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Comfort Systems USA, Inc. (FIX)
Q2 2008 Earnings Call
August 1, 2008 11:00 am ET
William F. Murdy – Chairman of the Board and Chief Executive Officer
William George III – Chief Financial Officer
Thomas N. Tanner – Chief Operating Officer
Matt Duncan - Stephens Inc.
Rich Wesolowski - Sidoti
David Uschak - SMH Capital
Tahira Afzal - KeyBanc
Josh Wilson - RLR Capital
Previous Statements by FIX
» Comfort Systems USA Inc. Q3 2009 Earnings Call Transcript
» Comfort Systems, Inc. Q4 2008 Earnings Call Transcript
» Comfort Systems USA Inc. Q3 2008 Earnings Call Transcript
William George III
Thanks, Marsha. Good morning, everyone. Welcome to Comfort Systems USA’s second quarter earnings call.
Our comments this morning as well as our press releases contain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. What we say is based on the current plans and expectations of Comfort Systems USA. Those plans and expectations involve risks and uncertainties that can cause actual future activities and results of our operations to be materially different from those set forth in our comments. You can read a more detailed listing and commentary concerning our specific risk factors in our Form 10-K as well as in our press release covering these earnings.
On our call with me this morning are Bill Murdy, Comfort Systems USA CEO and Tom Tanner, our Chief Operating Officer. Bill Murdy will open our remarks.
William F. Murdy
Thanks, Bill. Welcome everyone. We are very pleased to report the quarter record revenue and earnings for Q2 ’08. We’re reporting $0.38 per share versus $0.25 a share for the comparable quarter in ’07. That’s an increase in excess of 50%.
This improvement we believe demonstrates the productivity and delivery capability of our outstanding operations around the country.
Our revenues in Q2 of $355 million and $318 million of same-store basis compared to $281 million for the comparable quarter in ’07. Total backlog at June 30 was $780 million. Backlog on same-store basis was $701 million versus $720 million on June 30, 2007, at a decrease of $19 million. However, we exclude the purposeful downsizing at Atlas which resulted in a $37 million decrease in Atlas’ backlog. Our overall backlog is actually up year-over-year. I’m sure Tom will have some more to say about the backlog including some remarks on booking since the end of the second quarter.
Having mentioned Atlas, let me add that it continues on its recovery and improvement plan and that it effectively broke even in the second quarter.
Cash flow also remains very strong. At the six months ended June 30, it was $19 million versus $4 million for the first six months of 2007.
Our outlook for the rest of 2008 and into 2009 is positive. We have recently added some very strong operations and our overall productivity and continuing ability to get additional new construction, retrofit work and service opportunities, some of which by the way is energy-efficiency driven, allows us to be very positive even in questionable economy.
I’ll have more to say in conclusion before the Q&A but at this point, I’d like to turn the mike over to Bill George for some detailed comments on our financial results. Bill?
William George III
Thanks, Bill. Let me just take a minute or two to fill in a couple of additional details in our results.
The first item that I want to update is some data relating to our progress in accruals at Atlas. As Bill Murdy has indicated, Atlas is on track with its recovery plan and it approximately broke even in the second quarter as compared to a $3.6 million loss in the second quarter of 2007.
Atlas revenues this quarter were down $1.2 million compared to one year ago and Atlas backlog has approximately $37 million less than it was one year ago. Also, you may recall, at the end of 2007, Atlas had a total of $6.2 million in accruals relating to claims and contingencies on certain of its Legacy jobs. At the end of the second quarter, those accruals stood at $2.7 million and the new team at Atlas has now resolved approximately two-thirds of those projects including all of the projects in the Mid-Atlantic and the California markets.
The resolution so far is within the expected parameters and based on our substantial progress, we feel encouraged that it remains our best judgment, that these accruals are sufficient in light of remaining risks, even though we expect to vigorously contest many of these matters.
Positive pre-cash flow was a remarkable $22.8 million this quarter which is a historic high watermark for second quarter. Cash balances remain strong at $101.5 million despite our continued expenditures on acquisitions, our dividend and regular stock repurchases.
Since year-end, our stock repurchase program has continued to return money to our stockholders in a disciplined way and as of today, we have retired 1.9 million of our outstanding shares and returned $23.7 million of cash to our shareholders through this program since we began buying shares 14 months ago.
Our balance sheet remains rock solid with strong cash balances and nominal debt. Where it’s prudent to do so from a return on investment standpoint, we continue to deploy our balance sheet to strengthen our operations. For example, by purchasing equipment instead of leasing it and investing in modern or improved physical plant and technological resources. We continue to make even more important investments in training and service growth and we believe that these moves will improve our results and opportunities for years to come.