Watsco Achieves Record Sales, Earnings, Net Income and EPS During Second Quarter
14% EPS Growth and 40-Basis Point Operating Margin Expansion
Second Quarter Results
Key performance metrics:
-
14% increase in earnings per share to a record
$2.07 -
10% increase in operating income to a record
$129 million - 40 basis-point expansion in operating margins to 10.1%
- 30 basis-point improvement in gross profit margin
- 10 basis-point reduction in SG&A as a percentage of sales
Sales trends:
-
5% sales growth to a record
$1.28 billion - 7% increase in HVAC equipment (67% of sales), including 8% growth in the U.S.
- 2% increase in other HVAC products (28% of sales)
- 3% growth in commercial refrigeration products (5% of sales)
Mr. Nahmad added: “We believe technology changes progressing in our
industry will accelerate and our industry-specific focus, scale and
leadership position will serve us well. In time, we believe peers and
competitors will realize that
First-Half Results
Key performance metrics:
-
10% increase in earnings per share to a record
$2.80 -
6% increase in operating income to a record
$178 million - 20 basis-point expansion in operating margins to 8.3%
- 20 basis-point improvement in gross profit margin
- Flat SG&A as a percentage of sales
Sales trends:
-
4% sales growth to a record
$2.15 billion - 5% increase in HVAC equipment (66% of sales)
- 1% increase in other HVAC products (29% of sales)
- 4% growth in commercial refrigeration products (5% of sales)
Mr. Nahmad added: “First-half results reflect further investments in technology and additional headcount of approximately 150 customer-facing employees intended to enhance long-term sales growth and market share. We remain optimistic that 2017 will be a record year for our company.”
Acquisition of 35% of
On
Acquisition of Joint Venture Interests
In February 2017, Watsco raised its ownership of Carrier Enterprise
Northeast LLC, also a joint venture with
Technology Strategy
Dividends & Cash Flow
In
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
Conference Call Information
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Time:
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A replay of the conference call will be available on the Company's website.
About
Watsco’s traditional sales channel is the industry’s largest and
currently serves 88,000 contractor businesses through 562 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 June 30, | Six Months Ended June 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Revenues | $1,275,924 | $1,214,435 | $2,148,019 | $2,065,859 | ||||||||
Cost of sales | 965,646 | 922,574 | 1,619,185 | 1,561,551 | ||||||||
Gross profit | 310,278 | 291,861 | 528,834 | 504,308 | ||||||||
Gross profit margin | 24.3 | % | 24.0 | % | 24.6 | % | 24.4 | % | ||||
SG&A expenses (1) | 180,930 | 174,271 | 350,787 | 336,050 | ||||||||
Operating income | 129,348 | 117,590 | 178,047 | 168,258 | ||||||||
Operating margin | 10.1 | % | 9.7 | % | 8.3 | % | 8.1 | % | ||||
Interest expense, net | 1,647 | 1,054 | 2,902 | 2,040 | ||||||||
Income before income taxes | 127,701 | 116,536 | 175,145 | 166,218 | ||||||||
Income taxes | 36,854 | 35,112 | 50,530 | 50,620 | ||||||||
Net income | 90,847 | 81,424 | 124,615 | 115,598 | ||||||||
Less: net income attributable to noncontrolling interest | 17,091 | 16,803 | 24,678 | 25,440 | ||||||||
Net income attributable to Watsco | $73,756 | $64,621 | $99,937 | $90,158 | ||||||||
Diluted earnings per share: | ||||||||||||
Net income attributable to Watsco shareholders | $73,756 | $64,621 | $99,937 | $90,158 | ||||||||
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock | 6,186 | 5,251 | 8,374 | 7,302 | ||||||||
Earnings allocated to Watsco shareholders | $67,570 | $59,370 | $91,563 | $82,856 | ||||||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 32,708,646 | 32,606,336 | 32,694,306 | 32,576,326 | ||||||||
Diluted earnings per share for Common and Class B common stock | $2.07 | $1.82 | $2.80 | $2.54 | ||||||||
(1) Selling, general and administrative expenses. |
||||||||||||
WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) |
||||
June 30, 2017 |
December 31, 2016 | |||
Cash and cash equivalents | $51,034 | $56,010 | ||
Accounts receivable, net | 613,193 | 475,974 | ||
Inventories | 770,012 | 685,011 | ||
Other | 17,502 | 23,161 | ||
Total current assets | 1,451,741 | 1,240,156 | ||
Property and equipment, net | 92,255 | 90,502 | ||
Goodwill, intangibles, net and other | 610,422 | 543,991 | ||
Total assets | $2,154,418 | $1,874,649 | ||
Accounts payable and accrued expenses | $422,556 | $314,688 | ||
Current portion of long-term obligations | 1,880 | 200 | ||
Total current liabilities | 424,436 | 314,888 | ||
Borrowings under revolving credit agreement | 379,300 | 235,294 | ||
Deferred income taxes and other liabilities | 70,322 | 72,719 | ||
Total liabilities | 874,058 | 622,901 | ||
Watsco's shareholders’ equity | 1,018,665 | 1,005,828 | ||
Non-controlling interest | 261,695 | 245,920 | ||
Shareholders’ equity | 1,280,360 | 1,251,748 | ||
Total liabilities and shareholders’ equity | $2,154,418 | $1,874,649 | ||
WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) |
||||||
Six Months Ended June 30, | ||||||
2017 | 2016 | |||||
Cash flow from operating activities: | ||||||
Net income | $124,615 | $115,598 | ||||
Non-cash items | 21,677 | 21,099 | ||||
Changes in working capital | (114,053 | ) | (94,764 | ) | ||
Net cash provided by operating activities | 32,239 | 41,933 | ||||
Cash flow from investing activities: | ||||||
Investment in unconsolidated entity |
(63,600 | ) | - | |||
Capital expenditures, net | (10,237 | ) | (4,994 | ) | ||
Net cash used in investing activities | (73,837 | ) | (4,994 | ) | ||
Cash flow from financing activities: | ||||||
Net proceeds under revolving credit agreement | 144,006 | 22,025 | ||||
Proceeds from non-controlling interest for investment in unconsolidated entity |
12,720 | - | ||||
Dividends on Common and Class B Common stock | (74,835 | ) | (60,164 | ) | ||
Purchase of additional ownership from non-controlling interest | (42,688 | ) | - | |||
Distributions to non-controlling interest | (6,799 | ) | (7,114 | ) | ||
Other | 3,488 | 3,575 | ||||
Net cash provided by (used in) financing activities | 35,892 | (41,678 | ) | |||
Effect of foreign exchange rate changes on cash and cash equivalents | 730 | 54 | ||||
Net decrease in cash and cash equivalents | (4,976 | ) | (4,685 | ) | ||
Cash and cash equivalents at beginning of period | 56,010 | 35,229 | ||||
Cash and cash equivalents at end of period | $51,034 | $30,544 | ||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170725005494/en/
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com