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TheStreet Open House

Watsco Sets New Records For Sales, Operating Profit And EPS During Second Quarter

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.

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