SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) July 23, 2003
WATSCO, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Florida | 1-5581 | 59-0778222 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
2665 South Bayshore Drive
Suite 901
Coconut Grove, Florida 33133
(Address of Principal Executive Offices, Including Zip Code)
Registrant’s telephone number, including area code (305) 714-4100
N/A
(Former Name or Former Address, if Changed Since Last Report)
| Item 7. | Financial Statements, Pro Forma Financial Information and Exhibits. |
| (c) | Exhibit 99.1—Watsco, Inc. Press Release dated July 23, 2003 |
| Item 9. | Regulation FD Disclosure. |
On July 23, 2003, Watsco, Inc. (the “Company”) issued a press release reporting its financial results for the quarter and year ended June 30, 2003. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
In addition to being furnished pursuant to “Item 9. Regulation FD Disclosure” (“Item 9”) of Form 8-K, the information contained in this Form 8-K is being furnished pursuant to “Item 12. Results of Operations and Financial Condition,” under Item 9 of Form 8-K, as directed by the United States Securities and Exchange Commission in Release No. 34-47583.
The information in this Form 8-K and the Exhibit attached hereto shall be deemed “furnished” and not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any Company filing under the Securities Act of 1933, as amended.
| Exhibit Number |
Description | |
| 99.1 | Press release dated July 23, 2003 issued by Watsco, Inc. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| WATSCO, INC. | ||||||||
| Dated: July 24, 2003 |
By: | /s/ BARRY S. LOGAN | ||||||
| Barry S. Logan Vice President – Finance and Secretary | ||||||||
Exhibit Index
| Exhibit Number |
Exhibit Description | |
| 99.1 | Press release dated July 23, 2003 issued by Watsco, Inc. | |
Exhibit 99.1
Watsco Reports Record Second Quarter Results
MIAMI, FLORIDA, July 23, 2003 – Watsco, Inc. (NYSE:WSO) announced today record operating performance for the second quarter and for the first six months of 2003.
For the quarter, diluted earnings per share improved 13% to a record 52 cents on record net income of $13.4 million. Operating profit advanced 7% to $22.9 million for the quarter, with operating margins expanding 20 basis-points to a record 6.7%. Gross profit increased 4% to $84.3 million with gross selling margins rising 30 basis-points to 24.8%. Interest expense declined 18% or $.3 million from a 16% reduction in average daily borrowings. Shares used in the computation of diluted earnings per share declined 6% primarily reflecting the impact of the Company’s share repurchase program.
Sales during the second quarter increased 3% to $340.5 million, including a 3% same-store sales increase in residential and light-commercial products and a decline in sales to the manufactured housing market. Sales results also include a contribution of $10.2 million from 52 locations that were acquired during the second quarter.
For the six months, diluted earnings per share rose 18% to a record 67 cents on record net income of $17.2 million. Operating profit grew 8% to $30.4 million during the first-half of 2003, with operating margins expanding 30 basis-points to 5.1%. Gross profit increased 3% to $148.1 million with gross selling margins improving 30 basis-points to 24.8%. Interest expense decreased 19% or $.7 million from a 17% reduction in average daily borrowings. Shares used in the computation of diluted earnings per share declined 5% during the period.
Sales for the first six months of 2003 increased 2% to $597.9 million, including a 3% same-store sales increase in residential and light-commercial products and a decline in sales to the manufactured housing market. Sales results also include the contribution from the 52 acquired locations.
Cash flow from operations was $13.2 million for the quarter and $12.2 million year to date and is expected to grow substantially by the end of 2003 as the second half of the year is typically a strong seasonal period for cash flow. Long-term debt at June 30, 2003 declined 18% to $80.0 million compared to $97.7 million a year ago. The Company’s debt-to-total capitalization ratio improved to 19% at June 30, 2003 versus 23% a year ago.
Albert Nahmad, Watsco’s President and Chief Executive Officer stated, “Watsco is operating at record levels of performance in earnings per share and net income with expanded operating margins and continued cash flow during the first-half of 2003. These trends are expected to continue and result in another solid year.”
Watsco is the nation’s largest independent distributor of air conditioning, heating and refrigeration equipment and related products in the distribution segment of the HVAC/R industry, currently operating 324 locations serving customers in 31 states. 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 and regulatory factors. More detailed information about those factors is contained in Watsco’s filings with the Securities and Exchange Commission.
WATSCO, INC.
Condensed Consolidated Results of Operations
(In thousands, except per share data)
(Unaudited)
| Quarter Ended June 30, |
Six Months Ended June 30, | |||||||||||
| 2003 |
2002 |
2003 |
2002 | |||||||||
| Revenue |
$ | 340,516 | $ | 331,170 | $ | 597,914 | $ | 587,985 | ||||
| Cost of sales |
256,172 | 249,900 | 449,784 | 443,740 | ||||||||
| Gross profit |
84,344 | 81,270 | 148,130 | 144,245 | ||||||||
| SG&A expenses |
61,468 | 59,832 | 117,700 | 116,176 | ||||||||
| Operating profit |
22,876 | 21,438 | 30,430 | 28,069 | ||||||||
| Interest expense, net |
1,565 | 1,914 | 3,077 | 3,781 | ||||||||
| Income before income taxes |
21,311 | 19,524 | 27,353 | 24,288 | ||||||||
| Income taxes |
7,885 | 7,058 | 10,121 | 8,780 | ||||||||
| Net income |
$ | 13,426 | $ | 12,466 | $ | 17,232 | $ | 15,508 | ||||
| Basic earnings per share |
$ | 0.54 | $ | 0.48 | $ | 0.69 | $ | 0.60 | ||||
| Diluted earnings per share |
$ | 0.52 | $ | 0.46 | $ | 0.67 | $ | 0.57 | ||||
| Weighted average shares used to calculate: |
||||||||||||
| Basic earnings per share |
25,016 | 26,018 | 25,069 | 25,928 | ||||||||
| Diluted earnings per share |
25,786 | 27,328 | 25,787 | 27,181 | ||||||||
Segment Information:
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| Revenue: | 2003 |
2002 |
2003 |
2002 |
||||||||||||
| Distribution |
$ | 334,099 | $ | 322,837 | $ | 584,831 | $ | 571,629 | ||||||||
| Staffing |
6,417 | 8,333 | 13,083 | 16,356 | ||||||||||||
| Total |
$ | 340,516 | $ | 331,170 | $ | 597,914 | $ | 587,985 | ||||||||
| Operating profit (loss): |
||||||||||||||||
| Distribution |
$ | 26,336 | $ | 24,307 | $ | 37,572 | $ | 33,577 | ||||||||
| Staffing |
(350 | ) | (333 | ) | (759 | ) | (621 | ) | ||||||||
| Corporate |
(3,110 | ) | (2,536 | ) | (6,383 | ) | (4,887 | ) | ||||||||
| Total |
$ | 22,876 | $ | 21,438 | $ | 30,430 | $ | 28,069 | ||||||||
Watsco, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
| June 30, 2003 (unaudited) |
December 31, 2002 | |||||
| Cash and cash equivalents |
$ | 12,304 | $ | 25,880 | ||
| Accounts receivable, net |
168,425 | 129,396 | ||||
| Inventories |
215,487 | 176,407 | ||||
| Other current assets |
9,332 | 13,878 | ||||
| Total current assets |
405,548 | 345,561 | ||||
| Property and equipment, net |
24,182 | 25,850 | ||||
| Other non-current assets |
136,005 | 132,308 | ||||
| Total assets |
$ | 565,735 | $ | 503,719 | ||
| Accounts payable and accrued liabilities |
$ | 135,891 | $ | 86,180 | ||
| Current portion of long-term obligations |
239 | 272 | ||||
| 136,130 | 86,452 | |||||
| Borrowings under revolving credit agreement |
50,000 | 50,000 | ||||
| Long-term notes |
30,000 | 30,000 | ||||
| Other long-term obligations |
6,382 | 8,066 | ||||
| Total liabilities |
222,512 | 174,518 | ||||
| Shareholders’ equity |
343,223 | 329,201 | ||||
| Total liabilities and shareholders’ equity |
$ | 565,735 | $ | 503,719 | ||