Comfort Systems Usa, Inc. · NYSE:FIX
Comfort Systems Usa — Investor Presentation (November 2008)
37 slides from Comfort Systems Usa's investor presentation, Nov 3, 2008
Slide 1: Comfort Systems USA
COMFORT LY Ch. Quality People. Building Solutions. SYSTEMS Wun As of October 31, 7.
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 communiti
Slide 6: Comfort Systems USA
6 Comfort Systems USA National Commercial, Industrial, Institutional HVAC/Piping/Plumbing Strong balance sheet Substantial continuing growth 56% new construction; 44% service, repair, retrofit Revenue run rate $1.3 billion
Slide 7: Comfort Today
7 Comfort Today Over $20M $10M - $20M Under $10M Comfort Systems USA National Accounts ANNUAL REVENUES Region 3 Region 1 Region 2
Slide 8: What We Do
8 What We Do Commercial HVAC Quality People. Building Solutions. Applied Systems Piping Service, Repair, Retrofit
Slide 9: Long Term Industry Growth
9 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, In
Slide 10: Industry Trend Toward Service & Replacement
10 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 11: Revenues by Activity
11 14% 30% 56% Revenues by Activity New Construction/Installation Replacement Service and Maintenance Q3 2008
Slide 12: Diverse Project Mix
12 0 2,000 4,000 0-1M 1-5M 5-10M 10-15M 15+M PROJECT SIZE # OF PROJECTS (As of September 30, 2008) Diverse Project Mix Average Project Size $425,000 Average Project Length 6-9 months Value of Projects >$1M $1,306.6M Value of Projects <$1M $703.3M 4,422 257 52 12 9 TOTAL PROJECTS = 4,752
Slide 13: Diverse End-Use Base
13 Healthcare Education Government Manufacturing Office Building Multi-Family Retail/Restaurants Distribution Other Residential 17% 11% 13% 13% 14% 8% 1% 12% 1% 2% Top Ten Customers Diverse End-Use Base Served by 13 different Comfort operating units Largest customer = less than 3% of revenues Lodgin
Slide 14: Diverse End-Use Base
14 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 15: Competitive Advantages
15 Competitive Advantages High quality operations Ability to leverage and proliferate technical expertise Ability to collaborate on large jobs and share labor Energy efficiency services National multi-location service capability Purchasing economics Bonding and insurance
Slide 16: Financial Overview
16 Financial Overview
Slide 17: Capital Structure Management
17 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 18: Safety
19 0.0 5.0 10.0 15.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Safe employees Valued by customers Lost time injury rate is 60% less than industry average Claims cost per payroll dollar down from 4.6% to 1.5% We can build a culture OSHA Recordable Rate Source: Bureau of Labor Statistics,
Slide 19: 3Q Financial Profile – Ongoing Operations
20 3Q YTD 3Q 08 07 08 07 Financial Profile – Ongoing Operations Revenues $ 348.6 $286.1 $ 999.4 $ 816.3 Adjusted EBITDA $ 25.4 $19.8 $ 68.5 $ 41.7 % Revenue 7.3% 6.9% 6.9% 5.1% Operating Income $ 21.9 $ 18.1 $ 59.3 $ 36.8 % Revenue 6.3% 6.3% 5.9% 4.5% Net Income - $ 13.8 $ 11.5 $ 37.2 $ 23.8 % Reven
Slide 20: Revenues
21 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 2004 2005 2006 2007 Run Rate 2008 Revenues Revenues for the nine months ended September 30, 2008 were $999.4 million. Revenues
Slide 21: Operating Margins
22 Operating Margins (a) Annual Operating Margin 0% 1% 2% 3% 4% 5% 6% 2004 2005 2006 2007 YTD Q3 08 (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, respect
Slide 22: Adjusted EBITDA – Continuing Operations
23 Adjusted EBITDA – Continuing Operations $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2004 2005 2006 2007 YTD Q3 08 $25.5 (millions) $39.3 $49.6 $56.8 $68.5
Slide 23: Strong Cash Flows
24 Strong Cash Flows Funds From Operations (a) $46.9 $ 83.6 $ 24.7 CapEx, Net (b) (10.1) (10.8) (7.6) Free Cash Flow $36.8 $ 72.8 $ 17.1 (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 24: Financial Strengths
25 Financial Strengths Market share up – revenue and profit performance better than industry Commitment to cost containment $102.3 million cash at 9/30/08; substantial credit capacity if needed Positive free cash flow for nine calendar years
Slide 25: Profile For Growth
26 Profile For Growth TIME EAR NINGS Service ACQUISITIONS INCREMENTAL SERVICE GROWTH CURRENT OPERATIONS (CONSTRUCTION AND SERVICE) Energy Efficiency Commercial HVAC
Slide 26: Operations: Increase Productivity
27 Operations 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 27: Job Loop
28 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 28: Peter Drucker quote
29 The only things that evolve by themselves in an organization are disorder, friction and malperformance. -Peter Drucker
Slide 29: Service
30 Service Increase Service* Grow Maintenance Base Education –Employees and Customers Higher margin opportunity Recurring revenue National accounts $2.50+ of repair and replacement for every $1.00 of maintenance Target Retrofit Projects –Energy Efficiency –IAQ * Maintenance, service, repair, retrofi
Slide 30: Select Customers
31 Select Customers ® *Trademarks and logos are the property of their respective owners.
Slide 31: Energy Efficiency-Retrofitting HVAC
32 Energy Efficiency-Retrofitting HVAC Green not a “fad” Energy costs drive need for efficiency1 HVAC 30% - 65 % electric usage Energy Star (Dept. of Energy/EPA) / LEED2 (USGBC3) 2- 4 year pay outs depending on electric rates, usage, age 1. FMI projects $21.2 Billion of new non-residential construct
Slide 32: Growth
33 Growth Internal – More of what we do best – Service – Energy efficiency Step Out Growth – Start ups in new geographies – New locations for existing companies – Techs “on their own” Targeted acquisitions – Best non-union HVAC oriented mechanical in new area
Slide 33: The Ideal Candidate
34 $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 34: Target Cities
35 Atlanta, GA (Service) Boise, ID Charleston, SC Columbia/Florence, SC Dallas/Fort Worth, TX El Paso, TX Ft. Lauderdale, FL Los Angeles, CA Nashville, TN Target Cities (Listed Alphabetically) Norfolk, VA Omaha, NE PA/NJ Portland, OR Richmond, VA San Antonio, TX Savannah, GA Spartanburg/Greenville,
Slide 35: Outlook
36 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 36: Comfort Systems USA
COMFORT USA SYSTEMS
Slide 37: Contact
Quality People. Bulding 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 (November 2008) on 6ix