COCONUT GROVE, Fla.--(BUSINESS WIRE)--July 20, 2006--Watsco, Inc. (NYSE:WSO), the largest distributor of air conditioning and heating products, today announced record operating results for the second quarter and six months ended June 30, 2006.

Earnings per share for the second quarter increased 27% to a record $1.03 per diluted share with net income increasing by 28% to a record $28.7 million, compared to 81 cents per diluted share on net income of $22.4 million in 2005. During the quarter, revenues grew 16%, or $69 million, to a record $512 million, with revenue growth of 15% on a same-store basis. Gross profit grew 19%, or $21 million, to $132 million with gross profit margin improving 70 basis-points to 25.9%. Operating income advanced 27%, or $10.0 million, to a record $47.2 million with operating margins expanding 80 basis-points to a record 9.2%.

For the first six months of 2006, earnings per share increased 32% to a record $1.50 per diluted share with net income increasing by 32% to a record $41.8 million, compared to $1.14 per diluted share on net income of $31.6 million in the comparable period of 2005. Revenues grew 15%, or $117 million, to a record $906 million, with revenue growth of 14% on a same-store basis. Gross profit grew 17%, or $34 million, to $233 million with gross profit margin advancing 50 basis-points to 25.7%. Operating income increased 30%, or $16.1 million, to a record $69.0 million with operating margins expanding 90 basis-points to a record 7.6%.

Albert H. Nahmad, Watsco's President and Chief Executive Officer, stated: "This quarter's financial performance is the most outstanding in Watsco's history. Strong demand for our products, higher prices related to the launch of new, higher-efficiency air conditioning systems and improved margins combined to produce terrific top and bottom-line performance. New higher-efficiency products have been well-accepted by the market and even more innovative products will be available in the future to provide a greater number of consumer choices to offset increasing energy costs."

Mr. Nahmad added: "Investment continues in building Watsco's network and during the last year we added 23 new locations and expanded product offerings. We are focused on our goal of building the industry's broadest and most effective network available that serves our contractor customers. The potential is huge as Watsco presently enjoys only 7-8% market share of the estimated $25 billion market for our products."

There are an estimated 120 million single-family homes in the United States, most of which have central air conditioning and heating systems. Eventually, these systems will wear out and require repair or replacement. Watsco's focused strategy provides the products, technical solutions and convenience that contractors require to satisfy the needs of homeowners and businesses that depend on the comfort and energy-efficiency provided by HVAC systems.

Watsco will be holding its investor conference call today, July 20, 2006 at 11:00 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 362 locations serving over 38,000 customers in 32 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
                 (In thousands, except per share data)
                              (Unaudited)

                     Quarter                   Six-Months
                      Ended       Percentage     Ended      Percentage
                     June 30,       Change      June 30,      Change
                ------------------ ------  ------------------ ------
                  2006      2005             2006      2005
                --------  --------         --------  --------
Revenues        $512,029  $443,030   16%   $906,336  $788,982   15%
Cost of sales    379,541   331,505          673,768   590,032
                 -------   -------          -------   -------
Gross profit     132,488   111,525   19%    232,568   198,950   17%
                 -------   -------          -------   -------
  Gross profit
   margin           25.9%     25.2%            25.7%     25.2%
                    ----      ----             ----      ----

SG&A expenses     85,324    74,410   15%    163,562   146,026   12%
                 -------   -------          -------   -------
Operating
 income           47,164    37,115   27%     69,006    52,924   30%
                 -------   -------          -------   -------
  Operating
   margin           9.2%      8.4%             7.6%      6.7%
                    ---       ---              ---       ---

Interest
 expense, net      1,120       978   15%      1,919     2,023   (5%)
                 -------   -------          -------   -------
Income before
 income taxes     46,044    36,137   27%     67,087    50,901   32%
Income taxes      17,296    13,731           25,292    19,347
                 -------   -------          -------   -------
   Net income   $ 28,748  $ 22,406   28%   $ 41,795  $ 31,554   32%
                 =======   =======          =======   =======

Earnings per share for Common and Class B common stock:
  Basic         $   1.10  $   0.86   28%   $   1.60  $   1.21   32%
  Diluted       $   1.03  $   0.81   27%   $   1.50  $   1.14   32%

Weighted average Common and Class B common shares
 and equivalent shares used to calculate earnings per share:
   Basic          26,186    26,044           26,154    25,989
   Diluted        27,891    27,771           27,937    27,663

(Note: Information in the attached press release referring to
"same-store basis" excludes the effects of locations acquired or
locations opened or closed during the prior twelve months.)

                 Condensed Consolidated Balance Sheets
                            (In thousands)

                                                  June      December
                                                   30,         31,
                                                  2006        2005
                                               ----------- -----------
                                               (Unaudited)
Cash and cash equivalents                       $   7,204   $  27,650
Accounts receivable, net                          228,723     191,747
Inventories                                       338,198     266,543
Other                                              10,426       8,051
                                                ---------   ---------
  Total current assets                            584,551     493,991
Property and equipment, net                        17,804      17,244
Other                                             168,029     167,496
                                                  -------     -------
  Total assets                                  $ 770,384   $ 678,731
                                                =========   =========

Accounts payable and accrued expenses           $ 203,271   $ 169,219
Current portion of long-term obligations           10,080      10,079
                                                ---------   ---------
  Total current liabilities                       213,351     179,298

Borrowings under revolving credit agreement        60,000      30,000
Long-term notes, net of current portion                 -      10,000
Other long-term obligations, net of current
 portion                                           10,940       8,783
                                                ---------   ---------
  Total liabilities                               284,291     228,081

Shareholders' equity                              486,093     450,650
                                                ---------   ---------
  Total liabilities and shareholders' equity    $ 770,384   $ 678,731
                                                =========   =========

CONTACT: Watsco, Inc., Coconut Grove
Barry S. Logan, 305-714-4102
blogan@watsco.com

SOURCE: Watsco, Inc.