Comfort Systems Usa, Inc. · NYSE:FIX
Comfort Systems Usa — Investor Presentation (February 2008)
42 slides from Comfort Systems Usa's investor presentation, Feb 28, 2008
Slide 1: Comfort Systems USA
COMFORT I<, Quality People. Building Solutions. sverems UA A. As of February 27, ~
Slide 2: Safe Harbor Statement
2 This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current plans and expectations of Comfort Systems USA, Inc. and involve risks and uncertainties that could cause actual future activ
Slide 3: Vision
3 To be the nation’s premier HVAC and mechanical systems installation and services provider. Vision
Slide 4: Mission
4 Mission To provide the best value HVAC and mechanical systems installation and service, principally in the mid-market commercial, industrial, and institutional sectors, while caring for our customers, employees and the environment and realizing superior returns for our stockholders.
Slide 5: Values
5 Act with honesty and integrity. Show respect for all stakeholders. Exceed customer expectations. Seek “win-win” solutions. Demonstrate spirit, drive, and teamwork. Pursue innovation. Achieve premier safety performance. Commit to energy efficiency. Communicate openly..... and often. Impact our comm
Slide 6: Comfort Systems USA
6 Comfort Systems USA National Commercial, Industrial, Institutional HVAC/Piping/Plumbing Strong balance sheet Profitable/cash flow positive in tough 2001- 2003 conditions Good results in 2004 Growth, increased profitability and strong cash flow in 2005-2006-2007 56% new construction; 44% service, r
Slide 7: Long-Term Goals
7 Expanding margins - #1 priority Focus on job selection, estimating, execution, continuous improvement Double-digit EPS growth Double-digit revenue growth Expand service Prudent acquisitions in our sector Comfort Systems USA – Long-term Goals
Slide 8: Comfort Today
8 Comfort Today Over $20M $10M - $20M Under $10M Comfort Systems USA – Multi-Family Comfort Systems USA National Accounts ANNUAL REVENUES Region 3 Region 1 Region 2
Slide 9: What We Do
9 What We Do Commercial HVAC Quality People. Building Solutions. Applied Systems Piping Service, Repair, Retrofit
Slide 10: Long Term Industry Growth
10 Long Term Industry Growth The Dodge Index for Nonresidential Building Construction 2000=100 Building comfort a “necessity” Mechanical equipment – requires service, repair, replacement Increasing technical content and building automation Energy efficiency and IAQ emerging Outsourcing Commercial, I
Slide 11: Industry Trend Toward Service & Replacement
11 Industry Trend Toward Service & Replacement (Recurring Revenue) 5+ million commercial buildings (DOE) Recurring service 20 year replacement cycle “Inventory” of future business OEMs note significant deferred maintenance & replacement over recent years Source: The Trane Company NEW CONSTRUCTION 70
Slide 12: Revenues by Activity
12 14% 30% 56% Revenues by Activity New Construction/ Installation Replacement Service and Maintenance 2007
Slide 13: Diverse Project Mix
13 0 2,000 4,000 0-1M 1-5M 5-10M 10-15M 15+M PROJECT SIZE # OF PROJECTS (As of December 31, 2007) Diverse Project Mix Average Project Size $435,000 Average Project Length 6-9 months Value of Projects >$1M $1,113.0M Value of Projects <$1M $644.0M 3,751 216 55 14 4 TOTAL PROJECTS = 4,040
Slide 14: Diverse End-Use Base
14 Healthcare Education Government Manufacturing Office Building Multi-Family Retail/Restaurants Distribution Other Residential 14% 9% 11% 15% 19% 9% 1% 12% 2% 1% Top Ten Customers Diverse End-Use Base Served by 11 different Comfort operating units Largest customer = less than 4% of revenues Lodging
Slide 15: Diverse End-Use Base
15 Diverse End-Use Base Omni Orlando Resort at Championsgate Orlando, Florida Navy Federal Credit Union Pensacola, Florida University Hospital Little Rock, Arkansas University United Methodist Church Syracuse, New York
Slide 16: Competitive Advantages
16 Competitive Advantages High quality operations Ability to leverage and proliferate technical expertise Ability to collaborate on large jobs and share labor National multi-location service capability Purchasing economics Bonding and insurance
Slide 17: Financial Overview
17 Financial Overview
Slide 18: History
18 History 1997 to 1999 – IPO, rapid acquisition growth, strong organic growth 2000 – Integration challenges, trough in profits, high leverage, start of rationalization of operations 2001 – Working capital conservation increases cash flow/reduces debt 2002 to 2003 – Sale of assets; smaller stronger
Slide 19: Capital Structure Management
19 Capital Structure Management $ Revenue Revenues 298 854 1370 1591 1546 2,000 1,500 1,000 500 0 819 Acquisition Phase and Industry Growth 785 820 1057 900 400 300 200 $ Debt Debt –– EBITDA 0.6 346 275 205 15 10 4.0 3.0 2.0 1.0 3.6 3.9 2.7 0.7 9 0.3 0.0 0.0 80 100 120 140 160 180 200 1986 1988 1990
Slide 20: Project Review and Controls
20 Project Review and Controls If project > 10% TTM revenues or new technical application – Then Senior Vice President review required prior to bid process – This may include blind estimate by another Comfort unit experienced in type/size of project Bonding qualification Project management training
Slide 21: Backlog
21 Backlog (in millions) 786.7 818.5 634.1 720.0 700.5 653.8 678.9 690.0 726.7 680.6 618.7 569.1 507.8 0 200 400 600 800 1000 Dec. 04 Mar. 05 Jun. 05 Sept. 05 Dec. 05 Mar . 06 Jun . 06 Sept. 06 Dec. 06 Mar. 07 Jun. 07 Sept. 07 Dec. 07 Note: Excludes all divested and discontinued operations Backlog r
Slide 22: Safety
22 0.0 5.0 10.0 15.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Safe employees Valued by customers Lost time injury rate is 70% less than industry average Claims cost per payroll dollar down from 4.6% to 1.7% We can change behavior OSHA Recordable Rate Source: Bureau of Labor Statistics, Stan
Slide 23: Financial Profile – Ongoing Operations
23 4Q YTD 4Q 07 06 07 06 Financial Profile – Ongoing Operations Revenues $ 293.3 $ 268.1 $ 1,109.5 $ 1,056.5 Adjusted EBITDA $ 15.1 $ 12.6 $ 56.8 $ 49.6 % Revenue 5.1% 4.7% 5.1% 4.7% Operating Income $ 13.1 $ 11.2 $ 49.9 $ 44.5 % Revenue 4.5% 4.2% 4.5% 4.2% Net Income - Continuing Ops $ 8.7 $ 7.5 $
Slide 24: Revenues
24 Revenues $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 2003 2004 2005 2006 2007 Revenues
Slide 25: Operating Margins
25 Operating Margins (a) Annual Operating Margin 0% 1% 2% 3% 4% 5% 6% 2003 2004 2005 2006 2007 (a) This table includes non-GAAP financial information as the information provided excludes goodwill impairment charges of $2.7 million, $0.6 million and $33.9 million for 2003, 2004 and 2005, respectively
Slide 26: Adjusted EBITDA – Continuing Operations
26 Adjusted EBITDA – Continuing Operations $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2003 2004 2005 2006 2007 $25.5 (millions) $39.3 $49.6 $17.9 $56.8
Slide 27: Strong Cash Flows
27 Strong Cash Flows Funds From Operations (a) $ 83.6 $ 24.7 $37.4 CapEx, Net (b) (10.8) (7.6) (5.4) Free Cash Flow $ 72.8 $ 17.1 $ 32.0 (a) Funds From Operations is defined as net cash provided by operating activities adjusted by taxes paid related to the sale of businesses of $7.0 million in 2006.
Slide 28: Financial Strengths
28 Financial Strengths Market share up – revenue and profit performance better than industry Commitment to cost containment $139.6 million cash at 12/31/07; substantial credit capacity if needed Positive free cash flow for nine calendar years
Slide 29: Profile For Growth
29 Profile For Growth T I M E E A R N I N G S Service ACQUISITIONS INCREMENTAL SERVICE GROWTH Commercial HVAC CURRENT OPERATIONS (CONSTRUCTION AND SERVICE)
Slide 30: Strategy: Increase Productivity
30 Strategy Increase Productivity Education – Leadership – Project Managers – Superintendents – Service Sales – Service Operations – Craft Best Practices – Project Management – Estimating Cooperation with suppliers Prefabrication New materials and methods
Slide 31: Job Loop
31 Job Loop Project Estimating Post-Project Review We review projects and apply what we have learned to improve our performance. Project Pricing Project Qualification Project Management
Slide 32: Peter Drucker quote
32 The only things that evolve by themselves in an organization are disorder, friction and malperformance. -Peter Drucker
Slide 33: Strategy: Increase Service
33 Strategy Increase Service* Grow Maintenance Base Education – Sales – Sales Management – Service Operations Benchmarking Target Retrofit Projects – Energy Efficiency – IAQ * Maintenance, service, repair, retrofit
Slide 34: Increase Service
34 Higher margin opportunity Full maintenance contracts/ life of installation Recurring revenue National accounts $2.50+ of repair and replacement for every $1.00 of maintenance Increase Service T I M E E A R N I N G S Service ACQUIS ITIONS INCREMENTAL SERVICE GROWTH CURRENT OPERATIONS (Construction
Slide 35: Select Customers
35 Select Customers ® *Trademarks and logos are the property of their respective owners.
Slide 36: Strategy: Grow
36 Strategy Grow Internal Growth – More of what we do best – Service Step Out Growth – Start ups in new geographies – New locations for existing companies – Techs “on their own” Targeted acquisitions
Slide 37: The Ideal Candidate
37 $20 million in revenue Construction and service In a growing market where we are not now Company that has performed well in the past and has continuing demonstrable upside Organizational structure capable of sustaining/improving the company Ownership/management that wants to stay on to operate co
Slide 38: Target Cities
38 Ft. Lauderdale, FL Norfolk, VA Richmond, VA Raleigh/Durham, NC Savannah, GA Charleston, SC Columbia/Florence, SC Tampa, FL Spartanburg/Greenville, SC Atlanta, GA (Service) Target Cities (Listed East to West) Nashville, TN Omaha, NE Dallas/Fort Worth, TX San Antonio, TX El Paso, TX Albuquerque, NM
Slide 39: Industry Activity
39 Industry Activity 20 year CAGR – 4% (F.W. Dodge) Nonresidential new construction continuing (U.S. Census Bureau - Construction Put In Place) Maintenance and replacement on growing installed base Dodge Forecast Non-Res. Building Winter 07 2006 +18% 2007 +7% 2008 - 2% 2009 +1% 2010 +5%
Slide 40: Outlook
40 Outlook Long-Term $40+ billion fragmented industry HVAC is a basic necessity Commercial construction continuing Growing installed base for recurring maintenance, service, repair and retrofit Scale opportunities – service, purchasing, prefab, bonding, best practices Diverse customer base and geogr
Slide 41: Comfort Systems
COMFORT LY CA SYSTEMS: a“
Slide 42: Contact
Quality People. Building Solutions. C O N T A C T: Bill George Executive Vice President and CFO 1-800-723-8431 bgeorge@comfortsystemsusa.com www.comfortsystemsusa.com
Comfort Systems USA — Investor Presentation (February 2008) on 6ix