Watsco EPS Climbs 16% on Record Sales, Earnings, Operating Margins and Improved Efficiency During Second Quarter
Second Quarter Results
Key performance metrics:
-
16% increase in earnings per share to a record
$1.85 -
11% growth in operating income to a record
$125 million - 50 basis-point expansion in operating margins to a record 10.2%
- 20 basis-point improvement in gross profit margin
- 30 basis-point reduction in SG&A as a percentage of sales to a record low
-
5% sales growth to a record
$1.22 billion
Sales trends:
- 7% growth in HVAC equipment (67% of sales)
- 1% growth in other HVAC products (29% of sales)
- 3% growth in commercial refrigeration products (4% of sales)
First Half 2015 Results
Key performance metrics:
-
21% increase in earnings per share to a record
$2.51 -
16% growth in operating income to a record
$172 million - 80 basis-point expansion in operating margins to a record 8.5%
- 40 basis-point improvement in gross profit margin
- 40 basis-point reduction in SG&A as a percentage of sales to a record low
-
5% sales growth to a record
$2.03 billion
Sales trends:
- 8% growth in HVAC equipment (66% of sales)
- 1% growth in other HVAC products (30% of sales)
- 4% growth in commercial refrigeration products (4% of sales)
Mr. Nahmad added: “2015 performance includes an additional 100 employees and the continued development and launch of technologies to generate long-term growth and market share. New employees, including more salespeople, counter-sales personnel and commercial HVAC experts intensify our sales and customer service efforts. Our technology investments, both in talent and capital spending, provide innovative capabilities to sell products and serve customers as well as provide greater insight into our business. We expect these investments to generate growth and further distance ourselves from the competition.”
First-half results include a contribution of
Cash Flow & Dividends
For the first-half of 2015,
Outlook for 2015
Watsco’s outlook for full-year 2015 diluted earnings per share is within
the range of
Conference Call Information
Date:
Time:
Webcast: http://investors.watsco.com
Dial-in number:
A replay of the conference call will be available on the Company's website.
About
Watsco’s traditional sales channel is the sale of products from one of
its 566 locations in
Forward-Looking Statements
This document contains or incorporates by reference statements that are not historical in nature and that are intended to be, and are hereby identified as, “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Statements which are not historical in nature, including the words “anticipate,” “estimate,” “could,” “should,” “may,” “plan,” “seek,” “expect,” “believe,” “intend,” “target,” “will,” “project,” “focused,” “outlook” and variations of these words and negatives thereof and similar expressions are intended to identify forward-looking statements, including statements regarding, among others, (i) economic conditions, (ii) business and acquisition strategies, (iii) potential acquisitions and/or joint ventures, (iv) financing plans and (v) industry, demographic and other trends affecting our financial condition or results of operations. These forward-looking statements are based on management’s current expectations, are not guarantees of future performance and are subject to a number of risks, uncertainties and changes in circumstances, certain of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of several factors, including, but not limited to general economic conditions, competitive factors within the HVAC/R industry, effects of supplier concentration, fluctuations in certain commodity costs, consumer spending, consumer debt levels, new housing starts and completions, capital spending in the commercial construction market, access to liquidity needed for operations, seasonal nature of product sales, weather conditions, insurance coverage risks, federal, state and local regulations impacting our industry and products, prevailing interest rates, foreign currency exchange rate fluctuations, international political risk, cybersecurity risk and the continued viability of our business strategy.
We believe these forward-looking statements are reasonable; however, you
should not place undue reliance on any forward-looking statements, which
are based on current expectations. For additional information regarding
other important factors that may affect our operations and could cause
actual results to vary materially from those anticipated in the
forward-looking statements see the discussion included in Item 1A “Risk
Factors” of our most recent Annual Report on Form 10-K, as well as the
other documents and reports that we file with the
WATSCO, INC. | |||||||||||||||||||||
Condensed Consolidated Results of Operations | |||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Revenues | $ | 1,223,439 | $ | 1,170,186 | $ | 2,032,411 | $ | 1,932,754 | |||||||||||||
Cost of sales | 928,194 | 890,913 | 1,532,941 | 1,465,412 | |||||||||||||||||
Gross profit | 295,245 | 279,273 | 499,470 | 467,342 | |||||||||||||||||
Gross profit margin | 24.1 | % | 23.9 | % | 24.6 | % | 24.2 | % | |||||||||||||
SG&A expenses | 170,386 | 166,293 | 327,603 | 318,809 | |||||||||||||||||
Operating income | 124,859 | 112,980 | 171,867 | 148,533 | |||||||||||||||||
Operating margin | 10.2 | % | 9.7 | % | 8.5 | % | 7.7 | % | |||||||||||||
Interest expense, net | 1,630 | 1,247 | 3,007 | 2,256 | |||||||||||||||||
Income before income taxes | 123,229 | 111,733 | 168,860 | 146,277 | |||||||||||||||||
Income taxes | 38,988 | 33,348 | 53,319 | 43,489 | |||||||||||||||||
Net income | 84,241 | 78,385 | 115,541 | 102,788 | |||||||||||||||||
Less: net income attributable to non-controlling interest | 18,818 | 22,284 | 27,070 | 29,934 | |||||||||||||||||
Net income attributable to Watsco | $ | 65,423 | $ | 56,101 | $ | 88,471 | $ | 72,854 | |||||||||||||
Diluted earnings per share: | |||||||||||||||||||||
Net income attributable to Watsco shareholders | $ | 65,423 | $ | 56,101 | $ | 88,471 | $ | 72,854 | |||||||||||||
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock | 5,179 | 4,281 | 6,917 | 5,526 | |||||||||||||||||
Earnings allocated to Watsco shareholders | $ | 60,244 | $ | 51,820 | $ | 81,554 | $ | 67,328 | |||||||||||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share |
32,477,262 | 32,353,045 | 32,454,298 | 32,329,376 | |||||||||||||||||
Diluted earnings per share for Common and Class B common stock | $ | 1.85 | $ | 1.60 | $ | 2.51 | $ | 2.08 | |||||||||||||
WATSCO, INC. | |||||||||
Condensed Consolidated Balance Sheets | |||||||||
(Unaudited, in thousands) | |||||||||
June 30, | December 31, | ||||||||
2015 | 2014 | ||||||||
Cash and cash equivalents | $ | 21,851 | $ | 24,447 | |||||
Accounts receivable, net | 599,071 | 434,234 | |||||||
Inventories | 799,044 | 677,990 | |||||||
Other | 21,444 | 20,664 | |||||||
Total current assets | 1,441,410 | 1,157,335 | |||||||
Property and equipment, net | 60,989 | 53,480 | |||||||
Goodwill, intangibles, net and other | 564,156 | 580,252 | |||||||
Total assets | $ | 2,066,555 | $ | 1,791,067 | |||||
Accounts payable and accrued expenses | $ | 369,155 | $ | 286,853 | |||||
Current portion of long-term obligations | 2,743 | 169 | |||||||
Total current liabilities | 371,898 | 287,022 | |||||||
Borrowings under revolving credit agreement | 433,412 | 303,199 | |||||||
Deferred income taxes and other liabilities | 70,547 | 68,807 | |||||||
Total liabilities | 875,857 | 659,028 | |||||||
Watsco's shareholders’ equity | 925,941 | 883,960 | |||||||
Non-controlling interest | 264,757 | 248,079 | |||||||
Shareholders’ equity | 1,190,698 | 1,132,039 | |||||||
Total liabilities and shareholders’ equity | $ | 2,066,555 | $ | 1,791,067 | |||||
WATSCO, INC. | |||||||||||
Condensed Consolidated Statements of Cash Flows | |||||||||||
(Unaudited, in thousands) | |||||||||||
Six Months Ended June 30, | |||||||||||
2015 | 2014 | ||||||||||
Cash flow from operating activities: | |||||||||||
Net income | $ | 115,541 | $ | 102,788 | |||||||
Non-cash items | 18,557 | 17,152 | |||||||||
Changes in working capital | (208,225 | ) | (185,098 | ) | |||||||
Net cash used in operating activities | (74,127 | ) | (65,158 | ) | |||||||
Cash flow used in investing activities: | |||||||||||
Capital expenditures, net | (14,010 | ) | (5,570 | ) | |||||||
Cash flow from financing activities: | |||||||||||
Dividends on Common and Class B Common stock | (49,165 | ) | (27,909 | ) | |||||||
Net proceeds under revolving credit agreement | 131,146 | 118,767 | |||||||||
Distributions to non-controlling interest | (3,654 | ) | (25,817 | ) | |||||||
Other | 7,495 | 3,148 | |||||||||
Net cash provided by financing activities | 85,822 | 68,189 | |||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (281 | ) | (74 | ) | |||||||
Net decrease in cash and cash equivalents | (2,596 | ) | (2,613 | ) | |||||||
Cash and cash equivalents at beginning of period | 24,447 | 19,478 | |||||||||
Cash and cash equivalents at end of period | $ | 21,851 | $ | 16,865 | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20150721005389/en/
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior
Vice President
blogan@watsco.com