Second quarter results include locations added from joint venture transactions with Carrier Corporation in the Northeast United States, Mexico and Canada.
First Half 2012 Results
Revenues increased 16% to a record $1.6 billion, including $180 million of sales from new locations. Same-store sales increased 4%, reflecting a 7% increase in sales of HVAC equipment (62% of sales), a 3% decrease in other HVAC products (34% of sales) and a 19% increase in commercial refrigeration products (4% of sales).
Gross profit increased 12% to a record $389 million, and gross profit margin declined 100 basis-points to 23.6%. Same-store gross profit increased to $347 million and same-store gross profit margin decreased 90 basis-points to 23.7%.
Operating income was a record $106 million with operating margin of 6.4%. Same-store operating income increased 5% to $96 million with operating margins improving 10 basis-points to 6.6%. SG&A expenses increased 11% to $283 million and as a percentage of sales were 17.2%. SG&A excluding new locations decreased 2% to $250 million and as a percentage of sales were 17.1%.
Earnings per share (adjusted for acquisition-related expenses) increased 8% to $1.43 per diluted share ($1.41 on a GAAP basis). Net income increased 9% to a record $48 million.
Cash Flow and Dividends
For the six months ended June 30, 2012, Watsco used $60 million of operating cash flow in 2012 versus $42 million in 2011 primarily to fund increased working capital requirements for the summer selling season. At June 30, 2012, cash and cash equivalents were $35 million and long-term debt was $236 million, reflecting $82 million of borrowings used in the formation of a joint venture with Carrier in Canada. At June 30, 2012, the Company's debt-to-total-capitalization is 16%.
On April 27, 2012, Watsco completed the refinancing of its credit facilities with a syndicate of banks. The new facility provides borrowings of up to $500 million subject to customary covenants and other conditions and matures in five years.