Watsco Reports Record First Quarter Sales and Net Income; Sales Momentum Building into Second Quarter After Seasonally Late Start to the Year
Annual Dividend Boosted 19% to
Sales trends:
-
Sales increased 2% to a record
$872 million (3% on a same-store basis) - HVAC equipment increased 3% (65% of sales)
- Other HVAC products increased 1% (30% of sales)
- Commercial refrigeration products increased 5% (5% of sales)
Key performance metrics:
-
Gross profit improved 3% to a record
$219 million (gross margin improved 10 basis-points) -
SG&A increased 5%, reflecting sales and service-related headcount
additions (
4 cents per share impact) and higher technology spending (2 cents per share impact) -
Operating income decreased 4% to
$49 million -
Net income increased 3% to a record
$26 million -
Earnings per share was flat at
71 cents -
Operating cash flow of
$34 million ($1.05 per diluted share)
Mr. Nahmad added: “We are pleased to boost our dividend to an annual
rate of
It is important to note that the first quarter of each calendar year is highly seasonal due to the nature and timing of the replacement market for air conditioning systems, which is strongest in the second and third quarters. Accordingly, the Company’s first quarter financial results are disproportionately affected by this seasonality.
Technology Strategy
Acquisition of Joint Venture Interests
In
Cash Flow & Dividends
The Company has targeted cash flow from operations to exceed net income
in 2017. From 2000 to 2016, Watsco’s operating cash flow was
approximately
Other
Results include income tax benefits 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.
Use of Non-GAAP Financial Information
In this release, the Company discloses non-GAAP measure of “operating cash flow per share”, which is determined by dividing “net cash provided by operating activities” as shown in the attached Condensed Consolidated Statements of Cash Flows by the “weighted–average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share” as shown in the attached Condensed Consolidated Results of Operations. The Company believes that this information provides a meaningful comparison and important correlation of the Company’s financial performance and cash flow generation on a per share basis in order to further assess overall performance.
The Company also 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 561 locations
in
This document includes certain “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by the use of words such as
“will,” “would,” “anticipate,” “expect,” “believe,” “plan,”
“optimistic,” “goal” or “intend,” the negative of these terms and
similar references to future periods. 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 March 31, |
||||||||
2017 | 2016 | |||||||
Revenues | $ | 872,095 | $ | 851,424 | ||||
Cost of sales | 653,539 | 638,977 | ||||||
Gross profit | 218,556 | 212,447 | ||||||
Gross margin | 25.1 | % | 25.0 | % | ||||
SG&A expenses | 169,857 | 161,779 | ||||||
Operating income | 48,699 | 50,668 | ||||||
Operating margin | 5.6 | % | 6.0 | % | ||||
Interest expense, net | 1,255 | 986 | ||||||
Income before income taxes | 47,444 | 49,682 | ||||||
Income taxes | 13,676 | 15,508 | ||||||
Net income | 33,768 | 34,174 | ||||||
Less: net income attributable to non-controlling interest | 7,587 | 8,637 | ||||||
Net income attributable to Watsco shareholders | $ | 26,181 | $ | 25,537 | ||||
Diluted earnings per share: | ||||||||
Net income attributable to Watsco shareholders | $ | 26,181 | $ | 25,537 | ||||
Less: distributed and undistributed earnings allocated to non-vested restricted common stock | 3,120 | 2,413 | ||||||
Earnings allocated to Watsco shareholders | $ | 23,061 | $ | 23,124 | ||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 32,679,806 | 32,537,225 | ||||||
Diluted earnings per share for Common and Class B common stock | $ | 0.71 | $ | 0.71 | ||||
WATSCO, INC. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Unaudited, in thousands) | ||||||
March 31, 2017 | December 31, 2016 | |||||
Cash and cash equivalents | $ | 47,421 | $ | 56,010 | ||
Accounts receivable, net | 481,600 | 475,974 | ||||
Inventories | 751,505 | 685,011 | ||||
Other | 19,975 | 23,161 | ||||
Total current assets | 1,300,501 | 1,240,156 | ||||
Property and equipment, net | 90,532 | 90,502 | ||||
Goodwill, intangibles, net and other | 544,246 | 543,991 | ||||
Total assets | $ | 1,935,279 | $ | 1,874,649 | ||
Accounts payable and accrued expenses | $ | 377,100 | $ | 314,688 | ||
Current portion of long-term obligations | 1,798 | 200 | ||||
Total current liabilities | 378,898 | 314,888 | ||||
Borrowings under revolving credit agreement | 280,300 | 235,294 | ||||
Deferred income taxes and other liabilities | 67,863 | 72,719 | ||||
Total liabilities | 727,061 | 622,901 | ||||
Watsco's shareholders’ equity | 978,336 | 1,005,828 | ||||
Non-controlling interest | 229,882 | 245,920 | ||||
Shareholders’ equity | 1,208,218 | 1,251,748 | ||||
Total liabilities and shareholders’ equity | $ | 1,935,279 | $ | 1,874,649 | ||
WATSCO, INC. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(Unaudited, in thousands) | ||||||||
Quarter Ended March 31, | ||||||||
2017 | 2016 | |||||||
Cash flow from operating activities: | ||||||||
Net income | $ | 33,768 | $ | 34,174 | ||||
Non-cash items | 11,882 | 10,893 | ||||||
Changes in working capital | (11,333 | ) | (3,215 | ) | ||||
Net cash provided by operating activities | 34,317 | 41,852 | ||||||
Cash flow from investing activities: | ||||||||
Capital expenditures, net | (4,127 | ) | (2,674 | ) | ||||
Cash flow from financing activities: | ||||||||
Dividends on Common and Class B Common stock | (37,383 | ) | (30,033 | ) | ||||
Net proceeds (repayments) under revolving credit agreement | 45,006 | (7,400 | ) | |||||
Purchase of additional ownership from non-controlling interest | (42,688 | ) | - | |||||
Distributions to non-controlling interest | (6,798 | ) | (7,115 | ) | ||||
Other | 2,934 | 2,910 | ||||||
Net cash used in financing activities | (38,929 | ) | (41,638 | ) | ||||
Effect of foreign exchange rate changes on cash and cash equivalents | 150 | 87 | ||||||
Net decrease in cash and cash equivalents | (8,589 | ) | (2,373 | ) | ||||
Cash and cash equivalents at beginning of period | 56,010 | 35,229 | ||||||
Cash and cash equivalents at end of period | $ | 47,421 | $ | 32,856 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170425005415/en/
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com
Fax:
305-858-4492
www.watsco.com