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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-13011

COMFORT SYSTEMS USA, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
Incorporation or Organization)

76-0526487
(I.R.S. Employer
Identification No.)

675 Bering Drive
Suite 400
Houston, Texas 77057
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (713830-9600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

FIX

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes  No 

The number of shares outstanding of the issuer’s common stock as of July 22, 2020 was 36,478,839 (excluding treasury shares of 4,644,526).

Table of Contents

COMFORT SYSTEMS USA, INC.

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2020

    

Page

Part I—Financial Information

2

Item 1—Financial Statements

2

Consolidated Balance Sheets

2

Consolidated Statements of Operations

3

Consolidated Statements of Stockholders’ Equity

4

Consolidated Statements of Cash Flows

5

Condensed Notes to Consolidated Financial Statements

6

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3—Quantitative and Qualitative Disclosures about Market Risk

33

Item 4—Controls and Procedures

34

Part II—Other Information

34

Item 1—Legal Proceedings

34

Item 1A—Risk Factors

34

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 6—Exhibits

36

Signatures

37

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

COMFORT SYSTEMS USA, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

June 30,

December 31,

    

2020

    

2019

 

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

53,253

$

50,788

Billed accounts receivable, less allowance for credit losses of $9,998 and $6,907, respectively

 

624,526

 

619,037

Unbilled accounts receivable, less allowance for credit losses of $684 and $0, respectively

 

47,654

 

55,542

Other receivables, less allowance for credit losses of $884 and $0, respectively

 

20,892

 

37,632

Inventories

 

12,212

 

10,053

Prepaid expenses and other

 

10,453

 

14,396

Costs and estimated earnings in excess of billings, less allowance for credit losses of $79 and $0, respectively

 

23,515

 

2,736

Total current assets

 

792,505

 

790,184

PROPERTY AND EQUIPMENT, NET

 

121,569

 

109,796

LEASE RIGHT-OF-USE ASSET

97,586

84,073

GOODWILL

 

420,782

 

332,447

IDENTIFIABLE INTANGIBLE ASSETS, NET

 

210,164

 

159,974

DEFERRED TAX ASSETS

25,833

21,923

OTHER NONCURRENT ASSETS

 

7,004

 

6,615

Total assets

$

1,675,443

$

1,505,012

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt

$

85

$

20,817

Accounts payable

 

202,075

 

196,195

Accrued compensation and benefits

 

101,243

 

102,891

Billings in excess of costs and estimated earnings

 

226,047

 

166,918

Accrued self-insurance

 

46,099

 

39,546

Other current liabilities

 

105,937

 

81,630

Total current liabilities

 

681,486

 

607,997

LONG-TERM DEBT, NET

 

231,442

 

205,318

LEASE LIABILITIES

83,753

 

72,697

DEFERRED TAX LIABILITIES

 

3,365

 

1,425

OTHER LONG-TERM LIABILITIES

 

46,964

 

32,271

Total liabilities

 

1,047,010

 

919,708

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, 4,620,071 and 4,465,448 shares, respectively

 

(112,104)

 

(103,960)

Additional paid-in capital

 

322,419

 

320,168

Retained earnings

 

417,707

 

368,685

Total stockholders’ equity

 

628,433

 

585,304

Total liabilities and stockholders’ equity

$

1,675,443

$

1,505,012

The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents

COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

    

2020

    

2019

    

2020

    

2019

 

REVENUE

$

743,468

$

650,302

$

1,443,599

$

1,188,775

COST OF SERVICES

 

597,773

 

530,286

 

1,180,811

 

962,094

Gross profit

 

145,695

 

120,016

 

262,788

 

226,681

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

85,045

 

84,506

 

177,969

 

163,411

GAIN ON SALE OF ASSETS

 

(312)

 

(192)

 

(866)

 

(411)

Operating income

 

60,962

 

35,702

 

85,685

 

63,681

OTHER INCOME (EXPENSE):

Interest income

 

28

 

67

 

92

 

92

Interest expense

 

(2,554)

 

(3,050)

 

(5,171)

 

(4,112)

Changes in the fair value of contingent earn-out obligations

 

(3,871)

 

(1,762)

 

(1,599)

 

(1,920)

Other

 

 

149

 

25

 

164

Other income (expense)

 

(6,397)

 

(4,596)

 

(6,653)

 

(5,776)

INCOME BEFORE INCOME TAXES

 

54,565

 

31,106

 

79,032

 

57,905

PROVISION FOR INCOME TAXES

 

15,070

 

6,933

 

21,821

 

13,866

NET INCOME

$

39,495

$

24,173

$

57,211

$

44,039

INCOME PER SHARE:

Basic

$

1.08

$

0.65

$

1.56

$

1.19

Diluted

$

1.08

$

0.65

$

1.55

$

1.18

SHARES USED IN COMPUTING INCOME PER SHARE:

Basic

 

36,581

 

36,943

 

36,628

 

36,933

Diluted

 

36,737

 

37,223

 

36,821

 

37,228

DIVIDENDS PER SHARE

$

0.105

$

0.100

$

0.210

$

0.195

The accompanying notes are an integral part of these consolidated financial statements.

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COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share Amounts)

(Unaudited)

Six Months Ended

June 30, 2019

Additional

Total

 

    

Common Stock

    

Treasury Stock

    

Paid-In

Retained

    

Stockholders’

 

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Earnings

    

Equity

 

BALANCE AT DECEMBER 31, 2018

 

41,123,365

$

411

 

(4,229,653)

$

(87,747)

$

316,479

$

268,904

 

$

498,047

Net income

 

19,866

 

19,866

Issuance of Stock:

Issuance of shares for options exercised

 

41,103

861

(61)

 

800

Issuance of restricted stock & performance stock

 

38,539

817

1,189

 

2,006

Shares received in lieu of tax withholding payment on vested restricted stock

 

(15,013)

(781)

 

(781)

Stock-based compensation

 

2,084

 

2,084

Dividends

 

(3,506)

 

(3,506)

Share repurchase

 

(67,394)

(3,321)

 

(3,321)

BALANCE AT MARCH 31, 2019

41,123,365

411

(4,232,418)

(90,171)

319,691

285,264

515,195

Net income

 

24,173

 

24,173

Issuance of Stock:

Issuance of shares for options exercised

 

1,408

31

(11)

 

20

Issuance of restricted stock & performance stock

 

69,067

1,486

(1,486)

 

Shares received in lieu of tax withholding payment on vested restricted stock

 

(13,573)

(717)

 

(717)

Stock-based compensation

 

1,685

 

1,685

Dividends

 

(3,692)

 

(3,692)

Share repurchase

 

(93,468)

(4,576)

 

(4,576)

BALANCE AT JUNE 30, 2019

41,123,365

$

411

(4,268,984)

$

(93,947)

$

319,879

$

305,745

$

532,088

Six Months Ended

June 30, 2020

Additional

Total

    

Common Stock

    

Treasury Stock

    

Paid-In

Retained

    

Stockholders’

 

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Earnings

    

Equity

 

BALANCE AT DECEMBER 31, 2019

 

41,123,365

$

411

 

(4,465,448)

$

(103,960)

$

320,168

$

368,685

 

$

585,304

Net income

 

17,716

 

17,716

Cumulative-effect adjustment (1)

(515)

(515)

Issuance of Stock:

Issuance of shares for options exercised

 

 

Issuance of restricted stock & performance stock

 

43,902

1,054

801

 

1,855

Shares received in lieu of tax withholding payment on vested restricted stock

 

(14,722)

(622)

 

(622)

Stock-based compensation

 

2,134

 

2,134

Dividends

 

(3,844)

 

(3,844)

Share repurchase

 

(237,359)

(8,985)

 

(8,985)

BALANCE AT MARCH 31, 2020

 

41,123,365

411

 

(4,673,627)

(112,513)

323,103

382,042

593,043

Net income

39,495

39,495

Issuance of Stock:

Issuance of shares for options exercised

34,562

836

(280)

556

Issuance of restricted stock & performance stock

84,987

2,048

(2,048)

Shares received in lieu of tax withholding payment on vested restricted stock

(13,002)

(454)

(454)

Stock-based compensation

1,644

1,644

Dividends

(3,830)

(3,830)

Share repurchase

(52,991)

(2,021)

(2,021)

BALANCE AT JUNE 30, 2020

41,123,365

$

411

(4,620,071)

$

(112,104)

$

322,419

$

417,707

$

628,433

________________________________________

(1)Represents the adjustment to Retained Earnings as a result of adopting Accounting Standards Update (ASU) No. 2016-13, “Financial Instruments – Credit Losses (Topic 326),” on January 1, 2020. See Note 2 for more information.

The accompanying notes are an integral part of these consolidated financial statements.

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COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

Six Months Ended

June 30,

    

2020

    

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

57,211

$

44,039

Adjustments to reconcile net income to net cash provided by operating activities—

Amortization of identifiable intangible assets

 

17,141

 

13,006

Depreciation expense

 

13,633

 

12,013

Change in right-of-use assets

8,687

7,150

Bad debt expense

 

4,593

 

784

Deferred tax provision (benefit)

 

(2,980)

 

458

Amortization of debt financing costs

 

270

 

191

Gain on sale of assets

 

(866)

 

(411)

Changes in the fair value of contingent earn-out obligations

 

1,599

 

1,920

Stock-based compensation

 

5,188

 

4,679

Changes in operating assets and liabilities, net of effects of acquisitions and divestitures—

(Increase) decrease in—

Receivables, net

 

30,258

 

(13,081)

Inventories

 

(220)

 

(197)

Prepaid expenses and other current assets

 

13,382

 

(735)

Costs and estimated earnings in excess of billings and unbilled accounts receivable

 

(6,185)

 

(3,070)

Other noncurrent assets

 

(228)

 

(275)

Increase (decrease) in—

Accounts payable and accrued liabilities

 

(1,984)

 

(37,849)

Billings in excess of costs and estimated earnings

 

22,082

 

2,699

Other long-term liabilities

 

2,205

 

(4,721)

Net cash provided by operating activities

 

163,786

 

26,600

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

 

(14,539)

 

(15,680)

Proceeds from sales of property and equipment

 

1,378

 

632

Cash paid for acquisitions, net of cash acquired

 

(101,998)

 

(196,298)

Net cash used in investing activities

 

(115,159)

 

(211,346)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving credit facility

 

178,000

 

307,000

Payments on revolving credit facility

 

(151,000)

 

(111,000)

Payments on term loan

(11,250)

Payments on other debt

 

(32,449)

 

(3,221)

Payments of dividends to stockholders

 

(7,674)

 

(7,198)

Share repurchase

 

(11,006)

 

(7,897)

Shares received in lieu of tax withholding

 

(1,076)

 

(1,498)

Proceeds from exercise of options

 

556

 

820

Deferred acquisition payments

(400)

(500)

Payments for contingent consideration arrangements

 

(9,865)

 

(593)

Net cash provided by (used in) financing activities

 

(46,164)

 

175,913

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

2

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

2,465

 

(8,833)

CASH AND CASH EQUIVALENTS, beginning of period

 

50,788

 

45,620

CASH AND CASH EQUIVALENTS, end of period

$

53,253

$

36,787

The accompanying notes are an integral part of these consolidated financial statements.

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COMFORT SYSTEMS USA, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(Unaudited)

1. Business and Organization

Comfort Systems USA, Inc., a Delaware corporation, provides comprehensive mechanical and electrical contracting services, which principally includes heating, ventilation and air conditioning (“HVAC”), plumbing, electrical, piping and controls, as well as off-site construction, monitoring and fire protection. We install, maintain, repair and replace products and systems throughout the United States. The terms “Comfort Systems,” “we,” “us,” or the “Company,” refer to Comfort Systems USA, Inc. or Comfort Systems USA, Inc. and its consolidated subsidiaries, as appropriate in the context.

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, 2019 (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. 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 credit losses, 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.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The standard requires companies to consider historical experiences, current market conditions and reasonable and supportable forecasts in the measurement of expected credit losses. The standard requires us to accrue higher credit losses on financial assets compared to the legacy guidance on various items, such as contract assets and current receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. We adopted ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326)”, on January 1, 2020, and the impact was not material to our overall financial statements. The adoption of ASU No. 2016-13 resulted in an increase in Allowance for Credit Losses of $0.7 million, an increase to Deferred Tax Assets of $0.2 million and an impact of $0.5 million to Retained Earnings.

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In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” This standard removes certain disclosure requirements including the valuation processes for Level 3 fair value measurements, the policy for timing of transfers between levels and the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The standard requires certain additional disclosures for public entities, including disclosure of the changes in unrealized gains and losses included in Other Comprehensive Income for Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. Certain amendments, including the amendment on changes in unrealized gains and losses and the range and weighted average of significant unobservable inputs, should be applied prospectively while other amendments should be applied retrospectively to all periods presented upon their effective date. We have modified our fair value disclosures to conform with the requirements of ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement,” which we adopted on January 1, 2020.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within that year. Early adoption is permitted. We are currently evaluating the potential impact of this authoritative guidance on our consolidated financial statements.

In May 2020, the SEC issued a final rule to amend the financial statement requirements for business combinations and dispositions, including the related pro forma financial information. The rule revises the significance tests, including consideration of registrant’s market capitalization for the investment test and consideration of registrant’s revenue for the income test. The significance threshold for business dispositions is also increased from 10% to 20%. The rule further eliminates the potential requirement that registrants present a third year of audited financial statements of acquired businesses and modifies pro forma adjustments rules for items directly related to accounting for the transaction. The rule is effective January 1, 2021. Early adoption is permitted. The impact of this authoritative guidance on our consolidated financial statements will depend on future acquisitions and dispositions completed subsequent to adoption of this guidance.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Sales-based taxes are excluded from revenue.

We provide mechanical and electrical contracting services. Our mechanical segment principally includes HVAC, plumbing, piping and controls, as well as off-site construction, monitoring and fire protection. Our electrical segment includes installation and servicing of electrical systems. We install, maintain, repair and replace products and systems throughout the United States. All of our revenue is recognized over time as we deliver goods and services to our customers. Revenue can be earned based on an agreed upon fixed price or based on actual costs incurred, marked up at an agreed upon percentage.

We account for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we either have written authorization from the customer to proceed or an executed contract.

We generally do not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. On rare occasions, when significant pre-contract costs are incurred, they are capitalized and amortized on a percentage of completion basis over the life of the contract. We do not currently have any capitalized obtainment or fulfillment costs on our Balance Sheet and did not incur any impairment loss on such costs in the current year.

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Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion (the process described below in more detail) is complex, subject to many variables and requires significant judgment. The consideration to which we are entitled on our long-term contracts may include both fixed and variable amounts. Variable amounts can either increase or decrease the transaction price. A common example of variable amounts that can either increase or decrease contract value are pending change orders that represent contract modifications for which a change in scope has been authorized or acknowledged by our customer, but the final adjustment to contract price is yet to be negotiated. Other examples of positive variable revenue include amounts awarded upon achievement of certain performance metrics, program milestones or cost of completion date targets and can be based upon customer discretion. Variable amounts can result in a deduction from contract revenue if we fail to meet stated performance requirements, such as complying with the construction schedule.

Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing performance obligation(s). The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis.

We have a Company-wide policy requiring periodic review of the Estimate at Completion in which management reviews the progress and execution of our performance obligations and estimated remaining obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenue and costs. The risks and opportunities include management's judgment about the ability and cost to achieve the schedule (e.g., the number and type of milestone events), technical requirements (e.g., a newly developed product versus a mature product) and other contract requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation (e.g., to estimate increases in wages and prices for materials and related support cost allocations), execution by our subcontractors, the availability and timing of funding from our customer, and overhead cost rates, among other variables.

Based on this analysis, any adjustments to revenue, cost of services, and the related impact to operating income are recognized as necessary in the quarter when they become known. These adjustments may result from positive program performance if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities and may result in an increase in operating income during the performance of individual performance obligations. Likewise, if we determine we will not be successful in mitigating these risks or realizing related opportunities, these adjustments may result in a decrease in operating income. Changes in estimates of revenue, cost of services and the related impact to operating income are recognized quarterly on a cumulative catchup basis, meaning we recognize in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation's percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. For projects in which estimates of total costs to be incurred on a performance obligation exceed total estimates of revenue to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined.

In the first six months of 2020 and 2019, net revenue recognized from our performance obligations satisfied in previous periods was not material.

Disaggregation of Revenue

Our consolidated 2020 revenue was derived from contracts to provide service activities in the mechanical and electrical services segments we serve. Refer to Note 9 – Segment Information for additional information on our reportable segments. We disaggregate our revenue from contracts with customers by activity, customer type and service provided, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the following tables (dollars in thousands):

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Three Months Ended June 30,

Six Months Ended June 30,

Revenue by Service Provided

   

2020

   

2019

   

2020

   

2019

Mechanical Services

$

622,700

   

83.8

%

$

553,031

   

85.0

%

$

1,188,164

   

82.3

%

$

1,087,616

   

91.5

%

Electrical Services

120,768

16.2

%

97,271

15.0

%

255,435

17.7

%

101,159

8.5

%

Total

$

743,468

100.0

%

$

650,302

100.0

%

$

1,443,599

100.0

%

$

1,188,775

100.0

%

Three Months Ended June 30,

Six Months Ended June 30,

Revenue by Type of Customer

2020

2019

 

2020

2019

 

Industrial

$

300,870

40.5

%

$

198,002

30.5

%

$

576,068

39.9

%

$

366,662

30.8

%

Education

130,004

17.5

%

100,220

15.4

%

239,588

16.6

%

166,963

14.1

%

Office Buildings

75,594

10.2

%

105,483

16.2

%

151,166

10.5

%

171,695

14.4

%

Healthcare

96,050

12.9

%

87,878

13.5

%

195,309

13.5

%

179,901

15.1

%

Government

39,832

5.4

%

44,443

6.8

%

78,813

5.5

%

76,722

6.5

%

Retail, Restaurants and Entertainment

64,628

8.7

%

58,086

8.9

%

125,831

8.7

%

117,477

9.9

%

Multi-Family and Residential

20,555

2.8

%

29,061

4.5

%

39,286

2.7

%

59,296

5.0

%

Other

15,935

2.0

%

27,129

4.2

%

37,538

2.6

%

50,059

4.2

%

Total

$

743,468

100.0

%

$

650,302

100.0

%

$

1,443,599

100.0

%

$

1,188,775

100.0

%

Three Months Ended June 30,

Six Months Ended June 30,

Revenue by Activity Type

2020

2019

 

2020

2019

 

New Construction

$

377,433

50.8

%

$

291,479

44.8

%

$

724,833

50.2

%

$

515,439

43.4

%

Existing Building Construction

225,103

30.3

%

199,398

30.7

%

432,269

29.9

%

381,694

32.1

%

Service Projects

58,378

7.8

%

58,808

9.0

%

110,026

7.6

%

109,192

9.2

%

Service Calls, Maintenance and Monitoring

82,554

11.1

%

100,617

15.5

%

176,471

12.3

%