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):  June 1, 2006

 

Commission File Number:  1-13011

 

COMFORT SYSTEMS USA, INC.

(Exact name of registrant as specified in its charter)

 

 

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 2.01                          Completion of Acquisition or Disposition of Assets

 

On June 1, 2006, Comfort Systems USA, Inc. (the “Company”) along with its wholly-owned subsidiary, ARC Comfort Systems USA, Inc. (“ARC”), entered into an asset purchase agreement to sell certain assets of ARC to Mesa Energy Systems, Inc. (a subsidiary of EMCOR Group, Inc.) for approximately $0.7 million in cash, subject to a purchase price adjustment based upon the closing balance sheet for the transferred assets. There is no gain or loss associated with this sale. The purchase price was determined by arms-length negotiation between the parties. The Company is in the process of shutting down the remaining operations of ARC.

 

Item 9.01                          Financial Statements

 

(b)                                 Pro forma financial information

 

The following unaudited financial information reflects the pro forma consolidated statements of operations for the three months ended March 31, 2006 and the three years in the period ended December 31, 2005 and the related pro forma consolidated balance sheet as of March 31, 2006 in light of this transaction and the shutting down of the remaining operations of ARC. The unaudited pro forma consolidated statement of operations for the three months ended March 31, 2006 and the year ended December 31, 2005, gives effect to the disposition as if it occurred on January 1, 2005. The unaudited pro forma consolidated balance sheet as of March 31, 2006 assumes the disposition occurred on March 31, 2006. The pro forma information is based on the historical financial statements of the divested company after giving effect to the proposed disposition 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 and the shutdown of ARC 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, 2005.

 

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Comfort Systems USA, Inc.

Pro Forma Consolidated Balance Sheet

As of March 31, 2006

(in thousands)

(Unaudited)

 

		Historical			Divested Company (A)			Pro Forma
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	58,361		$	—		$	58,361
Accounts receivable, net		206,410			(2,297		)	204,113
Other receivables		5,014			(1		)	5,013
Inventories		8,276			(23		)	8,253
Costs and estimated earnings in excess of billings		25,249			(54		)	25,195
Prepaid expenses and other		11,680			(108		)	11,572
Assets related to discontinued operations		469			3,091			3,560
Total current assets		315,459			608			316,067
PROPERTY AND EQUIPMENT, net		13,547			(88		)	13,459
GOODWILL		62,954			—			62,954
OTHER NONCURRENT ASSETS		7,180			(520		)	6,660
Total assets		$	399,140		$	—		$	399,140
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt		$	—		$	—		$	—
Accounts payable		67,945			(411		)	67,534
Accrued compensation and benefits		22,782			(162		)	22,620
Billings in excess of costs and estimated earnings		57,150			(274		)	56,876
Income taxes payable		1,051			—			1,051
Accrued self insurance expense		17,882			(24		)	17,858
Other current liabilities		13,736			(292		)	13,444
Liabilities related to discontinued operations		62			1,163			1,225
Total current liabilities		180,608			—			180,608
LONG-TERM DEBT, NET OF CURRENT MATURITIES		—			—			—
Total liabilities		180,608			—			180,608
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY		218,532			—			218,532
Total liabilities and stockholders’ equity		$	399,140		$	—		$	399,140

 

The accompanying note is an integral part of this financial statement.

 

2

 

Comfort Systems USA, Inc.

Pro Forma Consolidated Statement of Operations

Three Months Ended March 31, 2006

(in thousands, except per share amounts)

(Unaudited)

 

		Historical			Divested Company(B)			Pro Forma
REVENUES		$	237,854		$	(1,469	)	$	236,385
COST OF SERVICES		201,010			(1,393		)	199,617
Gross profit		36,844			(76		)	36,768
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		30,134			(391		)	29,743
GAIN ON SALE OF ASSETS		(16		)	(4		)	(20		)
Operating income		6,726			319			7,045
OTHER INCOME (EXPENSE):
Interest income		647			(1		)	646
Interest expense		(155		)	—			(155		)
Other		19			—			19
Other income (expense)		511			(1		)	510
INCOME BEFORE INCOME TAXES		7,237			318			7,555
INCOME TAX EXPENSE		2,910			111			3,021
INCOME FROM CONTINUING OPERATIONS		$	4,327		$	207		$	4,534
INCOME PER SHARE:
Basic		$	0.11					$	0.11
Diluted		$	0.11					$	0.11
SHARES USED IN COMPUTING INCOME PER SHARE:
Basic		39,857						39,857
Diluted		40,862						40,862

 

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, 2005

(in thousands, except per share amounts)

 

(Unaudited)

 

		Historical			Divested Company (B)			Pro Forma
REVENUES		$	899,531		$	(6,982	)	$	892,549
COST OF SERVICES		752,354			(7,947		)	744,407
Gross profit		147,177			965			148,142
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		114,611			(1,326		)	113,285
GOODWILL IMPAIRMENT		33,877			—			33,877
(GAIN) LOSS ON SALE OF ASSETS		(36		)	(49		)	(85		)
Operating income (loss)		(1,275		)	2,340			1,065
OTHER INCOME (EXPENSE):
Interest income		766			(14		)	752
Interest expense		(1,075		)	—			(1,075		)
Write off of debt costs		(870		)	—			(870		)
Other		107			—			107
Other income (expense)		(1,072		)	(14		)	(1,086		)
LOSS BEFORE INCOME TAXES		(2,347		)	2,326			(21		)
INCOME TAX EXPENSE (BENEFIT)		14,027			821			14,848
LOSS FROM CONTINUING OPERATIONS		$	(16,374	)	$	1,505		$	(14,869	)
LOSS PER SHARE:
Basic		$	(0.42	)				$	(0.38	)
Diluted		$	(0.42	)				$	(0.38	)
SHARES USED IN COMPUTING INCOME PER SHARE:
Basic		39,298						39,298
Diluted		39,298						39,298

 

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, 2004

(in thousands, except per share amounts)

(Unaudited)

 

		Historical			Divested Company (B)			Pro Forma
REVENUES		$	778,621		$	(11,263	)	$	767,358
COST OF SERVICES		656,660			(12,342		)	644,318
Gross profit		121,961			1,079			123,040
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		100,844			(2,415		)	98,429
GOODWILL IMPAIRMENT		637			—			637
(GAIN) LOSS ON SALE OF ASSETS		(24		)	(91		)	(115		)
Operating income		20,504			3,585			24,089
OTHER INCOME (EXPENSE):
Interest income		172			—			172
Interest expense		(1,566		)	—			(1,566		)
Other		(427		)	—			(427		)
Other income (expense)		(1,821		)	—			(1,821		)
INCOME (LOSS) BEFORE INCOME TAXES		18,683			3,585			22,268
INCOME TAX EXPENSE (BENEFIT)		7,327			1,262			8,589
INCOME (LOSS) FROM CONTINUING OPERATIONS		$	11,356		$	2,323		$	13,679
INCOME PER SHARE:
Basic		$	0.30					$	0.36
Diluted		$	0.29					$	0.35
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.

 

5

 

Comfort Systems USA, Inc.

Pro Forma Consolidated Statement of Operations

Year Ended December 31, 2003

(in thousands, except per share amounts)

(Unaudited)

 

		Historical			Divested Company (B)			Pro Forma
REVENUES		$	746,216		$	(14,191	)	$	732,025
COST OF SERVICES		628,718			(13,306		)	615,412
Gross profit		117,498			(885		)	116,613
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		107,421			(2,803		)	104,618
GOODWILL IMPAIRMENT		2,726			—			2,726
RESTRUCTURING CHARGES		3,223			(108		)	3,115
LOSS ON SALE OF ASSETS		304			(57		)	247
Operating income		3,824			2,083			5,907
OTHER INCOME (EXPENSE):
Interest income		66			—			66
Interest expense		(3,893		)	5			(3,888		)
Write off of debt costs		(4,172		)	—			(4,172		)
Other		158			6			164
Other income (expense)		(7,841		)	11			(7,830		)
INCOME (LOSS) BEFORE INCOME TAXES		(4,017		)	2,094			(1,923		)
INCOME TAX EXPENSE (BENEFIT)		(1,857		)	741			(1,116		)
INCOME (LOSS) FROM CONTINUING OPERATIONS		$	(2,160	)	$	1,353		$	(807	)
LOSS PER SHARE:
Basic		$	(0.06	)				$	(0.02	)
Diluted		$	(0.08	)				$	(0.04	)
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.

 

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 and shutting down of the remaining operations of ARC as outlined in the preceding introduction as if the disposition occurred on January 1, 2005 in the pro forma consolidated statement of operations and on March 31, 2006 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.

 

The estimated increase in cash from the cash proceeds of $0.7 million from the disposition, and the related investment income from the cash proceeds have not been included as pro forma adjustments.

 

7

 

SIGNATURES

 

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 George
		William George
		Executive Vice President and Chief Financial Officer

 

Date:   June 5, 2006

 

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