Watsco Sets Records for Sales, Net Income, EPS, Cash Flow & Boosts Annual Dividend 21% to $3.40 Per Share
Third Quarter Results
Sales trends:
-
4% growth to a record
$1.18 billion (5% on same-store basis) - 5% growth in HVAC equipment (66% of sales), including 8% growth in the U.S.
- 3% growth in other HVAC products (29% of sales)
- 2% growth in commercial refrigeration products (5% of sales)
Key performance metrics:
-
5% increase in earnings per share to a record
$1.64 -
5% growth in operating income to a record
$111 million - 10 basis-point expansion in operating margins to 9.4%
- 10 basis-point increase in gross profit margin
- Flat SG&A as a percentage of sales
Mr. Nahmad added: “We are also pleased to increase Watsco’s annual
dividend to
Nine-Month Results
Sales trends:
-
5% growth to a record
$3.21 billion - 7% growth in HVAC equipment (66% of sales), including 8% growth in the U.S.
- 2% growth in other HVAC products (29% of sales)
- 2% growth in commercial refrigeration products (5% of sales)
Key performance metrics:
-
14% increase in earnings per share to a record
$4.16 -
11% growth in operating income to a record
$283 million - 50 basis-point expansion in operating margins to a record 8.8%
- 30 basis-point increase in gross profit margin
- 20 basis-point improvement in SG&A as a percentage of sales to a record low
Technology Strategy
Since 2012,
Examples of innovations that
- Mobile apps and other on-line tools to enable e-commerce and establish the industry’s most data-rich catalog of product information.
- Business intelligence and data analytics to enable more insightful decision-making by more than 700 P&L managers across the company.
- Supply chain optimization to improve fill-rates, increase inventory turns and reduce infrastructure costs over the long-term.
- Tools to improve operational efficiency for 7+ million annual customer transactions.
The present annual run-rate for costs associated with these initiatives
is approximately
Cash Flow & Dividends
For the third quarter, operating cash flow was a record
Revised Outlook for 2015
Watsco’s revised outlook for 2015 diluted earnings per share is growth
of 12% to 13%, or approximately
Conference Call Information
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About
Watsco’s traditional sales channel is the sale of products from one of
its 567 locations in
Forward-Looking Statements
This document contains or incorporates by reference statements that are not historical in nature and that are intended to be, and are hereby identified as, “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Statements which are not historical in nature, including the words “anticipate,” “estimate,” “could,” “should,” “may,” “plan,” “seek,” “expect,” “believe,” “intend,” “target,” “will,” “project,” “focused,” “outlook” and variations of these words and negatives thereof and similar expressions are intended to identify forward-looking statements, including statements regarding, among others, (i) economic conditions, (ii) business and acquisition strategies, (iii) potential acquisitions and/or joint ventures, (iv) financing plans and (v) industry, demographic and other trends affecting our financial condition or results of operations. These forward-looking statements are based on management’s current expectations, are not guarantees of future performance and are subject to a number of risks, uncertainties and changes in circumstances, certain of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of several factors, including, but not limited to general economic conditions, competitive factors within the HVAC/R industry, effects of supplier concentration, fluctuations in certain commodity costs, consumer spending, consumer debt levels, new housing starts and completions, capital spending in the commercial construction market, access to liquidity needed for operations, seasonal nature of product sales, weather conditions, insurance coverage risks, federal, state and local regulations impacting our industry and products, prevailing interest rates, foreign currency exchange rate fluctuations, international political risk, cybersecurity risk and the continued viability of our business strategy.
We believe these forward-looking statements are reasonable; however, you
should not place undue reliance on any forward-looking statements, which
are based on current expectations. For additional information regarding
other important factors that may affect our operations and could cause
actual results to vary materially from those anticipated in the
forward-looking statements see the discussion included in Item 1A “Risk
Factors” of our most recent Annual Report on Form 10-K, as well as the
other documents and reports that we file with the
WATSCO, INC. Condensed Consolidated Results of Operations (In thousands, except per share data) (Unaudited) |
|||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 (1) | 2014 | ||||||||||||
Revenues | $ | 1,177,012 | $ | 1,134,999 | $ | 3,209,423 | $ | 3,067,753 | |||||||
Cost of sales | 891,166 | 860,234 | 2,424,107 | 2,325,646 | |||||||||||
Gross profit | 285,846 | 274,765 | 785,316 | 742,107 | |||||||||||
Gross profit margin | 24.3 | % | 24.2 | % | 24.5% | 24.2 | % | ||||||||
SG&A expenses | 175,166 | 169,527 | 502,769 | 488,336 | |||||||||||
Operating income | 110,680 | 105,238 | 282,547 | 253,771 | |||||||||||
Operating margin | 9.4 | % | 9.3 | % | 8.8% | 8.3 | % | ||||||||
Interest expense, net | 1,519 | 1,534 | 4,526 | 3,790 | |||||||||||
Income before income taxes | 109,161 | 103,704 | 278,021 | 249,981 | |||||||||||
Income taxes | 34,517 | 32,573 | 87,836 | 76,062 | |||||||||||
Net income | 74,644 | 71,131 | 190,185 | 173,919 | |||||||||||
Less: net income attributable to non-controlling interest | 16,676 | 16,670 | 43,746 | 46,604 | |||||||||||
Net income attributable to Watsco | $ | 57,968 | $ | 54,461 | $ | 146,439 | $ | 127,315 | |||||||
Diluted earnings per share: | |||||||||||||||
Net income attributable to Watsco shareholders | $ | 57,968 | $ | 54,461 | $ | 146,439 | $ | 127,315 | |||||||
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock | 4,592 | 4,103 | 11,505 | 9,635 | |||||||||||
Earnings allocated to Watsco shareholders | $ | 53,376 | $ | 50,358 | $ | 134,934 | $ | 117,680 | |||||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 32,498,857 | 32,375,939 | 32,469,313 | 32,345,068 | |||||||||||
Diluted earnings per share for Common and Class B common stock | $ | 1.64 | $ | 1.56 | $ | 4.16 | $ | 3.64 |
(1) Diluted earnings per share for the nine-month period in 2015 reflect
a
Note: Reference in this press release to ‘total-shareholder-return’ reflects market appreciation of Watsco’s common stock and dividends.
WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) |
||||||||
September 30, | December 31, | |||||||
2015 | 2014 | |||||||
Cash and cash equivalents | $ | 28,505 | $ | 24,447 | ||||
Accounts receivable, net | 510,004 | 434,234 | ||||||
Inventories | 751,944 | 677,990 | ||||||
Other | 24,041 | 20,664 | ||||||
Total current assets | 1,314,494 | 1,157,335 | ||||||
Property and equipment, net | 63,297 | 53,480 | ||||||
Goodwill, intangibles, net and other | 551,668 | 580,252 | ||||||
Total assets | $ | 1,929,459 | $ | 1,791,067 | ||||
Accounts payable and accrued expenses | $ | 328,502 | $ | 286,853 | ||||
Current portion of long-term obligations | 2,535 | 169 | ||||||
Total current liabilities | 331,037 | 287,022 | ||||||
Borrowings under revolving credit agreement | 304,941 | 303,199 | ||||||
Deferred income taxes and other liabilities | 71,916 | 68,807 | ||||||
Total liabilities | 707,894 | 659,028 | ||||||
Watsco's shareholders’ equity | 955,362 | 883,960 | ||||||
Non-controlling interest | 266,203 | 248,079 | ||||||
Shareholders’ equity | 1,221,565 | 1,132,039 | ||||||
Total liabilities and shareholders’ equity | $ | 1,929,459 | $ | 1,791,067 |
WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) |
||||||||||
Nine Months Ended September 30, | ||||||||||
2015 | 2014 | |||||||||
Cash flow from operating activities: | ||||||||||
Net income | $ | 190,185 | $ | 173,919 | ||||||
Non-cash items | 29,577 | 27,596 | ||||||||
Changes in working capital | (120,004 | ) | (159,796 | ) | ||||||
Net cash provided by operating activities | 99,758 | 41,719 | ||||||||
Cash flow from investing activities: | ||||||||||
Capital expenditures, net | (19,907 | ) | (8,902 | ) | ||||||
Cash flow from financing activities: | ||||||||||
Dividends on Common and Class B Common stock | (73,840 | ) | (48,884 | ) | ||||||
Net proceeds under revolving credit agreement | 3,327 | 122,943 | ||||||||
Distributions to non-controlling interest | (13,266 | ) | (25,817 | ) | ||||||
Purchase of additional ownership from non-controlling interest | - | (87,735 | ) | |||||||
Other | 8,752 | 4,075 | ||||||||
Net cash used in financing activities | (75,027 | ) | (35,418 | ) | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (766 | ) | (186 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 4,058 | (2,787 | ) | |||||||
Cash and cash equivalents at beginning of period | 24,447 | 19,478 | ||||||||
Cash and cash equivalents at end of period | $ | 28,505 | $ | 16,691 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20151027005612/en/
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com