0.61] | | $ | [removed: 0.36] [added: 0.73] | | $ | [removed: (0.99] [added: 0.36] | [removed: )] |

| Income [removed: (loss)] from continuing operations | | $ | [removed: 1.30] [added: 1.72] | | $ | [removed: 0.61] [added: 1.30] | | $ | [removed: 0.73] [added: 0.61] | | $ | [removed: 0.35] [added: 0.73] | | $ | [removed: (0.88] [added: 0.35] | [removed: )] |

| Net income [removed: (loss)] | | $ | [removed: 1.30] [added: 1.72] | | $ | [removed: 0.61] [added: 1.30] | | $ | [removed: 0.73] [added: 0.61] | | $ | [removed: 0.36] [added: 0.73] | | $ | [removed: (0.99] [added: 0.36] | [removed: )] |

| Cash dividends per share | | $ | [removed: 0.250] [added: 0.275] | | $ | [removed: 0.225] [added: 0.250] | | $ | [removed: 0.210] [added: 0.225] | | $ | [removed: 0.200] [added: 0.210] | | $ | 0.200 | |

| [removed: BALANCE] [added: BALANCE] SHEET [removed: DATA:] [added: DATA:] | | | | | | | | | | | | | | | | |

| Working capital | | $ | [removed: 118,882] [added: 98,276] | | $ | [removed: 111,433] [added: 118,882] | | $ | [removed: 109,618] [added: 111,433] | | $ | [removed: 84,349] [added: 109,618] | | $ | [removed: 90,800] [added: 84,349] | |

| Total assets | | $ | [removed: 691,594] [added: 708,903] | | $ | [removed: 655,942] [added: 691,594] | | $ | [removed: 592,789] [added: 655,942] | | $ | [removed: 573,461] [added: 592,789] | | $ | [removed: 589,947] [added: 573,461] | |

| Total debt | | $ | [removed: 11,507] [added: 2,811] | | $ | [removed: 40,346] [added: 11,507] | | $ | [removed: 2,000] [added: 40,346] | | $ | [removed: 7,400] [added: 2,000] | | $ | [removed: 15,381] [added: 7,400] | |

| Total [removed: stockholders'] [added: stockholders’] equity | | $ | [removed: 365,005] [added: 376,633] | | $ | [removed: 321,393] [added: 365,005] | | $ | [removed: 314,022] [added: 321,393] | | $ | [removed: 287,306] [added: 314,022] | | $ | [removed: 283,106] [added: 287,306] | |

| Total Comfort Systems USA, Inc. [removed: stockholders'] [added: stockholders’] equity | | $ | [removed: 346,721] [added: 376,633] | | $ | [removed: 306,281] [added: 346,721] | | $ | [removed: 295,834] [added: 306,281] | | $ | [removed: 270,405] [added: 295,834] | | $ | [removed: 264,591] [added: 270,405] | |

[added: | | (a) | | Included in operating income is a goodwill impairment charge of $0.7 million for 2014.] There were no goodwill impairment charges for [added: 2016,] 2015, 2013 or 2012. [added: |]

| Income (loss) from discontinued operations | | | — | | | — | | | — | | | — | | | 0.01 | |

| --- | --- | --- | --- |

_

| Discontinued operations— | | | | | | | | | | | | | | | | |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

(a)

Included in operating income are goodwill impairment charges of $0.7 million and $57.3 million for 2014 and 2011, respectively.

[removed: INDEX] [added: INDEX] TO FINANCIAL STATEMENTS

| | | [removed: Page | |] [added: Page] |

| [removed: Comfort] [added: [Comfort] Systems USA, [removed: Inc. | |] [added: Inc.](#COMFORTSYSTEMSUSAINC_496109)] | | |

[removed: | [](#fc12901_management_s_report_on_interna__man02650) [Management's] [added: Management’s] Report on Internal Control over Financial [removed: Reporting](#fc12901_management_s_report_on_interna__man02650) | | | [47](#fc12901_management_s_report_on_interna__man02650) | |][added: Reporting]

[removed: | [](#f1) [Report of Independent Registered Public Accounting Firm](#f1) | | | [48](#f1) | |][added: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM]

[removed: | [](#f2) [Report of Independent Registered Public Accounting Firm](#f2) | | | [49](#f2) | |][added: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM]

| [removed: [](#fi12901_comfort_systems_usa,_inc._cons__com04303) [Consolidated Statements of Stockholders' Equity](#fi12901_comfort_systems_usa,_inc._cons__com04303)] [added: Comfort Systems USA, Inc. stockholders’ equity] | | | [removed: [52](#fi12901_comfort_systems_usa,_inc._cons__com04303)] [added: 376,633] | | [added: | 346,721 | |]

[removed: Management's] [added: | [Management’s] Report on Internal Control over Financial [removed: Reporting][added: Reporting](#ManagementsReportonInternalControloverFi) | | 40 |]

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules [removed: 13a-15(f)] [added: 13a‑15(f)] and [removed: 15d-15(f).][added: 15d‑15(f).]

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, [removed: 2015] [added: 2016] based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 framework).

Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2015.][added: 2016.]

Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein, has issued an attestation report auditing the effectiveness of our internal control over financial reporting as of December 31, [removed: 2015.][added: 2016.]

[removed: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM][added: | [Report of Independent Registered Public Accounting Firm](#REPORTOFINDEPENDENTREGISTEREDPUBLICACCOU) | | 41 |]

We have audited the accompanying consolidated balance sheets of Comfort Systems USA, Inc. as of December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the related consolidated statements of operations, [removed: stockholders'] [added: stockholders’] equity and cash flows for each of the three years in the period ended December 31, [removed: 2015.][added: 2016.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Comfort Systems USA, Inc. at December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2015,] [added: 2016,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Comfort Systems USA, [removed: Inc.'s] [added: Inc.’s] internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on criteria established in [removed: _Internal] [added: Internal] Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: framework)_] [added: framework)] and our report dated February 23, [removed: 2016] [added: 2017] expressed an unqualified opinion thereon.

| | [removed: |] /s/ ERNST & YOUNG LLP |

We have audited Comfort Systems USA, [removed: Inc.'s] [added: Inc.’s] internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on criteria established in [removed: _Internal] [added: Internal] Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: framework)_] [added: framework)] (the COSO criteria).

In our opinion, Comfort Systems USA, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Comfort Systems USA, Inc. as of December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the related consolidated statements of operations, [removed: stockholders'] [added: stockholders’] equity and cash flows for each of the three years in the period ended December 31, [removed: 2015] [added: 2016] of Comfort Systems USA, Inc. and our report dated February 23, [removed: 2016] [added: 2017] expressed an unqualified opinion thereon.

| | | [removed: December 31,] [added: December 31,] | | | | | |

| | | [removed: 2015] | [added: 2016] | | [removed: 2014] | [added: 2015] | | [added: | 2014 | | |]

| [removed: ASSETS] [added: ASSETS] | | | | | | | |

| Cash and cash equivalents | | $ | [removed: 56,464] [added: 32,074] | | $ | [removed: 32,064] [added: 56,464] | |

| Accounts receivable, less allowance for doubtful accounts of [removed: $5,158] [added: $4,288] and [removed: $4,379,] [added: $5,158,] respectively | | | [removed: 302,052] [added: 318,837] | | | [removed: 303,575] [added: 302,052] | |

| Other receivables | | | [removed: 20,642] [added: 20,363] | | | [removed: 15,520] [added: 20,642] | |

| Inventories | | | [removed: 7,941] [added: 9,208] | | | [removed: 8,646] [added: 7,941] | |

| Prepaid expenses and other | | | [removed: 5,836] [added: 6,106] | | | [removed: 6,168] [added: 5,836] | |

| Costs and estimated earnings in excess of billings | | | [removed: 31,338] [added: 29,369] | | | [removed: 27,620] [added: 31,338] | |

[removed: | Assets related to discontinued operations | | | — | | | 176 | |][added: Discontinued Operations]

| Total current assets | | | [removed: 424,273] [added: 415,957] | | | [removed: 393,769] [added: 424,273] | |

| PROPERTY AND EQUIPMENT, NET | | | [removed: 60,813] [added: 68,195] | | | [removed: 55,759] [added: 60,813] | |

| [removed: GOODWILL] [added: Balance at beginning of year] | | [added: $] | 143,874 | | [added: $] | 140,341 | |

| IDENTIFIABLE INTANGIBLE ASSETS, NET | | | [removed: 41,079] [added: 42,435] | | | [removed: 45,666] [added: 41,079] | |

| OTHER NONCURRENT ASSETS | | | [removed: 21,555] [added: 5,938] | | | [removed: 20,407] [added: 5,279] | |

| Total assets | | $ | [removed: 691,594] [added: 708,903] | | $ | [removed: 655,942] [added: 691,594] | |

| [removed: LIABILITIES] [added: LIABILITIES] AND [removed: STOCKHOLDERS' EQUITY] [added: STOCKHOLDERS’ EQUITY] | | | | | | | |

| Current maturities of long-term debt | | $ | [removed: 500] [added: 600] | | $ | [removed: —] [added: 500] | |

| Current maturities of long-term capital lease obligations | | | [removed: 251] [added: 163] | | | [removed: 317] [added: 251] | |

| Accounts payable | | | [removed: 106,684] [added: 103,440] | | | [removed: 106,211] [added: 106,684] | |

| [Report of Independent Registered Public Accounting Firm](#ACCOUNTINGFIRM_173307) | | 42 |

| [Consolidated Balance Sheets](#CONSOLIDATEDBALANCESHEETS_522126) | | 43 |

| [Consolidated Statements of Operations](#CONSOLIDATEDSTATEMENTSOFOPERATIONS_39514) | | 44 |

| [Consolidated Statements of Stockholders’ Equity](#STATEMENTSOFSTOCKHOLDERSEQUITY_511143) | | 45 |

| [Consolidated Statements of Cash Flows](#STATEMENTSOFCASHFLOWS_915327) | | 46 |

| | |

| --- | --- |

February 23, 2017

| | |

| --- | --- |

| | /s/ ERNST & YOUNG LLP |

February 23, 2017

| GOODWILL | | | 149,208 | | | 143,874 | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| Other | | | | 1,097 | | | 76 | | | 91 | |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | Additional | | | | | | Non- | | | Total | | |

| | | Shares | | Amount | | | Shares | | Amount | | | Capital | | | Earnings | | | Interests | | | Equity | | |

| Issuance of Stock: | | | | | | | | | | | | | | | | | | | | | | | |

| Cumulative effect of change in accounting principle | | — | | | — | | — | | | — | | | — | | | (38) | | | — | | | (38) | |

| Net income | | — | | | — | | — | | | — | | | — | | | 64,896 | | | — | | | 64,896 | |

| Issuance of Stock: | | | | | | | | | | | | | | | | | | | | | | | |

| Issuance of shares for options exercised | | — | | | — | | 111,761 | | | 1,568 | | | 10 | | | — | | | — | | | 1,578 | |

| Issuance of restricted stock & performance stock | | — | | | — | | 172,727 | | | 2,282 | | | (306) | | | — | | | — | | | 1,976 | |

| Dividends | | — | | | — | | — | | | — | | | — | | | (10,264) | | | — | | | (10,264) | |

| Acquisition of noncontrolling interests | | — | | | — | | — | | | — | | | (17,346) | | | — | | | (18,284) | | | (35,630) | |

| Share repurchase | | — | | | — | | (460,170) | | | (13,088) | | | — | | | — | | | — | | | (13,088) | |

| BALANCE AT DECEMBER 31, 2016 | | 41,123,365 | | $ | 411 | | (3,914,251) | | $ | (57,387) | | $ | 309,625 | | $ | 123,984 | | $ | — | | $ | 376,633 | |

| Gain on sale of assets | | | (761) | | | (880) | | | (830) | |

| Deferred acquisition payments | | | (1,350) | | | — | | | — | |

December 31, 2016

1.

| HVAC | | $ | 1,225,755 | | 75 | % |

| Plumbing | | | 245,151 | | 15 | % |

_

| | | | | |

| --- | --- | --- | --- | --- |

| [](#fe12901_comfort_systems_usa,_inc._cons__com03397) [Consolidated Balance Sheets](#fe12901_comfort_systems_usa,_inc._cons__com03397) | | | [50](#fe12901_comfort_systems_usa,_inc._cons__com03397) | |

| [](#fg12901_comfort_systems_usa,_inc._cons__com03873) [Consolidated Statements of Operations](#fg12901_comfort_systems_usa,_inc._cons__com03873) | | | [51](#fg12901_comfort_systems_usa,_inc._cons__com03873) | |

| [](#fk12901_comfort_systems_usa,_inc._cons__com03000) [Consolidated Statements of Cash Flows](#fk12901_comfort_systems_usa,_inc._cons__com03000) | | | [53](#fk12901_comfort_systems_usa,_inc._cons__com03000) | |

| [](#fm12901_comfort_systems_usa,_inc._note__com02991) [Notes to Consolidated Financial Statements](#fm12901_comfort_systems_usa,_inc._note__com02991) | | | [54](#fm12901_comfort_systems_usa,_inc._note__com02991) | |

| | | |

| --- | --- | --- |

February 23, 2016

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Liabilities related to discontinued operations | | | — | | | 263 | |

| Comfort Systems USA, Inc. stockholders' equity | | | 346,721 | | | 306,281 | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Other | | | 76 | | | 91 | | | 204 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Additional Paid-In Capital | | | Retained Earnings (Deficit) | | | Non- Controlling Interests | | | Total Stockholders' Equity | | | | | | | | | | | | | | |

| | | Shares | | | Amount | | | Shares | | | Amount | | | | | | | | | | | | | | |

| BALANCE AT DECEMBER 31, 2012 | | | 41,123,365 | | | 411 | | | (3,879,299 | ) | | (41,012 | ) | | 317,534 | | | (6,528 | ) | | 16,901 | | | 287,306 | |

| Net income | | | — | | | — | | | — | | | — | | | — | | | 27,269 | | | 1,287 | | | 28,556 | |

| Issuance of restricted stock | | | — | | | — | | | 122,375 | | | 1,301 | | | (1,301 | ) | | — | | | — | | | — | |

| Forfeiture of unvested restricted stock | | | — | | | — | | | (469 | ) | | (5 | ) | | 5 | | | — | | | — | | | — | |

| Dividends | | | — | | | — | | | — | | | — | | | (1,862 | ) | | (5,973 | ) | | — | | | (7,835 | ) |

| Share repurchase | | | — | | | — | | | (125,541 | ) | | (1,832 | ) | | — | | | — | | | — | | | (1,832 | ) |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Issuance of shares for options exercised including tax benefit | | | — | | | — | | | 317,333 | | | 3,728 | | | 966 | | | — | | | — | | | 4,694 | |

| Tax benefit from vesting of restricted stock | | | — | | | — | | | — | | | — | | | 284 | | | — | | | — | | | 284 | |

| Proceeds from businesses sold | | | — | | | — | | | 43 | |

1.

| HVAC | | $ | 1,216,999 | | | 77 | % |

| Plumbing | | | 221,273 | | | 14 | % |

| Other | | | 63,221 | | | 4 | % |

| Total | | $ | 1,580,519 | | | 100 | % |

2.

COMFORT SYSTEMS USA, INC.

_

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]

We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules [removed: 13a-15(e)] [added: 13a‑15(e)] and [removed: 15d-15(e)] [added: 15d‑15(e)] under the Securities Exchange Act of 1934) as of the end of the period covered by this report.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules [removed: 13a-15(e)] [added: 13a‑15(e)] and [removed: 15d-15(e)] [added: 15d‑15(e)] of the Securities Exchange Act of 1934) are effective as of the end of the period covered by this report.

[removed: Internal] [added: Internal] Controls over Financial [removed: Reporting][added: Reporting]

[removed: Changes] [added: Changes] in Internal Control over Financial [removed: Reporting][added: Reporting]

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules [removed: 13a-15(f)] [added: 13a‑15(f)] and [removed: 15d-15(f)] [added: 15d‑15(f)] under the Securities Exchange Act of 1934) during the three months ended December 31, [removed: 2015] [added: 2016] that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

_

[removed: PART] [added: PART] III

_

The Company has made this code of ethics available on our website, as described in Item 1 of this annual report on Form [removed: 10-K.][added: 10‑K.]

If we make substantive amendments to this code of ethics or grant any waiver, including any implicit waiver, we will disclose the nature of such amendment or waiver on our website or in a report on Form [removed: 8-K] [added: 8‑K] within four business days of such amendment or waiver.

The other information called for by this item has been omitted in accordance with the instructions to Form [removed: 10-K.][added: 10‑K.]

The Company will file with the Commission a definitive proxy statement including the other information to be disclosed under this item in the 120 days following December 31, [removed: 2015] [added: 2016] and such information is hereby incorporated by reference.

[removed: _ITEMS] [added: ITEMS] 11, 12, 13 AND [removed: 14._][added: 14.]

These items have been omitted in accordance with the instructions to Form [removed: 10-K.][added: 10‑K.]

The Company will file with the Commission a definitive proxy statement including the information to be disclosed [added: under the items in the 120 days following December 31, 2016 and such information is hereby incorporated by reference.]

[removed: PART] [added: PART] IV

_

under the items in the 120 days following December 31, 2015 and such information is hereby incorporated by reference.

[removed: _The] [added: (a)The] following documents are filed as part of this annual report on Form [removed: 10-K:_][added: 10‑K:]

[added: | | (1) | |] Consolidated Financial [removed: Statements (Included Under Item 8):] [added: Statements:] The Index to the Consolidated Financial Statements is included [removed: on page 38] [added: under Part II, Item 8] of this annual report on Form [removed: 10-K] [added: 10‑K] and is incorporated herein by reference. [added: |]

[added: | | (2) | |] Financial Statement Schedules: [added: |]

[removed: _Exhibits_][added: (b)Exhibits]

[removed: _Excluded] [added: (c)Excluded] financial [removed: statements:_][added: statements:]

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_

_(a)_

(1)

(2)

_(b)_

_(c)_

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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| | | COMFORT SYSTEMS USA, INC. | | |

| | | By: | | /s/ BRIAN E. LANE Brian E. Lane _President and Chief Executive Officer_ |

| Date: February 23, 2016 | | | | |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

| Signature | | Title | | Date |

| /s/ BRIAN E. LANE Brian E. Lane | | President, Chief Executive Officer, and Director (Principal Executive Officer) | | February 23, 2016 |

| /s/ WILLIAM GEORGE William George | | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | February 23, 2016 |

| /s/ JULIE S. SHAEFF Julie S. Shaeff | | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | | February 23, 2016 |

| /s/ FRANKLIN MYERS Franklin Myers | | Chairman of the Board | | February 23, 2016 |

| /s/ DARCY G. ANDERSON Darcy G. Anderson | | Director | | February 23, 2016 |

| /s/ HERMAN E. BULLS Herman E. Bulls | | Director | | February 23, 2016 |

| /s/ ALFRED J. GIARDINELLI, JR. Alfred J. Giardinelli, Jr. | | Director | | February 23, 2016 |

| /s/ ALAN P. KRUSI Alan P. Krusi | | Director | | February 23, 2016 |

| /s/ JAMES H. SCHULTZ James H. Schultz | | Director | | February 23, 2016 |

| /s/ CONSTANCE E. SKIDMORE Constance E. Skidmore | | Director | | February 23, 2016 |

| /s/ VANCE W. TANG Vance W. Tang | | Director | | February 23, 2016 |

INDEX OF EXHIBITS

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | Incorporated by Reference to the Exhibit Indicated Below and to the Filing with the Commission Indicated Below | | | |

| Exhibit Number | | | Description of Exhibits | | Exhibit Number | | | Filing or File Number |

| | 3.1 | | Second Amended and Restated Certificate of Incorporation of the Registrant | | | 3.1 | | 333-24021 |

| | 3.2 | | Certificate of Amendment dated May 21, 1998 | | | 3.2 | | 1998 Form 10-K |

| | 3.3 | | Certificate of Amendment dated July 9, 2003 | | | 3.3 | | 2003 Form 10-K |

| | 3.4 | | Amended and Restated Bylaws of Comfort Systems USA, Inc. | | | 3.1 | | March 26, 2012 Form 8-K |

| | 4.1 | | Form of certificate evidencing ownership of Common Stock of the Registrant | | | 4.1 | | 333-24021 |

| | *10.1 | | Comfort Systems USA, Inc. 1997 Long-Term Incentive Plan | | | 10.1 | | 333-24021 |

| | *10.2 | | Comfort Systems USA, Inc. 1997 Non-Employee Directors' Stock Plan | | | 10.2 | | 333-24021 |

| | *10.3 | | Amendment to the 1997 Non-Employee Directors' Stock Plan dated May 23, 2002 | | | 10.3 | | Second Quarter 2002 Form 10-Q/A |

The Company has determined not to include a summary of the information required by the Form 10-K under this Item 16 of the Form 10-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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| | COMFORT SYSTEMS USA, INC. | |

| | | |

| | By: | /s/ BRIAN E. LANE |