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) October 22, 2003
WATSCO, INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida
(State or Other Jurisdiction of Incorporation)
| 1-5581 | 59-0778222 | |
| (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 October 22, 2003 |
| Item 9. | Regulation FD Disclosure |
On October 22, 2003, Watsco, Inc. (the “Company”) issued a press release reporting its financial results for the quarter and year ended September 30, 2003. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
| Item 12. | Results of Operations and Financial Condition |
On October 22, 2003, the Company issued a press release reporting its financial results for the quarter and year ended September 30, 2003. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
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 October 22, 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: October 22, 2003 | By: | /s/ Barry S. Logan | ||||||
| Barry S. Logan, Vice President – Finance and Secretary | ||||||||
Exhibit Index
| Exhibit Number |
Description | |
| 99.1 | Press Release dated October 22, 2003 issued by Watsco, Inc. | |
Exhibit 99.1
Watsco Reports Record Third-Quarter Results
MIAMI, FLORIDA, October 22, 2003 – Watsco, Inc. (NYSE:WSO) announced today record performance for the third quarter and for the nine-month period ended September 30, 2003.
Third-quarter diluted earnings per share advanced 13% to a record 51 cents compared to 45 cents last year. Net income increased 12% to a record $13.2 million versus $11.8 million a year ago. Operating profit improved 10% to a record $22.3 million for the quarter, with operating margins expanding 20 basis-points to 6.4%. Gross profit was $85.8 million with gross selling margins rising 10 basis-points to 24.6%. Interest expense declined 25% or $.4 million from a 21% reduction in average daily borrowings.
Sales during the third quarter increased 7% to $348.6 million, including a 5% same-store sales increase in residential and light-commercial products and a 25% decline in same-store sales to the manufactured housing market. Sales results also include a contribution of $15.8 million from 52 locations that were acquired during the first half of 2003.
Nine-month diluted earnings per share rose 16% to a record $1.18 compared to $1.02 in 2002. Net income increased 11% to a record $30.5 million versus $27.4 million during the same period last year. Operating profit grew 9% to a record $52.7 million, with operating margins expanding 30 basis-points to 5.6%. Gross profit was $234.0 million, with gross selling margins improving 20 basis-points to 24.7%. Interest expense decreased 21% or $1.1 million from an 18% reduction in average daily borrowings.
Sales for the nine months increased 4% to $946.5 million, including a 4% same-store sales increase in residential and light-commercial products and a 30% decline in same-store sales to the manufactured housing market. Sales results also include a contribution of $25.9 million from the 52 acquired locations.
Cash flow from operations was $26.9 million for the third quarter and $39.1 million for the nine-months ended September 30, 2003. Long-term debt stands at $60.0 million, a 26% decline compared to a year ago. The Company’s debt-to-total capitalization ratio improved to 14% at quarter-end versus 20% a year ago. On October 1, 2003, the Company announced that its Board of Directors had doubled the Company’s regular quarterly cash dividend to 8 cents per share. The dividend is payable on October 31, 2003 to shareholders of record as of October 15, 2003.
“Our record third quarter results were achieved by performance in three key areas: sales growth, enhanced operating margins and lower borrowing costs,” stated Albert Nahmad, Watsco’s President and Chief Executive Officer. “We are pleased with the consistent record earnings growth and strong cash flow thus far in 2003 and expect these trends to continue for the remainder of the year.”
Watsco will be holding its investor conference call today, October 22, 2003 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, Inc. 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 and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within Watsco’s industry and the seasonal nature of sales of Watsco’s products. 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. More detailed information about those factors is contained in Watsco’s filings made from time to time with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K.
WATSCO, INC.
Condensed Consolidated Results of Operations
(In thousands, except per share data)
(Unaudited)
| Quarter-Ended September 30, |
Nine-Months Ended September 30, | |||||||||||
| 2003 |
2002 |
2003 |
2002 | |||||||||
| Revenue |
$ | 348,597 | $ | 326,286 | $ | 946,511 | $ | 914,271 | ||||
| Cost of sales |
262,765 | 246,201 | 712,549 | 689,941 | ||||||||
| Gross profit |
85,832 | 80,085 | 233,962 | 224,330 | ||||||||
| SG&A expenses |
63,550 | 59,800 | 181,250 | 175,976 | ||||||||
| Operating profit |
22,282 | 20,285 | 52,712 | 48,354 | ||||||||
| Interest expense, net |
1,301 | 1,739 | 4,378 | 5,520 | ||||||||
| Income before income taxes |
20,981 | 18,546 | 48,334 | 42,834 | ||||||||
| Income taxes |
7,763 | 6,704 | 17,884 | 15,484 | ||||||||
| Net income |
$ | 13,218 | $ | 11,842 | $ | 30,450 | $ | 27,350 | ||||
| Basic earnings per share |
$ | 0.53 | $ | 0.47 | $ | 1.21 | $ | 1.06 | ||||
| Diluted earnings per share |
$ | 0.51 | $ | 0.45 | $ | 1.18 | $ | 1.02 | ||||
| Weighted average shares used to calculate: |
||||||||||||
| Basic earnings per share |
25,059 | 25,369 | 25,065 | 25,739 | ||||||||
| Diluted earnings per share |
26,077 | 26,367 | 25,889 | 26,912 | ||||||||
Segment Information:
| Quarter Ended Sept. 30, |
Nine Months Ended Sept. 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Distribution |
$ | 341,770 | $ | 317,337 | $ | 926,601 | $ | 888,966 | ||||||||
| Staffing |
6,827 | 8,949 | 19,910 | 25,305 | ||||||||||||
| Total |
$ | 348,597 | $ | 326,286 | $ | 946,511 | $ | 914,271 | ||||||||
| Operating profit (loss): |
||||||||||||||||
| Distribution |
$ | 26,053 | $ | 23,416 | $ | 63,625 | $ | 56,993 | ||||||||
| Staffing |
(440 | ) | (80 | ) | (1,199 | ) | (701 | ) | ||||||||
| Corporate |
(3,331 | ) | (3,051 | ) | (9,714 | ) | (7,938 | ) | ||||||||
| Total |
$ | 22,282 | $ | 20,285 | $ | 52,712 | $ | 48,354 | ||||||||
Watsco, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
| September 30, 2003 (unaudited) |
December 31, 2002 | |||||
| Cash and cash equivalents |
$ | 16,413 | $ | 25,880 | ||
| Accounts receivable, net |
157,209 | 129,396 | ||||
| Inventories |
207,468 | 176,407 | ||||
| Other current assets |
8,527 | 13,878 | ||||
| Total current assets |
389,617 | 345,561 | ||||
| Property and equipment, net |
23,116 | 25,850 | ||||
| Other non-current assets |
135,384 | 132,308 | ||||
| Total assets |
$ | 548,117 | $ | 503,719 | ||
| Accounts payable and accrued liabilities |
$ | 127,826 | $ | 86,180 | ||
| Current portion of long-term obligations |
178 | 272 | ||||
| 128,004 | 86,452 | |||||
| Borrowings under revolving credit agreement |
30,000 | 50,000 | ||||
| Long-term notes |
30,000 | 30,000 | ||||
| Other long-term obligations |
5,720 | 8,066 | ||||
| Total liabilities |
193,724 | 174,518 | ||||
| Shareholders’ equity |
354,393 | 329,201 | ||||
| Total liabilities and shareholders’ equity |
$ | 548,117 | $ | 503,719 | ||