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EX-99.4 - EX-99.4 - COMFORT SYSTEMS USA INCa10-18990_1ex99d4.htm
EX-99.3 - EX-99.3 - COMFORT SYSTEMS USA INCa10-18990_1ex99d3.htm
EX-23.1 - EX-23.1 - COMFORT SYSTEMS USA INCa10-18990_1ex23d1.htm
EX-99.2 - EX-99.2 - COMFORT SYSTEMS USA INCa10-18990_1ex99d2.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K/A

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (date of earliest event reported):  July 28, 2010

 

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.)

 

675 Bering Drive

Suite 400

Houston, Texas 77057

(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))

 

 

 



 

Explanatory Note:

 

As previously reported in a Current Report on Form 8-K filed on July 30, 2010 (the “Initial Form 8-K”), Comfort Systems USA, Inc. (the “Company”) entered into a stock purchase agreement (the “Stock Purchase Agreement”), dated July 28, 2010, to purchase all of the issued and outstanding stock of ColonialWebb Contractors Company, a Virginia corporation (“ColonialWebb”). As a result of the acquisition, ColonialWebb is a wholly-owned subsidiary of the Company.  This Amendment No. 1 on Form 8-K/A amends and supplements the Initial Form 8-K to include financial statements and pro forma financial information required pursuant to Item 9.01 of Form 8-K.

 

Item 9.01        Financial Statements and Exhibits

 

(a)                                 Financial statements of businesses acquired

 

The audited financial statements for ColonialWebb as of December 31, 2008, including the related independent auditors’ report, are included as Exhibit 99.2 hereto.

 

The audited financial statements for ColonialWebb as of December 31, 2009, including the related independent auditors’ report, are included as Exhibit 99.3 hereto.

 

The unaudited financial statements for ColonialWebb as of June 30, 2010 are included as Exhibit 99.4 hereto.

 

(b)                                 Pro forma financial information

 

The following unaudited pro forma condensed combined balance sheet combines the historical consolidated balance sheet of the Company and the historical balance sheet of ColonialWebb, giving effect to the acquisition as if the acquisition had been consummated on June 30, 2010.  The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2009 and the six months ended June 30, 2010 combine the historical consolidated statements of operations of the Company and the historical statements of operations of ColonialWebb, giving effect to the acquisition as if it had occurred on January 1, 2009.  The unaudited pro forma adjustments to reflect the purchase price allocation are based upon preliminary information, which may be revised as additional information becomes available.

 

The notes to the unaudited pro forma condensed combined financial statements provide a more detailed discussion of how such adjustments were derived and presented in the pro forma financial statements.  The accompanying unaudited pro forma condensed combined financial statements have been compiled from historical financial statements and other information as described herein, but do not purport to represent what the Company’s financial position or results of operations actually would have been had the transactions occurred on the dates indicated herein, or project the Company’s performance for any future periods.  Historically, the construction industry has been highly cyclical and, specifically, the HVAC industry is subject to seasonal variations.

 

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, 2009 and Form 10-Q for the period ended June 30, 2010.

 

1



 

Comfort Systems USA, Inc.

Pro Forma Condensed Combined Balance Sheet

As of June 30, 2010

(in thousands)

(Unaudited)

 

 

 

Historical

 

ColonialWebb

 

Pro Forma
Adjustments

 

Notes

 

Pro Forma
Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

107,602

 

$

28,560

 

$

(57,072

)

(A)

 

$

57,329

 

 

 

 

 

 

 

(21,761

)

(A)

 

 

 

Accounts receivable, net

 

208,183

 

34,287

 

 

 

 

242,470

 

Other receivables

 

4,325

 

638

 

 

 

 

4,963

 

Income tax receivable

 

17,451

 

 

 

 

 

17,451

 

Inventories

 

9,290

 

625

 

 

 

 

9,915

 

Prepaid expenses and other

 

23,960

 

338

 

2,891

 

(D)

 

27,189

 

Costs and estimated earnings in excess of billings

 

22,098

 

5,858

 

 

 

 

27,956

 

Total current assets

 

392,909

 

70,306

 

(75,942

)

 

 

387,273

 

PROPERTY AND EQUIPMENT, net

 

31,897

 

10,039

 

3,108

 

(C)

 

45,044

 

GOODWILL

 

98,759

 

 

49,654

 

(C)

 

148,413

 

IDENTIFIABLE INTANGIBLE ASSETS, net

 

18,412

 

 

28,100

 

(C)

 

46,512

 

MARKETABLE SECURITIES

 

3,777

 

 

 

 

 

3,777

 

OTHER NONCURRENT ASSETS

 

2,733

 

20

 

 

 

 

2,753

 

Total assets

 

$

548,487

 

$

80,365

 

$

4,920

 

 

 

$

633,772

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

 

$

2,922

 

$

 

 

 

$

2,922

 

Current maturities of notes to former owners

 

2,316

 

 

 

 

 

2,316

 

Accounts payable

 

78,038

 

10,923

 

 

 

 

88,961

 

Accrued compensation and benefits

 

30,844

 

7,744

 

 

 

 

38,588

 

Billings in excess of costs and estimated earnings

 

60,033

 

11,424

 

 

 

 

71,457

 

Accrued self insurance expense

 

27,081

 

2,012

 

300

 

(C)

 

29,393

 

Other current liabilities

 

31,124

 

817

 

245

 

(C)

 

32,186

 

Total current liabilities

 

229,436

 

35,842

 

545

 

 

 

265,823

 

LONG-TERM DEBT, NET OF CURRENT MATURITIES

 

 

4,826

 

 

 

 

4,826

 

NOTES TO FORMER OWNERS, NET OF CURRENT MATURITIES

 

4,375

 

 

24,200

 

(B)

 

28,575

 

DEFERRED INCOME TAX LIABILITIES

 

6,348

 

 

12,680

 

(D)

 

19,028

 

OTHER LONG-TERM LIABILITIES

 

3,801

 

2,076

 

6,660

 

(B)

 

10,993

 

 

 

 

 

 

 

(1,544

)

(E)

 

 

 

Total liabilities

 

243,960

 

42,744

 

42,541

 

 

 

329,245

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

304,527

 

37,621

 

(37,621

)

(F)

 

304,527

 

Total liabilities and stockholders’ equity

 

$

548,487

 

$

80,365

 

$

4,920

 

 

 

$

633,772

 

 

The accompanying notes are an integral part of this financial statement.

 

2



 

Comfort Systems USA, Inc.

Pro Forma Condensed Combined Statement of Operations

Six Months Ended June 30, 2010

(in thousands, except per share amounts)

(Unaudited)

 

 

 

Historical

 

ColonialWebb

 

Pro Forma
Adjustments

 

Notes

 

Pro Forma
Combined

 

REVENUES

 

$

486,063

 

$

92,314

 

$

 

 

 

$

578,377

 

COST OF SERVICES

 

404,590

 

67,331

 

193

 

(G)

 

472,167

 

 

 

 

 

 

 

53

 

(J)

 

 

 

Gross profit

 

81,473

 

24,983

 

(246

)

 

 

106,210

 

 

 

 

 

 

 

 

 

 

 

 

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

73,020

 

17,615

 

1,556

 

(G)

 

92,416

 

 

 

 

 

 

 

197

 

(E)

 

 

 

 

 

 

 

 

 

28

 

(J)

 

 

 

GOODWILL IMPAIRMENT

 

4,446

 

 

 

 

 

4,446

 

LOSS (GAIN) ON SALE OF ASSETS

 

(473

)

(52

)

 

 

 

(525

)

Operating income

 

4,480

 

7,420

 

(2,027

)

 

 

9,873

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

144

 

167

 

(72

)

(H)

 

239

 

Interest expense

 

(574

)

(181

)

(393

)

(I)

 

(1,148

)

Other

 

6

 

9

 

 

 

 

15

 

Other income (expense)

 

(424

)

(5

)

(465

)

 

 

(894

)

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

4,056

 

7,415

 

(2,492

)

 

 

8,979

 

INCOME TAX EXPENSE

 

1,245

 

 

1,859

 

(D)

 

3,104

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

$

2,811

 

$

7,415

 

$

(4,351

)

 

 

$

5,875

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

 

 

 

 

 

$

0.16

 

Diluted

 

$

0.07

 

 

 

 

 

 

 

$

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES USED IN COMPUTING INCOME PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

37,566

 

 

 

 

 

 

 

37,566

 

Diluted

 

37,834

 

 

 

 

 

 

 

37,834

 

 

The accompanying notes are an integral part of this financial statement.

 

3



 

Comfort Systems USA, Inc.

Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2009

(in thousands, except per share amounts)

(Unaudited)

 

 

 

Historical

 

ColonialWebb

 

Pro Forma
Adjustments

 

Notes

 

Pro Forma
Combined

 

REVENUES

 

$

1,128,907

 

$

218,700

 

$

 

 

 

$

1,347,607

 

COST OF SERVICES

 

903,357

 

156,586

 

387

 

(G)

 

1,060,436

 

 

 

 

 

 

 

106

 

(J)

 

 

 

Gross profit

 

225,550

 

62,114

 

(493

)

 

 

287,171

 

 

 

 

 

 

 

 

 

 

 

 

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

169,023

 

39,052

 

3,601

 

(G)

 

210,804

 

 

 

 

 

 

 

(928

)

(E)

 

 

 

 

 

 

 

 

 

56

 

(J)

 

 

 

GOODWILL IMPAIRMENT

 

 

 

 

 

 

 

GAIN ON SALE OF ASSETS

 

(106

)

(49

)

 

 

 

(155

)

Operating income

 

56,633

 

23,111

 

(3,222

)

 

 

76,522

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

585

 

365

 

(293

)

(H)

 

657

 

Interest expense

 

(1,202

)

(528

)

(786

)

(I)

 

(2,516

)

Other

 

17

 

21

 

 

 

 

38

 

Other income (expense)

 

(600

)

(142

)

(1,079

)

 

 

(1,821

)

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

56,033

 

22,969

 

(4,301

)

 

 

74,701

 

INCOME TAX EXPENSE

 

21,437

 

 

7,099

 

(D)

 

28,536

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

$

34,596

 

$

22,969

 

$

(11,400

)

 

 

$

46,165

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.91

 

 

 

 

 

 

 

$

1.21

 

Diluted

 

$

0.90

 

 

 

 

 

 

 

$

1.20

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES USED IN COMPUTING INCOME PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

38,046

 

 

 

 

 

 

 

38,046

 

Diluted

 

38,451

 

 

 

 

 

 

 

38,451

 

 

The accompanying notes are an integral part of this financial statement.

 

4



 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

1.              Purchase Price Allocation

 

The allocation of the purchase price to the assets acquired and liabilities assumed is preliminary and, therefore, subject to change.  The allocation of the purchase price was prepared based on the information available as of the acquisition date and, therefore, may be materially impacted by certain adjustments on the finalization of the fair value assessments of ColonialWebb’s assets and liabilities.

 

The following is the unaudited pro forma purchase price and the unaudited pro forma purchase price allocation based on ColonialWebb’s unaudited June 30, 2010 balance sheet (in thousands):

 

Cash paid from available funds

 

$

57,072

 

Cash paid for excess working capital

 

21,761

 

Notes issued to former owners

 

24,200

 

Estimated fair value of contingent earn-out payments

 

6,660

 

Total consideration and costs

 

$

109,693

 

 

 

 

 

Pro forma purchase price allocation:

 

 

 

Fair value of net assets acquired

 

$

41,728

 

Effect of transaction on deferred income taxes

 

(9,789

)

Estimated identifiable intangible assets

 

28,100

 

Goodwill

 

49,654

 

Total consideration and costs

 

$

109,693

 

 

2.              Pro Forma Adjustments

 

The accompanying pro forma condensed combined financial statements give effect to the following pro forma adjustments necessary to reflect the acquisition outlined in the preceding introduction as if the transaction occurred on January 1, 2009 in the pro forma condensed combined statement of operations and on June 30, 2010 in the pro forma condensed combined balance sheet:

 

(A)       Purchase price paid from cash, including the cash paid for excess working capital as of June 30, 2010.

 

(B)       Additional consideration payable in the form of notes issued to the former owners and contingent earn-out payments associated with the achievement of specified milestones.  Contingent earn-out payments are recorded at their estimated fair value determined based on a probability-weighted income approach.  This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy.  Future changes in the estimated fair value of the contingent payments will be recognized immediately in earnings.

 

(C)       Fair value adjustments to assets and liabilities acquired, which includes $3.1 million to property and equipment, $49.7 million to goodwill, $28.1 million to intangible assets (see note 3), $0.3 million to accrued self insurance expense, and $0.2 million to other current liabilities.

 

(D)       Adjustments to reflect the addition of deferred income taxes related to acquired assets and liabilities and the conversion of ColonialWebb from an S-Corp to a C-Corp.

 

(E)        Adjustment to conform the accounting for deferred compensation with the Company’s accounting policy.

 

(F)         Elimination of ColonialWebb’s pre-existing stockholders’ equity balances due to change in ownership.

 

(G)       Amortization of preliminary fair value amounts allocated to definite-lived intangible assets over the preliminary estimated useful lives.  (See note 3 for further details.)

 

5



 

(H)      Elimination of the Company’s interest income associated with the utilization of cash for the transaction.

 

(I)           Interest expense incurred on the notes to former owners.

 

(J)           Depreciation expense incurred on the step-up of the property and equipment to fair value.

 

3.              Identifiable Intangible Assets

 

The preliminary components of identifiable intangible assets resulting from the acquisition and their related amortizable lives are as follows (dollars in thousands):

 

 

 

Estimated
Amortization Life

 

Estimated
Value

 

Backlog

 

18 months

 

$

580

 

Customer relationships

 

15 years

 

15,700

 

Non-compete agreements

 

1-5 years

 

1,720

 

Trade names

 

25 years

 

10,100

 

Total

 

 

 

$

28,100

 

 

These components are subject to change based upon the results of a third party valuation of the identifiable intangible assets.  The estimated value of the backlog, trade names, and non-compete agreements are being amortized using the straight line method of accounting over their estimated amortization lives.  The estimated value of the customer relationships is being amortized using the expected future cash flows that reflect the expected economic benefit.

 

6



 

(d)           Exhibits

 

The following exhibits are included herein:

 

10.1 Stock Purchase Agreement, dated July 28, 2010 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 30, 2010).

 

23.1 Consent of Keiter, Stephens, Hurst, Gary & Shreaves, P.C.

 

99.1 Press release dated July 28, 2010 (i) announcing the Company’s acquisition of ColonialWebb and (ii) discussing the Company’s second quarter earnings (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on July 30, 2010).

 

99.2 The audited financial statements for ColonialWebb as of December 31, 2008, including the related independent auditors’ report.

 

99.3 The audited financial statements for ColonialWebb as of December 31, 2009, including the related independent auditors’ report.

 

99.4 The unaudited financial statements for ColonialWebb as of June 30, 2010.

 

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:  October 6, 2010

 

7