When William F. Murdy became chairman and CEO of Comfort Systems USA in July 2000 the company was struggling to unburden itself from $350 million in short-term debt. The problem was that Comfort Systems, a national heating, ventilation and cooling (HVAC) company, was having trouble managing its growth during the late 1990s, the hey day of corporate roll ups.
“We built up debt as a result of the consolidation among a very large number of companies that were, quote, ‘rolled up’ into one company,” said Murdy. Comfort Systems had gone public in 1997, raising substantial equity and subsequently borrowed $350 million to acquire companies and support operations. However, the company’s plan to aggregate and coordinate a national brand for commercial HVAC installation and maintenance, faltered. ” Frankly, we acquired too much too fast and we were not able to assimilate and manage the business properly. At the same time Wall Street soured on industry consolidation because a number of similar corporations proved they were unable to operate as a consolidated entity.”
Murdy and his senior management team went to work immediately creating cash through getting net overbilled and collecting receivables more efficiently. There were some companies closed down and some internal consolidations and within a year of taking over Comfort Systems, Murdy and his team had halved the short-term debt number to about $180 million, a remarkable feat, but not enough to truly turn around the company and prepare it for a cooling of the economy.
So after a little over 14 months as CEO, Murdy and his senior management team met with a number of investment banks including Morgan Chase in New York City to discuss a plan to restructure Comfort Systems’ short-term debt. The day of that meeting was a fateful date for all Americans – Sept. 11, 2001.
Needless to say, Comfort Systems never made a deal that day. Instead, Murdy and his team returned safely to the company’s headquarters in Houston and set in place their Plan B for turning Comfort Systems around.
Plan B wins big
Ultimately, the next strategy worked out even better than debt restructuring. Murdy learned that Emcor Group, Inc., one of the world’s largest mechanical and electrical construction services corporations, was looking to acquire companies with unionized operations. It so happened that some of the companies that Comfort Systems had acquired during its roll-up phase were union organizations. Additionally, some of those particular properties focused on projects like food processing and water management, which were beyond what Comfort Systems considered its core – HVAC. Emcor took all the union-based companies from Comfort Systems, paying in cash, which paid down the rest of the debt and cleared the way for Murdy’s team to operate the remaining companies in a challenging economy.”The HVAC commercial installation market is extremely fragmented,” said Murdy. “When you consider that Comfort, Emcor and the three largest original equipment manufacturers – Carrier, Trane, and York – equal only about 10 percent of the market, you can understand what I mean. Comfort Systems represents 2 percent of the total but that makes us the largest purely commercial HVAC installation and services company in the industry.”Today, Comfort Systems consists of 45 operations throughout the country, 5,000 employees in 62 cities and annual revenue in excess of $800 million.”We have the strongest balance sheet of all companies in the specialty construction services business,” said Murdy. “One of our strengths is that we are equipment agnostic, which means that we fit the equipment to the application. We can work with the most efficient suppliers in the area and we are not locked in to any one OEM.”
Training and Energy
In order to succeed as a large commercial HVAC installation services company, training is critical. From field techs to project managers, well-trained people are absolutely essential.
Some of Comfort’s training is aimed at achieving and sustaining energy efficiency. “Since HVAC accounts for half of the energy usage in a building, all facilities face a major challenge with rising energy prices,” said Murdy. “An installation must be energy efficient and the ongoing HVAC service must ensure that it operates in the most efficient fashion.”
For example, Comfort Systems’ Mechanical Design-Build Services represent the company’s commitment to maximizing energy-efficiency results based on stated customer goals and objectives. “We view the energy-efficiency based mechanical design-build process as a business solution for our clients, and more than just an engineering and construction project approach. Our mechanical design-build services process maintains the highest-quality delivery approach assuring open lines of communication between Comfort Systems USA, our customers, and the entire project team. As a team, we work closely with architects, engineers and other specialty contractors to incorporate energy engineering and lifecycle concepts into all mechanical systems design options. By working together, we produce the most operationally economical and energy-efficient structure possible.”
The strength of being the largest installer of commercial HVAC equipment is national reach, which is why Comfort Systems offers a comprehensive National Accounts program. Based in Indianapolis Ind., National Accounts provides the dedicated infrastructure and experience to support clients who typically manage hundreds of locations across the U.S.
“Our dedicated infrastructure includes proprietary service call tracking and Web-based reporting software tied into National Account’s accounting systems,” said Murdy. “We provide our customers 15,000 locations, with the most complete range of solutions, including consolidated billing, dedicated account management, information capture and reporting, process efficiencies and equipment operational savings. National Accounts exists to identify high earnings opportunities for our operating companies and to partner with them to deliver service operational excellence to our customers.”
Looking ahead, Murdy expects growth to come organically. Comfort Systems has made the right moves, eliminating its unwieldy debt, thereby paving the way for profit. For the first time ever, the fragmented HVAC field, composed of as many as 35,000 different companies, offers a single company to provide complete HVAC service, anywhere, anytime.
“While Comfort Systems is a relatively young brand, our companies average nearly 30 years of experience,” said Murdy. “Comfort is our business, and our vast portfolio includes HVAC work for virtually every type of building, including shopping malls, schools, museums, libraries, restaurants, prisons, manufacturing plants and healthcare facilities. Our technical experts design, install and fine-tune HVAC systems for downtown high-rises, hospitals, universities and national hotels. We’re also behind the scenes at factories and industrial plants that produce everything from potato chips to computer chips.”
By merging the talents of top HVAC-related firms from around the country, Comfort Systems USA renders the widest range of technical expertise and service available. With its extensive work history, Comfort Systems USA forms “centers of excellence” to guarantee success for any project, no matter what the size.