Seeking Alpha
Profile| Send Message|
( followers)

The Wall Street Transcript recently interviewed William F. Murdy, Chairman and Chief Executive Officer of Comfort Systems USA, Inc. (NYSE:FIX). Key excerpts follow:

TWST: Would you begin with a history and an overview of Comfort Systems?

Mr. Murdy: Comfort Systems is a company that is 11.5 years old. It was originally a rollup of HVAC, mechanical contractors and service providers across the country. It has since consolidated itself into an operating company. We have a presence across the entire US from Orlando, Florida, to Seattle and from San Diego to Portland, Maine, and do about $1.3 billion in revenues. We have one of the strongest balance sheets in the specialty contracting arena and believe that we are ready to deal with what's coming in the economy.

TWST: Please give us an idea of who you see as the customer. How is that customer changing considering the current financial landscape?

Mr. Murdy: Our customers are ultimately end users of commercial buildings, hospitals, jails, schools, the military, etc., although we work a lot of the time in construction for general contractors. We work with the end user on construction but more often when we are servicing HVAC equipment and systems.

How is the customer changing? The economy here has caused a lot of people to think twice about continued development of properties, whether it's condos or hotels or commercial office buildings, and so the customer is more cautious. We have a very robust backlog that we continue to work with the end-user customer, who, as I said before, is principally service oriented, hasn't backed off. HVAC equipment needs to be maintained and serviced, repaired occasionally, ultimately retrofitted — it's just a matter of physics — so that continues. In other words, the economy or the downturn or the problems in the economy haven't yet affected things to the extent that end users are not servicing their equipment.

TWST: Given the blessing of a huge backlog, what are your priorities for the company? What would make the next 12 to 24 months a success?

Mr. Murdy: Backlog is backlog and the volume of it is certainly important and what we report is certainly indicative of future activity, but more important than just the volume of that backlog is what we can profitably do. We are trying to guard against just taking work for the sake of work. We want to maintain the bottom line because the profit is the name of the future. We have to continue to operate in a profitable manner so that we can continue to see the business grow and prosper in the future. So I guess the answer to your question is, we have to be careful about what work we take. We can't just be out there taking everything and if we have to sacrifice top-line growth to ensure bottom line positiveness, we are liable to do that.

TWST: Considering the current economic climate, what do you see your competitors doing? How is the competition defined by region?

Mr. Murdy: The commercial HVAC construction and services business is a very fragmented business. It's probably a $40 billion a year business, as we are the largest pure player involved; we do $1.3 billion. So we are 3% of the business and there are other large factors, but the real competition is local companies competing with our local operations and the competition is varied and strong and competent. In most areas, we are not aimed at the big mega jobs nor are we aimed at the smaller jobs, either on the construction or the service side. So we are in that nice mid-area and there is certainly competition in that area but we don't have to compete with everybody at the low end nor do we compete with the mega companies at the high end.

TWST: What do you see as your biggest opportunities?

Mr. Murdy: To continue to do what we do right now, the bulk of it. But we see a big opportunity in the energy efficiency area. HVAC systems consume 40% to 50% of the electric power used in a building or a manufacturing facility, office building, restaurant, hotel or school. So to the extent we can work on those systems, make them more efficient either by replacing them or keeping them maintained is a real opportunity for us because everybody is interested in saving electric power costs. We are "green," although we stay away from green washing. I think we are realistically green. There is a lot of money to be saved and there is payout from spending capital and upgrading HVAC systems in order to garner the savings from efficiency in electric usage.

TWST: So you see the company well positioned for the impending green economy?

Mr. Murdy: I think we are. I think the whole HVAC sector is because we use so much electric energy. The quality of the equipment, the efficiency built in new equipment, the further efficiency we can build into a system by designing and installing it correctly and then maintaining it gives us an opportunity to save end users' money.

TWST: Do you feel you've succeeded in your goals from three years ago? What are your goals today? What might come up that will cause you to change direction?

Mr. Murdy: I don't think there is a lot that could cause us to change direction. We know we are in a good sector, well positioned in that sector, we've got the balance sheet strength, we've got excellent management capability, especially in our local operations. There is a need for our services and our opportunities are further enhanced by energy efficiency. We feel pretty good about the fundamentals of the business. Now, is there a likely downturn coming in non-residential construction and how we will handle that? We think we are prepared for that and, as I said before, if we have to sacrifice something on the top line to keep the bottom line intact, we will do that.

Source: Interview with Comfort Systems CEO William Murdy