UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 18, 2019

WATSCO, INC.

(Exact name of registrant as specified in its charter)

Florida

(State or other jurisdiction of incorporation)

2665 South Bayshore Drive, Suite 901

Miami, Florida 33133

(Address of principal executive offices, including zip code)

(305) 714-4100

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Securities registered pursuant to Section 12(b) of the Act:

On July 18, 2019, Watsco, Inc., a Florida corporation (the “Company”), issued a press release reporting its financial results for the quarter and six months ended June 30, 2019. A copy of the Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated by reference in this Item 2.02.

The information set forth in Item 2.02 of this Current Report on Form 8-K is incorporated by reference in this Item 7.01.

The information contained in this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall be deemed “furnished” and not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any Company filing under the Securities Act of 1933, as amended.

(d) Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibit 99.1

Watsco Reports Record Second Quarter Results

Record First-Half Operating Cash Flow;

Continued Investments in Technology and Network Expansion;

Announced Purchase of $206 Million HVAC Distributor Peirce-Phelps, Inc.

MIAMI, FLORIDA – (GLOBENEWSWIRE), July 18, 2019 – Watsco, Inc. (NYSE: WSO) reported its second quarter results. Record sales and net income attributable to Watsco was achieved for the quarter and six-month periods ended June 30, 2019.

Second Quarter Results

Strong sales and earnings growth during the first two months of the quarter were offset by a dramatic slowdown in June from cooler, wetter weather in certain markets. Sales momentum has rebounded in July and the Company believes it can produce record performance for the year. Results also reflect increased investments in new locations and to expand the adoption, penetration and development of Watsco’s industry-leading technology platforms.

Sales trends:

Key performance metrics:

Albert H. Nahmad, Watsco’s Chairman and CEO stated: “Watsco’s second quarter performance produced the highest sales and net income of any quarter in our history despite weather conditions and strong earnings comparisons of a year ago. We are encouraged by our acquisition-related activities, which add to our presence and capabilities in important markets. We remain very active to identify and act on more opportunities to invest in and grow our Company.”

First-Half 2019 Results

Sales trends:

Key performance metrics:

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Acquisitions

Watsco completed three transactions during the second quarter for aggregate consideration of $60 million, consisting of $53 million in cash and $7 million in Watsco shares.

Watsco announced today that it has executed an agreement to acquire the HVAC business of Peirce-Phelps, Inc. Peirce-Phelps was founded in 1925 and is one of the largest distributors in North America with current annual sales of approximately $206 million. Peirce Phelps currently serves over 9,000 contractor-customers from 19 locations in Pennsylvania, New Jersey and Delaware. Peirce-Phelps will operate as a subsidiary of Carrier Enterprise LLC, a joint venture formed in 2009 between Watsco and Carrier Corporation. Terms of the transaction were not disclosed. Closing of the transaction is subject to customary conditions.

Technology Investments

Watsco has launched a variety of technologies and process enhancements to transform how HVAC contractor customers are served. Speed, productivity and scale are critical factors as the digital era progresses and Watsco is making investments to ensure an unparalleled customer-experience. The most notable is the digitization of Watsco’s interactions with its customer-base through e-commerce and mobile apps, supported by the industry’s richest depository of product information of over 700,000 SKUs.

Watsco has also launched internal-facing technologies, including (1) a business intelligence platform to provide insights to 600+ P&L managers and their teams, (2) proprietary order fulfillment software to deliver speed, convenience and order accuracy to customers (currently used at two-thirds of the Company’s locations), and (3) demand planning and inventory optimization software to improve fill-rates and inventory turns and to reduce real estate requirements.

Technology spending increased $1.5 million during the second quarter (or 3 cents per diluted share) and increased $2.9 million (or 7 cents per diluted share) for the first-half of 2019, driven in part by the Company’s acquisition of Alert Labs in August 2018, an early stage company and pioneer in the IoT space.

Specific technology-related achievements thus far in 2019:

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Cash Flow & Dividends

Operating cash flow for the first half of 2019 was a record $68 million versus a cash use of $19 million in 2018. The Company has targeted cash flow from operations to exceed net income in 2019. Since 2000, Watsco’s operating cash flow was approximately $2.4 billion compared to net income of approximately $2.2 billion, surpassing the Company’s stated goal of generating cash flow in excess of net income.

Watsco has paid cash dividends for 45 consecutive years. Dividends paid during the first half of 2019 increased 19% to $120 million compared to last year. The Company’s philosophy is to share increasing amounts of cash flow with shareholders through higher dividends while maintaining a conservative financial position. In January 2019, we raised our annual dividend 10% to $6.40 per share. Future increases in dividends will be considered in light of investment opportunities, cash flow, general economic conditions and the Company’s overall financial condition.

Adoption of Lease Accounting Standard

Effective January 1, 2019, we adopted the Financial Accounting Standards Board Accounting Standards Update 2016-02, Leases, which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. We have recorded lease right-of-use assets and lease liabilities and presented these amounts separately on our Condensed Consolidated Balance Sheet as of June 30, 2019. The adoption of this standard did not have a material impact on our Condensed Consolidated Results of Operations or Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2019.

Second Quarter Earnings Conference Call Information

Date: July 18, 2019

Time: 10:00 a.m. (EDT)

Webcast: http://investors.watsco.com

Dial-in number: United States (844) 883-3908 / International (412) 317-9254

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 on a “same-store basis” and the presentation of SG&A expenses to exclude the impact of locations opened or acquired over the last 12 months. Information referring to “same-store basis” exclude the effects of locations closed, acquired, or locations opened, unless they are within close geographical proximity to existing locations, during the immediately preceding 12 months. In the analysis of SG&A performance, the costs pertaining to new locations (opened or acquired) during the preceding 12 months are excluded to derive an informative comparison to the prior year periods. 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 U.S. GAAP.

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About Watsco

Watsco is the largest distribution network for heating, air conditioning and refrigeration (HVAC/R) products with locations in the United States, Canada, Mexico and Puerto Rico, and on an export basis to Latin America and the Caribbean. Watsco estimates that over 300,000 contractors and technicians visit or call one of its 585 locations each year to get information, obtain technical support and buy products. HVAC/R products provide comfort to homes and businesses regardless of the outdoor climate. Older systems often operate below today’s government mandated energy efficiency and environmental standards. Watsco has an opportunity to accelerate the replacement of these systems at a scale greater than its competitors as the movement toward reducing energy consumption and its environmental impact continues. This is especially important since heating and cooling accounts for approximately half of the energy consumed in a typical U.S. home. Additional information about Watsco may be found at http://www.watsco.com.

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. Detailed information about these factors and additional important factors can be found in the documents that Watsco files with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements speak only as of the date the statements were made. Watsco assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable law.

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WATSCO, INC.

Condensed Consolidated Results of Operations

(In thousands, except share and per share data)

(Unaudited)

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WATSCO, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

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WATSCO, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

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