Watsco Sets Third Quarter Records for Sales, Earnings, EPS and Operating Margins
Third Quarter Results
Key performance metrics:
-
9% increase in earnings per share to a record
$1.78 -
8% increase in operating income to a record
$119 million - 20 basis-point expansion in operating margins to a record 9.6%
-
5% sales growth to a record
$1.24 billion (6% increase on a same-store basis) - 20 basis-point reduction in SG&A as a percentage of sales to a record low
-
$48 million debt reduction during the quarter - 34% decrease in interest costs from lower borrowings
Sales trends:
- 7% increase in HVAC equipment (67% of sales)
- 2% increase in other HVAC products (28% of sales)
- 7% growth in commercial refrigeration products (5% of sales)
Mr. Nahmad added: “Watsco is generating record cash flow in 2016,
representing a 47% increase over the same period last year. Over the
last 12 months, operating cash flow has been
Nine-Month Results
Key performance metrics:
-
4% increase in earnings per share to a record
$4.32 -
2% increase in operating income to a record
$288 million -
3% sales increase to a record
$3.31 billion -
47% improvement in operating cash flow to a record
$146 million -
$86 million debt reduction versus a year ago (33% decrease in interest costs)
Sales trends:
- 4% increase in HVAC equipment (66% of sales)
- 1% increase in other HVAC products (29% of sales)
- 7% growth in commercial refrigeration products (5% of sales)
Technology Strategy
We have created and launched innovations to enhance the buying experience of our 88,000 customers and the service capabilities at our 568 locations:
- Mobile apps and other on-line tools to enable e-commerce using the industry’s most data-rich catalog of product information.
- Business intelligence and data analytics to enable more insightful decision-making by more than 600 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.
Dividends & Cash Flow
The Company has targeted cash flow from operations to exceed net income
in 2016. From 2000 to 2015, Watsco’s operating cash flow was
approximately
Outlook for 2016
Watsco’s outlook for full-year 2016 diluted earnings per share is within
the range of
Other
Results include income tax benefits of
Conference Call Information
Date:
Time:
Webcast: http://investors.watsco.com
Dial-in number:
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
About
Watsco’s traditional sales channel is through one of its 568 locations
in
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, INC. | ||||||||
Condensed Consolidated Results of Operations | ||||||||
(In thousands, except per share data) | ||||||||
(Unaudited) | ||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||
2016 | 2015 | 2016 | 2015 | |||||
Revenues | $1,241,232 | $1,177,012 | $3,307,091 | $3,209,423 | ||||
Cost of sales | 939,028 | 891,166 | 2,500,579 | 2,424,107 | ||||
Gross profit | 302,204 | 285,846 | 806,512 | 785,316 | ||||
Gross profit margin | 24.3% | 24.3% | 24.4% | 24.5% | ||||
SG&A expenses | 182,904 | 175,166 | 518,954 | 502,769 | ||||
Operating income | 119,300 | 110,680 | 287,558 | 282,547 | ||||
Operating margin | 9.6% | 9.4% | 8.7% | 8.8% | ||||
Interest expense, net | 996 | 1,519 | 3,036 | 4,526 | ||||
Income before income taxes | 118,304 | 109,161 | 284,522 | 278,021 | ||||
Income taxes | 37,786 | 34,517 | 88,406 | 87,836 | ||||
Net income | 80,518 | 74,644 | 196,116 | 190,185 | ||||
Less: net income attributable to non- controlling interest |
17,419 | 16,676 | 42,859 | 43,746 | ||||
Net income attributable to Watsco |
$63,099 | $57,968 | $153,257 | $146,439 | ||||
Diluted earnings per share: | ||||||||
Net income attributable to Watsco shareholders |
$63,099 | $57,968 | $153,257 | $146,439 | ||||
Less: distributed and undistributed earnings allocated to non-vested restricted common stock |
5,078 | 4,592 | 12,383 | 11,505 | ||||
Earnings allocated to Watsco shareholders |
$58,021 | $53,376 | $140,874 | $134,934 | ||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share |
32,650,153 | 32,498,857 | 32,601,115 | 32,469,313 | ||||
Diluted earnings per share for Common and Class B common stock |
$1.78 | $1.64 | $4.32 | $4.16 | ||||
WATSCO, INC. | ||||
Condensed Consolidated Balance Sheets | ||||
(Unaudited, in thousands) | ||||
September 30, | December 31, | |||
2016 | 2015 | |||
Cash and cash equivalents | $35,910 | $35,229 | ||
Accounts receivable, net | 548,000 | 451,079 | ||
Inventories | 739,718 | 673,967 | ||
Other | 25,381 | 20,990 | ||
Total current assets | 1,349,009 | 1,181,265 | ||
Property and equipment, net | 59,729 | 62,715 | ||
Goodwill, intangibles, net and other | 548,859 | 544,462 | ||
Total assets | $1,957,597 | $1,788,442 | ||
Accounts payable and accrued expenses | $357,931 | $270,117 | ||
Current portion of long-term obligations | 196 | 184 | ||
Total current liabilities | 358,127 | 270,301 | ||
Borrowings under revolving credit agreement | 219,400 | 245,300 | ||
Deferred income taxes and other liabilities | 73,736 | 69,120 | ||
Total liabilities | 651,263 | 584,721 | ||
Watsco's shareholders’ equity | 1,039,019 | 957,310 | ||
Non-controlling interest | 267,315 | 246,411 | ||
Shareholders’ equity | 1,306,334 | 1,203,721 | ||
Total liabilities and shareholders’ equity | $1,957,597 | $1,788,442 | ||
WATSCO, INC. | ||||
Condensed Consolidated Statements of Cash Flows | ||||
(Unaudited, in thousands) | ||||
Nine Months Ended September 30, | ||||
2016 | 2015 | |||
Cash flow from operating activities: | ||||
Net income | $196,116 | $190,185 | ||
Non-cash items | 31,670 | 29,577 | ||
Changes in working capital | (81,486) | (120,004) | ||
Net cash provided by operating activities | 146,300 | 99,758 | ||
Cash flow from investing activities: | ||||
Capital expenditures, net | (8,314) | (19,907) | ||
Cash flow from financing activities: | ||||
Dividends on Common and Class B Common stock | (90,298) | (73,840) | ||
Net (repayments) proceeds under revolving credit agreement | (25,900) | 3,327 | ||
Distributions to non-controlling interest | (26,027) | (13,266) | ||
Other | 4,852 | 8,752 | ||
Net cash used in financing activities | (137,373) | (75,027) | ||
Effect of foreign exchange rate changes on cash and cash equivalents |
68 | (766) | ||
Net increase in cash and cash equivalents | 681 | 4,058 | ||
Cash and cash equivalents at beginning of period | 35,229 | 24,447 | ||
Cash and cash equivalents at end of period | $35,910 | $28,505 | ||
View source version on businesswire.com: http://www.businesswire.com/news/home/20161025005432/en/
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com