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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Comfort Systems Usa, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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We are exposed to market risk primarily related to potential adverse changes in interest rates. At times, we use derivative financial instruments to manage our interest rate risk. There is some market risk from fluctuations in the prices of certain commodities and materials due to tariffs or other macroeconomic factors. In many cases, these increased costs are recoverable, and we do not expect these potential cost increases to have a material impact on our results of operations. We are actively involved in monitoring exposure to market risk and continue to develop and utilize appropriate risk management techniques. We are not exposed to any other significant financial market risks or foreign currency exchange risk from the use of derivative financial instruments.
There were no outstanding borrowings on the revolving credit facility as of June 30, 2026. The weighted average interest rate applicable to the borrowings under the revolving credit facility was approximately 5.0% as of December 31, 2025. Our debt with fixed interest rates consists of notes to former owners of acquired companies and acquired notes payable.
We measure certain assets at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. We did not recognize any impairments in the current year on those assets required to be measured at fair value on a nonrecurring basis.
The valuation of the Company’s contingent earn-out payments is determined using a probability weighted discounted cash flow method. This analysis reflects the contractual terms of the purchase agreements (e.g., minimum and maximum payment, length of earn-out periods, manner of calculating any amounts due, etc.) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows, and a discount rate.