Gross profit increased 11% to a record $701 million and gross profit margin improved 30 basis-points to 24.0%. On a same-store basis, gross profit increased by 7% with gross profit margin improving 20 basis-points to 23.9%. SG&A expenses increased 7% to $470 million and as a percentage of sales were a record low of 16.1%. SG&A excluding new locations increased 2% to $449 million and as a percentage of sales were a record low of 15.9%.
Operating income increased 21% to a record $231 million with operating margin expanding 70 basis-points to 7.9%. Same-store operating income increased 19% to $228 million with operating margin expanding 90 basis-points to 8.1%.
Earnings per share increased 22% to a record $3.18 per diluted share on record net income of $110 million, compared to $2.61 per diluted share on net income of $89 million in 2012.
Results for the nine months ended September 30, 2013 include 35 new locations from a joint venture formed on April 27, 2012 with Carrier Corporation in Canada, of which Watsco owns 60% and Carrier owns 40%. The results also reflect a 10% greater ownership interest effective July 1, 2012 in Carrier Enterprise LLC, a U.S. joint venture formed with Carrier in 2009.Cash Flow and Dividends For the quarter, Watsco generated $128 million of operating cash flow, an all-time record for any quarter in its history. For the nine months ended September 30, 2013, Watsco’s operating cash flow was $51 million versus $64 million in the same period in 2012. At September 30, 2013, cash and cash equivalents were $29 million, borrowings were $285 million and the Company’s debt-to-total-capitalization ratio was 20%. The Company expects to generate significant cash flow from operations during the fourth quarter of 2013. Dividends paid during the first nine-months of 2013 were $26 million. On October 2, 2013, the Company raised its quarterly dividend rate 60% to 40 cents per share. Watsco has paid quarterly dividends for 38 consecutive years.