MIAMI--(BUSINESS WIRE)--Feb. 11, 2016-- Watsco, Inc. (NYSE: WSO) reported record results for the fourth quarter and year ended December 31, 2015.

Fourth Quarter Results

Key performance metrics:

• 9% earnings per share growth to a record 75 cents
• 4% operating income increase to a record $54 million
• 10 basis-point expansion in operating margins to a record 6.0%
• 20 basis-point improvement in gross margin
• 3% sales growth to a record $904 million (4% on same-store basis)

Sales trends:

• 6% HVAC equipment growth (65% of sales), including 8% growth in the U.S.
• Flat sales for other HVAC products (30% of sales)
• 4% increase in commercial refrigeration products (5% of sales)

Albert H. Nahmad, Watsco’s Chairman and CEO stated: “Watsco produced another solid quarter of earnings growth, with expanded operating margins on record sales, market share gains and record cash flow. We experienced consistent growth in both residential and commercial markets, with continued strength in sales of high-efficiency replacement systems. These results are particularly satisfying given the blockbuster results we achieved in the fourth quarter of 2014. Overall, our results represent a nice finish to another excellent year.”

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 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

Key performance metrics:

• 13% earnings per share growth to a record $4.90
• 10% operating income increase to a record $337 million
• 40 basis-point expansion in operating margins to a record 8.2%
• 30 basis-point improvement in gross profit margin
• 20 basis-point reduction in SG&A as a percentage of sales to a record low
• 4% sales growth to a record $4.11 billion (5% on a same-store basis)

Sales trends:

• 7% HVAC equipment growth (66% of sales), including 8% growth in the U.S.
• 2% increase in other HVAC products (29% of sales)
• 2% increase in commercial refrigeration products (5% of sales)

Mr. Nahmad added: “2015 was an outstanding year for Watsco, which we believe highlights the stability and consistency of our company. We are especially proud of achieving record operating margins given the substantial investments we have made in products, technology and people to drive long-term performance and innovation in our business.”

Technology Strategy

Watsco is actively transforming its business into the digital age by investing in scalable platforms for mobile apps, e-commerce, business intelligence and supply chain optimization. Strategic goals are to further strengthen Watsco’s leadership position, accelerate sales and profit growth, increase the speed and convenience of serving customers and to extend the company’s reach into new geographies and sales channels. The full-year 2015 results include an increase of $7 million, or 60%, in technology-related costs (approximately 13 cents per share for the full year and 3 cents per share for the fourth quarter).

Cash Flow & Dividends

Operating cash flow for the year increased 53% to a record $221 or approximately $6.82 per share. For the fourth quarter, operating cash flow increased 18% to a record $122 million. Since 2000, Watsco’s operating cash flow was approximately $1.6 billion compared to net income of approximately $1.5 billion, surpassing the Company’s stated goal of generating cash flow in excess of net income.

Watsco has paid dividends for over 40 consecutive years. The Company’s philosophy is to share increasing amounts of cash flow through higher dividends while maintaining a conservative financial position. Watsco announced a 21% increase in its annual dividend rate to $3.40 per share effective January 2016. Any future increases in dividends will be considered in light of investment opportunities, cash flow, general economic conditions and the company’s overall financial condition.

Conference Call Information

Date: February 11, 2016
Time: 10:00 a.m. (ET)
Webcast: http://investors.watsco.com
Dial-in number: United States (866) 777-2509 / International (412) 317-5413

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 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 the United States (GAAP).

About Watsco

Watsco improves indoor living and working environments with air conditioning and heating solutions that provide comfort regardless of the outdoor climate. There are approximately 89 million central air conditioning and heating systems installed in the United States that have been in service for more than 10 years. 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 our 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.

Watsco’s traditional sales channel is through one of its 566 locations in the United States, Canada, Mexico and Puerto Rico, and on an export basis to Latin America and the Caribbean. This network has been built over the last 25 years and serves 88,000 active customers. Watsco is developing and investing in technologies to enable sales via e-commerce, on-line marketplaces and through the retail sales channel. As the industry leader, we believe that significant growth potential remains given that the marketplace for HVAC/R products at the consumer level is estimated to be $80 billion. 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. Forward-looking statements speak only as of the date the statement was 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. 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.

(1) Diluted earnings per share for the full year of 2015 reflect a 13 cent per share benefit from a 10% greater ownership in Carrier Enterprise LLC, a U.S. joint venture formed with Carrier Corporation in 2009. Watsco increased its ownership in Carrier Enterprise to 80% on July 1, 2014.

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Source: Watsco, Inc.

Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com