Watsco, Inc. (NYSE: WSO) (Paris: WSO) today reported results for the second quarter and for the six months ended June 30, 2012.
Second Quarter Results
Revenues increased 15% to a record $1.0 billion, including $114 million of sales added by new locations. Same-store sales increased 2%, reflecting a 5% increase in air conditioning and heating (HVAC) equipment (63% of sales), a 4% decrease in other HVAC products (33% of sales) and a 16% increase in commercial refrigeration products (4% of sales).
Gross profit increased 12% to a record $238 million. Gross profit margin (on an overall and same-store basis) declined 50 basis-points to 23.6%, reflecting primarily a higher sales mix of HVAC equipment and growth in sales of commercial products, both of which generate lower gross margins than non-equipment products.Operating income increased 14% to a record $86 million with operating margins of 8.5%. Same-store operating income increased 4% to $79 million with a 20 basis-point increase in operating margin to 8.8%. Selling, general and administrative (SG&A) expenses increased 11% to $153 million. SG&A excluding new locations decreased 4% for the quarter and was 14.8% as a percentage of sales. Earnings per share increased 6% to a record $1.15 per diluted share on record net income of $39 million, compared to $1.09 per diluted share on net income of $36 million in 2011. Albert Nahmad, Watsco’s President & CEO, stated, “Watsco had a good quarter posting all-time records for sales and profits. Our commercial sales were up double digits, far outpacing the industry. The trend for sales of low efficiency residential equipment continued with market demand strongest in the Midwest and Northeast. Most importantly, we were able to build on market share gains from the first quarter.” Mr. Nahmad added, “Our goal is to continue to improve our competitive posture and gain share with our expanded footprint and product offering. We are pleased with our expanded market coverage in Latin America and, recently, Canada. Our strong financial position enables us to continue to seek additional investments to further enhance our industry position.”