Form 8-K

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 21, 2005

 


 

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) (Zip Code)

 

Registrant’s telephone number, including area code (305) 714-4100

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 


 

Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.02. Results of Operations and Financial Condition

 

On July 21, 2005, the Company issued a press release reporting its financial results for the quarter and six months ended June 30, 2005. 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, as amended, 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.

 

Item 9.01. Financial Statements and Exhibits

 

(c) Exhibits

 

Exhibit
Number


 

Description


99.1   Press release dated July 21, 2005 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 21, 2005   By:  

/s/ Ana M. Menendez


        Ana M. Menendez,
        Chief Financial Officer


Exhibit Index

 

Exhibit
Number


 

Description


99.1   Press release dated July 21, 2005 issued by Watsco, Inc.
Press Release

Exhibit 99.1

 

Watsco Reports Record Second Quarter

Sales, Earnings and Earnings Per Share

 

COCONUT GROVE, FLORIDA, July 21, 2005 – Watsco, Inc. (NYSE:WSO) today announced record operating results for the second quarter and six months ended June 30, 2005. The 2005 results for the quarter and for the six-months include the results of East Coast Metal Distributors, a Sunbelt-based HVAC distributor with 27 locations acquired in January 2005.

 

Earnings per share for the second quarter increased 12% per diluted share to a record 81 cents on net income of $22.4 million, compared to 72 cents per diluted share on net income of $19.4 million in 2004. Revenues grew $70 million, or 19%, to $443 million with HVAC revenues growing 3% on a same-store basis. Operating income advanced $4.9 million, or 15%, to a record $37.1 million with operating margins of 8.4%. On a same-store basis, operating margins were 8.7%, consistent with a year ago.

 

For the first six months of 2005, earnings per share increased 18% per diluted share to a record $1.14 on net income of $31.6 million, compared to 97 cents per diluted share on net income of $26.0 million in 2004. Revenues grew $138 million, or 21%, to $789 million with HVAC revenue growth of 5% on a same-store basis. Operating income increased $8.9 million, or 20%, to a record $52.9 million with operating margins of 6.7%. On a same-store basis, operating margins improved 10 basis-points to 6.9%.

 

Operating cash flow was $23.5 million during the quarter compared to $12.1 million a year ago. For the six month period, the Company used cash of $6.5 million to fund its working capital needs compared to $13.3 million in 2004. Cash flow is expected to grow substantially by the end of 2005 as the second half of the year is typically a strong seasonal period of cash flow. Outstanding debt at June 30, 2005 declined 17% to $50.1 million and the Company’s debt-to-total capitalization ratio improved to 10% from 13% last year.

 

“Our performance in the second quarter is even more satisfying as we reached record levels in sales, earnings and earnings per share in an industry-wide soft market,” commented Albert H. Nahmad, Watsco’s President and Chief Executive Officer. “2005 is off to a terrific start and we are optimistic that we will continue to operate at record levels this year. Longer term, we are also enthusiastically executing our strategy of building a national network that provides the finest service and product availability to HVAC contractors.”

 

Watsco will be holding its investor conference call today, July 21, 2005 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 nation’s largest distributor of air conditioning, heating and refrigeration equipment and related products in the distribution segment of the HVAC industry, currently operating 344 locations serving over 38,000 customers in 31 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.

 

2


WATSCO, INC.

Consolidated Results of Operations

(In thousands, except per share data)

(Unaudited)

 

    

Quarter Ended

June 30,


    Percentage
Change


   

Six-Months Ended

June 30,


    Percentage
Change


 
     2005

    2004

      2005

    2004

   

Revenues

   $ 443,030     $ 372,636     19 %   $ 788,982     $ 651,351     21 %

Cost of sales

     331,505       276,538             590,032       483,806        
    


 


       


 


     

Gross profit

     111,525       96,098     16 %     198,950       167,545     19 %
    


 


       


 


     

Gross profit margin

     25.2 %     25.8 %           25.2 %     25.7 %      
    


 


       


 


     

SG&A expenses

     74,410       63,841     17 %     146,026       123,499     18 %
    


 


       


 


     

Operating income

     37,115       32,257     15 %     52,924       44,046     20 %
    


 


       


 


     

Operating margin

     8.4 %     8.7 %           6.7 %     6.8 %      
    


 


       


 


     

Interest expense, net

     978       1,159     (16 )%     2,023       2,314     (13 )%
    


 


       


 


     

Income before income taxes

     36,137       31,098     16 %     50,901       41,732     22 %

Income tax expense

     13,731       11,711             19,347       15,716        
    


 


       


 


     

Net income

   $ 22,406     $ 19,387     16 %   $ 31,554     $ 26,016     21 %
    


 


       


 


     

Basic earnings per share

   $ 0.86     $ 0.76     13 %   $ 1.21     $ 1.02     19 %

Diluted earnings per share

   $ 0.81     $ 0.72     12 %   $ 1.14     $ 0.97     18 %

Weighted average shares and equivalent shares used to calculate:

                                            

Basic earnings per share

     26,044       25,455             25,989       25,384        

Diluted earnings per share

     27,771       26,920             27,663       26,821        

 

(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 30,

2005


   December 31,
2004


     (Unaudited)     

Cash and cash equivalents

   $ 5,615    $ 85,144

Accounts receivable, net

     208,776      145,213

Inventories

     254,482      218,704

Other

     9,711      8,638
    

  

Total current assets

     478,584      457,699

Property and equipment, net

     16,280      15,093

Other

     168,206      135,497
    

  

Total assets

   $ 663,070    $ 608,289
    

  

Accounts payable and accrued liabilities

   $ 164,698    $ 137,103

Current portion of long-term obligations

     10,081      10,056
    

  

Total current liabilities

     174,779      147,159

Borrowings under revolving credit agreement

     30,000      30,000

Long-term notes, net of current portion

     10,000      20,000

Other long-term obligations

     10,424      8,392
    

  

Total liabilities

     225,203      205,551

Shareholders’ equity

     437,867      402,738
    

  

Total liabilities and shareholders’ equity

   $ 663,070    $ 608,289
    

  

 

3