UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): December 31, 2005
Commission File Number: 1-13011
COMFORT SYSTEMS USA, INC.
(Exact name of registrant as specified in its charter)
|
DELAWARE |
|
76-0526487 |
|
(State or other jurisdiction of incorporation) |
|
(I.R.S. Employer Identification No.) |
777 Post Oak Boulevard
Suite 500
Houston, Texas 77056
(Address of Principal Executive offices) (Zip Code)
Registrant’s telephone number, including area code: (713) 830-9600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On December 31, 2005, Comfort Systems USA, Inc. (the “Company”) along with two of its wholly-owned subsidiaries, United Environmental Services, L.P. (“UES”) and Comfort Systems USA (Twin Cities), Inc. (“Twin Cities”), entered into an asset purchase agreement to sell substantially all of the assets of UES and Twin Cities to Automated Logic Corporation and Automated Logic Contracting Services, Inc. (together, “ALC”) for approximately $22.4 million in cash, net of transaction costs and a purchase price adjustment based upon the closing balance sheet for the transferred assets. The purchase price was determined by arms-length negotiation between the parties. Please refer to the Asset Purchase Agreement attached hereto as Exhibit 10.1.
Item 2.01 Completion of Acquisition or Disposition of Assets
See Item 1.01, which is incorporated herein by reference.
On January 4, 2006, the Company issued a press release announcing the sale of assets described in Item 1.01 above. The press release is attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits
(b) Pro forma financial information
The following unaudited financial information reflects the pro forma consolidated statements of operations for the nine months ended September 30, 2005 and the three years in the period ended December 31, 2004 and the related pro forma consolidated balance sheet as of September 30, 2005 in light of this transaction with ALC. The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2005 and the year ended December 31, 2004, gives effect to the disposition as if it occurred on January 1, 2004. The unaudited pro forma consolidated balance sheet as of September 30, 2005 assumes the sale occurred on September 30, 2005. The pro forma information is based on the historical financial statements of the companies divested after giving effect to the proposed transaction and the financial statements and are not necessarily indicative of the financial position or results of operations of the Company that would have actually occurred had the transaction been in effect as of the date or for the periods presented. The pro forma consolidated financial statements have been prepared based on preliminary estimates. The pro forma financial information should be read in conjunction with the Company’s historical financial statements included in its Form 10-K for the year ended December 31, 2004 and Form 10-Q for the period ended September 30, 2005.
1
Comfort Systems
USA, Inc.
Pro Forma Consolidated Balance Sheet
As of September 30, 2005
(in thousands)
(Unaudited)
|
|
|
|
|
Companies |
|
Pro Forma |
|
|
|
||||||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cash and cash equivalents |
|
$ |
33,709 |
|
|
$ |
— |
|
|
|
$ |
22,350 |
|
|
$ |
56,059 |
|
|
Accounts receivable, net |
|
206,147 |
|
|
(4,672 |
) |
|
|
— |
|
|
201,475 |
|
||||
|
Other receivables |
|
4,493 |
|
|
(2 |
) |
|
|
— |
|
|
4,491 |
|
||||
|
Inventories |
|
9,196 |
|
|
(408 |
) |
|
|
— |
|
|
8,788 |
|
||||
|
Costs and estimated earnings in excess of billings |
|
26,467 |
|
|
(645 |
) |
|
|
— |
|
|
25,822 |
|
||||
|
Prepaid expenses and other |
|
14,038 |
|
|
(523 |
) |
|
|
— |
|
|
13,515 |
|
||||
|
Assets related to discontinued operations |
|
872 |
|
|
10,176 |
|
|
|
(10,176 |
) |
|
872 |
|
||||
|
Total current assets |
|
294,922 |
|
|
3,926 |
|
|
|
12,174 |
|
|
311,022 |
|
||||
|
PROPERTY AND EQUIPMENT, net |
|
13,889 |
|
|
(737 |
) |
|
|
— |
|
|
13,152 |
|
||||
|
GOODWILL |
|
100,123 |
|
|
(3,292 |
) |
|
|
— |
|
|
96,831 |
|
||||
|
OTHER NONCURRENT ASSETS |
|
7,258 |
|
|
103 |
|
|
|
— |
|
|
7,361 |
|
||||
|
Total assets |
|
$ |
416,192 |
|
|
$ |
— |
|
|
|
$ |
12,174 |
|
|
$ |
428,366 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Current maturities of long-term debt |
|
$ |
— |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Accounts payable |
|
69,153 |
|
|
(1,284 |
) |
|
|
|
|
|
67,869 |
|
||||
|
Accrued compensation and benefits |
|
27,006 |
|
|
(315 |
) |
|
|
— |
|
|
26,691 |
|
||||
|
Billings in excess of costs and estimated earnings |
|
55,981 |
|
|
(2,799 |
) |
|
|
— |
|
|
53,182 |
|
||||
|
Income taxes payable |
|
2,132 |
|
|
— |
|
|
|
7,064 |
|
|
9,196 |
|
||||
|
Accrued self insurance expense |
|
18,645 |
|
|
(82 |
) |
|
|
— |
|
|
18,563 |
|
||||
|
Other current liabilities |
|
12,781 |
|
|
147 |
|
|
|
— |
|
|
12,928 |
|
||||
|
Liabilities related to discontinued operations |
|
38 |
|
|
4,333 |
|
|
|
(4,333 |
) |
|
38 |
|
||||
|
Total current liabilities |
|
185,736 |
|
|
— |
|
|
|
2,731 |
|
|
188,467 |
|
||||
|
LONG-TERM DEBT, NET OF CURRENT MATURITIES |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
||||
|
Total liabilities |
|
185,736 |
|
|
— |
|
|
|
2,731 |
|
|
188,467 |
|
||||
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
STOCKHOLDERS’ EQUITY |
|
230,456 |
|
|
— |
|
|
|
9,443 |
|
|
239,899 |
|
||||
|
Total liabilities and stockholders’ equity |
|
$ |
416,192 |
|
|
$ |
— |
|
|
|
$ |
12,174 |
|
|
$ |
428,366 |
|
The accompanying note is an integral part of this financial statement.
2
Comfort Systems
USA, Inc.
Pro Forma Consolidated Statement of Operations
Nine Months Ended September 30, 2005
(in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
Companies |
|
Pro Forma |
|
|
|
||||||||
|
REVENUES |
|
$ |
681,937 |
|
|
$ |
(17,373 |
) |
|
|
$ |
— |
|
|
$ |
664,564 |
|
|
COST OF SERVICES |
|
571,690 |
|
|
(12,187 |
) |
|
|
— |
|
|
559,503 |
|
||||
|
Gross profit |
|
110,247 |
|
|
(5,186 |
) |
|
|
— |
|
|
105,061 |
|
||||
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
|
87,339 |
|
|
(3,766 |
) |
|
|
— |
|
|
83,573 |
|
||||
|
LOSS (GAIN) ON SALE OF ASSETS |
|
(112 |
) |
|
5 |
|
|
|
— |
|
|
(107 |
) |
||||
|
Operating income |
|
23,020 |
|
|
(1,425 |
) |
|
|
— |
|
|
21,595 |
|
||||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest income |
|
429 |
|
|
— |
|
|
|
— |
|
|
429 |
|
||||
|
Interest expense |
|
(924 |
) |
|
— |
|
|
|
212 |
|
|
(712 |
) |
||||
|
Write off of debt costs |
|
(870 |
) |
|
— |
|
|
|
— |
|
|
(870 |
) |
||||
|
Other |
|
36 |
|
|
— |
|
|
|
— |
|
|
36 |
|
||||
|
Other income (expense) |
|
(1,329 |
) |
|
— |
|
|
|
212 |
|
|
(1,117 |
) |
||||
|
INCOME BEFORE INCOME TAXES |
|
21,691 |
|
|
(1,425 |
) |
|
|
212 |
|
|
20,478 |
|
||||
|
INCOME TAX EXPENSE |
|
9,452 |
|
|
(535 |
) |
|
|
74 |
|
|
8,991 |
|
||||
|
INCOME FROM CONTINUING OPERATIONS |
|
$ |
12,239 |
|
|
$ |
(890 |
) |
|
|
$ |
138 |
|
|
$ |
11,487 |
|
|
INCOME PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
$ |
0.29 |
|
||
|
Diluted |
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
$ |
0.29 |
|
||
|
SHARES USED IN COMPUTING INCOME PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
39,180 |
|
|
|
|
|
|
|
|
|
39,180 |
|
||||
|
Diluted |
|
40,179 |
|
|
|
|
|
|
|
|
|
40,179 |
|
||||
The accompanying note is an integral part of this financial statement.
3
Comfort Systems USA, Inc.
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2004
(in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
Companies |
|
Pro Forma |
|
|
|
||||||||||
|
REVENUES |
|
|
$ |
799,542 |
|
|
|
$ |
(20,921 |
) |
|
|
$ |
— |
|
|
$ |
778,621 |
|
|
COST OF SERVICES |
|
|
670,680 |
|
|
|
(14,020 |
) |
|
|
— |
|
|
656,660 |
|
||||
|
Gross profit |
|
|
128,862 |
|
|
|
(6,901 |
) |
|
|
— |
|
|
121,961 |
|
||||
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
|
|
105,637 |
|
|
|
(4,793 |
) |
|
|
— |
|
|
100,844 |
|
||||
|
GOODWILL IMPAIRMENT |
|
|
637 |
|
|
|
— |
|
|
|
— |
|
|
637 |
|
||||
|
GAIN ON SALE OF ASSETS |
|
|
(24 |
) |
|
|
— |
|
|
|
— |
|
|
(24 |
) |
||||
|
Operating income |
|
|
22,612 |
|
|
|
(2,108 |
) |
|
|
— |
|
|
20,504 |
|
||||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest income |
|
|
172 |
|
|
|
— |
|
|
|
— |
|
|
172 |
|
||||
|
Interest expense |
|
|
(1,566 |
) |
|
|
— |
|
|
|
466 |
|
|
(1,100 |
) |
||||
|
Other |
|
|
(427 |
) |
|
|
— |
|
|
|
— |
|
|
(427 |
) |
||||
|
Other income (expense) |
|
|
(1,821 |
) |
|
|
— |
|
|
|
466 |
|
|
(1,355 |
) |
||||
|
INCOME BEFORE INCOME TAXES |
|
|
20,791 |
|
|
|
(2,108 |
) |
|
|
466 |
|
|
19,149 |
|
||||
|
INCOME TAX EXPENSE |
|
|
8,128 |
|
|
|
(801 |
) |
|
|
163 |
|
|
7,490 |
|
||||
|
INCOME FROM CONTINUING OPERATIONS |
|
|
$ |
12,663 |
|
|
|
$ |
(1,307 |
) |
|
|
$ |
303 |
|
|
$ |
11,659 |
|
|
INCOME PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
$ |
0.30 |
|
||
|
Diluted |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
$ |
0.30 |
|
||
|
SHARES USED IN COMPUTING INCOME (LOSS) PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
|
38,409 |
|
|
|
|
|
|
|
|
|
|
38,409 |
|
||||
|
Diluted |
|
|
39,505 |
|
|
|
|
|
|
|
|
|
|
39,505 |
|
||||
The accompanying note is an integral part of this financial statement.
4
Comfort Systems USA, Inc.
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2003
(in thousands, except per share amounts)
(Unaudited)
|
|
|
Historical(E) |
|
Companies |
|
Pro Forma |
|
|||||||
|
REVENUES |
|
|
$ |
763,588 |
|
|
|
$ |
(17,372 |
) |
|
$ |
746,216 |
|
|
COST OF SERVICES |
|
|
640,433 |
|
|
|
(11,715 |
) |
|
628,718 |
|
|||
|
Gross profit |
|
|
123,155 |
|
|
|
(5,657 |
) |
|
117,498 |
|
|||
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
|
|
111,684 |
|
|
|
(4,263 |
) |
|
107,421 |
|
|||
|
GOODWILL IMPAIRMENT |
|
|
2,726 |
|
|
|
— |
|
|
2,726 |
|
|||
|
RESTRUCTURING CHARGES |
|
|
3,223 |
|
|
|
— |
|
|
3,223 |
|
|||
|
LOSS ON SALE OF ASSETS |
|
|
50 |
|
|
|
— |
|
|
50 |
|
|||
|
Operating income |
|
|
5,472 |
|
|
|
(1,394 |
) |
|
4,078 |
|
|||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Interest income |
|
|
66 |
|
|
|
— |
|
|
66 |
|
|||
|
Interest expense |
|
|
(3,893 |
) |
|
|
— |
|
|
(3,893 |
) |
|||
|
Write off of debt costs |
|
|
(4,172 |
) |
|
|
— |
|
|
(4,172 |
) |
|||
|
Other |
|
|
(129 |
) |
|
|
33 |
|
|
(96 |
) |
|||
|
Other income (expense) |
|
|
(8,128 |
) |
|
|
33 |
|
|
(8,095 |
) |
|||
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(2,656 |
) |
|
|
(1,361 |
) |
|
(4,017 |
) |
|||
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(1,359 |
) |
|
|
(498 |
) |
|
(1,857 |
) |
|||
|
INCOME (LOSS) FROM CONTINUING OPERATIONS |
|
|
$ |
(1,297 |
) |
|
|
$ |
(863 |
) |
|
$ |
(2,160 |
) |
|
LOSS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Basic |
|
|
$ |
(0.03 |
) |
|
|
|
|
|
$ |
(0.06 |
) |
|
|
Diluted |
|
|
$ |
(0.06 |
) |
|
|
|
|
|
$ |
(0.08 |
) |
|
|
SHARES USED IN COMPUTING LOSS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Basic |
|
|
37,702 |
|
|
|
|
|
|
37,702 |
|
|||
|
Diluted |
|
|
38,111 |
|
|
|
|
|
|
38,111 |
|
|||
The accompanying note is an integral part of this financial statement.
5
Comfort Systems USA, Inc.
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2002
(in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
Companies |
|
Pro Forma |
|
|||||||
|
REVENUES |
|
|
$ |
779,655 |
|
|
|
$ |
(18,430 |
) |
|
$ |
761,225 |
|
|
COST OF SERVICES |
|
|
646,209 |
|
|
|
(12,491 |
) |
|
633,718 |
|
|||
|
Gross profit |
|
|
133,446 |
|
|
|
(5,939 |
) |
|
127,507 |
|
|||
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
|
|
120,840 |
|
|
|
(4,172 |
) |
|
116,668 |
|
|||
|
GOODWILL IMPAIRMENT |
|
|
218 |
|
|
|
— |
|
|
218 |
|
|||
|
RESTRUCTURING CHARGES |
|
|
1,878 |
|
|
|
— |
|
|
1,878 |
|
|||
|
LOSS ON SALE OF ASSETS |
|
|
6 |
|
|
|
— |
|
|
6 |
|
|||
|
Operating income |
|
|
10,504 |
|
|
|
(1,767 |
) |
|
8,737 |
|
|||
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Interest income |
|
|
54 |
|
|
|
— |
|
|
54 |
|
|||
|
Interest expense |
|
|
(4,317 |
) |
|
|
— |
|
|
(4,317 |
) |
|||
|
Write off of debt costs |
|
|
(987 |
) |
|
|
— |
|
|
(987 |
) |
|||
|
Other |
|
|
1,721 |
|
|
|
— |
|
|
1,721 |
|
|||
|
Other income (expense) |
|
|
(3,529 |
) |
|
|
— |
|
|
(3,529 |
) |
|||
|
INCOME BEFORE INCOME TAXES |
|
|
6,975 |
|
|
|
(1,767 |
) |
|
5,208 |
|
|||
|
INCOME TAX EXPENSE |
|
|
3,562 |
|
|
|
(626 |
) |
|
2,936 |
|
|||
|
INCOME FROM CONTINUING OPERATIONS |
|
|
$ |
3,413 |
|
|
|
$ |
(1,141 |
) |
|
$ |
2,272 |
|
|
INCOME PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Basic |
|
|
$ |
0.09 |
|
|
|
|
|
|
$ |
0.06 |
|
|
|
Diluted |
|
|
$ |
0.09 |
|
|
|
|
|
|
$ |
0.06 |
|
|
|
SHARES USED IN COMPUTING INCOME PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Basic |
|
|
37,605 |
|
|
|
|
|
|
37,605 |
|
|||
|
Diluted |
|
|
38,154 |
|
|
|
|
|
|
38,154 |
|
|||
The accompanying note is an integral part of this financial statement.
6
NOTE TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. Pro Forma Adjustments
The accompanying pro forma consolidated financial statements give effect to the following pro forma adjustments necessary to reflect the sale outlined in the preceding introduction as if the transaction occurred on January 1, 2004 in the pro forma consolidated statement of operations and on September 30, 2005 in the pro forma consolidated balance sheet.
(A) Reduction of assets and liabilities as a result of the disposition.
(B) Reduction of revenue and expenses as a result of the disposition. These amounts do not consider any allocation of corporate overhead to the companies that were divested, and therefore, selling, general and administrative expenses do not reflect any potential reductions in corporate costs in response to this change in the Company.
(C) Estimated increase in cash from the cash proceeds of $22.4 million from the disposition, net of liabilities for costs related to the transaction, and the related income tax payable of $7.1 million.
(D) Estimated reduction of interest expense on the Company’s credit facility as a result of the payoff of this facility. The reduction in interest expense is based on the actual weighted average rates under the credit facility of approximately 5.8% for the nine months ended September 30, 2005 and approximately 5.04% for the year ended December 31, 2004. Investment income from the excess of the proceeds over the term loan balances have not been included as a pro forma adjustment.
(E) Certain reclassifications have been made in prior period income statements to reflect certain operating companies as discontinued operations. These discontinued operations are further discussed in the Company’s Form 10-Q for the period ended September 30, 2005. These reclassifications have not resulted in any changes to previously reported net income for any periods.
7
(c) Exhibits
The following exhibits are included herein:
|
10.1 |
|
Asset Purchase Agreement Dated as of December 31, 2005 by and among Automated Logic Corporation, Automated Logic Contracting Services, Inc. and Comfort Systems USA, Inc., Comfort Systems USA (Twin Cities), Inc., United Environmental Services, L.P. |
|
99.1 |
|
Press release dated January 4, 2006. |
8
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
COMFORT SYSTEMS USA, INC. |
||
|
|
By: |
/s/ WILLIAM F. MURDY |
|
|
|
William F. Murdy |
|
|
|
Chief Executive Officer |
|
Date: January 4, 2006 |
|
|
9