Excluding the charges for restructuring and debt cost writeoff, and the effect of divested units not included in discontinued operations, net income from ongoing operations was $3,193,000 or $0.08 per diluted share in the second quarter of 2003, again including a $0.02 per diluted share benefit in connection with the tax item noted previously.
The company reported revenues from continuing operations of $203,948,000 in the current quarter as compared to $198,799,000 in 2003. The company also reported free cash flow of $11,647,000 in the current quarter as compared to free cash flow of $13,095,000 in 2003. Backlog as of June 30, 2004, was a record $488,584,000, as compared to $473,163,000, the previous record as of March 31, 2004, and $453,888,000 on a same-store basis as of June 30, 2003.
Bill Murdy, Comfort Systems USA's chairman and CEO, said, "We are pleased to report another quarter of steady progress for Comfort Systems USA. Revenues were up 3 percent over last year, while operating income at ongoing operations increased 43 percent and margins climbed by more than 100 basis points. Pre-tax income grew by an even greater amount as a result of significantly lower interest expense this year. Free cash flow came in at healthy levels this quarter, while backlog reached another record, growing 8 percent over last year, and showed indications of improving profitability."
Murdy continued, "As we noted last quarter, our markets have experienced sharp increases this year in the cost of certain commodities used in our work, including steel, iron, and copper, which comprise 10 percent to 15 percent on average of the cost of our projects. We also indicated that we expected commodity inflation to have a modest effect on our results arising from projects where commodity inflation not anticipated in our cost estimates and price commitments could not be recovered in higher revenues on those projects.
"This effect during the second quarter was approximately $1 million before taxes, or $0.01 per diluted share, which we absorbed while still producing significant income and margin increases for the quarter. Based on certain steps we initiated earlier this year in response to commodity cost volatility, including early buying of materials for certain projects, and price adjustment provisions in project bids and contracts, we expect the impact of unrecoverable commodity cost inflation to be lower in coming quarters than it was in this quarter.
"While it remains possible that broader commodity cost inflation could slow demand for nonresidential new construction and replacement, we have not seen indications of this so far. Instead, we continue to see modestly improving activity levels in our industry. For our part, we have maintained our determined efforts, including cost containment and further strengthening of our balance sheet, to position the company for ongoing performance as our industry environment turns more favorable. We remain focused on delivering significantly better results for 2004 as compared to 2003."
Publication date: 08/23/2004