Julie Shaeff - CAO Brian Lane - President and CEO Bill George - CFO.

Adam Thalhimer - Thompson Davis Joe Mondillo - Sidoti & Company Brent Thielman - D.A. Davidson John D'Angelo - Macquarie.

Good day, ladies and gentlemen and welcome to the Q4 2016 Comfort Systems USA Earnings Conference Call. My name is Joyce and I will be the operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

[Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would like to turn the call over to your host for today Julie Shaeff, Chief Accounting Officer. Please proceed..

Thanks, Joyce. Good morning. Welcome to Comfort Systems USA’s fourth quarter earnings call. Our comments this morning as well as our press releases contain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. What we will say today is based on the current plans and expectations of Comfort Systems USA.

Those plans and expectations involve risks and uncertainties that could cause actual future activities and results of our operations to be materially different from those set forth in our comments.

You can read a more detailed listing and commentaries concerning our specific risk factors in our most recent Form 10-K and Form 10-Q as well as in our press release covering these earnings.

A slide presentation will accompany the prepared remarks as is posted on the Investor Relations section of the Company’s website found at www.comfortsystemsusa.com. Joining me on the call today is Brian Lane, our President and Chief Executive Officer; and Bill George, our Chief Financial Officer. Brian will open our remarks..

Okay. Thanks, Julie. Good morning, everyone, and thank you for joining us. I will start by thanking all of the Comfort Systems USA employees for their continued hard work and commitments. Today, I'm pleased to report the best fourth quarter and full year results in our history.

2016 was another great year for Comfort Systems, thanks to fantastic execution from our skilled workforce. Many of our operating companies particularly those in the Northeast, Upper-Midwest and Southeast had a record year. Thanks again for all your contributions. Both our full year and fourth quarter revenues were up 2016.

The full year revenue coming in at 1.6 billion, a 3.4% increase compared to 2015. We earned $0.45 per share in the fourth quarter as compared to $0.35 per share in the fourth quarter last year. For the full year EPS was a record $1.72 per share compared to a $1.30 per share a year-ago.

Free cash flow for the quarter was 36 million, which aggregates to 69 million for the full year. We have generated positive free cash flow for the past 18 calendar years. I'm also pleased to announce that we signed a definitive agreement to acquire BCH Mechanical and its affiliates.

BCH is a well established, regional mechanical contractor based in Largo, Florida. BCH has a strong construction presence in Tampa, Florida and the surrounding areas serving healthcare, research laboratories, industrial and manufacturing facilities, and institutional facilities.

BCH is conserved building services group has an extensive service network of operations across numerous states in the Southeast. BCH brings excellent resources and leadership at every level, and we expect that they will help us strengthen our market leadership and customer offerings throughout the Southeast and mid-Atlantic markets.

We currently expect to close this transaction at the beginning of April, and we look forward to welcoming BCHs employees to Comfort Systems into a strong and successful future together.

Bill?.

Thanks, Brian. Good morning, everyone. You can use Slides 2 through 6 as a research as me to provide some additional information regarding our financial results. Revenue this quarter was $392 million compared to $384 million last year. Revenue for the full year was 1.63 billion, which represents an increase of 54 million over the last year.

ShoffnerKalthoff, our newest company, contributed approximately $72 million of revenue during the year. Gross profit was 22.5% for the fourth quarter of 2016, a continued improvement from the very strong 21.9%, we achieved in the fourth quarter of 2015. The increase was broad-based reflecting solid project execution and improved service performance.

SG&A expense was $63 million for the fourth quarter of 2016, compared to $60 million for the fourth quarter of 2015. SG&A as a percentage of revenue was 16.1% in the current quarter, which compares to 15.6% in the fourth quarter of 2015.

The increase is a result of increased compensation accruals as a result of improved results and also reflects expanded service activities in multiple locations. As Brain described, profits were notably higher this year compared to last year.

Net income for the fourth quarter was $16.9 million or $0.45 per share compared to $13.2 million or $0.35 per share in the fourth quarter of last year. Our full year tax rate was 35.8%, which is up from the prior year tax rate of 35.2%.

Our tax rate increased as a result of the acquisition of the remaining interest in EAS at the beginning of this year.

We had expected an even larger increase to more normalized levels such as 37% or 38%; however for 2016, the increase was partially offset by the tax benefit from the adoption of a new accounting standard relating to equity rewards as well as by benefits from some other small desecrate items. We finished 2016 with very strong cash performance.

For the quarter, our free cash flow was 36 million which compares to 18 million for the same period in 2015. For the full year our free cash flow was $69 million; and by the year end, we had retired the debt that we incurred for the two large strategic transactions that we closed in the first quarter of 2016.

I also want to update you on our stock buyback program. We've been opportunistically repurchasing our share since 2007. During the fourth quarter of 2016, we purchased 76,000 shares; and for the full year, we've now purchased 460,000 shares.

On accumulative basis since our program began, we've repurchased over 7 million shares at an average price per share of $13.02, and over that period, we've returned approximately 95.6 million in cash to our share holders.

Before I finish, I would like to briefly talk about some of the financial characteristic relating to decision to acquire the BCH family of companies.

BCH is expected to contribute annualized revenues of approximately 100 million to 110 million, at profitability level that are generally equal to or above those currently experienced by our existing operations. If the transaction closes at the beginning of April as expected, we will own BCH for nine months this year.

In light of the required amortization expense related to intangible such as backlog as well as other cost associated with the transaction, the acquisition is expected to make a roughly neutral contribution to our earnings per share during 2017, and BCH should be modestly accretive in 2018.

The upfront transaction expenses relating to this purchase will be incurred and expensed in 2017, largely during the first quarter, before we close the transaction; and I currently expect that those expenses will cost us as much as $0.01 to $0.02 per share.

Seasonally, the first quarter is our lowest quarter of the year, every year; and we had some discrete positive developments in the same quarter last year and so bearing those expenses before we own BCH will affect our first quarter. We’ve been in touch with the ownership of BCH of over 10 years.

We're really delighted that they've agreed to join Comfort Systems USA. BCH will be a first-class addition to our organization and I agree with Brian that we will be even better together. Overall, we're pleased with strong results for the quarter and optimistic for the improved activity levels will continue in 2017.

So, that’s all I have on financials, Brian..

All right. Thanks, Bill. Let me start with backlog and activity in various sectors and markets. Please refer to Slides 7 to 9. Backlog at year end was 763 million, an increase of 44 million or 6% compared to third quarter of 2016. Compare to a year ago, our backlog increased 52 million a 7% increase.

The February 2016 acquisition of ShoffnerKalthoff contributed to the year-over-year increase in backlog, but did not affect the sequential increase. And even without the acquired backlog, our backlog is up from last year by about 16 million.

This increase gives us additional confidence that our backlog and prospects are consistent with continuing strong results in 2017. Overall, we are seeing a robust activity in most of markets. The Northeast and upper Midwest is our most profitable region and is operating at full capacity. We have seen improvement in the South.

Additionally, our Colorado operation had a tremendous year. Pricing is still stable in the majority of our markets, and we continue to book good projects. Larger projects while still less common have slowly started coming back in a few select markets.

Let's now look at our end-user sectors on Slide 8, Institutional markets made up 41% of our revenue in 2016. The commercial sector was 36% of our revenues and industrial and distribution represented 20% of our year-to-date activity.

We are happy with trends in the various sectors and at this point, no individual sector stands out as a primary driver or as a particular challenge. Please turn to Slide 9 for revenue mix. For the full year 40% of revenue was construction projects are new buildings and 31% of our revenue was construction projects in existing buildings.

The combined 71% of our revenues that are rise from new activities, we refer to as constructions and the revenues that are primarily supported by our backlog. Service related projects provided 11% of revenue. And pure service made of repair, maintenance agreements and other hourly work was 18% of revenue. Our service business had a fantastic year.

We continue to benefit from the investment that we have made and we remain strongly committed to those investments. Our maintenance phase is growing and we are seeing improvements in margins in many locations. We are optimistic about our ability to grow this profitable business as we move forward.

Our ongoing investments in our people continue to lift our results. And we believe our recent productivity and growth initiatives will further benefit us over the next year.

Our balance sheet is strong and as we demonstrated with our announcement last night, our long history of cash flow gives us confidence to invest in new businesses while continuing to return capital to our shareholders.

We believe that the majority of our markets are likely to remain active and supportive during the coming year, especially demand for work and existing buildings. We remain positive for 2017 especially in light of our backlog increases and the expected addition of our new partners in Central Florida. We are optimistic about 2017 and beyond.

In closing, I want to again thank our 8,000 employees for their hard work and dedication. I’ll now turn it back over to Joyce for questions. Thank you..

[Operator Instructions] The first question comes from the line of Adam Thalhimer with Thompson Davis. Please proceed..

Brain, you mentioned that the large projects slowly starting to come back in a few markets.

Can you provide a little bit more color there?.

Yes, Adam, you've followed us a long time. So, we went through a pretty much of five years drop of anything, of any significant with the exception of environmentally our systems, really. But I think we start to see a few pick up here in Texas, recently picked up a good size project.

So, when I consider that maybe five, may integrate pretty much in different sectors, not one dominated, but we have seen some larger steps start to come through, Adam..

Okay. And then I was curious with Shoff I know you've picked up a little bit of exposure to electrical construction.

And how is that going so far and what would be your thoughts on expanding that?.

Well, I'll start and Bill you might want to chime in. The electrical business at Shoff, it's just been outstanding -- has exceeded our expectations when they joined us. It's a really solid business, so I think we know a lot more about the electrical business today than we did before we had them. That's a terrific business.

I'm a big fan of it and hopefully in the future will continue to look into it. Bill, you want to add anything it..

I agree and this is -- proportionally, we don’t have much electrical, but we do have electrical exposure in other places. We've traditionally done some electrical in Tennessee.

There's electricians on the staff at our company in Greensboro, North Carolina, it's a good business, it's a lot like ours skilled workforce that I don’t know, it's a great place to invest in people and invest our favorite things to do, which is invest in the people..

And Adam, it's very similar to us seeing same customers, skills are little different, but it's all the same type of work we do at in terms of many projects and service center..

Okay.

And lastly, I was just curious and it's been awfully mild at least on the East Coast, I am not sure about the rest of the rest of the country, but what are you seeing so far in 2017?.

Yes, the magic weather question. I don't really worry too much about the weather. Could it helps one part or might dread another, I think we're doing a little bit more construction particularly up North with the temperatures that they recently had and service might be a little bit down.

But it balances out over the course of the year throughout the country. I mean it shouldn’t affect us in the first quarter negatively..

The next question comes from the line of Joe Mondillo with Sidoti & Company. Please proceed..

So, I was wondering if you could just comment on the different end markets that you're selling too. It looks like a few of them had a pretty good year in 2016, and one of those is including healthcare seem to picked up in 2016, as a percent of your revenue at least.

Could you comment on how where you are seeing strengths, and if that translates into better bigger more complex projects or vice-versa and how that maybe affect your sort of gross margin and profitability of your projects?.

Joe, what's really notable about this sector is to how it's sort of become broad-based without any sector kind of leading the ways. We had industrial for a couple of years that gave us our lift up until about a year ago. Industrial stayed strong, but there is just like a decent amount of activity in every level.

The most notable things is that so much of the work is in existing buildings and not new build, new build is pretty absent. We swung from 44% new construction in '15 to 40%, new construction in '16; and yet, our total construction was within a 100 basis points at the same.

So, the existing building work is really, if you look over 20 years, that’s the thing it’s the most amazing to me. The sectors are really well balanced..

Yes, they really are. Joe, really haven't talked about that this morning that the balance we're seeing is really refreshing. But you talk about gross margin, so I'm just going to jump on that. Well, I can't even 22.5% gross margin acquire. I mean though those are long as I can't remember.

But that’s a really impressive number for the folks that are working out in the field, in terms of efficiency and productivity. And I don’t think we could be happier with the performance of what they delivered. And we're getting it pretty much balanced in all those sectors, which is really impressive, as I see only other half..

So, regarding gross margin, what would you say as one or two biggest factors that are contributing to the expansion of gross margin? And how do you think of gross margin going into 2017, relative to, I mean, you saw a 90 basis point expansion in 2016, pretty good expansion 2015 as well.

Do you think you can continue to expand gross margins? So, what were the biggest factors and what's your sort of outlook in 2017?.

Joe, we talk about this a long time, and there is no one answer. It starts with the folks doing the work. We trained them as we talked about the recession. We never decreased the amount of money we spent on training. I think we're getting benefit from that. Once we got, we just have a skilled work force, that good folks and manage well.

We’ve proved our selectivity about the work, that is in our sweet spot and plus the mix is going to be bit different. As bill talked about, we got a lot of work in existing buildings. Our service component is great and so when you add all that up, in the mix, it is improved our gross margin.

And finally, we've been able to stay away from the large bad problem, the drug they go sell, we've had only 18 months now, a lack of series event which is knock on wood. Everybody gets tying a bell, but right now we've been a bit lucky as well.

But Bill you want to add on today?.

So, I agree completely with everything Brian said, especially start getting the mix thing, right. We have a unique mix, we've never seen before, unique in two ways; one, the higher level of service and even outside of service, such a high level of work in existing billing.

That’s creates headwind for same store revenue growth, but it creates lift for margins. And so, as far as prognosticating about what's coming, I would say, and characteristically for us, we feel really positive about our prospects within each segment to continue to do very, very well to have another great year in 2017.

How the mix develops, new constructions comes back, that’s going to drive our gross margin down, but it should increase our gross profit per man hour, it should increase our EPS, if that demand were to come back. So, fantastic numbers higher in every way you can slice the business up.

But obviously when we do slice the business at the mix as an awfully important that’s matter component to how that comes out..

Okay. And then, in regard to that as well, could you comment on pricing. It looked like in your 10-K that you filed last night showed a little bit of improvement on average project contract price that you mentioned in there.

Could you comment on pricing in general? And then also regarding pricing, if we do see tax reform with you as well as most of your competitors are going to fully benefit from most likely, still up in the air and how much or what not.

But, if we do see some tax reforming the benefits, do you think that the industry or yourselves will get all more competitive with bidding and pricing, and so do you think pricing would come down given the higher net margins that you and your other competitors will be running at, If the current demand levels maintain where we are at right now?.

I think it was something -- that last little bit I think it just the opposite, but let me start with your first thing. Pricing is really good, I mean 22.5% gross margin, there is a lot of execution in that, but a lot of that execution is the guys selling the work as well obviously. And there -- the market is willing to pay for quality right now.

We have to pay our people well, reward them and so we have to charge for quality in that, that is -- there is an overall supportive environment for that. And it's looks as good as that’s been since 2008 from where I say 2009. So that’s good. As far as the tax goes, the nice thing is the math is really simple for us on the tax rate, right.

If there is only one moving piece and that’s what they call the de-pad, the qualifying activities clearly, that is the one thing that could be taken away from us, that’s where the couple of percentage points to us, if they start doing, other than that, we're straight dollar for dollar wasn’t -- if kind of tax rate, we should benefit from this dollar for dollar and not only that.

If they cut out tax rate, the acquisitions that we have done recently, the IRRs go up very quickly on those, the simple cash paybacks go back. So, who knows what's going to happen, we are right in the business without expecting in tax cut, but we will benefit from tax cut.

And finally, I think tax cut almost certainly increases demand, I don’t know why it would have a negative effect of pricing. The scarcity of skilled labor will not be improved by a tax cut. So, I think pricing should be as good or better..

But, if they want to cut taxes, we will take it..

Yes..

The next question comes from the line of Tahira Afzal with KeyBanc Capital Markets. Please proceed..

Hi gentlemen, this is Sean on for Tahira today. Just want to give you big congratulations for really strong financial and really great year for you guys, so nice work.

I think my first question will just kind of dig into the visibility you have around new constructions, Bill, you pointed out how the new construction mix came down quite a bit from '15 to '16. And it's seems like you guys don’t have a lot of -- or it's hard to predict how each kind of segment is going to grow in '17.

But I just wondering what kind of visibility you have on new construction coming back and maybe you could talk about your kind of pursuits -- your near term pursuits and how you are kind of expecting backlog to turn through the year?.

So hopefully, there is one important -- there is 40% to 44% down to 40% comparison is going to force me to mention. So, I hope I'm mentioning for the last time which is fantastic bulge of work in the North Carolina markets in 2015.

Those giants data center projects that we had and some other big work they had in the pharma area were all new construction, so if you would have backed that out, you would find that actually the percentage is almost the same between that. But it's still very lowest, type for lowest ever.

Having said that, that's also the explanation for our same-store revenue, mild headwind, right that company after those big projects. And they were down by 50 million of revenue plus whereas Comfort was down by 18 million. So, if you take the rest of Comfort and you see what we are up low single digits just like we talked about.

So, there are lot of things like that, that really these comparisons, which are now it should be the last time these are important in this conversation, but then really are important to that. As far as the trend for backlog Comfort over a long period of time in a steady markets.

We will typically have net bookings of upgraded them one book-to-bill in the fourth and first quarters, and we look typically burn a little bit more than we look in the second and third quarters. And then, that is obviously been augmented by either a declining or an increasing market. Right now, I would say the market is steady at decent levels.

So, I would expect that to follow our usual patterns. We should have continued to have good backlog, maybe a bit up as differ into the first quarter and maybe we will burn a little more than we book in the second and third unless new project works back to come back..

I mean, Sean, what we're looking at right now, the activity is good, I'm not concerned at all. I think as it is I think there is a lot of good work out there right now..

Okay, great.

So, I guess just asking in a different way, if we assume sort of the mid-single digit type growth outlook for this year, you guys would sort of expect that mix to look pretty much the same in that kind of growth framework?.

I think for what you've going to use it for, I would use all same percentages, Sean, right..

Okay, and go ahead..

I'm going to any anything that pushes you also as percentage it should be pretty apparent as it's happening right..

If the markets are getting better what that will mean..

Okay. And then just looking at growth I mean you guys mentioned some of your stronger geographies are at full capacity. So I would assume that if you guys are going to get some healthy growth this year and there is some of the softer acquired areas are going to be picking up some steam this year.

So if you have any comments on that dynamics that would be helpful?.

Yes, I mean actually thing we are going to get some improvements, some growth from places that we have been had or I think certain areas are picking up. I think in bringing on our friends in central Florida, it's going to help us. So, I'd say I think the mid-single digit number that Bill referenced I think that's will be on..

And that would be an organic number?.

Yes. Estimate for organic would be 4 to 5 something at..

Okay, great. So I mean where it's going to be the biggest risk to that sort of outlook? I know you guys have talked about some of the challenges around the labor capacity.

Is that sort of a kind of biggest governor on growth at this point?.

No. I think it's clearly the first one, right. We'll make sure you have the -- folks will do the work. You always have risk of what comes out of Washington, right. But that could set something some back, but I think for us, what we control is bringing quality folks in and to do the work. I think that’s, that’s all we want to make sure we monitor..

Right and then for us keep in mind, the standard deviation is probably more than a percent or might be 2%. So frankly some of just random, we don’t know, it's always delayed for reason, we've been project somewhere and equipments gets delivered by the end of the year or not, this is unfortunately as not as much of science as you guys have.

So you know, I think there is a range of good outcomes as what I would say. I will have to say, if new constructions comes back that would be very important in revenue.

One of the reasons our revenues looks like it hasn’t grown, because we been shifting into work and existing building, there is just as much material that pass through and would create revenue.

When you're building a new building, all the materials you're bringing our are new; and you're working on existing building, you keep a lot of the duct work and lot of the pipes just not as much money, it's very profitable. You see high margin. You look like genius on the margin line.

But you look like you're slow on the growth line and this is because less service passing through..

No, it's always been, we're focused on profitability first..

Yes, I understand. So how does given the new construction would be such a big swing factor for growth. I mean how you guys see about it, entering this year versus this time last year? Just in terms of your visibility..

I feel better about new construction today than I had only since 2009. Instead, I mean we're not treating that growth to sky, but I think we're having steady improvement, low-single digit last year, mid-single digit this year.

But it's faced the improvement, which quite frankly better for us, considering the way situation able to staff them up and manage them. This is a better place for us..

Okay, great. And then just one last thing from you, to what extend its kind of labor cost inflation, rest to comfort system? I mean just to in the event that we get some of the other several sectors picking up and just generating more construction activity..

The only thing that is risk in that area is unexpected labor inflation, right. Because, we, and I would say, I would say our guys are pretty aware and conscious about that. You can never say, never. But I could most denial as where labor gets more if, we should make more money and we should happily able to reward on workers more.

We had mid-year raises in some places in last couple of years, haven't happened in the long time. It's good for us. It's good for them. We're happy to pay our guys what the market will permit us to pay them. And we think everybody benefits, that's good guys, they do good work, customers are happy..

The next question comes from the line of Brent Thielman with D.A. Davidson. Please proceed..

When you, another way to ask I guess, when you look at the backlog today and all the sectors represented in there.

Do you see any sort of deviation toward more complex sectors or even like that, that might be better for you, I guess something like data centers healthcare stuff like that?.

Not really, I think it's pretty much the same mix, Brent, we've seen over the last few years little days setter in there. The healthcare that picked up is what I've moved into life care as opposed to a major new build hospital. But I think the sectors and the complexity been pretty stable for the last few years..

Right, the good news is, there was that deviation a couple of years ago. And when industry came back first, complex phase came back first. And the good news is, it's maintained. But as far as further deviation in that direction, I don’t think so. But there is a good sign, we don’t rely on retailer.

We don’t rely a lot of very general office commercial spends. We don’t do a lot of full risk kind of specially garden apartments and for once we are in the right place..

Okay. Good to hear.

And then congrats on the announced acquisition, do you see any deals that similar size in a pipeline rate now, I mean this looks relative larger, I guess how that pipeline look?.

I would say, we are always looking and we -- I don’t know, I certainly not. This is the winter. We usually get the deal done in the winter. Our goals always get something done in the winter, we can't always do it. But I don’t think you should look for an announcement next week or the week after that..

Again, this one for a few weeks..

This is the Company. We are really happy to be associated with this company. This is one we have felt to be the great -- a great partner from many, many years. And we are thrilled that they are part of us, and we hope we could make them be glad. You know that they joined up with us..

But Brent, still the market is looking from the companies, yes. But that one let us know, everybody on the phone. We are here..

The next question comes from the line of John D'Angelo with Macquarie. Please proceed..

So, I guess first off, I just wanted to make sure I referred you guys right that BCH will not be accretive in '17, but it will be in '18?.

I think that’s my best guess, I don’t think, if it is it will be such, it will be a penny or two. Like that company that we bought last year ago, I think we ended up actually getting a penny out of it or two maybe one I think.

There is so much amortization at first that they make us put a value on the backlog and then just run it off against the earnings within that backlog, right. And so, I don’t know why accounting thinks that’s the good way to look at something you own, but we just do what we told and it's mainly this thing, they're not very accretive.

Having said that, a year or two later, they kick in and it's been fantastic and we look like geniuses..

But John, head on. We think their performance is still going to be terrific, it just that. And think about we are still cash flow..

A lot of cash is going to up a bit we buy them, but they are going to start cash flow in immediately, you see it in a EBITDA line and stuffs. And honestly, we don’t make our money with EPS. We make our money cash flow. Handing it over to you guys and making good investments.

And that’s that we are buying them for their cash flow not for their EPS accretion..

Right. Thank you for that. And then last question from me. So, I mean it's seems like you guys are up to take, take on some get financing acquisition. So, I am sort of wondering is, what's your plans to pay that down or if there is any plans at all or maybe you guys want to keep that in the capital structure now.

Just how do you guys sort of view that?.

So, we will borrow maybe day after that deal closes, we'll borrow two thirds of intern EBTDA, maybe our EBITDA is now twice as high as it was two years ago. So, we have more room to borrow. Well, we shouldn’t immediately start paying it down, over the summer, we usually have a little bit working capital because we get a lot of busy in the summer.

By year-end, we hope to pay down a lot of it. This past year, we borrowed something a good, I don’t know, more than 50 million to do the deals, we get at the beginning in the year plus in cash we had. I thought we paid down the two thirds, but we got it all paid down by the end of the year or borrowing a little more for this deal.

But we hope to make a big pay, a big chunk of it down by year-end. What would keep us having debt in our capital structure is more to these deals, that's certainly what my board is looking from us to do. So that's what we're looking for, but we'll only able to do it, if we find good deals.

And we're never going to lever our past, stocked at our bonding company is going to be very happy with, we're going to keep for a construction company and you can go back to the bible and read about how you got to help the money to build then there is something if you can started.

So, people for construction companies to have a strong balance sheet, and we're going to keep one. When we use the bible, we have a good year..

We have a follow-up question from the line of Joe Mondillo with Sidoti. Please proceed..

Just one follow-up question, if you will. Just wondering what, how the EAS business and I believe the couple of other business like your Arizona operation, all of those sort of contributed to a tough comparison in 2016.

So, I'm just wondering sort of what the outlook of those particular businesses looked, once we've anniversaried those tough comps or those businesses due to sort of get back to growth in 2017?.

Yes, Joe, I'll start first. I'll talk about Arizona ability with EAS. Arizona has come back really strong, it had a really solid year last year, and we were anticipating the same in 2017. So, I don’t think Arizona, anything out West quite frankly is going to be a tough comparable for us still on EAS..

EAS had a fantastic '15, so they created a nightmare comparable for as per '16. Because we bought the rest of it, we actually got more EPS from EAS in the year before. This year I think they will have a year that's comparable in the prior year. So let me just use this to say, this year is a tough comparable, right. Last year, we had a tough comparable.

This year is a tough comparable. The first quarter a year ago is a tough comparable. We had a first quarter I think we made $0.26, but we had like some litigations that only gave us as a couple of pennies. We actually collected some old receivables in Puerto Rico and gave us like a tax, some tax free earnings of the couple of pennies.

So, I think we think we're going to have another fantastic year. We think will do as well or better than last year, but that's saying something because last year was a great year..

There are no further questions in queue. I will now turn the call back over to Brain Lane for closing remarks..

Okay. Thank you, Joyce, and thank you everyone for joining the call and your interest in Comfort Systems. 2016 was a phenomenal year and I'm very proud of this organization and our terrific people. I'm very optimistic that 2017 will deliver very good results as well. We'll see you all in the road shortly and hope you will have a great weekend.

Thank you..

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day..