Watsco First Quarter EPS Surges 42% to New Record; EPS Climbs to 47 Cents Achieved by 14% Sales Gain & Expanded Operating Margins
COCONUT GROVE, Fla., Apr 24, 2006 (BUSINESS WIRE) -- Watsco, Inc. (NYSE:WSO), the largest distributor of air conditioning and heating products, today announced record operating results for the quarter ended March 31, 2006. The first quarter is historically the seasonal low point of the year. Sales, gross profit and operating profit increases combined to produce record operating margins, net income and earnings per share.
Earnings per share increased 42% to 47 cents per diluted share on net income of $13.0 million, compared to 33 cents per diluted share on net income of $9.1 million in 2005. Revenues grew $48 million, or 14%, to $394 million. Gross profit increased $12.7 million, or 14%, to $100 million with gross profit margins improving 10-basis points. Same-store growth rates for revenue and gross profit were also 14% for the quarter. Operating income increased $6.0 million, or 38%, to $21.8 million with operating margins rising 90 basis points to a record 5.5%. Net interest expense decreased 24% to $.8 million due to lower borrowings.
Albert H. Nahmad, Watsco's President and Chief Executive Officer, stated: "Watsco is off to a great start with double digit revenue increases and expanding margins. This should be another great year and even more exciting is the potential for long-term growth as we continue to find ways to increase our industry market share from its present 7%. We participate in a very large market with an estimated 120 million single-family homes in the United States, most of which have central air conditioning and heating systems that eventually wear out and must be repaired or replaced. We provide the products to repair or replace these systems at a scale greater than anyone else and are in an excellent position to benefit from new energy efficient equipment and a growing focus on indoor air quality."
Mr. Nahmad added, "Watsco is uniquely equipped with the human resources, capital and a proven strategy and will continue building our network of locations to expand our geographic presence and to add convenience to our contractor customers."
On April 3, Watsco announced a 25% increase in quarterly cash dividends to 25 cents per share. Dividends will be paid on April 28 to shareholders of record on April 14. During the quarter, the Company repurchased $3.7 million of its common shares.
On April 13, Watsco appeared once again in the Fortune Magazine list of America's 1,000 largest corporations and was ranked number 903 for the year 2005. Watsco's 29% total compounded return to shareholders over the last ten years was ranked number 26. The return is based on stock appreciation plus cash dividends.
Watsco will be holding its investor conference call today, April 24, 2006 at 10:00 a.m. Eastern Time. Shareholders interested in participating may call (877) 391-0532. Internet users can listen to a live webcast of the conference call on the Investor Relations section of Watsco's website at http://www.watsco.com.
Watsco is the largest distributor of air conditioning, heating and refrigeration equipment and related parts and supplies in the distribution segment of the HVAC industry, currently operating 357 locations serving over 38,000 customers in 31 states. The Company's goal is to build a national network of locations that provide the finest service and product availability for HVAC contractors, assisting and supporting them as they serve the country's homeowners and businesses. Additional information about Watsco may be found on the Internet 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, 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, 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 from time to time with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K.
WATSCO, INC. Consolidated Results of Operations Quarters Ended March 31, 2006 and 2005 (In thousands, except per share data) (Unaudited) Percentage 2006 2005 Change ------------ ------------ ------------ Revenues $ 394,307 $ 345,952 14% Cost of sales 294,227 258,527 ------------ ------------ Gross profit 100,080 87,425 14% Gross profit margin 25.4% 25.3% --------- --------- SG&A expenses 78,238 71,616 9% ------------ ------------ Operating income 21,842 15,809 38% Operating margin 5.5% 4.6% --------- --------- Interest expense, net 799 1,045 (24%) ------------ ------------ Income before income taxes 21,043 14,764 43% Income taxes 7,996 5,616 ------------ ------------ Net income $ 13,047 $ 9,148 43% ============ ============ Earnings per share for Common and Class B Common Stock: Basic $ 0.50 $ 0.35 43% Diluted $ 0.47 $ 0.33 42% Weighted average Common and Class B common shares and equivalent shares used to calculate earnings per share: Basic 26,121 25,935 Diluted 27,984 27,554 Condensed Consolidated Balance Sheets (In thousands) March 31, December 31, 2006 2005 ----------- ------------ (Unaudited) Cash and cash equivalents $ 675 $ 27,650 Accounts receivable, net 186,704 191,747 Inventories 316,718 266,543 Other 13,404 8,051 ----------- ------------ Total current assets 517,501 493,991 Property and equipment, net 17,532 17,244 Other 168,243 167,496 ----------- ------------ Total assets $ 703,276 $ 678,731 =========== ============ Accounts payable and accrued expenses $ 165,048 $ 169,219 Current portion of long-term obligations 10,080 10,079 ----------- ------------ Total current liabilities 175,128 179,298 ----------- ------------ Borrowings under revolving credit agreement 35,000 30,000 Long-term notes, net of current portion 10,000 10,000 Other long-term obligations, net of current portion 9,378 8,783 ----------- ------------ Total liabilities 229,506 228,081 Shareholders' equity 473,770 450,650 ----------- ------------ Total liabilities and shareholders' equity $ 703,276 $ 678,731 =========== ============
SOURCE: Watsco, Inc.
Watsco, Inc., Coconut Grove
Barry S. Logan, 305-714-4102
blogan@watsco.com