Watsco Achieves Record 2013 Fourth Quarter and Full Year Operating Results
Strong Residential Replacement Sales, Market Share Gains and Improved Margins From Operating Efficiencies Drive Performance
Fourth Quarter Results
Earnings per share increased 22% to a record
Revenues increased 8% to a record
Gross profit increased 9% to a record
It is important to note that the fourth quarter of each calendar year is highly seasonal due to the nature and timing of the replacement market for air conditioning, heating and refrigeration systems, which is strongest in the second and third quarters. Accordingly, the Company's fourth quarter financial results are disproportionately affected by this seasonality.
Full Year Results
Earnings per share increased 21% to a record
Revenues increased 9% to a record
Gross profit increased 10% to a record
Mr. Nahmad added, "2013 was another great year, which we believe highlights the stability and consistency of our company. Our team did a super job of managing the business and took advantage of opportunities in the markets to drive the business and optimize performance. Watsco's scale, access to capital, commitment to innovation and long-standing vendor relationships are all at the disposal of our most important asset - the local branches that serve our contractor customers."
2013 results include 35 new locations from a joint venture formed in
Cash Flow
Operating cash flow for the full year 2013 was
Mr. Nahmad added, "2013 was another strong year for cash flow, which we expect to continue in 2014. Our philosophy of sharing increased cash flow through higher dividends while maintaining a conservative financial position with continued capacity to build our network remain cornerstones of our company."
2012 Earnings Per Share on an Adjusted-Basis vs. GAAP Basis
Results for the full year and fourth quarter of 2012 on a GAAP basis include a reduction of diluted earnings per share of
Conference Call
Use of Non-GAAP Financial Information
In this release, the Company discloses non-GAAP measures of same-store sales and adjusted diluted earnings per share. 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. A reconciliation of adjusted diluted earnings per share to diluted earnings per share appears in the pages that follow. 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
There are approximately 89 million central air conditioning and heating systems installed in
WATSCO, INC. Condensed Consolidated Results of Operations (In thousands, except per share data) (Unaudited) | ||||||||
Quarter Ended December 31, | Year Ended December 31, | |||||||
2013 | 2012 | 2013 | 2012 | |||||
Revenues | $827,352 | $765,540 | $3,743,330 | $3,431,712 | ||||
Cost of sales | 628,822 | 582,747 | 2,844,077 | 2,617,317 | ||||
Gross profit | 198,530 | 182,793 | 899,253 | 814,395 | ||||
Gross profit margin | 24.0% | 23.9% | 24.0% | 23.7% | ||||
SG&A expenses | 158,415 | 149,362 | 628,044 | 589,487 | ||||
Operating income | 40,115 | 33,431 | 271,209 | 224,908 | ||||
Operating margin | 4.9% | 4.4% | 7.2% | 6.5% | ||||
Interest expense, net | 1,179 | 1,242 | 5,830 | 4,665 | ||||
Income before income taxes | 38,936 | 32,189 | 265,379 | 220,243 | ||||
Income taxes | 11,006 | 8,512 | 77,660 | 62,642 | ||||
Net income | 27,930 | 23,677 | 187,719 | 157,601 | ||||
Less: net income attributable to noncontrolling interest | 10,609 | 8,917 | 59,996 | 54,267 | ||||
Net income attributable to Watsco, Inc. | $17,321 | $14,760 | $127,723 | $103,334 | ||||
Diluted earnings per share: | ||||||||
Net income attributable to Watsco, Inc. shareholders | $17,321 | $14,760 | $127,723 | $103,334 | ||||
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock | 1,239 | 13,339 | 9,053 | 17,656 | ||||
Earnings allocated to Watsco, Inc. shareholders | $16,082 | $1,421 | $118,670 | $85,678 | ||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 32,292,276 | 32,181,792 | 32,258,068 | 31,744,399 | ||||
Diluted earnings per share for Common and Class B common stock | $0.50 | $0.04 | $3.68 | $2.70 |
Reconciliation of GAAP Financial Results to Non-GAAP Measures (Unaudited) | ||||||||
Quarter Ended December 31, | Year Ended December 31, | |||||||
2013 | 2012 | 2013 | 2012 | |||||
Diluted earnings per share (GAAP) | $0.50 | $0.04 | $3.68 | $2.70 | ||||
Effect of special dividend | - | $0.37 | - | $0.33 | ||||
Diluted earnings per share adjusted (Non-GAAP) | $0.50 | $0.41 | $3.68 | $3.03 |
Condensed Consolidated Balance Sheets (In thousands) (Unaudited) | ||||
December 31, | December 31, | |||
2013 | 2012 | |||
Cash and cash equivalents | $19,478 | $73,770 | ||
Accounts receivable, net | 399,565 | 377,655 | ||
Inventories | 583,154 | 546,083 | ||
Other | 18,905 | 17,943 | ||
Total current assets | 1,021,102 | 1,015,451 | ||
Property and equipment, net | 45,418 | 42,842 | ||
Goodwill, intangibles, net and other | 603,011 | 623,762 | ||
Total assets | $1,669,531 | $1,682,055 | ||
Accounts payable and accrued expenses | $243,399 | $282,354 | ||
Current portion of long-term obligations | 107 | 4 | ||
Total current liabilities | 243,506 | 282,358 | ||
Borrowings under revolving credit agreement | 230,044 | 316,182 | ||
Deferred income taxes and other liabilities | 68,589 | 61,475 | ||
Total liabilities | 542,139 | 660,015 | ||
Watsco's shareholders' equity | 840,396 | 748,214 | ||
Noncontrolling interest | 286,996 | 273,826 | ||
Shareholders' equity | 1,127,392 | 1,022,040 | ||
Total liabilities and shareholders' equity | $1,669,531 | $1,682,055 |
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
e-mail: blogan@watsco.com