Watsco, Inc. (NYSE:WSO)(PARIS:WSO)today reported results for the first quarter ended March 31, 2012.
Earnings per share (adjusted for acquisition-related expenses in 2012) increased 14% to 24 cents per diluted share (23 cents on a GAAP basis). Net income increased 13% to $8.5 million versus $7.5 million last year. Operating income improved 19% to $20 million with an operating margin of 3.2%. On a same-store basis, operating income increased 7% to $18 million with an operating margin of 3.1%.
Revenues grew 19% to a record $634 million and increased 7% on a same-store basis, reflecting 12% growth in sales of air conditioning and heating (HVAC) equipment (60% of sales), a 1% decline in sales of other HVAC products (34% of sales) and an 11% increase in sales of commercial refrigeration products (6% of sales).
Gross profit increased 12% to a record $151 million with a gross profit margin of 23.8%. On a same-store basis, gross profit increased 1% with gross profit margin declining 140 basis-points to 23.9%, reflecting the stronger sales mix of HVAC equipment, which generate lower margins than non-equipment products, and the timing of inventory purchases, which had a consequential impact on vendor discounts and rebates. Selling, general and administrative (SG&A) expenses increased 11% to $131 million and as a percentage of sales declined 150 basis-points to 20.6%. Excluding new locations, SG&A was flat on a year over year basis at $118 million.It is important to note that the first quarter of each calendar year is the seasonal low point for sales and profits due to the magnitude of the replacement market for air conditioning, heating and refrigeration systems during the second and third quarters of each calendar year. Accordingly, the Company's first quarter financial results are disproportionately affected by this seasonality and the overall general economic conditions. Albert Nahmad, Watsco’s President & Chief Executive Officer stated: “Watsco achieved strong sales and earnings growth during the quarter and I am especially proud of the share gains that our team was able to accomplish. We performed well in all areas of the HVAC equipment market from residential unitary through commercial. This performance was a result of our people working hard to provide a great customer experience for our contractors, which we will continue to enhance and improve in the months and years ahead.”
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