Slide 1: Comfort Systems USA
COMFORT Quality People. Building Solutions. sverems UA.
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement 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 future events of Comfort Systems USA, Inc. and involve risks and uncertainties
Slide 3: Vision
3 To be the nation’s premier HVAC and mechanical systems installation and services provider. Vision
Slide 4: 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 openlyand often. Impact our communitie
Slide 5: Comfort Systems USA
6 Comfort Systems USA National Commercial, Industrial, Institutional HVAC/Piping/Plumbing/Energy Efficiency Strong balance sheet Positive cash flow 47% new construction; 53% service, repair, retrofit 2009 Full Year Revenues $1.1 billion 2010 Run Rate $1.1 billion
Slide 6: Comfort Systems USA's Team
Comfort Systems USA’s TEAM William F. Murdy (68) Chairman/CEO Industry: 20 years CSUSA 10 years Club Quarters (CEO), Land Care (CEO), GID (CEO), Morgan Stanley Venture Capital (Pres) PRI (COO), US Army (10 years) BS-West Point, MBA-Harvard William George (45) EXVP-CFO Industry: 13 years CSUSA 13 yea
Slide 7: Comfort Today
8 Comfort Today Over $20M $10M - $20M Comfort Systems USA Energy Services Comfort Systems USA National Accounts ANNUAL REVENUES Region 3 Region 1 Region 2
Slide 8: ColonialWebb Contractors with Comfort Systems USA
9 ColonialWebb Contractors with Comfort Systems USA Over $20M $10M - $20M ANNUAL REVENUES Colonial Webb Locations Acquired July 2010 $180M - $190M Annual Revenue Main offices in Richmond, VA and Norfolk, VA
Slide 9: What We Do
10 What We Do Commercial HVAC Building comfort a “necessity” Mechanical equipment – requires service, repair, replacement Increasing technical content and building automation Energy efficiency and Indoor Air Quality (IAQ) emerging Outsourcing D R I V E R S Commercial, Industrial, Institutional HVAC
Slide 10: 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 11: Revenues by Activity
12 17% 36% 47% Revenues by Activity New Construction/ Installation Replacement Service and Maintenance 2010 YTD
Slide 12: Diverse Project Mix
13 PROJECT SIZE # OF PROJECTS (As of June 30, 2010) Diverse Project Mix Average Project Size $335,000 Average Project Length 6-9 months Value of Projects >$1M $1,050.8M Value of Projects <$1M $433.7M 4,176 202 37 14 7 TOTAL PROJECTS = 4,436
Slide 13: Top Customers
14 Top 20 Customers Diverse End-Use Base Served by 15 different Comfort operating units Largest customer = less than 3% of revenues 2010 YTD
Slide 14: Diverse End-Use Base
15 Diverse End-Use Base Omni Orlando Resort at ChampionsGate Orlando, Florida University Hospital Little Rock, Arkansas Arboretum Elementary School Waunakee, Wisconsin Iowa Renewal Energy Washington, Iowa
Slide 15: Competitive Advantages
16 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 Balance sheet strength Bonding and insurance Stron
Slide 16: Safety
17 Lost Time Injury Rate is 58% less than industry average Achieved 96% training completed OSHA Incident Rate is 44% less than industry average OSHA Recordable Rate Source: Bureau of Labor Statistics, Standard Industry Classification (SIC) Code 20 1710 – Specialty Trades Contractors – HVAC and Plumb
Slide 17: History – Financial
18 854 1,370 1,591 1,546 346 275 205 History – Financial Nonresidential Construction Spending (FW Dodge) 9/11/01 298 854 785 767 883 1,048 1,102 1,322 Revenues Sale of Assets Acquisition Phase and Industry Growth $ Revenue Capital Management Structure $ Debt Debt –TTM EBITDA Sale of Assets 1,129 819
Slide 18: Financial Overview
19 Financial Overview
Slide 19: Financial Profile
20 Financial Profile ($ in millions, except per share amounts) 2010 2009 2010 2009 249.6 $ 300.3 $ 486.1 $ 580.6 $ 9.8 $ 20.4 $ 15.5 $ 35.6 $ % Revenue 3.9% 6.8% 3.2% 6.1% Operating Income 6.8 $ 17.0 $ 8.9 $ 29.0 $ excluding goodwill impairment (**) % Revenue 2.7% 5.7% 1.8% 5.0% Net Income - Continu
Slide 20: Revenues
21 Revenues Revenues (in millions) Note: Excludes all divested and discontinued operations $883 $1,048 $1,102 $1,322 $1,129 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 2005 2006 2007 2008 2009
Slide 21: Operating Margins
22 Operating Margins (a) Annual Operating Margin This table includes non-GAAP financial information as the information provided excludes goodwill impairment charges of $33.9 million for 2005. No goodwill impairment charge was recorded for 2006, 2007, 2008 or 2009. 0% 1% 2% 3% 4% 5% 6% 7% 2005 2006 2
Slide 22: Backlog
23 Backlog (in millions) Note: Excludes all divested and discontinued operations
Slide 23: Free Cash Flow
24 Free Cash Flow (in millions) 2009 2008 2007 Cash From Operating Activities 54.3 $ 82.9 $ 83.6 $ Purchases Of Property and Equipment (9.5) (14.6) (11.1) Proceeds From Sales Of Property and Equipment 0.8 0.6 0.3 Free Cash Flow 45.6 $ 68.9 $ 72.8 $ Year Ended December 31,
Slide 24: Financial Strengths
25 Financial Strengths Market share up – revenue and profit performance better than industry Commitment to cost containment $108 million cash at 6/30/10 (prior to ColonialWebb acquisition); substantial credit capacity if needed Positive free cash flow for eleven calendar years
Slide 25: Profile For Growth
26 Profile For Growth T I M E E A R N I N G S 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 Safety Best Practices Project Management Estimating Cooperation with suppliers Prefabrication New materials and methods
Slide 27: Job Loop
28 Job Loop Post-Project Review We review projects and apply what we have learned to improve our performance. Project Estimating 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 Indoor Air Quality (IAQ) * Maintenance, servic
Slide 30: National Account Customers
31 National Account Customers *Trademarks and logos are the property of their respective owners.
Slide 31: Energy Efficiency-Retrofitting HVAC
32 Energy Efficiency-Retrofitting HVAC Green Is Part Of Our Business Energy costs drive need for efficiency HVAC 30% - 65 % electric usage Energy Star (Dept. of Energy/EPA) / LEED (USGBC) 2- 4 year pay outs depending on electric rates, usage, age, incentives Use Our Energy to Save Yours! ™
Slide 32: Growth
33 Growth Internal More of what we do best Service Energy efficiency Step Out Growth New locations for existing companies Techs “on their own” Targeted acquisitions Best HVAC oriented mechanical in new area
Slide 33: The Ideal Candidate
34 $20 million + in revenue Construction and service In a growing market in new area 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 company T
Slide 34: Target Markets
35 Boise, ID Charleston, SC Columbia/Florence, SC Dallas/Fort Worth, TX El Paso, TX Ft. Lauderdale, FL Greensboro, NC Jackson, Mississippi Target Markets (Listed Alphabetically) Los Angeles, CA Omaha, NE Portland, OR San Antonio, TX Savannah, GA Spartanburg/Greenville, SC Tampa, FL
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: What We Do
37 What We Do
Slide 37: rt g =| : oa 3h Bs
rt g =| : oa 3h Bs
Slide 38: Appendix I – GAAP Reconciliation To Adjusted EBITDA
40 Appendix I – GAAP Reconciliation To Adjusted EBITDA (in thousands) June 30, June 30, 2010 2009 2010 2009 Net Income 1,646 $ 10,098 $ 3,573 $ 17,040 $ Discontinued Operations - 300 (762) 480 Income Taxes 515 6,491 1,245 11,221 Other (Income) Expense 6 (9) (6) (2) Interest Expense, net 209 160 430
Slide 39: Appendix II – Supplemental Non-GAAP Information
41 Appendix II – Supplemental Non-GAAP Information ($ in thousands except per share amounts) 2010 2009 2010 2009 Operating Income 2,376 $ 17,040 $ 4,480 $ 29,009 $ Goodwill Impairment 4,446 - 4,446 - Operating Income 6,822 17,040 8,926 29,009 excluding goodwill impairment Interest and other (215) (1
Slide 40: Contact
C O N T A C T: Bill George Executive Vice President and CFO 1-800-723-8431 bgeorge@comfortsystemsusa.com www.comfortsystemsusa.com