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Watsco Achieves Record Sales, Net Income And EPS During Second Quarter

Stocks in this article: WSO

There are approximately 90 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 approximately 10% of the estimated $35 billion marketplace in the Americas for HVAC/R products. Additional information about Watsco may be found at

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.



Consolidated Results of Operations

(In thousands, except per share data)


Quarter Ended June 30, Six Months Ended June 30,
2013   2012 2013   2012
Revenues $1,120,452 $1,011,801 $1,834,085 $1,645,313
Cost of sales 853,772 773,326 1,391,959 1,256,216
Gross profit 266,680 238,475 442,126 389,097
Gross profit margin 23.8% 23.6% 24.1% 23.6%
SG&A expenses 161,595 152,604 306,487 283,317
Operating income 105,085 85,871 135,639 105,780
Operating margin 9.4% 8.5% 7.4% 6.4%
Interest expense, net 1,688 1,350 2,870 2,238
Income before income taxes 103,397 84,521 132,769 103,542
Income taxes 30,815 23,620 39,098 29,148
Net income 72,582 60,901 93,671 74,394

Less: net income attributable tononcontrolling interest

21,264 21,798 28,968 26,824
Net income attributable to Watsco, Inc. $51,318 $39,103 $64,703 $47,570
Diluted earnings per share:
Net income attributable to Watsco’s shareholders $51,318 $39,103 $64,703 $47,570

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

3,623 2,702 4,560 3,297

Earnings allocated to Watsco’sshareholders

$47,695 $36,401 $60,143 $44,273

Weighted-average Common and Class Bcommon shares and equivalent shares usedto calculate diluted earnings per share

32,248,855 31,783,707 32,231,246 31,309,088

Diluted earnings per share for Commonand Class B common stock

$1.48 $1.15 $1.87 $1.41


Condensed Consolidated Balance Sheets

(In thousands)


June 30, December 31,
2013 2012
Cash and cash equivalents $25,531 $73,770
Accounts receivable, net 525,613 377,655
Inventories 692,006 546,083
Other 17,834 17,943
Total current assets 1,260,984 1,015,451
Property and equipment, net 43,912 42,842
Goodwill, intangibles, net and other 608,113 623,762
Total assets $1,913,009 $1,682,055
Accounts payable and accrued expenses $361,773 $282,354
Current portion of long-term obligations 4 4
Total current liabilities 361,777 282,358
Borrowings under revolving credit agreement 398,276 316,182
Deferred income taxes and other liabilities 62,889 61,475
Total liabilities 822,942 660,015
Watsco's shareholders’ equity 794,889 748,214
Noncontrolling interest 295,178 273,826
Shareholders’ equity 1,090,067 1,022,040
Total liabilities and shareholders’ equity $1,913,009 $1,682,055

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