Watsco Achieves Record First Quarter Results
23% EPS increase on Strong Replacement Sales and Expanded Margins
Annual Dividend Rate Boosted 50% to
Key performance metrics:
-
Revenues increased 7% to a record
$763 million - Gross profit margin increased 10 basis-points
- SG&A decreased 30 basis-points as a percentage of sales
- Operating margins expanded 40 basis-points
-
Earnings per diluted share climbed 23% to a record
48 cents - Record first quarter operating cash flow
Revenues trends:
- HVAC equipment (62% of sales) increased 8%
- Non-equipment HVAC products (33% of sales) increased 5%
- Commercial refrigeration products (5% of sales) increased 2%
Mr. Nahmad added, "We are also pleased to increase Watsco’s dividend to
an annual rate of
It is important to note that the first quarter of each calendar year is the seasonal low point for sales and profits due to the magnitude of the replacement market for air conditioning, heating and refrigeration systems during the second and third quarters of each calendar year. Accordingly, the Company's first quarter financial results are disproportionately affected by this seasonality and the overall general economic conditions.
Conference Call
About
There are approximately 89 million central air conditioning and heating
systems installed 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 March 31, | ||||||||
2014 | 2013 | |||||||
Revenues | $ | 762,568 | $ | 713,633 | ||||
Cost of sales | 574,499 | 538,187 | ||||||
Gross profit | 188,069 | 175,446 | ||||||
Gross profit margin | 24.7 | % | 24.6 | % | ||||
SG&A expenses | 152,516 | 144,892 | ||||||
Operating income | 35,553 | 30,554 | ||||||
Operating margin | 4.7 | % | 4.3 | % | ||||
Interest expense, net | 1,009 | 1,182 | ||||||
Income before income taxes | 34,544 | 29,372 | ||||||
Income taxes | 10,141 | 8,283 | ||||||
Net income | 24,403 | 21,089 | ||||||
Less: net income attributable to noncontrolling interest | 7,650 | 7,704 | ||||||
Net income attributable to Watsco, Inc. | $ | 16,753 | $ | 13,385 | ||||
Diluted earnings per share: | ||||||||
Net income attributable to Watsco, Inc. shareholders | $ | 16,753 | $ | 13,385 | ||||
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock | 1,242 | 937 | ||||||
Earnings allocated to Watsco, Inc. shareholders | $ | 15,511 | $ | 12,448 | ||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share |
32,305,445 | 32,213,440 | ||||||
Diluted earnings per share for Common and Class B common stock | $ | 0.48 | $ | 0.39 | ||||
WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) |
|||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Cash and cash equivalents | $ | 19,457 | $ | 19,478 | |||||
Accounts receivable, net | 394,873 | 399,565 | |||||||
Inventories | 707,839 | 583,154 | |||||||
Other | 16,997 | 18,905 | |||||||
Total current assets | 1,139,166 | 1,021,102 | |||||||
Property and equipment, net | 44,072 | 45,418 | |||||||
Goodwill, intangibles, net and other | 593,618 | 603,011 | |||||||
Total assets | $ | 1,776,856 | $ | 1,669,531 | |||||
Accounts payable and accrued expenses | $ | 353,066 | $ | 243,399 | |||||
Current portion of long-term obligations | 109 | 107 | |||||||
Total current liabilities | 353,175 | 243,506 | |||||||
Borrowings under revolving credit agreement | 226,744 | 230,044 | |||||||
Deferred income taxes and other liabilities | 68,888 | 68,589 | |||||||
Total liabilities | 648,807 | 542,139 | |||||||
Watsco's shareholders’ equity | 844,857 | 840,396 | |||||||
Noncontrolling interest | 283,192 | 286,996 | |||||||
Shareholders’ equity | 1,128,049 | 1,127,392 | |||||||
Total liabilities and shareholders’ equity | $ | 1,776,856 | $ | 1,669,531 | |||||
WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) |
||||||||
Quarter Ended March 31, | ||||||||
2014 | 2013 | |||||||
Cash flow from operating activities: | ||||||||
Net income | $ | 24,403 | $ | 21,089 | ||||
Non-cash items | 10,438 | 10,166 | ||||||
Changes in working capital | (9,940 | ) | (48,754 | ) | ||||
Net cash provided by (used in) operating activities | 24,901 | (17,499 | ) | |||||
Cash flow from investing activities: | ||||||||
Capital expenditures, net | (1,666 | ) | (2,959 | ) | ||||
Cash flow from financing activities: | ||||||||
Dividends on Common and Class B Common stock | (13,923 | ) | (8,640 | ) | ||||
Net (repayments) proceeds under revolving credit agreement | (2,553 | ) | 6,651 | |||||
Distributions to noncontrolling interest | (7,614 | ) | (29,637 | ) | ||||
Other | 978 | 546 | ||||||
Net cash used in operating activities | (23,112 | ) | (31,080 | ) | ||||
Effect of foreign exchange rate changes on cash and cash equivalents | (144 | ) | (199 | ) | ||||
Net decrease in cash and cash equivalents | (21 | ) | (51,737 | ) | ||||
Cash and cash equivalents at beginning of period | 19,478 | 73,770 | ||||||
Cash and cash equivalents at end of period | $ | 19,457 | $ | 22,033 | ||||
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com