Watsco Reports 2016 Second Quarter Results
Record Sales, Net Income & EPS for First Half of 2016; Annual
Dividend Boosted 24% to
Second Quarter Results
Sales trends:
-
1% sales decline to
$1.21 billion (flat on a same-store basis) - 1% decrease in HVAC equipment (67% of sales)
- 3% decrease in other HVAC products (28% of sales)
- 8% growth in commercial refrigeration products (5% of sales)
Key performance metrics:
-
2% decrease in earnings per share to
$1.82 - 1% decrease in gross profit
-
6% decline in operating income to
$118 million -
$57 million increase in operating cash flow
Mr. Nahmad added: “Watsco has produced
First Half 2016 Results
Sales trends:
-
2% sales growth to a record
$2.07 billion - 2% growth in HVAC equipment (66% of sales), including 3% growth in the U.S.
- Flat sales for other HVAC products (29% of sales)
- 7% growth in commercial refrigeration products (5% of sales)
Key performance metrics:
-
1% earnings per share growth to a record
$2.54 -
1% increase in gross profit to a record
$504 million -
2% decline in operating income to
$168 million -
2% increase in net income to a record
$90 million -
$116 million improvement in operating cash flow -
$166 million debt reduction versus a year ago (32% decrease in interest costs)
Results for the first half of 2016 and second quarter include a
Technology Strategy
Watsco’s goals are to further strengthen its leadership position,
accelerate sales and profit growth through innovation, increase the
speed, convenience and efficiency in serving customers and to extend
Watsco’s reach into new geographies and sales channels.
Since 2012, Watsco’s technology team has grown from approximately 60
employees to 170 employees while achieving record levels of operating
performance. Financial performance during the first-half of 2016
reflects an increase of
Examples of innovations that
- Mobile apps and other on-line tools to enable e-commerce using the industry’s most data-rich catalog of product information.
- Business intelligence and data analytics to enable more insightful decision-making by more than 600+ P&L managers across the company.
- Supply chain optimization to improve fill-rates, increase inventory turns and reduce infrastructure costs over the long-term.
- Tools to improve operational efficiency for 7+ million annual customer transactions.
Dividends & Cash Flow
The Company has targeted cash flow from operations to exceed net income
in 2016. From 2000 to 2015, Watsco’s operating cash flow was
approximately
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.
Use of Non-GAAP Financial Information
In this release, the Company discloses non-GAAP measures of same-store
basis. Information referring to “same-store basis” excludes the effects
of locations acquired or locations opened or closed during the
immediately preceding 12 months unless they are within close
geographical proximity to existing locations. The Company believes that
this information provides greater comparability regarding its ongoing
operating performance. These measures should not be considered an
alternative to measurements required by accounting principles generally
accepted in
About
Watsco’s traditional sales channel is through one of its 563 locations
in
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, INC. Condensed Consolidated Results of Operations (In thousands, except per share data) (Unaudited) |
||||||||
Quarter Ended June 30, | Six Months Ended June 30, | |||||||
2016 | 2015 | 2016 | 2015 | |||||
Revenues | $1,214,435 | $1,223,439 | $2,065,859 | $2,032,411 | ||||
Cost of sales | 922,574 | 928,194 | 1,561,551 | 1,532,941 | ||||
Gross profit | 291,861 | 295,245 | 504,308 | 499,470 | ||||
Gross profit margin | 24.0% | 24.1% | 24.4% | 24.6% | ||||
SG&A expenses | 174,271 | 170,386 | 336,050 | 327,603 | ||||
Operating income | 117,590 | 124,859 | 168,258 | 171,867 | ||||
Operating margin | 9.7% | 10.2% | 8.1% | 8.5% | ||||
Interest expense, net | 1,054 | 1,630 | 2,040 | 3,007 | ||||
Income before income taxes | 116,536 | 123,229 | 166,218 | 168,860 | ||||
Income taxes | 35,112 | 38,988 | 50,620 | 53,319 | ||||
Net income | 81,424 | 84,241 | 115,598 | 115,541 | ||||
Less: net income attributable to noncontrolling interest | 16,803 | 18,818 | 25,440 | 27,070 | ||||
Net income attributable to Watsco | $64,621 | $65,423 | $90,158 | $88,471 | ||||
Diluted earnings per share: | ||||||||
Net income attributable to Watsco shareholders | $64,621 | $65,423 | $90,158 | $88,471 | ||||
Less: distributed and undistributed earnings | ||||||||
allocated to non-vested (restricted) common | ||||||||
stock | 5,251 | 5,179 | 7,302 | 6,917 | ||||
Earnings allocated to Watsco shareholders | $59,370 | $60,244 | $82,856 | $81,554 | ||||
Weighted-average Common and Class B common | ||||||||
shares and equivalent shares used to | ||||||||
calculate diluted earnings per share | 32,606,336 | 32,477,262 | 32,576,326 | 32,454,298 | ||||
Diluted earnings per share for Common and | ||||||||
Class B common stock | $1.82 | $1.85 | $2.54 | $2.51 | ||||
WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) |
||||
June 30, 2016 | December 31, 2015 | |||
Cash and cash equivalents | $30,544 | $35,229 | ||
Accounts receivable, net | 606,510 | 451,079 | ||
Inventories | 749,333 | 673,967 | ||
Other | 20,438 | 20,990 | ||
Total current assets | 1,406,825 | 1,181,265 | ||
Property and equipment, net | 60,311 | 62,715 | ||
Goodwill, intangibles, net and other | 552,455 | 544,462 | ||
Total assets | $2,019,591 | $1,788,442 | ||
Accounts payable and accrued expenses | $405,561 | $270,117 | ||
Current portion of long-term obligations | 988 | 184 | ||
Total current liabilities | 406,549 | 270,301 | ||
Borrowings under revolving credit agreement | 267,348 | 245,300 | ||
Deferred income taxes and other liabilities | 72,454 | 69,120 | ||
Total liabilities | 746,351 | 584,721 | ||
Watsco's shareholders’ equity | 1,003,303 | 957,310 | ||
Noncontrolling interest | 269,937 | 246,411 | ||
Shareholders’ equity | 1,273,240 | 1,203,721 | ||
Total liabilities and shareholders’ equity | $2,019,591 | $1,788,442 | ||
WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) |
||||||
Six Months Ended June 30, | ||||||
2016 | 2015 | |||||
Cash flow from operating activities: | ||||||
Net income | $115,598 | $115,541 | ||||
Non-cash items | 21,099 | 18,557 | ||||
Changes in working capital | (94,764 | ) | (208,225 | ) | ||
Net cash provided by (used in) operating activities | 41,933 | (74,127 | ) | |||
Cash flow from investing activities: | ||||||
Capital expenditures, net | (4,994 | ) | (14,010 | ) | ||
Cash flow from financing activities: | ||||||
Dividends on Common and Class B Common stock | (60,164 | ) | (49,165 | ) | ||
Net proceeds under revolving credit agreement | 22,025 | 131,146 | ||||
Distributions to noncontrolling interest | (7,114 | ) | (3,654 | ) | ||
Other | 3,575 | 7,495 | ||||
Net cash (used in) provided by financing activities | (41,678 | ) | 85,822 | |||
Effect of foreign exchange rate changes on cash and cash | ||||||
equivalents | 54 | (281 | ) | |||
Net decrease in cash and cash equivalents | (4,685 | ) | (2,596 | ) | ||
Cash and cash equivalents at beginning of period | 35,229 | 24,447 | ||||
Cash and cash equivalents at end of period | $30,544 | $21,851 | ||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160722005107/en/
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com