Comfort Systems Usa, Inc. · NYSE:FIX
Comfort Systems Usa — Investor Presentation (August 2006)
39 slides from Comfort Systems Usa's investor presentation, Aug 4, 2006
Slide 1: Quality People, Building Solutions
Quality People, Building Solutions. As of August 4, 2006
Slide 2: Safe Harbor Statement
This presentation includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as Amended. These statements are based on the Company’s expectation
Slide 3: Vision
To be the nation’s premier HVAC and mechanical systems installation and services provider. Vision
Slide 4: Mission
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
Honesty and Integrity Respect for ALL Stakeholders Exceed Customer Expectations Seek “Win-Win” Solutions Entrepreneurial Spirit and Drive Premier Safety Performance Communicate Openly Positively Impact Our Communities Think National - Act Local Values
Slide 6: Comfort Systems USA
Comfort Systems USA National Commercial, Industrial, Institutional HVAC/Piping/Plumbing Strong balance sheet Profitable/cash flow positive in tough 01-03 conditions Good results in 04 Increased growth, profitability and cash flow in 05/06 2006 - $501 million revenues 61% new construction; 39% servic
Slide 7: Comfort Today
Comfort Today Over $20M $10M - $20M Under $10M Comfort Systems USA – Multi-Family Comfort Systems USA National Accounts ANNUAL REVENUES
Slide 8: What We Do
What We Do Commercial HVAC Quality People. Building Solutions. Applied Systems Piping Service, Repair, Retrofit
Slide 9: SOMFORTUSCAN
SOMFORTUSCAN SYSTEMS '
Slide 10: Long Term Industry Growth
Long Term Industry Growth The Dodge Index for Nonresidential Building Construction 1996=100 B uilding comfort a “necessity” Mechanical equipment – requires service, repair, replacement Increasing technical content and building automation Energy efficiency and IAQ emerging Outsourcing Commercial, Ind
Slide 11: Industry Trend Toward Service & Replacement (Recurring Revenue)
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% 3
Slide 12: Revenues by Activity
13% 26% 61% Revenues by Activity New Construction/ Installation Replacement Service and Maintenance YTD June 2006
Slide 13: Diverse Project Mix
PROJECT SIZE # OF PROJECTS (As of June 30, 2006) Diverse Project Mix Average Project Size $250,000 Average Project Length 6-9 months Value of Projects >$1M $907.3M Value of Projects <$1M $756.2M 6,378 205 48 7 4 TOTAL PROJECTS = 6,642 0 2,000 4,000 0-1M 1-5M 5-10M 10-15M 15+M
Slide 14: Select General Contractors
Select General Contractors *Trademarks and logos are the property of their respective owners.
Slide 15: Diverse End-Use Base
Healthcare Schools Government Manufacturing Office Building Multi-Family Retail Distribution Other Residential 13% 8% 10% 14% 24% 7% 1% 9% 3% 2% Top Ten Customers Diverse End-Use Base Served by 11 different Comfort operating units Largest customer = less than 4% of revenues Hotels YTD June 2006 9%
Slide 16: Competitive Advantages
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 Financing Bonding and insurance
Slide 17: Financial Overview
Financial Overview
Slide 18: History
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 pla
Slide 19: History – Financial
$ Revenue Sale of Assets Revenues 298 854 1370 1591 1546 2000 2001 2,000 1,500 1,000 500 0 2002 819 Acquisition Phase and Industry Growth 1997 1998 1999 2003 785 2004 820 2005 900 400 300 200 $ Debt Debt –– EBITDA Sale of Assets 0.6 346 275 205 15 10 4.0 3.0 2.0 1.0 0 3.6 3.9 2.7 0.7 May 00 Capital
Slide 20: Project Review and Controls
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 Sarbane
Slide 21: Backlog
Backlog (in millions) Note: Excludes all divested and discontinued operations High backlog continues 412.5 422.0 447.1 507.8 569.1 618.7 634.1 726.7 680.6 690.0 0 200 400 600 800 Mar. 04 Jun. 04 Sept. 04 Dec. 04 Mar. 05 Jun. 05 Sept. 05 Dec. 05 Mar. 06 Jun. 06
Slide 22: Safety
Safe employees Valued by customers Lost time accident rate is 80% 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, Standard Industry Classification (SIC) Code 20 1710 – Specialty Trades Co
Slide 23: Financial Profile – Ongoing Operations
2Q YTD 2Q 06 05 06 (1) 05 (1) Financial Profile – Ongoing Operations Revenues ………………………….. $ 264.4 $ 229.5 $ 500.8 $ 423.6 Adjusted EBITDA………..……….. $ 13.3 $ 10.7 $ 21.6 $ 14.0 % Revenue…………………….... 5.0% 4.7% 4.3% 3.3% Operating Income …………...….. $ 12.1 $ 9.7 $ 19.1 $ 12.1 % Revenue……………………… 4.6% 4.
Slide 24: Revenues (2002 – 2006)
Revenues (2002 – 2006) Revenues $500 $600 $700 $800 $900 $1,000 $1,100 2002 2003 2004 2005 Run Rate 2006
Slide 25: Operating Margins
Operating Margins (a) Annual Operating Margin (a) This table includes non-GAAP financial information as the information provided excludes goodwill impairment charges of $0.2 million, $2.7 million, $0.6 million and $33.9 million for 2002, 2003, 2004 and 2005, respectively. 0% 1% 2% 3% 4% 5% 6% 2002 2
Slide 26: Financial Strengths
Financial Strengths Market share up – revenue and profit performance better than industry Commitment to cost containment $67 million cash at 6/30/06; substantial credit capacity if needed Positive free cash flow for last seven calendar years
Slide 27: Profile For Growth
Profile For Growth TIME EARNINGS Service ACQUISITIONS INCREMENTAL SERVICE GROWTH CURRENT OPERATIONS (CONSTRUCTION AND SERVICE) Commercial HVAC
Slide 28: Strategy: Increase Productivity
Strategy Increase Productivity Education Leadership Project Managers Superintendents Service Sales Service Operations Craft Best Practices Project Loop Estimating Cooperation with suppliers Prefabrication New materials and methods Focus Leadership Management
Slide 29: Job Loop
Job Loop Constant feedback Continuous improvement process Core HVAC – Job Loop Post Project Review Project Management Project Qualification Project Estimating Project Pricing
Slide 30: Peter Drucker quote
The only things that evolve by themselves in an organization are disorder, friction and malperformance. -Peter Drucker
Slide 31: Strategy: Increase Service
Strategy Increase Service * Grow Maintenance Base Education Sales Sales Management Service Operations Target Retrofit Projects Energy Efficiency IAQ * Maintenance, service, repair, retrofit
Slide 32: Increase Service
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 TIME EARNINGS Service ACQUISITIONS INCREMENTAL SERVICE GROWTH CURRENT OPERATIONS (CONSTRUCTION AND SERVICE) C
Slide 33: Select Customers
Select Customers ® *Trademarks and logos are the property of their respective owners.
Slide 34: Strategy: Grow
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 35: The Ideal Candidate
$20 million in revenue Full service mechanical 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 compan
Slide 36: Target Cities
Boston, MA Providence, RI Norfolk, VA Richmond, VA Raleigh/Durham, NC Charleston, SC Columbia, SC Tampa, FL Spartanburg/Greenville, SC Pittsburgh, PA Atlanta, GA (Service) Cincinnati, OH Target Cities (Listed East to West) Nashville, TN Tulsa, OK Dallas/Fort Worth, TX San Antonio, TX El Paso, TX Alb
Slide 37: Industry Activity
Industry Activity 25 year CAGR – 5% (F.W. Dodge) Nonresidential new construction increasing (U.S. Census Bureau - Construction Put In Place) Deferred maintenance and replacement Dodge Forecast March 06 06 +9% 07 +7% 08 +2%
Slide 38: Outlook
Outlook Long-Term $40+ billion fragmented industry HVAC is a basic necessity Commercial construction strong Growing installed base for recurring maintenance, service, repair and retrofit Scale opportunities – service, purchasing, bonding, best practices Diverse customer base and geography Energy eff
Slide 39: Contact
CONTACT: Bill George Executive Vice President and CFO 1-800-723-8431 bgeorge@comfortsystemsusa.com www.comfortsystemsusa.com Quality People, Building Solutions.
Comfort Systems USA — Investor Presentation (August 2006) on 6ix