Comfort Systems Usa, Inc. · NYSE:FIX
Comfort Systems Usa — Investor Presentation (November 2007)
43 slides from Comfort Systems Usa's investor presentation, Nov 1, 2007
Slide 1: Comfort Systems USA – Quality People. Building Solutions.
COMFORT I<, Quality People. Building Solutions. sverems UA A. As of November 1, -
Slide 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 Comfort Systems USA, Inc. and involve risks and uncertainties that could cause actual future activit
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
Act with honesty and integrity. Show respect for all stakeholders. Exceed customer expectations. Seek “win-win” solutions. Demonstrate spirit and drive. Pursue innovation. Achieve premier safety performance. Commit to energy efficiency. Communicate openly. Impact our communities positively. Think na
Slide 6: Comfort Systems USA
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 55% new construction; 45% service, repa
Slide 7: Long-Term Goals
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
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
What We Do Commercial HVAC Quality People. Building Solutions. Piping Service, Repair, Retrofit Applied Systems
Slide 10: Comfort Systems USA
COMFORT LY CA SYSTEMS: 10
Slide 11: Long Term Industry Growth
Long Term Industry Growth The Dodge Index for Nonresidential Building Construction 1996=100 Building comfort a “necessity” Mechanical equipment – requires service, repair, replacement Increasing technical content and building automation Energy efficiency and IAQ emerging Outsourcing Commercial, Indu
Slide 12: 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 13: Revenues by Activity
15% 30% 55% Revenues by Activity New Construction/ Installation Replacement Service and Maintenance YTD September 2007
Slide 14: Diverse Project Mix
PROJECT SIZE # OF PROJECTS (As of September 30, 2007) Diverse Project Mix Average Project Size $390,000 Average Project Length 6-9 months Value of Projects >$1M $1,092.0M Value of Projects <$1M $693.2M 4,276 216 52 14 4 TOTAL PROJECTS = 4,562 0 2,000 4,000 0-1M 1-5M 5-10M 10-15M 15+M
Slide 15: Select General Contractors
Select General Contractors *Trademarks and logos are the property of their respective owners.
Slide 16: Diverse End-Use Base
Healthcare Education Government Manufacturing Office Building Multi-Family Retail/Restaurants Distribution Other Residential 14% 9% 11% 15% 20% 9% 1% 12% 2% 1% Top Ten Customers Diverse End-Use Base Served by 13 different Comfort operating units Largest customer = less than 4% of revenues Lodging &
Slide 17: Diverse End-Use Base – Project Examples
Diverse End-Use Base Omni Orlando Resort at Championsgate Orlando, Florida HarborWalk Village Destin, Florida University Hospital Little Rock, Arkansas University United Methodist Church Syracuse, New York
Slide 18: 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 19: Comfort Systems USA
SOMFORT, CA. SYSTEMS
Slide 20: 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 21: Capital Structure Management
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 Sharpest downturn in 30 years Best-ever indu
Slide 22: 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 23: Backlog
Backlog (in millions) Note: Excludes all divested and discontinued operations Backlog remains strong Multi-family backlog has decreased from a year ago All other categories have continued to grow 507.8 569.1 618.7 680.6 726.7 690.0 678.9 653.8 700.5 720.0 634.1 818.5 0 200 400 600 800 1000 Dec. 04 M
Slide 24: 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 25: Financial Profile – Ongoing Operations
Financial Profile – Ongoing Operations Revenues $ 286.1 $ 287.7 $ 816.3 $ 788.5 Adjusted EBITDA $ 19.8 $ 15.4 $ 41.7 $ 37.0 % Revenue 6.9% 5.4% 5.1% 4.7% Operating Income $ 18.1 $ 14.2 $ 36.8 $ 33.3 % Revenue 6.3% 4.9% 4.5% 4.2% Net Income - Contg Ops $ 11.5 $ 9.0 $ 23.8 $ 21.2 % Revenue 4.0% 3.1% 2
Slide 26: Revenues
Revenues Revenues 2007 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 2003 2004 2005 2006 Run Rate
Slide 27: 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 $2.7 million, $0.6 million and $33.9 million for 2003, 2004 and 2005, respectively. No goodwill impairment charge was recorded for
Slide 28: Adjusted EBITDA – Continuing Operations
Adjusted EBITDA – Continuing Operations $25.5 (millions) $39.3 $49.6 $17.9 $41.7 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2003 2004 2005 2006 YTD Q3 07
Slide 29: Strong Cash Flows
Strong Cash Flows Funds From Operations (a) $ 25.5 $ 24.7 $37.4 CapEx, Net (b) (7.6) (7.6) (5.4) Free Cash Flow $ 17.9 $ 17.1 $ 32.0 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. CAPEX,
Slide 30: Financial Strengths
Financial Strengths Market share up – revenue and profit performance better than industry Commitment to cost containment $97.7 million cash at 9/30/07; substantial credit capacity if needed Positive free cash flow for last eight calendar years
Slide 31: Profile For Growth
Profile For Growth TIME EARNINGS Service ACQUISITIONS INCREMENTAL SERVICE GROWTH Commercial HVAC CURRENT OPERATIONS (CONSTRUCTION AND SERVICE)
Slide 32: 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 33: Job Loop
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 34: Peter Drucker quote
The only things that evolve by themselves in an organization are disorder, friction and malperformance. -Peter Drucker
Slide 35: Strategy – Increase Service
Strategy Increase Service* Grow Maintenance Base Education Sales Sales Management Service Operations Benchmarking Target Retrofit Projects Energy Efficiency IAQ * Maintenance, service, repair, retrofit
Slide 36: 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 Commercial HVAC CURRENT OPERATIONS (CONSTRUCTI
Slide 37: Select Customers
Select Customers ® *Trademarks and logos are the property of their respective owners.
Slide 38: 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 39: 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 40: Target Cities
Boston, MA 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 Albuque
Slide 41: Industry Activity
Industry Activity 20 year CAGR – 4% (F.W. Dodge) Nonresidential new construction increasing (U.S. Census Bureau - Construction Put In Place) Deferred maintenance and replacement Dodge Forecast Non-Res. Building Winter 07 2006 +18% 2007 +7% 2008 - 2% 2009 +1% 2010 +5%
Slide 42: 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 43: Contact
Quality People. Building Solutions. CONTACT: Bill George Executive Vice President and CFO 1-800-723-8431 bgeorge@comfortsystemsusa.com www.comfortsystemsusa.com
Comfort Systems USA — Investor Presentation (November 2007) on 6ix