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 540 locations in the United States, 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 $30 billion United States market 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, such as Form 10-K, Form 10-Q and Form 8-K.


Consolidated Results of Operations

(In thousands, except per share data)

Quarter Ended December 31, Year Ended December 31,
2011   2010 2011   2010
Revenues $645,833 $657,248 $2,977,759 $2,844,595
Cost of sales 485,123   503,221   2,249,465   2,171,354  
Gross profit 160,710 154,027 728,294 673,241
Gross profit margin 24.9 % 23.4 % 24.5 % 23.7 %
SG&A expenses 128,210   132,232   529,244   507,669  
Operating income 32,500 21,795 199,050 165,572
Operating margin 5.0 % 3.3 % 6.7 % 5.8 %
Interest expense, net 1,287   830   4,458   3,490  
Income before income taxes 31,213 20,965 194,592 162,082
Income taxes 8,683   6,443   56,850   50,360  
Net income 22,530 14,522 137,742 111,722
Less: net income attributable to
noncontrolling interest 9,150   4,077   47,292   30,962  
Net income attributable to Watsco, Inc. $13,380   $10,445   $90,450   $80,760  
Diluted earnings per share:
Net income attributable to Watsco,
Inc. shareholders $13,380 $10,445 $90,450 $80,760
Less: distributed and undistributed
earnings allocated to non-vested
(restricted) common stock 1,292   974   6,042   4,772  
Earnings allocated to Watsco, Inc.
shareholders $12,088   $9,471   $84,408   $75,988  
Weighted-average Common and Class B
common shares and equivalent shares
used to calculate diluted earnings
per share 30,788,888 30,637,584 30,753,291 30,578,608
Diluted earnings per share for
Common and Class B common stock $0.39   $0.31   $2.74   $2.49  


Condensed Consolidated Balance Sheets

(In thousands)

December 31, December 31,
2011 2010
Cash and cash equivalents $15,673 $126,498
Accounts receivable, net 327,664 305,088
Inventories 465,349 391,925
Other 19,491 14,493
Total current assets 828,177 838,004
Property and equipment, net 39,455 31,221
Goodwill, intangibles, net and other 400,516 368,002
Total assets $1,268,148 $1,237,227
Accounts payable and accrued expenses $203,020 $265,933
Borrowings under revolving credit agreements 20,000 -
Current portion of long-term obligations 19 72
Total current liabilities 223,039 266,005
Borrowings under revolving credit agreements - 10,000
Deferred income taxes and other liabilities 43,399 32,326
Total liabilities 266,438 308,331
Watsco's shareholders’ equity 802,790 764,461
Noncontrolling interest 198,920 164,435
Shareholders’ equity 1,001,710 928,896
Total liabilities and shareholders’ equity $1,268,148 $1,237,227

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