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Watsco Achieves Record Operating Results During Third 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.



Condensed Consolidated Results of Operations

(In thousands, except per share data)


Quarter Ended September 30, Nine Months Ended September 30,
2013   2012 2013   2012
Revenues $1,081,893 $1,020,859 $2,915,978 $2,666,172
Cost of sales 823,296 778,354 2,215,255 2,034,570
Gross profit 258,597 242,505 700,723 631,602
Gross profit margin 23.9% 23.8% 24.0% 23.7%
SG&A expenses 163,142 156,808 469,629 440,125
Operating income 95,455 85,697 231,094 191,477
Operating margin 8.8% 8.4% 7.9% 7.2%
Interest expense, net 1,781 1,185 4,651 3,423
Income before income taxes 93,674 84,512 226,443 188,054
Income taxes 27,556 24,981 66,654 54,129
Net income 66,118 59,531 159,789 133,925
Less: net income attributable to noncontrolling interest 20,419 18,526 49,387 45,350
Net income attributable to Watsco, Inc. $45,699 $41,005 $110,402 $88,575
Diluted earnings per share:
Net income attributable to Watsco, Inc. shareholders $45,699 $41,005 $110,402 $88,575

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

3,246 2,820 7,801 6,115
Earnings allocated to Watsco, Inc. shareholders $42,453 $38,185 $102,601 $82,460

Weighted-average Common and Class B common sharesand equivalent shares used to calculatediluted earnings per share

32,276,113 32,168,166 32,246,366 31,597,538
Diluted earnings per share for Common and Class B common stock $1.32 $1.19 $3.18 $2.61


Condensed Consolidated Balance Sheets

(In thousands)


September 30, December 31,
2013 2012
Cash and cash equivalents $29,229 $73,770
Accounts receivable, net 466,340 377,655
Inventories 643,874 546,083
Other 22,372 17,943
Total current assets 1,161,815 1,015,451
Property and equipment, net 44,891 42,842
Goodwill, intangibles, net and other 611,327 623,762
Total assets $1,818,033 $1,682,055


Accounts payable and accrued expenses

$311,683 $282,354
Current portion of long-term obligations 106 4
Total current liabilities 311,789 282,358
Borrowings under revolving credit agreement 284,800 316,182
Deferred income taxes and other liabilities 64,921 61,475
Total liabilities 661,510 660,015
Watsco's shareholders’ equity 838,755 748,214
Noncontrolling interest 317,768 273,826
Shareholders’ equity 1,156,523 1,022,040
Total liabilities and shareholders’ equity $1,818,033 $1,682,055

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