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Watsco Sets New Records In 2012 For Sales, Net Income & Cash Flow

Stocks in this article: WSO

Conference Call

Watsco is hosting a conference call at 10:00 a.m. (ET) on February 14, 2013 to discuss its fourth quarter and annual earnings results. The conference call will be web-cast by CCBN's StreetEvents at http://www.watsco.com. A replay of the conference call will be 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 sales and adjusted diluted earnings per share. 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. A reconciliation of adjusted diluted earnings per share to diluted earnings per share appears in the pages that follow. 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 570 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, sales seasonality 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 Forms 10-K, 10-Q and 8-K.

   

WATSCO, INC.

Condensed Consolidated Results of Operations

(In thousands, except per share data)

(Unaudited)

 
Quarter Ended December 31, Year Ended December 31,
2012   2011 2012   2011
Revenues $ 765,540 $ 645,833 $ 3,431,712 $ 2,977,759
Cost of sales   582,747     485,123     2,617,317     2,249,465  
Gross profit 182,793 160,710 814,395 728,294
Gross profit margin   23.9 %   24.9 %   23.7 %   24.5 %
SG&A expenses   149,362     128,210     589,487     529,244  
Operating income 33,431 32,500 224,908 199,050
Operating margin   4.4 %   5.0 %   6.5 %   6.7 %
Interest expense, net 1,242 1,287 4,665 4,458
Income before income taxes 32,189 31,213 220,243 194,592
Income taxes   8,512     8,683     62,642     56,850  
Net income 23,677 22,530 157,601 137,742
Less: net income attributable to noncontrolling interest   8,917     9,150     54,267     47,292  
Net income attributable to Watsco, Inc. $ 14,760   $ 13,380   $ 103,334   $ 90,450  
 
Diluted earnings per share:
Net income attributable to Watsco, Inc. shareholders $ 14,760 $ 13,380 $ 103,334 $ 90,450
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock:
Regular dividends 1,472 1,292 7,132 6,042
Special dividend   11,867     -     10,524     -  
Earnings allocated to Watsco, Inc. shareholders $ 1,421   $ 12,088   $ 85,678   $ 84,408  
 
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share 32,181,792 30,788,888 31,744,399 30,753,291
 
Diluted earnings per share for Common & Class B common stock $ 0.04   $ 0.39   $ 2.70   $ 2.74  
 
   

Reconciliation of GAAP Financial Results to Non-GAAP Measures

(Unaudited)

 
Quarter Ended December 31, Year Ended December 31,
2012   2011 2012   2011
Diluted earnings per share (GAAP) $ 0.04 $ 0.39 $ 2.70 $ 2.74
Effect of special dividend $ 0.37   - $ 0.33   -
Diluted earnings per share adjusted (Non-GAAP) $ 0.41 $ 0.39 $ 3.03 $ 2.74
 
   

WATSCO, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 
December 31, December 31,
2012 2011
 
Cash and cash equivalents $ 73,770 $ 15,673
Accounts receivable, net 377,655 327,664
Inventories 546,083 465,349
Other   17,943   19,491
Total current assets 1,015,451 828,177
 
Property and equipment, net 42,842 39,455
Goodwill, intangibles, net and other   623,762   400,516
Total assets $ 1,682,055 $ 1,268,148
 
Accounts payable and accrued expenses $ 282,354 $ 203,020
Borrowings under revolving credit agreement - 20,000
Current portion of long-term obligations   4   19
Total current liabilities 282,358 223,039
 
Borrowings under revolving credit agreement 316,182 -
Deferred income taxes and other liabilities   61,475   43,399
Total liabilities   660,015   266,438
 
Watsco's shareholders’ equity 748,214 802,790
Noncontrolling interest   273,826   198,920
Shareholders’ equity   1,022,040   1,001,710
Total liabilities and shareholders’ equity $ 1,682,055 $ 1,268,148
 




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