Watsco Sets First Quarter Records for Sales, Earnings, Earnings Per Share, Operating Margins and Cash Flow
Key performance metrics:
-
9% earnings per share growth to a record
71 cents -
8% operating income increase to a record
$51 million - 20 basis-point expansion in operating margins to a record 6.0%
-
5% sales growth to a record
$851 million (6% increase on a same-store basis) -
4% increase in gross profit to a record
$212 million (20 basis-point lower gross margin) - 40 basis-point decline in SG&A as a percentage of sales to a record low
-
$42 million record operating cash flow versus a cash use of$17 million last year -
$103 million debt reduction versus a year ago
Sales trends:
- 7% growth in HVAC equipment (65% of sales), including 10% growth in the U.S.
- 4% sales growth for other HVAC products (30% of sales), including 6% in the U.S.
- 6% growth in commercial refrigeration products (5% of sales)
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
Dividends & Cash Flow
The Company has targeted cash flow from operations to exceed net income
in 2016. Since 2000, Watsco’s operating cash flow was approximately
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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 565 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 March 31, | ||||
2016 | 2015 | |||
Revenues | $851,424 | $808,972 | ||
Cost of sales | 638,977 | 604,747 | ||
Gross profit | 212,447 | 204,225 | ||
Gross margin | 25.0% | 25.2% | ||
SG&A expenses | 161,779 | 157,217 | ||
Operating income | 50,668 | 47,008 | ||
Operating margin | 6.0% | 5.8% | ||
Interest expense, net | 986 | 1,377 | ||
Income before income taxes | 49,682 | 45,631 | ||
Income taxes | 15,508 | 14,331 | ||
Net income | 34,174 | 31,300 | ||
Less: net income attributable to non-controlling interest | 8,637 | 8,252 | ||
Net income attributable to Watsco | $25,537 | $23,048 | ||
Diluted earnings per share: | ||||
Net income attributable to Watsco shareholders | $25,537 | $23,048 | ||
Less: distributed and undistributed earnings allocated to non-vested restricted common stock | 2,413 | 1,868 | ||
Earnings allocated to Watsco shareholders | $23,124 | $21,180 | ||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 32,537,225 | 32,431,077 | ||
Diluted earnings per share for Common and Class B common stock | $0.71 | $0.65 | ||
WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) |
||||
March 31, 2016 | December 31, 2015 | |||
Cash and cash equivalents | $32,856 | $35,229 | ||
Accounts receivable, net | 464,154 | 451,079 | ||
Inventories | 746,122 | 673,967 | ||
Other | 18,793 | 20,990 | ||
Total current assets | 1,261,925 | 1,181,265 | ||
Property and equipment, net | 61,866 | 62,715 | ||
Goodwill, intangibles, net and other | 553,099 | 544,462 | ||
Total assets | $1,876,890 | $1,788,442 | ||
Accounts payable and accrued expenses | $347,064 | $270,117 | ||
Current portion of long-term obligations | 187 | 184 | ||
Total current liabilities | 347,251 | 270,301 | ||
Borrowings under revolving credit agreement | 237,900 | 245,300 | ||
Deferred income taxes and other liabilities | 71,035 | 69,120 | ||
Total liabilities | 656,186 | 584,721 | ||
Watsco's shareholders’ equity | 968,068 | 957,310 | ||
Non-controlling interest | 252,636 | 246,411 | ||
Shareholders’ equity | 1,220,704 | 1,203,721 | ||
Total liabilities and shareholders’ equity | $1,876,890 | $1,788,442 | ||
WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) |
||||||
Quarter Ended March 31, | ||||||
2016 | 2015 | |||||
Cash flow from operating activities: | ||||||
Net income | $34,174 | $31,300 | ||||
Non-cash items | 10,892 | 11,103 | ||||
Changes in working capital | (3,214 | ) | (59,186 | ) | ||
Net cash provided by (used in) operating activities | 41,852 | (16,783 | ) | |||
Cash flow from investing activities: | ||||||
Capital expenditures, net | (2,674 | ) | (3,043 | ) | ||
Cash flow from financing activities: | ||||||
Dividends on Common and Class B Common stock | (30,033 | ) | (24,524 | ) | ||
Net (repayments) proceeds under revolving credit agreement | (7,400 | ) | 38,497 | |||
Distributions to non-controlling interest | (7,115 | ) | (3,654 | ) | ||
Other | 2,910 | 1,698 | ||||
Net cash (used in) provided by financing activities | (41,638 | ) | 12,017 | |||
Effect of foreign exchange rate changes on cash and cash equivalents | 87 | (387 | ) | |||
Net decrease in cash and cash equivalents | (2,373 | ) | (8,196 | ) | ||
Cash and cash equivalents at beginning of period | 35,229 | 24,447 | ||||
Cash and cash equivalents at end of period | $32,856 | $16,251 | ||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160420005430/en/
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com
www.watsco.com