FIX 10-Q

Comfort Systems USA Inc (FIX)

10-Q 2024-04-25 For: 2024-03-31

View Original

Added on April 03, 2026

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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

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


		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		5
Condensed Notes to Consolidated Financial Statements		6
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3—Quantitative and Qualitative Disclosures about Market Risk		31
Item 4—Controls and Procedures		31
Part II—Other Information		33
Item 1—Legal Proceedings		33
Item 1A—Risk Factors		33
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 5—Other Information		34
Item 6—Exhibits		34
Signatures		36


	March 31,		December 31,
	2024		2023
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	100,792	$	205,150
Billed accounts receivable, less allowance for credit losses of $11,949 and $11,926, respectively		1,570,643		1,318,926
Unbilled accounts receivable, less allowance for credit losses of $929 and $850, respectively		76,975		72,774
Other receivables, less allowance for credit losses of $519 and $522, respectively		136,100		166,319
Inventories		71,061		65,538
Prepaid expenses and other		62,500		54,309
Costs and estimated earnings in excess of billings, less allowance for credit losses of $108 and $79, respectively		30,118		28,084
Total current assets		2,048,189		1,911,100
PROPERTY AND EQUIPMENT, NET		226,197		208,568
LEASE RIGHT-OF-USE ASSET		227,157		205,712
GOODWILL		862,934		666,834
IDENTIFIABLE INTANGIBLE ASSETS, NET		489,884		280,397
DEFERRED TAX ASSETS		31,928		17,723
OTHER NONCURRENT ASSETS		16,540		15,245
Total assets	$	3,902,829	$	3,305,579
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	12,885	$	4,867
Accounts payable		557,859		419,962
Accrued compensation and benefits		153,859		169,136
Billings in excess of costs and estimated earnings and deferred revenue		1,131,928		909,538
Accrued self-insurance		29,712		27,774
Other current liabilities		253,416		189,928
Total current liabilities		2,139,659		1,721,205
LONG-TERM DEBT		77,004		39,345
LEASE LIABILITIES		209,717		188,136
DEFERRED TAX LIABILITIES		1,120		1,120
OTHER LONG-TERM LIABILITIES		102,793		77,944
Total liabilities		2,530,293		2,027,750
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, 5,428,501 and 5,438,625 shares, respectively		(211,518)		(209,807)
Additional paid-in capital		348,582		339,562
Retained earnings		1,235,061		1,147,663
Total stockholders’ equity		1,372,536		1,277,829
Total liabilities and stockholders’ equity	$	3,902,829	$	3,305,579


	Three Months Ended
	March 31,
	2024		2023
REVENUE	$	1,537,016	$	1,174,640
COST OF SERVICES		1,239,653		969,235
Gross profit		297,363		205,405
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		162,723		135,032
GAIN ON SALE OF ASSETS		(820)		(512)
Operating income		135,460		70,885
OTHER INCOME (EXPENSE):
Interest income		1,603		1,397
Interest expense		(1,633)		(4,076)
Changes in the fair value of contingent earn-out obligations		(12,491)		(2,382)
Other		117		1
Other income (expense)		(12,404)		(5,060)
INCOME BEFORE INCOME TAXES		123,056		65,825
PROVISION FOR INCOME TAXES		26,737		8,609
NET INCOME	$	96,319	$	57,216

INCOME PER SHARE:
Basic	$	2.70	$	1.60
Diluted	$	2.69	$	1.59

SHARES USED IN COMPUTING INCOME PER SHARE:
Basic		35,739		35,812
Diluted		35,828		35,907


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


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

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


	Three Months Ended
	March 31, 2023
							Additional				Total
	Common Stock			Treasury Stock			Paid-In		Retained		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
BALANCE AT DECEMBER 31, 2022	41,123,365	$	411	(5,362,224)	$	(187,212)	$	332,080	$	854,644	$	999,923
Net income	—		—	—		—		—		57,216		57,216
Issuance of Stock:
Issuance of shares for options exercised	—		—	1,000		36		(18)		—		18
Issuance of restricted stock & performance stock	—		—	31,960		1,131		3,384		—		4,515
Shares received in lieu of tax withholding on vested stock	—		—	(12,728)		(1,798)		—		—		(1,798)
Stock-based compensation	—		—	—		—		3,438		—		3,438
Dividends ($0.175 per share)	—		—	—		—		—		(6,254)		(6,254)
Share repurchase	—		—	(29,400)		(3,568)		—		—		(3,568)
BALANCE AT MARCH 31, 2023	41,123,365	$	411	(5,371,392)	$	(191,411)	$	338,884	$	905,606	$	1,053,490


	Three Months Ended
	March 31, 2024
							Additional				Total
	Common Stock			Treasury Stock			Paid-In		Retained		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
BALANCE AT DECEMBER 31, 2023	41,123,365	$	411	(5,438,625)	$	(209,807)	$	339,562	$	1,147,663	$	1,277,829
Net income	—		—	—		—		—		96,319		96,319
Issuance of Stock:
Issuance of shares for options exercised	—		—	1,369		53		(26)		—		27
Issuance of restricted stock & performance stock	—		—	17,018		657		4,696		—		5,353
Shares received in lieu of tax withholding on vested stock	—		—	(6,763)		(2,126)		—		—		(2,126)
Stock-based compensation	—		—	—		—		4,350		—		4,350
Dividends ($0.25 per share)	—		—	—		—		—		(8,921)		(8,921)
Share repurchase	—		—	(1,500)		(295)		—		—		(295)
BALANCE AT MARCH 31, 2024	41,123,365	$	411	(5,428,501)	$	(211,518)	$	348,582	$	1,235,061	$	1,372,536


	Three Months Ended March 31,
Revenue by Service Provided	2024				2023
Mechanical Segment	$	1,185,009	77.1	%	$	918,615	78.2	%
Electrical Segment		352,007	22.9	%		256,025	21.8	%
Total	$	1,537,016	100.0	%	$	1,174,640	100.0	%

	Three Months Ended March 31,
Revenue by Type of Customer	2024				2023
Manufacturing	$	461,400	30.0	%	$	366,356	31.2	%
Technology		464,814	30.2	%		226,249	19.3	%
Healthcare		133,729	8.7	%		159,815	13.5	%
Education		133,983	8.7	%		110,253	9.4	%
Office Buildings		101,892	6.6	%		98,195	8.4	%
Retail, Restaurants and Entertainment		80,585	5.2	%		76,194	6.5	%
Government		87,801	5.7	%		64,415	5.5	%
Multi-Family and Residential		40,851	2.7	%		45,007	3.8	%
Other		31,961	2.2	%		28,156	2.4	%
Total	$	1,537,016	100.0	%	$	1,174,640	100.0	%

	Three Months Ended March 31,
Revenue by Activity Type	2024				2023
New Construction	$	898,976	58.5	%	$	627,952	53.5	%
Existing Building Construction		390,369	25.4	%		309,483	26.3	%
Service Projects		104,114	6.8	%		103,105	8.8	%
Service Calls, Maintenance and Monitoring		143,557	9.3	%		134,100	11.4	%
Total	$	1,537,016	100.0	%	$	1,174,640	100.0	%


	March 31, 2024		December 31, 2023
Contract assets:
Costs and estimated earnings in excess of billings, less allowance for credit losses	$	30,118	$	28,084
Contract liabilities:
Billings in excess of costs and estimated earnings and deferred revenue	$	1,131,928	$	909,538


	Fair Value Measurements at March 31, 2024
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	100,792	$	—	$	—	$	100,792
Life insurance—cash surrender value	$	—	$	7,721	$	—	$	7,721
Contingent earn-out obligations	$	—	$	—	$	71,296	$	71,296

	Fair Value Measurements at December 31, 2023
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	205,150	$	—	$	—	$	205,150
Life insurance—cash surrender value	$	—	$	7,473	$	—	$	7,473
Contingent earn-out obligations	$	—	$	—	$	44,222	$	44,222


	Three Months Ended		Year Ended
	March 31, 2024		December 31, 2023
Balance at beginning of period	$	44,222	$	32,317
Issuances		51,784		4,315
Settlements		(37,201)		(16,017)
Adjustments to fair value		12,491		23,607
Balance at end of period	$	71,296	$	44,222


Consideration transferred:
Cash paid at closing	$	267,500
Working capital adjustment		14,595
Notes issued to former owners		35,000
Estimated fair value of contingent earn-out payments		42,732
	$	359,827
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	171,027
Billed and unbilled accounts receivable		59,921
Prepaid expenses and other		1,476
Cost and estimated earnings in excess of billings		578
Property and equipment		2,528
Lease right-of-use asset		2,365
Goodwill		155,220
Identifiable intangible assets		170,100
Other noncurrent assets		136
Accounts payable		(15,138)
Billings in excess of costs and estimated earnings and deferred revenue		(179,895)
Current operating lease liabilities		(1,495)
Accrued expenses and other current liabilities		(6,243)
Long-term operating lease liabilities		(753)
	$	359,827


	Valuation Method	Estimated Useful Life		Estimated Fair Value
Backlog	Excess earnings	1.8 years	$	35,800
Trade Name	Relief-from-royalty	22.9 years		11,300
Customer Relationships	Excess earnings	10 years		123,000
Total			$	170,100



	Mechanical Segment		Electrical Segment		Total
Balance at December 31, 2022	$	363,929	$	247,860	$	611,789
Acquisitions and purchase price adjustments (See Note 5)		29,347		25,698		55,045
Balance at December 31, 2023		393,276		273,558		666,834
Acquisitions and purchase price adjustments (See Note 5)		195,900		200		196,100
Balance at March 31, 2024	$	589,176	$	273,758	$	862,934


Year ending December 31—
2024 (remainder of the year)	$	71,121
2025		63,532
2026		52,948
2027		50,967
2028		50,806
Thereafter		200,510
Total	$	489,884


	Net Leverage Ratio
	Less than 1.00		1.00 to less than 1.75		1.75 to less than 2.50		2.50 to less than 3.00		3.00 or greater
Additional Per Annum Interest Margin Added Under:
Base Rate Loan Option	0.00	%	0.25	%	0.50	%	0.75	%	1.00	%
SOFR Loan Option	1.00	%	1.25	%	1.50	%	1.75	%	2.00	%


	Balance at		Range of Stated
	March 31, 2024		Interest Rates
2024	$	4,800	2.5	%
2025		21,645	2.3 - 3.0	%
2026		31,625	2.5 - 5.5	%
2027		26,000	5.5	%
2028		5,000	5.5	%
Total	$	89,070


Consideration transferred:
Cash paid at closing	$	100,000
Working capital adjustment		1,531
Notes issued to former owners		10,000
Estimated fair value of contingent earn-out payments		9,052
	$	120,583
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	14,802
Billed and unbilled accounts receivable		38,411
Inventory		230
Prepaid expenses and other		326
Costs and estimated earnings in excess of billings		728
Property and equipment		2,674
Lease right-of-use asset		4,552
Goodwill		40,680
Identifiable intangible assets		63,300
Other noncurrent assets		10
Accounts payable		(20,612)
Billings in excess of costs and estimated earnings and deferred revenue		(19,188)
Current operating lease liabilities		(133)
Accrued expenses and other current liabilities		(826)
Long-term debt		(59)
Long-term operating lease liabilities		(4,312)
	$	120,583


		Estimated	Estimated
	Valuation Method	Useful Life	Fair Value
Backlog	Excess earnings	1.8 years	$	12,900
Trade Name	Relief-from-royalty	22 years		10,600
Customer Relationships	Excess earnings	9 years		39,800
Total			$	63,300



	March 31, 2024		December 31, 2023
Operating lease right-of-use assets	$	227,157	$	205,712
Operating lease liabilities:
Other current liabilities	$	26,130	$	24,426
Long-term operating lease liabilities		209,717		188,136
Total operating lease liabilities	$	235,847	$	212,562


Year ending December 31—
2024 (excluding the three months ended March 31, 2024)	$	29,282
2025		36,864
2026		33,144
2027		28,915
2028		25,252
Thereafter		183,669
Total lease payments		337,126
Less—present value discount		(101,279)
Present value of operating lease liabilities	$	235,847



	Three Months Ended March 31, 2024
	Mechanical Segment		Electrical Segment		Corporate		Consolidated
Revenue	$	1,185,009	$	352,007	$	—	$	1,537,016
Gross Profit	$	217,712	$	79,651	$	—	$	297,363

	Three Months Ended March 31, 2023
	Mechanical Segment		Electrical Segment		Corporate		Consolidated
Revenue	$	918,615	$	256,025	$	—	$	1,174,640
Gross Profit	$	164,067	$	41,338	$	—	$	205,405


		Aggregate
		Contract
	No. of	Price Value
Contract Price of Project	Projects	(millions)
Under $2 million	7,639	$	1,608.7
$2 million - $10 million	739		3,359.5
$10 million - $20 million	134		1,902.9
$20 million - $40 million	97		2,773.7
Greater than $40 million	59		4,023.4
Total	8,668	$	13,668.2


				Total Number of Shares	Maximum Number of
				Purchased as Part of	Shares that May Yet Be
	Total Number of	Average Price		Publicly Announced Plans	Purchased Under the Plans
Period	Shares Purchased	Paid Per Share		or Programs (1)	or Programs
January 1 - January 31	1,500	$	196.89	10,257,824	686,301
February 1 - February 29	—	$	—	10,257,824	686,301
March 1 - March 31	—	$	—	10,257,824	686,301
	1,500	$	196.89	10,257,824	686,301


		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	Certificate of Amendment dated May 20, 2016	3.1	May 20, 2016 Form 8-K
3.5	Amended and Restated Bylaws of Comfort Systems USA, Inc.	3.1	March 25, 2016 Form 8-K
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)


	Comfort Systems USA, Inc.

April 25, 2024	By:	/s/ Brian E. Lane
		Brian E. Lane
		President, Chief Executive Officer and Director

April 25, 2024	By:	/s/ William George
		William George
		Executive Vice President and Chief Financial Officer

April 25, 2024	By:	/s/ Julie S. Shaeff
		Julie S. Shaeff
		Senior Vice President and Chief Accounting Officer