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Watsco Delivers 17% EPS Growth And Record Cash Flow In Third Quarter

Conference Call

Watsco is hosting a conference call at 10:00 a.m. (EDT) on October 25, 2012 to discuss its third quarter earnings results. The conference call will be web-cast by CCBN's StreetEvents at http://www.watsco.com (a replay is also available on the Company's website). For those unable to connect to the webcast, you may listen via telephone. The dial-in number for callers in the United States is (866) 740-9405; the dial-in number for callers outside of the United States is (702) 696-4900.

Use of Non-GAAP Financial Information

In this release, the Company discloses non-GAAP measures of same-store. Information referring to “same-store basis” excludes the effects of locations acquired or locations opened or closed during the immediately preceding 12 months unless they are within close geographical proximity to existing locations. The Company believes that this information provides greater comparability regarding its ongoing operating performance. These measures should not be considered an alternative to measurements required by accounting principles generally accepted in the United States (GAAP).

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, including on Forms 10-K, 10-Q and 8-K.

   

WATSCO, INC.

Condensed Consolidated Results of Operations

(In thousands, except per share data)

(Unaudited)

 

Quarter EndedSeptember 30,

Nine Months EndedSeptember 30,

2012   2011 2012   2011
Revenues $1,020,859 $914,039 $2,666,172 $2,331,926
Cost of sales 778,354 694,632 2,034,570 1,764,342
Gross profit 242,505 219,407 631,602 567,584
Gross profit margin 23.8% 24.0% 23.7% 24.3%
SG&A expenses 156,808 145,096 440,125 401,034
Operating income 85,697 74,311 191,477 166,550
Operating margin 8.4% 8.1% 7.2% 7.1%
Interest expense, net 1,185 1,352 3,423 3,171
Income before income taxes 84,512 72,959 188,054 163,379
Income taxes 24,981 21,141 54,129 48,167
Net income 59,531 51,818 133,925 115,212
Less: net income attributable to noncontrolling interest 18,526 18,271 45,350 38,142
Net income attributable to Watsco, Inc. $41,005 $33,547 $88,575 $77,070
 
Diluted earnings per share:

Net income attributable to Watsco, Inc. shareholders

$41,005 $33,547 $88,575 $77,070

Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock

2,820 2,293 6,115 5,101

Earnings allocated to Watsco, Inc. shareholders

$38,185 $31,254 $82,460 $71,969
 
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share 32,168,166 30,758,532 31,597,538 30,741,295
 
Diluted earnings per share for Common and Class B common stock $1.19 $1.02 $2.61 $2.34
 
   

WATSCO, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 
September 30, December 31,
2012 2011
 
Cash and cash equivalents $45,961 $15,673
Accounts receivable, net 455,674 327,664
Inventories 618,077 465,349
Other 21,258 19,491
Total current assets 1,140,970 828,177
 
Property and equipment, net 42,715 39,455
Goodwill, intangibles, net and other 616,132 400,516
Total assets $1,799,817 $1,268,148
 
Accounts payable and accrued expenses $328,197 $203,020
Borrowings under revolving credit agreement - 20,000
Current portion of long-term obligations 7 19
Total current liabilities 328,204 223,039
 
Borrowings under revolving credit agreement 202,180 -
Deferred income taxes and other liabilities 48,110 43,399
Total liabilities 578,494 266,438
 
Watsco's shareholders’ equity 925,474 802,790
Noncontrolling interest 295,849 198,920
Shareholders’ equity 1,221,323 1,001,710
Total liabilities and shareholders’ equity $1,799,817 $1,268,148
 




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