Watsco, Inc. (NYSE:WSO)(Paris: WSO) today reported record results for the third quarter and nine months ended September 30, 2012.
Third Quarter Results
Earnings per share increased 17% to a record $1.19 per diluted share on record net income of $41 million, compared to $1.02 per diluted share on net income of $34 million in 2011. Operating income increased 15% to a record $86 million with operating margin expanding 30 basis-points to 8.4%. Same-store operating income increased 3% to $76 million with a 20 basis-point improvement in operating margin to 8.3%.
Revenues increased 12% to a record $1.02 billion, including $103 million of sales added by new locations. Same-store sales increased 1%, reflecting a 1% 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 11% to a record $243 million with gross margin declining 20 basis-points to 23.8%. On a same-store basis, gross profit decreased by 2% with gross profit margin declining 50 basis-points to 23.5%. Selling, general and administrative (SG&A) expenses increased 8% to $157 million and as a percentage of sales improved 50 basis-points to a record low of 15.4%. SG&A excluding new locations decreased 4% for the quarter and as a percentage of sales decreased 70 basis-points to a record low of 15.2%. Albert Nahmad, Watsco’s Chairman and President, said: “Watsco achieved solid earnings growth in the face of a tough economic environment. Growth in international markets and improved operating efficiency combined to produce higher operating margins. We also added value from our increased ownership of Carrier Enterprise LLC. We generated the highest level of cash flow for any quarter in our history, which is a testimony to our business model and focus on delivering both earnings growth and cash flow. We continue to see progress in our basic strategies of growing share of market, enhancing our customer experience, driving improvements to operations and increasing our product and geographic reach.”