Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | ||
Mar. 31, 2015 | Apr. 24, 2015 | Dec. 31, 2014 | |
Document and Entity Information | |||
Entity Registrant Name | COMFORT SYSTEMS USA INC | ||
Entity Central Index Key | 1035983 | ||
Document Type | 10-Q | ||
Document Period End Date | 31-Mar-15 | ||
Amendment Flag | FALSE | ||
Current Fiscal Year End Date | -19 | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 37,391,203 | ||
Treasury Stock, Shares | 3,816,216 | 3,732,162 | 3,853,586 |
Document Fiscal Year Focus | 2015 | ||
Document Fiscal Period Focus | Q1 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS: | ||
Cash and cash equivalents | $38,892 | $32,064 |
Accounts receivable, less allowance for doubtful accounts of $4,257 and $4,379, respectively | 306,864 | 303,575 |
Other receivables | 8,983 | 15,520 |
Inventories | 10,027 | 8,646 |
Prepaid expenses and other | 26,564 | 25,591 |
Costs and estimated earnings in excess of billings | 31,300 | 27,620 |
Assets related to discontinued operations | 176 | 176 |
Total current assets | 422,806 | 413,192 |
PROPERTY AND EQUIPMENT, NET | 55,640 | 55,759 |
GOODWILL | 143,569 | 140,341 |
IDENTIFIABLE INTANGIBLE ASSETS, NET | 46,012 | 45,666 |
OTHER NONCURRENT ASSETS | 10,777 | 10,792 |
Total assets | 678,804 | 665,750 |
CURRENT LIABILITIES: | ||
Current maturities of long-term capital lease obligations | 299 | 317 |
Accounts payable | 109,478 | 106,211 |
Accrued compensation and benefits | 45,992 | 44,683 |
Billings in excess of costs and estimated earnings | 82,306 | 77,446 |
Accrued self-insurance expense | 29,427 | 28,903 |
Other current liabilities | 25,056 | 24,814 |
Liabilities related to discontinued operations | 263 | 263 |
Total current liabilities | 292,821 | 282,637 |
LONG-TERM DEBT | 37,000 | 39,500 |
LONG-TERM CAPITAL LEASE OBLIGATIONS | 463 | 529 |
DEFERRED INCOME TAX LIABILITIES | 10,204 | 10,817 |
OTHER LONG-TERM LIABILITIES | 11,129 | 10,874 |
Total liabilities | 351,617 | 344,357 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, $.01 par, 5,000,000 shares authorized, none issued and outstanding | ||
Common stock, $.01 par, 102,969,912 shares authorized, 41,123,365 and 41,123,365 shares issued, respectively | 411 | 411 |
Treasury stock, at cost, 3,816,216 and 3,853,586 shares, respectively | -43,175 | -43,598 |
Additional paid-in capital | 320,844 | 320,084 |
Retained earnings | 32,213 | 29,384 |
Comfort Systems USA, Inc. stockholders' equity | 310,293 | 306,281 |
Noncontrolling interests | 16,894 | 15,112 |
Total stockholders' equity | 327,187 | 321,393 |
Total liabilities and stockholders' equity | $678,804 | $665,750 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, except Share data, unless otherwise specified | ||
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $4,257 | $4,379 |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized | 102,969,912 | 102,969,912 |
Common stock, shares issued | 41,123,365 | 41,123,365 |
Treasury stock, shares | 3,816,216 | 3,853,586 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
REVENUE | $369,547 | $321,381 |
COST OF SERVICES | 304,859 | 269,232 |
Gross profit | 64,688 | 52,149 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 53,696 | 50,385 |
GAIN ON SALE OF ASSETS | -176 | -133 |
Operating income | 11,168 | 1,897 |
OTHER INCOME (EXPENSE): | ||
Interest income | 1 | 11 |
Interest expense | -505 | -336 |
Changes in the fair value of contingent earn-out obligations | 130 | |
Other | 18 | 68 |
Other income (expense) | -486 | -127 |
INCOME BEFORE INCOME TAXES | 10,682 | 1,770 |
INCOME TAX EXPENSE | 3,793 | 692 |
INCOME FROM CONTINUING OPERATIONS | 6,889 | 1,078 |
Income (loss) from discontinued operations, net of income tax expense (benefit) of $- and $10 | -15 | |
NET INCOME INCLUDING NONCONTROLLING INTERESTS | 6,889 | 1,063 |
Less: Net income (loss) attributable to noncontrolling interests | 1,823 | 688 |
NET INCOME ATTRIBUTABLE TO COMFORT SYSTEMS USA, INC. | $5,066 | $375 |
Basic- | ||
Income from continuing operations (in dollars per share) | $0.14 | $0.01 |
Net income (in dollars per share) | $0.14 | $0.01 |
Diluted- | ||
Income from continuing operations (in dollars per share) | $0.13 | $0.01 |
Net income (in dollars per share) | $0.13 | $0.01 |
SHARES USED IN COMPUTING INCOME PER SHARE: | ||
Basic (in shares) | 37,281,000 | 37,582,000 |
Diluted (in shares) | 37,605,000 | 37,890,000 |
DIVIDENDS PER SHARE (in dollars per share) | $0.06 | $0.06 |
CONSOLIDATED_STATEMENTS_OF_OPE1
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2014 |
CONSOLIDATED STATEMENTS OF OPERATIONS | |
Operating loss, income tax expense (benefit) | $10 |
CONSOLIDATED_STATEMENTS_OF_STO
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Non-Controlling Interests | Total |
In Thousands, except Share data, unless otherwise specified | ||||||
BALANCE at Dec. 31, 2013 | $411 | ($37,468) | $318,123 | $14,768 | $18,188 | $314,022 |
BALANCE (in shares) at Dec. 31, 2013 | 41,123,365 | -3,488,438 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 23,063 | 5,536 | 28,599 | |||
Issuance of Stock: | ||||||
Issuance of shares for options exercised including tax benefit | 1,132 | 79 | 1,211 | |||
Issuance of shares for options exercised including tax benefit (in shares) | 103,619 | |||||
Issuance of restricted stock | 1,243 | -1,243 | ||||
Issuance of restricted stock (in shares) | 115,044 | |||||
Shares received in lieu of tax withholding payment on vested restricted stock | -531 | -531 | ||||
Shares received in lieu of tax withholding payment on vested restricted stock (in shares) | -34,657 | |||||
Tax benefit from vesting of restricted stock | 133 | 133 | ||||
Stock-based compensation expense | 2,992 | 2,992 | ||||
Dividends | -8,447 | -8,447 | ||||
Distribution to noncontrolling interests (unaudited) | -8,612 | -8,612 | ||||
Share repurchase | -7,974 | -7,974 | ||||
Share repurchase (in shares) | -549,154 | |||||
BALANCE at Dec. 31, 2014 | 411 | -43,598 | 320,084 | 29,384 | 15,112 | 321,393 |
BALANCE (in shares) at Dec. 31, 2014 | 41,123,365 | -3,853,586 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 5,066 | 1,823 | 6,889 | |||
Issuance of Stock: | ||||||
Issuance of shares for options exercised including tax benefit | 423 | -36 | 387 | |||
Issuance of shares for options exercised including tax benefit (in shares) | 37,370 | |||||
Stock-based compensation expense | 796 | 796 | ||||
Dividends | -2,237 | -2,237 | ||||
Distribution to noncontrolling interests (unaudited) | -41 | -41 | ||||
Share repurchase (in shares) | 0 | |||||
BALANCE at Mar. 31, 2015 | $411 | ($43,175) | $320,844 | $32,213 | $16,894 | $327,187 |
BALANCE (in shares) at Mar. 31, 2015 | 41,123,365 | -3,816,216 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income including noncontrolling interests | $6,889 | $1,063 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities- | ||
Amortization of identifiable intangible assets | 1,831 | 1,604 |
Depreciation expense | 3,792 | 3,050 |
Bad debt expense | 211 | 33 |
Deferred tax benefit | -1,241 | -1,622 |
Amortization of debt financing costs | 93 | 65 |
Gain on sale of assets | -176 | -133 |
Changes in the fair value of contingent earn-out obligations | -130 | |
Stock-based compensation expense | 1,388 | 1,431 |
(Increase) decrease in- | ||
Receivables, net | 2,854 | 7,330 |
Inventories | -1,263 | -393 |
Prepaid expenses and other current assets | 735 | 824 |
Costs and estimated earnings in excess of billings | -3,592 | -4,443 |
Other noncurrent assets | 278 | 182 |
Increase (decrease) in- | ||
Accounts payable and accrued liabilities | 3,721 | -11,169 |
Billings in excess of costs and estimated earnings | 4,817 | -6,181 |
Other long-term liabilities | 78 | -295 |
Net cash provided by (used in) operating activities | 20,415 | -8,784 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | -3,623 | -3,882 |
Proceeds from sales of property and equipment | 206 | 217 |
Cash paid for acquisitions, net of cash acquired | -5,350 | -4,000 |
Net cash used in investing activities | -8,767 | -7,665 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from revolving line of credit | 14,500 | 18,000 |
Payment on revolving line of credit | -17,000 | -11,000 |
Payments on capital lease obligations | -84 | |
Payments of dividends to shareholders | -2,237 | -2,067 |
Share repurchase program | -416 | |
Excess tax benefit of stock-based compensation | 90 | -14 |
Proceeds from exercise of options | 297 | 542 |
Distributions to noncontrolling interests | -41 | |
Payments for contingent consideration arrangements | -345 | |
Net cash provided by (used in) financing activities | -4,820 | 5,045 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 6,828 | -11,404 |
CASH AND CASH EQUIVALENTS, beginning of period | 32,064 | 52,054 |
CASH AND CASH EQUIVALENTS, end of period | $38,892 | $40,650 |
Business_and_Organization
Business and Organization | 3 Months Ended |
Mar. 31, 2015 | |
Business and Organization | |
Business and Organization | 1. Business and Organization |
Comfort Systems USA, Inc., a Delaware corporation, provides comprehensive heating, ventilation and air conditioning ("HVAC") installation, maintenance, repair and replacement services within the mechanical services industry. We operate primarily in the commercial, industrial and institutional HVAC markets and perform most of our services within office buildings, retail centers, apartment complexes, manufacturing plants and healthcare, education and government facilities. In addition to standard HVAC services, we provide specialized applications such as building automation control systems, fire protection, process cooling, electronic monitoring and process piping. Certain locations also perform related activities such as electrical service and plumbing. Approximately 52% of our consolidated 2015 revenue is attributable to installation of systems in newly constructed facilities, with the remaining 48% attributable to maintenance, repair and replacement services. The following service activities account for our consolidated 2015 revenue: HVAC 76%, plumbing 15%, building automation control systems 5% and other 4%. These service activities are within the mechanical services industry, which is the single industry segment we serve. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Summary of Significant Accounting Policies | ||||||||
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies | |||||||
Basis of Presentation | ||||||||
These interim statements should be read in conjunction with the historical Consolidated Financial Statements and related notes of Comfort Systems included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission ("SEC") for the year ended December 31, 2014 (the "Form 10-K"). | ||||||||
The accompanying unaudited consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X of the SEC. Accordingly, these financial statements do not include all the footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Form 10-K. We believe all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature. Certain amounts in prior periods may have been reclassified to conform to the current year presentation. The effects of the reclassifications were not material to the unaudited consolidated financial statements. The results of operations for interim periods are not necessarily indicative of the results for the full fiscal year. | ||||||||
Use of Estimates | ||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, revenue and expenses and disclosures regarding contingent assets and liabilities. Actual results could differ from those estimates. The most significant estimates used in our financial statements affect revenue and cost recognition for construction contracts, the allowance for doubtful accounts, self-insurance accruals, deferred tax assets, warranty accruals, fair value accounting for acquisitions and the quantification of fair value for reporting units in connection with our goodwill impairment testing. | ||||||||
Cash Flow Information | ||||||||
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. | ||||||||
Cash paid (in thousands) for: | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Interest | $ | 407 | $ | 261 | ||||
Income taxes | 590 | 519 | ||||||
| | | | | | | | |
Total | $ | 997 | $ | 780 | ||||
| | | | | | | | |
| | | | | | | | |
Recent Accounting Pronouncements | ||||||||
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 provides a framework that replaces the existing revenue recognition guidance. The guidance can be applied on a full retrospective or modified retrospective basis whereby the entity records a cumulative effect of initially applying this update at the date of initial application, and early adoption is not permitted. It is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the potential impact of this authoritative guidance on our consolidated financial statements. | ||||||||
Income Taxes | ||||||||
We are subject to income tax in the United States and Puerto Rico and we file a consolidated return for federal income tax purposes. Income taxes are provided for under the liability method, which takes into account differences between financial statement treatment and tax treatment of certain transactions. | ||||||||
Deferred income taxes are based on the difference between the financial reporting and tax basis of assets and liabilities. The deferred income tax provision represents the change during the reporting period in the deferred tax assets and deferred tax liabilities, net of the effect of acquisitions and dispositions. Deferred tax assets include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. | ||||||||
We regularly evaluate valuation allowances established for deferred tax assets for which future realization is uncertain. We perform this evaluation quarterly. In assessing the realizability of deferred tax assets, we must consider whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. We consider all available evidence, both positive and negative, in determining whether a valuation allowance is required. Such evidence includes the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in prior carryback years and tax planning strategies in making this assessment, and judgment is required in considering the relative weight of negative and positive evidence. | ||||||||
Significant judgment is required in assessing the timing and amounts of deductible and taxable items. We establish reserves when, despite our belief that our tax return positions are supportable, we believe that certain positions may be disallowed. When facts and circumstances change, we adjust these reserves through our provision for income taxes. | ||||||||
To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and are classified as a component of income tax expense in our consolidated statements of operations. | ||||||||
For the three months ended March 31, 2015 our tax expense is $3.8 million with an effective tax rate of 35.5% as compared to tax expense of $0.7 million with an effective tax rate of 39.1% for the three months ended March 31, 2014. The effective rate for 2015 is higher than the federal statutory rate of 35.0% primarily due to state income taxes (3.9%) and non-deductible expenses (1.3%) partially offset by the impact of the noncontrolling interest of EAS which for tax purposes is treated as a partnership (2.7%) and the production activity deduction (1.8%). The effective rate for 2014 is higher than the federal statutory rate of 35.0% primarily due to state income taxes (4.0%). Tax reserves are analyzed and adjusted quarterly as events occur to warrant such changes. Adjustments to tax reserves are a component of the effective tax rate. | ||||||||
Financial Instruments | ||||||||
Our financial instruments consist of cash and cash equivalents, accounts receivable, other receivables, accounts payable, life insurance policies, notes to former owners, capital leases and a revolving credit facility. We believe that the carrying values of these instruments on the accompanying balance sheets approximate their fair values. | ||||||||
Segment Disclosure | ||||||||
Our activities are within the mechanical services industry, which is the single industry segment we serve. Each operating subsidiary represents an operating segment and these segments have been aggregated, as the operating units meet all of the aggregation criteria. | ||||||||
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Fair Value Measurements | 3. Fair Value Measurements | |||||||||||||
We classify and disclose assets and liabilities carried at fair value in one of the following three categories: | ||||||||||||||
• | Level 1—quoted prices in active markets for identical assets and liabilities; | |||||||||||||
• | Level 2—observable market based inputs or unobservable inputs that are corroborated by market data; and | |||||||||||||
• | Level 3—significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. | |||||||||||||
The following table summarizes the fair values, and levels within the fair value hierarchy in which the fair value measurements fall, for assets and liabilities measured on a recurring basis as of March 31, 2015 (in thousands): | ||||||||||||||
Fair Value Measurements at | ||||||||||||||
Reporting Date Using | ||||||||||||||
Balance | Quoted Prices In | Significant | Significant | |||||||||||
March 31, 2015 | Active Markets | Other | Unobservable | |||||||||||
for Identical | Observable | Inputs | ||||||||||||
Assets | Inputs | (Level 3) | ||||||||||||
(Level 1) | (Level 2) | |||||||||||||
Cash and cash equivalents | $ | 38,892 | $ | 38,892 | $ | — | $ | — | ||||||
Life insurance—cash surrender value | $ | 3,343 | $ | — | $ | 3,343 | $ | — | ||||||
Contingent earn-out obligations | $ | 425 | $ | — | $ | — | $ | 425 | ||||||
Cash and cash equivalents consist primarily of highly rated money market funds at a variety of well-known institutions with original maturities of three months or less. The original cost of these assets approximates fair value due to their short term maturity. | ||||||||||||||
One of our operations has life insurance policies covering 44 employees with a combined face value of $41.7 million. The policy is invested in mutual funds and the fair value measurement of the cash surrender balance associated with these policies is determined using Level 2 inputs within the fair value hierarchy and will vary with investment performance. The cash surrender value of these policies is $3.3 million as of March 31, 2015 and $3.2 million as of December 31, 2014. These assets are included in "Other Noncurrent Assets" in our consolidated balance sheets. | ||||||||||||||
We value contingent earn-out obligations using a probability weighted discounted cash flow method. 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. This analysis reflects the contractual terms of the purchase agreements (e.g., minimum and maximum payments, length of earn-out periods, manner of calculating any amounts due, etc.) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows and a discount rate. The contingent earn-out obligations are measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings. | ||||||||||||||
The table below presents a reconciliation of the fair value of our contingent earn-out obligations that use significant unobservable inputs (Level 3) (in thousands). | ||||||||||||||
Balance at beginning of year | $ | 670 | ||||||||||||
Issuances | 100 | |||||||||||||
Settlements | (345 | ) | ||||||||||||
Adjustments to fair value | — | |||||||||||||
| | | | | ||||||||||
Balance at end of period | $ | 425 | ||||||||||||
| | | | | ||||||||||
| | | | | ||||||||||
We measure certain assets at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. We did not recognize any impairments, in the current quarter, on those assets required to be measured at fair value on a nonrecurring basis. | ||||||||||||||
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2015 | |
Acquisitions | |
Acquisitions | 4. Acquisitions |
Acquisition of DynaTen | |
On May 1, 2014, we closed a transaction to acquire DynaTen Corporation ("DynaTen") which reports as a separate operation location in Northern Texas. DynaTen is a regional mechanical contractor based in Fort Worth, Texas which engages in broad range of mechanical contracting projects, HVAC services and controls, in the Dallas/FortWorth metroplex and in surrounding areas. The total purchase price, which was finalized in the first quarter of 2015, was $40.5 million, of which $19.8 million was allocated to goodwill. | |
Other Acquisitions | |
We completed two acquisition in the first quarter of 2015 and one acquisition in the first quarter of 2014. These acquisitions were not material and were "tucked-in" with existing operations. The total purchase price for the "tucked-in" acquisitions, including earn-outs, was $6.7 million and $1.5 million in the first quarter of 2015 and 2014, respectively. Our consolidated balance sheet includes preliminary allocations of the purchase price to the assets acquired and liabilities assumed based on estimates of fair value, pending completion of final valuation and purchase price adjustments. The results of operations of acquisitions are included in our consolidated financial statements from their respective acquisition dates. Additional contingent purchase price ("earn-out") has been or will be paid if certain acquisitions achieve predetermined profitability targets. | |
Goodwill_and_Identifiable_Inta
Goodwill and Identifiable Intangible Assets, Net | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
Goodwill and Identifiable Intangible Assets, Net | ||||||||||||||||
Goodwill and Identifiable Intangible Assets, Net | ||||||||||||||||
5. Goodwill and Identifiable Intangible Assets, Net | ||||||||||||||||
Goodwill | ||||||||||||||||
The changes in the carrying amount of goodwill are as follows (in thousands): | ||||||||||||||||
March 31, | December 31, | |||||||||||||||
2015 | 2014 | |||||||||||||||
Balance at beginning of year | $ | 140,341 | $ | 114,588 | ||||||||||||
Additions | 3,228 | 26,480 | ||||||||||||||
Impairment adjustment | — | (727 | ) | |||||||||||||
| | | | | | | | |||||||||
Balance at end of period | $ | 143,569 | $ | 140,341 | ||||||||||||
| | | | | | | | |||||||||
| | | | | | | | |||||||||
Identifiable Intangible Assets, Net | ||||||||||||||||
Identifiable intangible assets consist of the following (dollars in thousands): | ||||||||||||||||
March 31, 2015 | December 31, 2014 | |||||||||||||||
Estimated | Gross | Accumulated | Gross | Accumulated | ||||||||||||
Useful Lives | Book Value | Amortization | Book Value | Amortization | ||||||||||||
in Years | ||||||||||||||||
Customer relationships | 2 - 15 | $ | 52,617 | $ | (27,653 | ) | $ | 50,440 | $ | (26,287 | ) | |||||
Backlog | 1 - 2 | 1,600 | (975 | ) | 1,600 | (829 | ) | |||||||||
Noncompete agreements | 2 - 7 | 2,890 | (2,878 | ) | 2,890 | (2,868 | ) | |||||||||
Tradenames | 2 - 25 | 27,995 | (7,584 | ) | 27,995 | (7,275 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Total | $ | 85,102 | $ | (39,090 | ) | $ | 82,925 | $ | (37,259 | ) | ||||||
| | | | | | | | | | | | | | | | |
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LongTerm_Debt_Obligations
Long-Term Debt Obligations | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Long-Term Debt Obligations | ||||||||||||||
Long-Term Debt Obligations | ||||||||||||||
6. Long-Term Debt Obligations | ||||||||||||||
Long-term debt obligations consist of the following (in thousands): | ||||||||||||||
March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||
Revolving credit facility | $ | 36,000 | $ | 38,500 | ||||||||||
Notes to former owners | 1,000 | 1,000 | ||||||||||||
Capital lease obligations | 762 | 846 | ||||||||||||
| | | | | | | | |||||||
Total debt | 37,762 | 40,346 | ||||||||||||
Less—current portion | (299 | ) | (317 | ) | ||||||||||
| | | | | | | | |||||||
Total long-term portion of debt | $ | 37,463 | $ | 40,029 | ||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Revolving Credit Facility | ||||||||||||||
We have a $250.0 million senior credit facility (the "Facility") provided by a syndicate of banks which is available for borrowings and letters of credit. The Facility expires in October 2019 and is secured by a first lien on substantially all of our personal property except for assets related to projects subject to surety bonds and assets held by certain unrestricted subsidiaries and a second lien on our assets related to projects subject to surety bonds. The Facility provides that availability under the Facility will be limited to the lesser of the face amount of $250.0 million, or indebtedness less certain exclusions equal to 2.75 times trailing twelve month Credit Facility Adjusted EBITDA, which calculates to availability of $248.5 million as of March 31, 2015. As of March 31, 2015, we had $36.0 million of outstanding borrowings, $48.0 million in letters of credit outstanding and $164.5 million of credit available. | ||||||||||||||
There are two interest rate options for borrowings under the Facility, the Base Rate Loan Option and the Eurodollar Rate Loan Option. These rates are floating rates determined by the broad financial markets, meaning they can and do move up and down from time to time. Additional margins are then added to these two rates. | ||||||||||||||
The following is a summary of the additional margins: | ||||||||||||||
Consolidated Total Indebtedness to Credit | ||||||||||||||
Facility Adjusted EBITDA | ||||||||||||||
Less than | 0.75 to 1.50 | 1.50 to 2.25 | 2.25 or | |||||||||||
0.75 | greater | |||||||||||||
Additional Per Annum Interest Margin Added Under: | ||||||||||||||
Base Rate Loan Option | 0.25 | % | 0.50 | % | 0.75 | % | 1.00 | % | ||||||
Eurodollar Rate Loan Option | 1.25 | % | 1.50 | % | 1.75 | % | 2.00 | % | ||||||
The weighted average interest rate applicable to the borrowings under the Facility was approximately 1.4% as of March 31, 2015. | ||||||||||||||
Certain of our vendors require letters of credit to ensure reimbursement for amounts they are disbursing on our behalf, such as to beneficiaries under our self-funded insurance programs. We have also occasionally used letters of credit to guarantee performance under our contracts and to ensure payment to our subcontractors and vendors under those contracts. Our lenders issue such letters of credit through the Facility for a fee. We have never had a claim made against a letter of credit that resulted in payments by a lender or by us and believe such claim is unlikely in the foreseeable future. The letter of credit fees range from 1.25% to 2.00% per annum, based on the ratio of Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA, as defined in the credit agreement. | ||||||||||||||
Commitment fees are payable on the portion of the revolving loan capacity not in use for borrowings or letters of credit at any given time. These fees range from 0.20% to 0.35% per annum, based on the ratio of Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA, as defined in the credit agreement. | ||||||||||||||
The Facility contains financial covenants defining various financial measures and the levels of these measures with which we must comply. Covenant compliance is assessed as of each quarter end. | ||||||||||||||
The Facility's principal financial covenants include: | ||||||||||||||
Leverage Ratio—The Facility requires that the ratio of our Consolidated Total Indebtedness to our Credit Facility Adjusted EBITDA not exceed 2.75 through maturity. The leverage ratio as of March 31, 2015 was 0.51. | ||||||||||||||
Fixed Charge Coverage Ratio—The Facility requires that the ratio of Credit Facility Adjusted EBITDA, less non-financed capital expenditures, tax provision, dividends and amounts used to repurchase stock to the sum of interest expense and scheduled principal payments of indebtedness be at least 2.00; provided that the calculation of the fixed charge coverage ratio excludes stock repurchases and the payment of dividends at any time that the Company's Net Leverage Ratio does not exceed 1.50. The Facility also allows the fixed charge coverage ratio not to be reduced for stock repurchases through September 30, 2015 in an aggregate amount not to exceed $25 million if at the time of and after giving effect to such repurchase the Company's Net Leverage Ratio was less than or equal to 1.50. Capital expenditures, tax provision, dividends and stock repurchase payments are defined under the Facility for purposes of this covenant to be amounts for the four quarters ending as of any given quarterly covenant compliance measurement date. The fixed charge coverage ratio as of March 31, 2015 was 20.47. | ||||||||||||||
Other Restrictions—The Facility permits acquisitions of up to $25.0 million per transaction, provided that the aggregate purchase price of such an acquisition and of acquisitions in the same fiscal year does not exceed $60.0 million. However, these limitations only apply when the Company's Net Leverage Ratio is equal to or greater than 2.00. | ||||||||||||||
While the Facility's financial covenants do not specifically govern capacity under the Facility, if our debt level under the Facility at a quarter-end covenant compliance measurement date were to cause us to violate the Facility's leverage ratio covenant, our borrowing capacity under the Facility and the favorable terms that we currently have could be negatively impacted by the lenders. | ||||||||||||||
We are in compliance with all of our financial covenants as of March 31, 2015. | ||||||||||||||
Notes to Former Owners | ||||||||||||||
We issued subordinated notes to the former owners of acquired companies as part of the consideration used to acquire these companies. These notes had an outstanding balance of $1.0 million as of March 31, 2015 and bear interest, payable quarterly, at a weighted average interest rate of 2.5%. The principle is due in equal installments on October 2016 and 2017. | ||||||||||||||
Other Debt | ||||||||||||||
In conjunction with our acquisition of our northern Texas operation, we acquired capital lease obligations of $0.7 million. Currently, $0.8 million of capital lease obligations are outstanding, of which $0.3 million is considered current. | ||||||||||||||
Our majority owned subsidiary, EAS, has a revolving $2.5 million credit line that is available for temporary working capital needs and expires July 31, 2015. As of March 31, 2015, we had no outstanding borrowings and, therefore, $2.5 million of credit available. We estimate that the weighted average interest rate applicable to borrowings under this variable rate credit line would be approximately 2.7% as of March 31, 2015. | ||||||||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | |
7. Commitments and Contingencies | |
Claims and Lawsuits | |
We are subject to certain legal and regulatory claims, including lawsuits arising in the normal course of business. We maintain various insurance coverages to minimize financial risk associated with these claims. We have estimated and provided accruals for probable losses and related legal fees associated with certain litigation in the accompanying consolidated financial statements. While we cannot predict the outcome of these proceedings, in management's opinion and based on reports of counsel, any liability arising from these matters individually and in the aggregate will not have a material effect on our operating results, cash flows or financial condition, after giving effect to provisions already recorded. | |
Surety | |
Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a financial institution known as a surety. If we fail to perform under the terms of a contract or to pay subcontractors and vendors who provided goods or services under a contract, the customer may demand that the surety make payments or provide services under the bond. We must reimburse the surety for any expenses or outlays it incurs. To date, we are not aware of any losses to our sureties in connection with bonds the sureties have posted on our behalf, and do not expect such losses to be incurred in the foreseeable future. | |
Surety market conditions are currently challenging as a result of significant losses incurred by many sureties in recent periods, both in the construction industry as well as in certain larger corporate bankruptcies. As a result, less bonding capacity is available in the market and terms have become more restrictive. Further, under standard terms in the surety market, sureties issue bonds on a project-by-project basis, and can decline to issue bonds at any time. Historically, approximately 25% to 35% of our business has required bonds. While we currently have strong surety relationships to support our bonding needs, future market conditions or changes in the sureties' assessment of our operating and financial risk could cause the sureties to decline to issue bonds for our work. If that were to occur, the alternatives include doing more business that does not require bonds, posting other forms of collateral for project performance such as letters of credit or cash, and seeking bonding capacity from other sureties. We would likely also encounter concerns from customers, suppliers and other market participants as to our creditworthiness. While we believe our general operating and financial characteristics would enable us to ultimately respond effectively to an interruption in the availability of bonding capacity, such an interruption would likely cause our revenue and profits to decline in the near term. | |
Self-Insurance | |
We are substantially self-insured for workers' compensation, employer's liability, auto liability, general liability and employee group health claims, in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages. Loss estimates associated with the larger and longer-developing risks, such as workers' compensation, auto liability and general liability, are reviewed by a third-party actuary quarterly. | |
Stockholders_Equity
Stockholders' Equity | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Stockholders' Equity | ||||||||
Stockholders' Equity | ||||||||
8. Stockholders' Equity | ||||||||
Earnings Per Share | ||||||||
Basic earnings per share ("EPS") is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed considering the dilutive effect of stock options, contingently issuable restricted stock and restricted stock units. | ||||||||
There were approximately 0.1 million anti-dilutive stock options excluded from the calculation of diluted EPS for the three months ended March 31, 2015 and no anti-dilutive stock options for the three months ended March 31, 2014. | ||||||||
The following table reconciles the number of shares outstanding with the number of shares used in computing basic and diluted earnings per share for each of the periods presented (in thousands): | ||||||||
Three Months | ||||||||
Ended March 31, | ||||||||
2015 | 2014 | |||||||
Common shares outstanding, end of period(a) | 37,307 | 37,597 | ||||||
Effect of using weighted average common shares outstanding | (26 | ) | (15 | ) | ||||
| | | | | | | | |
Shares used in computing earnings per share—basic | 37,281 | 37,582 | ||||||
Effect of shares issuable under stock option plans based on the treasury stock method | 233 | 186 | ||||||
Effect of contingently issuable restricted shares | 91 | 122 | ||||||
| | | | | | | | |
Shares used in computing earnings per share—diluted | 37,605 | 37,890 | ||||||
| | | | | | | | |
| | | | | | | | |
(a) | Excludes 0.1 million shares of unvested contingently issuable restricted stock outstanding as of March 31, 2014. | |||||||
Share Repurchase Program | ||||||||
On March 29, 2007, our Board of Directors (the "Board") approved a stock repurchase program to acquire up to 1.0 million shares of our outstanding common stock. Subsequently, the Board has from time to time approved extensions of the program to acquire additional shares. On October 24, 2014, the Board approved an extension to the program by increasing the shares authorized for repurchase by 1.0 million shares. Since the inception of the repurchase program, the Board has approved 7.6 million shares to be repurchased. | ||||||||
The share repurchases will be made from time to time at our discretion in the open market or privately negotiated transactions as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. The Board may modify, suspend, extend or terminate the program at any time. No shares were repurchased during the current quarter. Since the inception of the program in 2007 and as of March 31, 2015, we have repurchased a cumulative total of 6.6 million shares at an average price of $11.30 per share. | ||||||||
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Summary of Significant Accounting Policies | ||||||||
Basis of Presentation | Basis of Presentation | |||||||
These interim statements should be read in conjunction with the historical Consolidated Financial Statements and related notes of Comfort Systems included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission ("SEC") for the year ended December 31, 2014 (the "Form 10-K"). | ||||||||
The accompanying unaudited consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X of the SEC. Accordingly, these financial statements do not include all the footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Form 10-K. We believe all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature. Certain amounts in prior periods may have been reclassified to conform to the current year presentation. The effects of the reclassifications were not material to the unaudited consolidated financial statements. The results of operations for interim periods are not necessarily indicative of the results for the full fiscal year. | ||||||||
Use of Estimates | Use of Estimates | |||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, revenue and expenses and disclosures regarding contingent assets and liabilities. Actual results could differ from those estimates. The most significant estimates used in our financial statements affect revenue and cost recognition for construction contracts, the allowance for doubtful accounts, self-insurance accruals, deferred tax assets, warranty accruals, fair value accounting for acquisitions and the quantification of fair value for reporting units in connection with our goodwill impairment testing. | ||||||||
Cash Flow Information | Cash Flow Information | |||||||
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. | ||||||||
Cash paid (in thousands) for: | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Interest | $ | 407 | $ | 261 | ||||
Income taxes | 590 | 519 | ||||||
| | | | | | | | |
Total | $ | 997 | $ | 780 | ||||
| | | | | | | | |
| | | | | | | | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements | |||||||
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 provides a framework that replaces the existing revenue recognition guidance. The guidance can be applied on a full retrospective or modified retrospective basis whereby the entity records a cumulative effect of initially applying this update at the date of initial application, and early adoption is not permitted. It is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the potential impact of this authoritative guidance on our consolidated financial statements. | ||||||||
Income Taxes | Income Taxes | |||||||
We are subject to income tax in the United States and Puerto Rico and we file a consolidated return for federal income tax purposes. Income taxes are provided for under the liability method, which takes into account differences between financial statement treatment and tax treatment of certain transactions. | ||||||||
Deferred income taxes are based on the difference between the financial reporting and tax basis of assets and liabilities. The deferred income tax provision represents the change during the reporting period in the deferred tax assets and deferred tax liabilities, net of the effect of acquisitions and dispositions. Deferred tax assets include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. | ||||||||
We regularly evaluate valuation allowances established for deferred tax assets for which future realization is uncertain. We perform this evaluation quarterly. In assessing the realizability of deferred tax assets, we must consider whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. We consider all available evidence, both positive and negative, in determining whether a valuation allowance is required. Such evidence includes the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in prior carryback years and tax planning strategies in making this assessment, and judgment is required in considering the relative weight of negative and positive evidence. | ||||||||
Significant judgment is required in assessing the timing and amounts of deductible and taxable items. We establish reserves when, despite our belief that our tax return positions are supportable, we believe that certain positions may be disallowed. When facts and circumstances change, we adjust these reserves through our provision for income taxes. | ||||||||
To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and are classified as a component of income tax expense in our consolidated statements of operations. | ||||||||
For the three months ended March 31, 2015 our tax expense is $3.8 million with an effective tax rate of 35.5% as compared to tax expense of $0.7 million with an effective tax rate of 39.1% for the three months ended March 31, 2014. The effective rate for 2015 is higher than the federal statutory rate of 35.0% primarily due to state income taxes (3.9%) and non-deductible expenses (1.3%) partially offset by the impact of the noncontrolling interest of EAS which for tax purposes is treated as a partnership (2.7%) and the production activity deduction (1.8%). The effective rate for 2014 is higher than the federal statutory rate of 35.0% primarily due to state income taxes (4.0%). Tax reserves are analyzed and adjusted quarterly as events occur to warrant such changes. Adjustments to tax reserves are a component of the effective tax rate. | ||||||||
Financial Instruments | Financial Instruments | |||||||
Our financial instruments consist of cash and cash equivalents, accounts receivable, other receivables, accounts payable, life insurance policies, notes to former owners, capital leases and a revolving credit facility. We believe that the carrying values of these instruments on the accompanying balance sheets approximate their fair values. | ||||||||
Segment Disclosure | Segment Disclosure | |||||||
Our activities are within the mechanical services industry, which is the single industry segment we serve. Each operating subsidiary represents an operating segment and these segments have been aggregated, as the operating units meet all of the aggregation criteria. | ||||||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Summary of Significant Accounting Policies | ||||||||
Schedule of cash paid | Cash paid (in thousands) for: | |||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Interest | $ | 407 | $ | 261 | ||||
Income taxes | 590 | 519 | ||||||
| | | | | | | | |
Total | $ | 997 | $ | 780 | ||||
| | | | | | | | |
| | | | | | | | |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Summary of fair values and levels within the fair value hierarchy in which the fair value measurements fall for assets and liabilities measured on a recurring basis | The following table summarizes the fair values, and levels within the fair value hierarchy in which the fair value measurements fall, for assets and liabilities measured on a recurring basis as of March 31, 2015 (in thousands): | |||||||||||||
Fair Value Measurements at | ||||||||||||||
Reporting Date Using | ||||||||||||||
Balance | Quoted Prices In | Significant | Significant | |||||||||||
March 31, 2015 | Active Markets | Other | Unobservable | |||||||||||
for Identical | Observable | Inputs | ||||||||||||
Assets | Inputs | (Level 3) | ||||||||||||
(Level 1) | (Level 2) | |||||||||||||
Cash and cash equivalents | $ | 38,892 | $ | 38,892 | $ | — | $ | — | ||||||
Life insurance—cash surrender value | $ | 3,343 | $ | — | $ | 3,343 | $ | — | ||||||
Contingent earn-out obligations | $ | 425 | $ | — | $ | — | $ | 425 | ||||||
Schedule of reconciliation of the fair value of contingent earn-out obligations that use significant unobservable inputs (Level 3) | The table below presents a reconciliation of the fair value of our contingent earn-out obligations that use significant unobservable inputs (Level 3) (in thousands). | |||||||||||||
Balance at beginning of year | $ | 670 | ||||||||||||
Issuances | 100 | |||||||||||||
Settlements | (345 | ) | ||||||||||||
Adjustments to fair value | — | |||||||||||||
| | | | | ||||||||||
Balance at end of period | $ | 425 | ||||||||||||
| | | | | ||||||||||
| | | | | ||||||||||
Goodwill_and_Identifiable_Inta1
Goodwill and Identifiable Intangible Assets, Net (Tables) | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
Goodwill and Identifiable Intangible Assets, Net | ||||||||||||||||
Schedule of changes in the carrying amount of goodwill | The changes in the carrying amount of goodwill are as follows (in thousands): | |||||||||||||||
March 31, | December 31, | |||||||||||||||
2015 | 2014 | |||||||||||||||
Balance at beginning of year | $ | 140,341 | $ | 114,588 | ||||||||||||
Additions | 3,228 | 26,480 | ||||||||||||||
Impairment adjustment | — | (727 | ) | |||||||||||||
| | | | | | | | |||||||||
Balance at end of period | $ | 143,569 | $ | 140,341 | ||||||||||||
| | | | | | | | |||||||||
| | | | | | | | |||||||||
Schedule of components of identifiable intangible assets | Identifiable intangible assets consist of the following (dollars in thousands): | |||||||||||||||
March 31, 2015 | December 31, 2014 | |||||||||||||||
Estimated | Gross | Accumulated | Gross | Accumulated | ||||||||||||
Useful Lives | Book Value | Amortization | Book Value | Amortization | ||||||||||||
in Years | ||||||||||||||||
Customer relationships | 2 - 15 | $ | 52,617 | $ | (27,653 | ) | $ | 50,440 | $ | (26,287 | ) | |||||
Backlog | 1 - 2 | 1,600 | (975 | ) | 1,600 | (829 | ) | |||||||||
Noncompete agreements | 2 - 7 | 2,890 | (2,878 | ) | 2,890 | (2,868 | ) | |||||||||
Tradenames | 2 - 25 | 27,995 | (7,584 | ) | 27,995 | (7,275 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Total | $ | 85,102 | $ | (39,090 | ) | $ | 82,925 | $ | (37,259 | ) | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
LongTerm_Debt_Obligations_Tabl
Long-Term Debt Obligations (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Long-Term Debt Obligations | ||||||||||||||
Schedule of components of long-term debt obligations | ||||||||||||||
Long-term debt obligations consist of the following (in thousands): | ||||||||||||||
March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||
Revolving credit facility | $ | 36,000 | $ | 38,500 | ||||||||||
Notes to former owners | 1,000 | 1,000 | ||||||||||||
Capital lease obligations | 762 | 846 | ||||||||||||
| | | | | | | | |||||||
Total debt | 37,762 | 40,346 | ||||||||||||
Less—current portion | (299 | ) | (317 | ) | ||||||||||
| | | | | | | | |||||||
Total long-term portion of debt | $ | 37,463 | $ | 40,029 | ||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Summary of additional margins | ||||||||||||||
Consolidated Total Indebtedness to Credit | ||||||||||||||
Facility Adjusted EBITDA | ||||||||||||||
Less than | 0.75 to 1.50 | 1.50 to 2.25 | 2.25 or | |||||||||||
0.75 | greater | |||||||||||||
Additional Per Annum Interest Margin Added Under: | ||||||||||||||
Base Rate Loan Option | 0.25 | % | 0.50 | % | 0.75 | % | 1.00 | % | ||||||
Eurodollar Rate Loan Option | 1.25 | % | 1.50 | % | 1.75 | % | 2.00 | % | ||||||
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Stockholders' Equity | ||||||||
Reconciliation of number of shares outstanding with the number of shares used in computing basic and diluted earnings per share | ||||||||
The following table reconciles the number of shares outstanding with the number of shares used in computing basic and diluted earnings per share for each of the periods presented (in thousands): | ||||||||
Three Months | ||||||||
Ended March 31, | ||||||||
2015 | 2014 | |||||||
Common shares outstanding, end of period(a) | 37,307 | 37,597 | ||||||
Effect of using weighted average common shares outstanding | (26 | ) | (15 | ) | ||||
| | | | | | | | |
Shares used in computing earnings per share—basic | 37,281 | 37,582 | ||||||
Effect of shares issuable under stock option plans based on the treasury stock method | 233 | 186 | ||||||
Effect of contingently issuable restricted shares | 91 | 122 | ||||||
| | | | | | | | |
Shares used in computing earnings per share—diluted | 37,605 | 37,890 | ||||||
| | | | | | | | |
| | | | | | | | |
(a) | Excludes 0.1 million shares of unvested contingently issuable restricted stock outstanding as of March 31, 2014. | |||||||
Business_and_Organization_Deta
Business and Organization (Details) | 3 Months Ended |
Mar. 31, 2015 | |
Installation of systems in newly constructed facilities | |
Business and Organization | |
Percentage of revenue attributable to services | 52.00% |
Maintenance, repair and replacement services | |
Business and Organization | |
Percentage of revenue attributable to services | 48.00% |
HVAC | |
Business and Organization | |
Percentage of revenue attributable to services | 76.00% |
Plumbing | |
Business and Organization | |
Percentage of revenue attributable to services | 15.00% |
Building automation control systems | |
Business and Organization | |
Percentage of revenue attributable to services | 5.00% |
Other | |
Business and Organization | |
Percentage of revenue attributable to services | 4.00% |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Cash paid for: | ||
Interest | $407 | $261 |
Income taxes for continuing operations | 590 | 519 |
Total | 997 | 780 |
Income Taxes | ||
Tax expense | $3,793 | $692 |
Effective tax rate (as a percent) | 35.50% | 39.10% |
Federal statutory income taxes rate (as a percent) | 35.00% | 35.00% |
State income taxes rate (as a percent) | 3.90% | 4.00% |
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Depreciation and Amortization, Percent | 1.30% | |
Noncontrolling interest (as a percent) | 2.70% | |
Production activity deduction (as a percent) | 1.80% |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | |
Fair Value Measurements | ||
Number of employees covered under life insurance policies | 44 | |
Combined face value of life insurance policies | $41,700,000 | |
Cash surrender value | 3,300,000 | 3,200,000 |
Contingent earn-out obligations | ||
Reconciliation of the fair value of contingent earn-out obligations that use significant unobservable inputs (Level 3) | ||
Balance at beginning of year | 670,000 | |
Issuances | 100,000 | |
Settlements | -345,000 | |
Balance at end of period | 425,000 | |
Recurring basis | Total | ||
Fair Value Measurements | ||
Cash and cash equivalents | 38,892,000 | |
Life insurance - cash surrender value | 3,343,000 | |
Contingent earn-out obligations | 425,000 | |
Recurring basis | Quoted Market Prices In Active Markets for Identical Assets (Level 1) | ||
Fair Value Measurements | ||
Cash and cash equivalents | 38,892,000 | |
Recurring basis | Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) | ||
Fair Value Measurements | ||
Life insurance - cash surrender value | 3,343,000 | |
Recurring basis | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Contingent earn-out obligations | $425,000 |
Acquisitions_Details
Acquisitions (Details) (USD $) | 3 Months Ended | |||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
item | item | |||
Acquisitions | ||||
Goodwill on acquisition | $143,569,000 | $140,341,000 | $114,588,000 | |
Number of acquisitions | 2 | 1 | ||
Dyna Ten | ||||
Acquisitions | ||||
Total purchase price | 40,500,000 | |||
Goodwill on acquisition | 19,800,000 | |||
Other Acquisitions | ||||
Acquisitions | ||||
Total purchase price | $6,700,000 | $1,500,000 |
Goodwill_and_Identifiable_Inta2
Goodwill and Identifiable Intangible Assets, Net (Details) (USD $) | 3 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Dec. 31, 2014 |
Changes in the carrying amount of goodwill | ||
Balance at the beginning of period | $140,341 | $114,588 |
Additions | 3,228 | 26,480 |
Impairment adjustment | -727 | |
Balance at the end of period | $143,569 | $140,341 |
Goodwill_and_Identifiable_Inta3
Goodwill and Identifiable Intangible Assets, Net (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Dec. 31, 2014 |
Identifiable Intangible Assets, Net | ||
Gross Book Value | 85,102 | $82,925 |
Accumulated Amortization | -39,090 | -37,259 |
Customer relationships | ||
Identifiable Intangible Assets, Net | ||
Gross Book Value | 52,617 | 50,440 |
Accumulated Amortization | -27,653 | -26,287 |
Customer relationships | Minimum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 2 years | |
Customer relationships | Maximum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 15 years | |
Backlog | ||
Identifiable Intangible Assets, Net | ||
Gross Book Value | 1,600 | 1,600 |
Accumulated Amortization | -975 | -829 |
Backlog | Minimum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 1 year | |
Backlog | Maximum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 2 years | |
Noncompete agreements | ||
Identifiable Intangible Assets, Net | ||
Gross Book Value | 2,890 | 2,890 |
Accumulated Amortization | -2,878 | -2,868 |
Noncompete agreements | Minimum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 2 years | |
Noncompete agreements | Maximum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 7 years | |
Tradenames | ||
Identifiable Intangible Assets, Net | ||
Gross Book Value | 27,995 | 27,995 |
Accumulated Amortization | -7,584 | ($7,275) |
Tradenames | Minimum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 2 years | |
Tradenames | Maximum | ||
Identifiable Intangible Assets, Net | ||
Estimated Useful Lives in Years | 25 years |
LongTerm_Debt_Obligations_Deta
Long-Term Debt Obligations (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Long-Term Debt Obligations | ||
Total debt | $37,762 | $40,346 |
Less - current portion | -299 | -317 |
Total long-term portion of debt | 37,463 | 40,029 |
Revolving credit facility | ||
Long-Term Debt Obligations | ||
Total debt | 36,000 | 38,500 |
Notes to former owners | ||
Long-Term Debt Obligations | ||
Total debt | 1,000 | 1,000 |
Capital Lease Obligations. | ||
Long-Term Debt Obligations | ||
Total debt | $762 | $846 |
LongTerm_Debt_Obligations_Deta1
Long-Term Debt Obligations (Details 2) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Dec. 31, 2014 | 1-May-14 | |
item | |||
Other disclosures | |||
Current portion of capital lease obligations | $299,000 | $317,000 | |
Revolving credit facility | |||
Long-Term Debt Obligations | |||
Borrowing capacity | 250,000,000 | ||
Outstanding borrowings | 36,000,000 | ||
Letters of credit amount outstanding | 48,000,000 | ||
Credit available | 164,500,000 | ||
Principal financial covenants | |||
Leverage ratio | 0.51 | ||
Number of quarters of capital expenditures, tax provision, dividends and stock repurchase payments used for calculation of fixed charge coverage ratio | 4 | ||
Number of interest rate options | 2 | ||
Debt instrument covenant credit availability ratio | 2.75 | ||
Number of trailing months used to calculate available credit | 12 months | ||
Other disclosures | |||
Weighted average interest rate (as a percent) | 1.40% | ||
Revolving credit facility | EAS | |||
Long-Term Debt Obligations | |||
Borrowing capacity | 2,500,000 | ||
Credit available | 2,500,000 | ||
Other disclosures | |||
Weighted average interest rate (as a percent) | 2.70% | ||
Revolving credit facility | Actual | |||
Principal financial covenants | |||
Fixed charge coverage ratio | 20.47 | ||
Revolving credit facility | Minimum | |||
Long-Term Debt Obligations | |||
Borrowing capacity | 250,000,000 | ||
Additional per annum interest margin added under: | |||
Letter of credit fees (as a percent) | 1.25% | ||
Commitment fees payable on unused portion of the facility (as a percent) | 0.20% | ||
Revolving credit facility | Minimum | Covenant Requirement | |||
Principal financial covenants | |||
Net leverage ratio used as basis for other restrictions | 2 | ||
Revolving credit facility | Minimum | Actual | |||
Principal financial covenants | |||
Fixed charge coverage ratio | 2 | ||
Revolving credit facility | Maximum | |||
Long-Term Debt Obligations | |||
Credit available | 248,500,000 | ||
Principal financial covenants | |||
Permitted amount of acquisitions per transaction | 25,000,000 | ||
Aggregate purchase price of current acquisition and acquisitions in the preceding 12 month period for determining permitted amount of acquisition per transaction | 60,000,000 | ||
Additional per annum interest margin added under: | |||
Letter of credit fees (as a percent) | 2.00% | ||
Commitment fees payable on unused portion of the facility (as a percent) | 0.35% | ||
Revolving credit facility | Maximum | Through maturity | |||
Principal financial covenants | |||
Leverage ratio | 2.75 | ||
Revolving credit facility | Maximum | Covenant Requirement | |||
Principal financial covenants | |||
Net leverage ratio used to determine exclusion of stock repurchases and the payment of dividends for calculation of the fixed charge coverage ratio | 1.5 | ||
Revolving credit facility | Maximum | Actual | |||
Principal financial covenants | |||
Amount of stock repurchases to maintain maximum net leverage ratio | 25,000,000 | ||
Net leverage ratio after giving effect to stock repurchases for calculation of the fixed charge coverage ratio | 1.5 | ||
Revolving credit facility | Base rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: Less than 0.75 | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 0.25% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 0.25% | ||
Revolving credit facility | Base rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: 0.75 to 1.50 | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 0.50% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 0.50% | ||
Revolving credit facility | Base rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: 1.50 to 2.25 | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 0.75% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 0.75% | ||
Revolving credit facility | Base rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: 2.25 or greater | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 1.00% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 1.00% | ||
Revolving credit facility | Eurodollar rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: Less than 0.75 | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 1.25% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 1.25% | ||
Revolving credit facility | Eurodollar rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: 0.75 to 1.50 | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 1.50% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 1.50% | ||
Revolving credit facility | Eurodollar rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: 1.50 to 2.25 | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 1.75% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 1.75% | ||
Revolving credit facility | Eurodollar rate | Consolidated Total Indebtedness to Credit Facility Adjusted EBITDA: 2.25 or greater | |||
Market rates relating to interest options | |||
Interest rate margin (as a percent) | 2.00% | ||
Additional per annum interest margin added under: | |||
Additional per annum interest margin (as a percent) | 2.00% | ||
Notes to former owners | |||
Long-Term Debt Obligations | |||
Outstanding borrowings | 1,000,000 | ||
Other disclosures | |||
Weighted average interest rate (as a percent) | 2.50% | ||
Other debt | Dyna Ten | |||
Other disclosures | |||
Capital lease obligation pertaining to acquisition in northern Texas | 800,000 | 700,000 | |
Current portion of capital lease obligations | $300,000 |
Commitments_and_Contingencies1
Commitments and Contingencies (Surety) | 3 Months Ended |
Mar. 31, 2015 | |
Minimum | |
Surety | |
Percentage of business which has required bonds | 25.00% |
Maximum | |
Surety | |
Percentage of business which has required bonds | 35.00% |
Stockholders_Equity_Details
Stockholders' Equity (Details) (Stock Options) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Stock Options | ||
Earnings Per Share | ||
Anti-dilutive securities excluded from computation of earnings per share amount (in shares) | 0.1 | 0 |
Stockholders_Equity_Details_2
Stockholders' Equity (Details 2) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Reconciliation of the number of shares outstanding with the number of shares used in computing basic and diluted earnings per share | ||
Common shares outstanding, end of period | 37,307,000 | 37,597,000 |
Effect of using weighted average common shares outstanding | -26,000 | -15,000 |
Shares used in computing earnings per share - basic | 37,281,000 | 37,582,000 |
Effect of shares issuable under stock option plans based on the treasury stock method | 233,000 | 186,000 |
Effect of contingently issuable restricted shares | 91,000 | 122,000 |
Shares used in computing earnings per share - diluted | 37,605,000 | 37,890,000 |
Number of shares of unvested contingently issuable restricted stock outstanding | 100,000 |
Stockholders_Equity_Details_3
Stockholders' Equity (Details 3) (USD $) | 3 Months Ended | 99 Months Ended | ||
In Millions, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2015 | Oct. 24, 2014 | Mar. 29, 2007 |
Share Repurchase Program | ||||
Number of shares of outstanding common stock authorized to be acquired under a stock repurchase program | 7.6 | 7.6 | 1 | 1 |
Number of shares of common stock repurchased | 0 | 6.6 | ||
Average price (in dollars per share) | $11.30 |