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

Stocks in this article: WSO

About Watsco, Inc.

Watsco improves indoor living and working environments with air conditioning and heating solutions that provide comfort regardless of the outdoor climate. Our solutions also promote healthier indoor spaces by removing pollutants from the indoor air that can lead to asthma, allergies and reductions in productivity. Furthermore, since heating and cooling accounts for approximately 56% of the energy consumed in a typical United States home, we offer consumers the greatest opportunity to save money on energy by replacing existing air conditioning and heating systems with more energy efficient and environmentally friendly solutions.

There are approximately 89 million central air conditioning and heating systems installed in the United States that have been in service for more than 10 years. Older systems often operate below today’s government mandated energy efficiency and environmental standards. Watsco has an opportunity to accelerate the replacement of these systems at a scale greater than our competitors as the movement toward reducing energy consumption and its environmental impact continues. We operate from more than 575 locations in the United States, Canada, Mexico and Puerto Rico, with additional market coverage on an export basis to Latin America and the Caribbean. As the industry leader, significant growth potential remains given that our current revenue run-rate is less than 10% of the estimated $35 billion marketplace in the Americas for HVAC/R products. Additional information about Watsco may be found at http://www.watsco.com.

This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive market, new housing starts and completions, capital spending in commercial construction, consumer spending and debt levels, regulatory and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within Watsco’s industry, seasonal nature of sales of Watsco’s products, the ability of the Company to expand its business, insurance coverage risks and final GAAP adjustments. Forward-looking statements speak only as of the date the statement was made. Watsco assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Detailed information about these factors and additional important factors can be found in the documents that Watsco files with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K.

       

WATSCO, INC.

Consolidated Results of Operations

(In thousands, except per share data)

(Unaudited)

 
 
Quarter Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Revenues $ 1,011,801 $ 883,548 $ 1,645,313 $ 1,417,887
Cost of sales   773,326     670,357     1,256,216     1,069,710  
Gross profit 238,475 213,191 389,097 348,177
Gross profit margin   23.6 %   24.1 %   23.6 %   24.6 %
SG&A expenses   152,604     137,662     283,317     255,938  
Operating income 85,871 75,529 105,780 92,239
Operating margin   8.5 %   8.5 %   6.4 %   6.5 %
Interest expense, net   1,350     997     2,238     1,819  
Income before income taxes 84,521 74,532 103,542 90,420
Income taxes   23,620     22,260     29,148     27,026  
Net income 60,901 52,272 74,394 63,394
Less: net income attributable to noncontrolling interest   21,798     16,249     26,824     19,871  
Net income attributable to Watsco, Inc. $ 39,103   $ 36,023   $ 47,570   $ 43,523  
 
Diluted earnings per share:
Net income attributable to Watsco, Inc. shareholders $ 39,103 $ 36,023 $ 47,570 $ 43,523
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock   2,702     2,453     3,297     2,831  
Earnings allocated to Watsco, Inc. shareholders $ 36,401   $ 33,570   $ 44,273   $ 40,692  
 
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share 31,783,707 30,770,295 31,309,088 30,732,533
 
Diluted earnings per share for Common and Class B common stock $ 1.15   $ 1.09   $ 1.41   $ 1.32  
 
       

Reconciliation of GAAP Financial Results to Non-GAAP Measures

(Unaudited)

 
 
Quarter Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Diluted earnings per share (GAAP) $ 1.15 $ 1.09 $ 1.41 $ 1.32
Effect of acquisition-related transaction costs   -   - $ 0.02 $ 0.01
Diluted earnings per share adjusted (Non-GAAP) $ 1.15 $ 1.09 $ 1.43 $ 1.33
   

WATSCO, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 
 
June 30, December 31,
2012 2011
 
Cash and cash equivalents $ 35,207 $ 15,673
Accounts receivable, net 509,612 327,664
Inventories 672,434 465,349
Other   20,342   19,491
Total current assets 1,237,595 828,177
 
Property and equipment, net 43,440 39,455
Goodwill, intangibles, net and other   613,840   400,516
Total assets $ 1,894,875 $ 1,268,148
 
Accounts payable and accrued expenses $ 381,323 $ 203,020
Borrowings under revolving credit agreement - 20,000
Current portion of long-term obligations   13   19
Total current liabilities 381,336 223,039
 
Borrowings under revolving credit agreement 235,621 -
Deferred income taxes and other liabilities   47,132   43,399
Total liabilities   664,089   266,438
 
Watsco's shareholders’ equity 906,985 802,790
Noncontrolling interest   323,801   198,920
Shareholders’ equity   1,230,786   1,001,710
Total liabilities and shareholders’ equity $ 1,894,875 $ 1,268,148




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