Comfort Systems USA 10-Q 2021-09-30

Filed 2021-10-27. 2 sections, 158K characters. Original on sec.gov · Markdown · JSON

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 1-13011

COMFORT SYSTEMS USA, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of Incorporation or Organization)	76-0526487 (I.R.S. Employer Identification No.)
675 Bering DriveSuite 400Houston, Texas 77057(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (713) 830-9600

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	FIX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ⌧	Accelerated filer ◻	Non-accelerated filer ◻	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ⌧

The number of shares outstanding of the issuer’s common stock as of October 22, 2021 was 36,041,288 (excluding treasury shares of 5,082,077).

COMFORT SYSTEMS USA, INC.

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2021


		Page
Part I—Financial Information		2
Item 1—Financial Statements		2
Consolidated Balance Sheets		2
Consolidated Statements of Operations		3
Consolidated Statements of Stockholders’ Equity		4
Consolidated Statements of Cash Flows		6
Condensed Notes to Consolidated Financial Statements		7
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3—Quantitative and Qualitative Disclosures about Market Risk		33
Item 4—Controls and Procedures		33
Part II—Other Information		34
Item 1—Legal Proceedings		34
Item 1A—Risk Factors		34
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 6—Exhibits		36
Signatures		37

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

COMFORT SYSTEMS USA, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)


	September 30,		December 31,
	2021		2020
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	67,721	$	54,896
Billed accounts receivable, less allowance for credit losses of $7,618 and $9,087, respectively		700,629		619,544
Unbilled accounts receivable, less allowance for credit losses of $815 and $784, respectively		59,473		45,596
Other receivables, less allowance for credit losses of $503 and $759, respectively		30,489		44,212
Inventories		19,908		13,472
Prepaid expenses and other		11,519		15,510
Costs and estimated earnings in excess of billings, less allowance for credit losses of $34 and $79, respectively		14,972		18,622
Total current assets		904,711		811,852
PROPERTY AND EQUIPMENT, NET		115,538		117,206
LEASE RIGHT-OF-USE ASSET		104,336		94,727
GOODWILL		526,964		464,392
IDENTIFIABLE INTANGIBLE ASSETS, NET		268,099		231,807
DEFERRED TAX ASSETS		22,812		29,401
OTHER NONCURRENT ASSETS		8,874		7,970
Total assets	$	1,951,334	$	1,757,355
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	5,958	$	—
Accounts payable		236,387		204,145
Accrued compensation and benefits		137,910		121,864
Billings in excess of costs and estimated earnings		244,578		226,237
Accrued self-insurance		19,930		49,166
Other current liabilities		97,499		91,492
Total current liabilities		742,262		692,904
LONG-TERM DEBT, NET		266,772		235,733
LEASE LIABILITIES		88,923		80,576
DEFERRED TAX LIABILITIES		1,339		1,339
OTHER LONG-TERM LIABILITIES		80,249		50,374
Total liabilities		1,179,545		1,060,926
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par, 5,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $.01 par, 102,969,912 shares authorized, 41,123,365 and 41,123,365 shares issued, respectively		411		411
Treasury stock, at cost, 5,080,907 and 4,935,186 shares, respectively		(150,987)		(129,243)
Additional paid-in capital		326,493		322,451
Retained earnings		595,872		502,810
Total stockholders’ equity		771,789		696,429
Total liabilities and stockholders’ equity	$	1,951,334	$	1,757,355

The accompanying notes are an integral part of these consolidated financial statements.

COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
REVENUE	$	833,896	$	714,099	$	2,217,552	$	2,157,698
COST OF SERVICES		674,684		566,903		1,808,416		1,747,714
Gross profit		159,212		147,196		409,136		409,984
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		95,287		90,888		271,050		268,857
GAIN ON SALE OF ASSETS		(180)		(377)		(1,021)		(1,243)
Operating income		64,105		56,685		139,107		142,370
OTHER INCOME (EXPENSE):
Interest income		1		7		7		99
Interest expense		(1,586)		(1,733)		(4,443)		(6,904)
Changes in the fair value of contingent earn-out obligations		(1,244)		3,423		4,523		1,824
Other		20		(15)		112		10
Other income (expense)		(2,809)		1,682		199		(4,971)
INCOME BEFORE INCOME TAXES		61,296		58,367		139,306		137,399
PROVISION FOR INCOME TAXES		14,999		8,279		33,553		30,100
NET INCOME	$	46,297	$	50,088	$	105,753	$	107,299

INCOME PER SHARE:
Basic	$	1.28	$	1.37	$	2.91	$	2.93
Diluted	$	1.27	$	1.36	$	2.90	$	2.92

SHARES USED IN COMPUTING INCOME PER SHARE:
Basic		36,296		36,557		36,328		36,604
Diluted		36,434		36,750		36,500		36,797

The accompanying notes are an integral part of these consolidated financial statements.

COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUIT****Y

(In Thousands, Except Share Amounts)

(Unaudited)


	Nine Months Ended
	September 30, 2020
							Additional				Total
	Common Stock			Treasury Stock			Paid-In		Retained		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
BALANCE AT DECEMBER 31, 2019	41,123,365	$	411	(4,465,448)	$	(103,960)	$	320,168	$	368,685	$	585,304
Net income	—		—	—		—		—		17,716		17,716
Cumulative-effect adjustment (1)	—		—	—		—		—		(515)		(515)
Issuance of Stock:
Issuance of shares for options exercised	—		—	—		—		—		—		—
Issuance of restricted stock & performance stock	—		—	43,902		1,054		801		—		1,855
Shares received in lieu of tax withholding payment on vested restricted stock

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