Selling, general and administrative expenses

$ 4,341,955

^[1]

$ 4,220,702

^[1]

$ 4,113,239

Cost of sales

3,276,296

3,186,118

3,105,882

Gross profit

1,065,659

1,034,584

1,007,357

715,671

688,952

670,609

Other income

3,886

Operating income

353,874

345,632

336,748

Interest expense, net

6,363

3,713

5,547

Income before income taxes

347,511

341,919

331,201

Income taxes

90,221

105,936

104,677

Net income

257,290

235,983

226,524

Less: net income attributable to non-controlling interest

49,069

53,173

53,595

Net income attributable to Watsco, Inc.

$ 208,221

$ 182,810

$ 172,929

Earnings per share for Common and Class B common stock:

Basic

$ 5.81

^[2]

$ 5.16

^[2]

$ 4.91

Diluted

$ 5.81

^[2]

$ 5.15

^[2]

$ 4.90

[1]

Sales of residential central air conditioners, heating equipment and parts and supplies are seasonal. Demand related to the residential central air conditioning replacement market is typically highest in the second and third quarters, and demand for heating equipment is usually highest in the fourth quarter. Demand related to the new construction sectors throughout most of the markets is fairly evenly distributed throughout the year except for dependence on housing completions and related weather and economic conditions.

[2]

Quarterly and year-to-date earnings per share are calculated on an individual basis; therefore, the sum of earnings per share amounts for the quarters may not equal earnings per share amounts for the year.

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Net income	$ 257,290	$ 235,983	$ 226,524
Other comprehensive gain (loss), net of tax
Foreign currency translation adjustment	15,993	6,211	(39,378)
Unrealized (loss) gain on cash flow hedging instruments	(702)	(965)	2,713
Reclassification of (gain) loss on cash flow hedging instruments into earnings	(358)	323	(1,993)
Unrealized (loss) gain on available-for-sale securities	(15)	14	(8)
Other comprehensive gain (loss)	14,918	5,583	(38,666)
Comprehensive income	272,208	241,566	187,858
Less: comprehensive income attributable to non-controlling interest	54,678	55,382	38,086
Comprehensive income attributable to Watsco, Inc.	$ 217,530	$ 186,184	$ 149,772

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 80,496	$ 56,010
Accounts receivable, net	478,133	475,974
Inventories	761,314	685,011
Other current assets	17,454	23,161
Total current assets	1,337,397	1,240,156
Property and equipment, net	91,198	90,502
Goodwill	382,729	379,737
Intangible assets, net	161,065	158,564
Other assets	74,488	5,690
Total assets	2,046,877	1,874,649
Current liabilities:
Current portion of other long-term obligations	244	200
Accounts payable	230,476	185,482
Accrued expenses and other current liabilities	185,757	129,206
Total current liabilities	416,477	314,888
Long-term obligations:
Borrowings under revolving credit agreement	21,800	235,294
Other long-term obligations, net of current portion	285	348
Total long-term obligations	22,085	235,642
Deferred income taxes and other liabilities	57,338	72,371
Commitments and contingencies
Watsco, Inc. shareholders' equity:
Preferred stock, $0.50 par value, 10,000,000 shares authorized; no shares issued
Paid-in capital	804,008	592,350
Accumulated other comprehensive loss, net of tax	(34,221)	(43,530)
Retained earnings	594,556	550,482
Treasury stock, at cost, 4,823,988 and 6,322,650 shares of Common stock and 48,263 and 48,263 shares of Class B common stock at December 31, 2017 and 2016, respectively	(87,440)	(114,425)
Total Watsco, Inc. shareholders' equity	1,297,953	1,005,828
Non-controlling interest	253,024	245,920
Total shareholders' equity	1,550,977	1,251,748
Total liabilities and shareholders' equity	2,046,877	1,874,649
Common Stock
Watsco, Inc. shareholders' equity:
Common stock, $0.50 par value	18,412	18,341
Class B Common Stock
Watsco, Inc. shareholders' equity:
Common stock, $0.50 par value	$ 2,638	$ 2,610

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2017	Dec. 31, 2016
Preferred stock, par value	$ 0.50	$ 0.50
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Common Stock
Common stock, par value	$ 0.50	$ 0.50
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares outstanding	36,825,128	36,682,562
Treasury stock, shares	4,823,988	6,322,650
Class B Common Stock
Common stock, par value	$ 0.50	$ 0.50
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares outstanding	5,275,838	5,218,754
Treasury stock, shares	48,263	48,263

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock, Class B Common Stock and Preferred Stock	Paid-In Capital	Accumulated Other Comprehensive Loss	Retained Earnings	Treasury Stock	Non-controlling Interest
Beginning balance at Dec. 31, 2014	$ 1,132,039	$ 20,689	$ 580,564	$ (23,747)	$ 420,879	$ (114,425)	$ 248,079
Beginning balance (in shares) at Dec. 31, 2014		35,006,621
Net income	226,524				172,929		53,595
Other comprehensive gain (loss)	(38,666)			(23,157)			(15,509)
Issuances of non-vested restricted shares of common stock (in shares)		200,479
Issuances of non-vested restricted shares of common stock		$ 100	(100)
Forfeitures of non-vested restricted shares of common stock (in shares)		(5,000)
Forfeitures of non-vested restricted shares of common stock		$ (2)	2
Common stock contribution to 401(k) plan	1,963	$ 9	1,954
Common stock contribution to 401(k) plan (in shares)		18,343
Stock issuances from exercise of stock options and employee stock purchase plan (in shares)		124,262
Stock issuances from exercise of stock options and employee stock purchase plan	8,632	$ 62	8,570
Retirement of common stock (in shares)		(33,212)
Retirement of common stock	(4,140)	$ (17)	(4,123)
Share-based compensation	13,233		13,233
Excess tax benefit from share-based compensation	2,422		2,422
Cash dividends declared and paid on Common and Class B common stock	(98,532)				(98,532)
Distributions to non-controlling interest	(39,754)						(39,754)
Ending balance at Dec. 31, 2015	1,203,721	$ 20,841	602,522	(46,904)	495,276	(114,425)	246,411
Ending balance (in shares) at Dec. 31, 2015		35,311,493
Net income	235,983				182,810		53,173
Other comprehensive gain (loss)	5,583			3,374			2,209
Issuances of non-vested restricted shares of common stock (in shares)		183,144
Issuances of non-vested restricted shares of common stock		$ 92	(92)
Forfeitures of non-vested restricted shares of common stock (in shares)		(26,000)
Forfeitures of non-vested restricted shares of common stock		$ (13)	13
Common stock contribution to 401(k) plan	2,348	$ 10	2,338
Common stock contribution to 401(k) plan (in shares)		20,045
Stock issuances from exercise of stock options and employee stock purchase plan (in shares)		72,482
Stock issuances from exercise of stock options and employee stock purchase plan	5,696	$ 36	5,660
Retirement of common stock (in shares)		(30,761)
Retirement of common stock	(4,018)	$ (15)	(4,003)
Share-based compensation	11,848		11,848
Cash dividends declared and paid on Common and Class B common stock	(127,604)				(127,604)
Decrease in non-controlling interest in Carrier Enterprise II	(42,909)		(25,936)				(16,973)
Distributions to non-controlling interest	(38,900)						(38,900)
Ending balance at Dec. 31, 2016	1,251,748	$ 20,951	592,350	(43,530)	550,482	(114,425)	245,920
Ending balance (in shares) at Dec. 31, 2016		35,530,403
Net income	257,290				208,221		49,069
Other comprehensive gain (loss)	14,918			9,309			5,609
Issuances of non-vested restricted shares of common stock (in shares)		176,899
Issuances of non-vested restricted shares of common stock		$ 88	(88)
Forfeitures of non-vested restricted shares of common stock (in shares)		(10,000)
Forfeitures of non-vested restricted shares of common stock		$ (5)	5
Common stock contribution to 401(k) plan	2,428	$ 8	2,420
Common stock contribution to 401(k) plan (in shares)		16,389
Stock issuances from exercise of stock options and employee stock purchase plan (in shares)		49,166
Stock issuances from exercise of stock options and employee stock purchase plan	5,287	$ 24	5,263
Retirement of common stock (in shares)		(32,804)
Retirement of common stock	(4,717)	$ (16)	(4,701)
Share-based compensation	13,536		13,536
Net proceeds from the sale of Common stock	247,433		220,448			26,985
Net proceeds from the sale of Common stock (in shares)		1,498,662
Cash dividends declared and paid on Common and Class B common stock	(164,147)				(164,147)
Investment in unconsolidated entity	12,720						12,720
Decrease in non-controlling interest in Carrier Enterprise II	(42,688)		(25,225)				(17,463)
Distributions to non-controlling interest	(42,831)						(42,831)
Ending balance at Dec. 31, 2017	$ 1,550,977	$ 21,050	$ 804,008	$ (34,221)	$ 594,556	$ (87,440)	$ 253,024
Ending balance (in shares) at Dec. 31, 2017		37,228,715

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net income	$ 257,290	$ 235,983	$ 226,524
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	22,033	20,066	19,117
Share-based compensation	13,293	12,319	12,596
Deferred income tax (benefit) provision	(10,735)	2,720	4,687
Provision for doubtful accounts	1,991	3,487	2,688
Non-cash contribution to 401(k) plan	2,428	2,348	1,963
Other income from investment in unconsolidated entity	(3,886)
Loss (gain) on sale of property and equipment	115	(189)	(487)
Excess tax benefits from share-based compensation			(2,422)
Changes in operating assets and liabilities:
Accounts receivable	(1,676)	(26,941)	(26,121)
Inventories	(73,403)	(9,729)	(3,652)
Accounts payable and other liabilities	99,956	43,734	(11,760)
Other, net	(886)	(2,067)	(285)
Net cash provided by operating activities	306,520	281,731	222,848
Cash flows from investing activities:
Investment in unconsolidated entity	(63,600)
Capital expenditures	(17,876)	(43,577)	(23,698)
Proceeds from sale of property and equipment	168	744	760
Net cash used in investing activities	(81,308)	(42,833)	(22,938)
Cash flows from financing activities:
Net repayments under revolving credit agreement	(213,494)	(10,006)	(56,256)
Dividends on Common and Class B common stock	(164,147)	(127,604)	(98,532)
Purchase of additional ownership from non-controlling interest	(42,688)	(42,909)
Distributions to non-controlling interest	(42,831)	(38,900)	(39,754)
Repurchases of common stock to satisfy employee withholding tax obligations	(4,674)	(3,975)	(1,465)
Net repayments of other long-term obligations	(19)	(150)	(157)
Excess tax benefits from share-based compensation			2,422
Net proceeds from issuances of common stock	5,244	5,653	5,957
Proceeds from non-controlling interest for investment in unconsolidated entity	12,720
Net proceeds from the sale of Common stock	247,744
Net cash used in financing activities	(202,145)	(217,891)	(187,785)
Effect of foreign exchange rate changes on cash and cash equivalents	1,419	(226)	(1,343)
Net increase in cash and cash equivalents	24,486	20,781	10,782
Cash and cash equivalents at beginning of year	56,010	35,229	24,447
Cash and cash equivalents at end of year	$ 80,496	$ 56,010	$ 35,229

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization, Consolidation and Presentation

Watsco, Inc. (collectively with its subsidiaries, “Watsco,” “we,” “us,” or “our”) was incorporated in Florida in 1956 and is the largest distributor of air conditioning, heating and refrigeration equipment and related parts and supplies (“HVAC/R”) in the HVAC/R distribution industry in North America. At December 31, 2017, we operated from 560 locations in 37 U.S. states, Canada, Mexico, and Puerto Rico with additional market coverage on an export basis to portions of Latin America and the Caribbean.

The consolidated financial statements include the accounts of Watsco, all of its wholly-owned subsidiaries and the accounts of three joint ventures with Carrier Corporation (“Carrier”), in each of which Watsco maintains a controlling interest. All significant intercompany balances and transactions have been eliminated in consolidation.

Foreign Currency Translation and Transactions

The functional currency of our operations in Canada is the Canadian dollar. Foreign currency denominated assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date, and income and expense items are translated at the average exchange rates in effect during the applicable period. The aggregate effect of foreign currency translation is recorded in accumulated other comprehensive loss in our consolidated balance sheets. Our net investment in our Canadian operations is recorded at the historical rate and the resulting foreign currency translation adjustments are included in accumulated other comprehensive loss in our consolidated balance sheets. Gains or losses resulting from transactions denominated in U.S. dollars are recognized in earnings primarily within cost of sales in our consolidated statements of income.

Our operations in Mexico consider their functional currency to be the U.S. dollar because the majority of their transactions are denominated in U.S. dollars. Gains or losses resulting from transactions denominated in Mexican pesos are recognized in earnings primarily within selling, general and administrative expenses in our consolidated statements of income.

Equity Method Investments

Investments in which we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in other assets in our consolidated balance sheets. Under this method of accounting, our proportionate share of the net income or loss of the investee is included in other income in our consolidated statements of income. The excess, if any, of the carrying amount of our investment over our ownership percentage in the underlying net assets of the investee is attributed to certain fair value adjustments with the remaining portion recognized as goodwill.

Reclassifications

Certain reclassifications of prior year amounts have been made to conform to the 2017 presentation. These reclassifications had no effect on net income or earnings per share as previously reported.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Significant estimates include valuation reserves for accounts receivable, inventories and income taxes, reserves related to self-insurance programs and the valuation of goodwill and indefinite lived intangible assets. While we believe that these estimates are reasonable, actual results could differ from such estimates.

Cash Equivalents

All highly liquid instruments purchased with original maturities of three months or less are considered to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable primarily consist of trade receivables due from customers and are stated at the invoiced amount less an allowance for doubtful accounts. An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of customers to make required payments. When preparing these estimates, we consider a number of factors, including the aging of a customer’s account, past transactions with customers, creditworthiness of specific customers, historical trends and other information. Upon determination that an account is uncollectible, the receivable balance is written off. At December 31, 2017 and 2016, the allowance for doubtful accounts totaled $6,049 and $6,169, respectively.

Inventories

Inventories consist of air conditioning, heating and refrigeration equipment and related parts and supplies and are valued at the lower of cost using the weighted-average cost basis and the first-in, first-out methods, or net realizable value. As part of the valuation process, inventories are adjusted to reflect excess, slow-moving and damaged inventories at their estimated net realizable value. Inventory policies are reviewed periodically, reflecting current risks, trends and changes in industry conditions. A reserve for estimated inventory shrinkage is also maintained to consider inventory shortages determined from cycle counts and physical inventories.

Vendor Rebates

We have arrangements with several vendors that provide rebates payable to us when we achieve any of a number of measures, generally related to the volume level of purchases. We account for such rebates as a reduction of inventory until we sell the product, at which time such rebates are reflected as a reduction of cost of sales in our consolidated statements of income. Throughout the year, we estimate the amount of the rebate based on our estimate of purchases to date relative to the purchase levels that mark our progress toward earning the rebates. We continually revise our estimates of earned vendor rebates based on actual purchase levels. At December 31, 2017 and 2016, we had $11,621 and $9,926, respectively, of rebates recorded as a reduction of inventory. Substantially all vendor rebate receivables are collected within three months immediately following the end of the year.

Marketable Securities

Investments in marketable equity securities are classified as available-for-sale and are included in other assets in our consolidated balance sheets. These equity securities are recorded at fair value using the specific identification method with unrealized holding gains and losses, net of deferred taxes, included in accumulated other comprehensive loss within shareholders’ equity. Dividend and interest income are recognized in the statements of income when earned.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is computed using the straight-line method. Buildings and improvements are depreciated or amortized over estimated useful lives ranging from 3-40 years. Leasehold improvements are amortized over the shorter of the respective lease terms or estimated useful lives. Furniture and fixtures are depreciated over estimated useful lives ranging from 5-7 years. Estimated useful lives for other depreciable assets range from 3-10 years.

Goodwill and Intangible Assets

Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. We test goodwill for impairment by first comparing the fair value of our reporting unit to its carrying value. If the fair value is determined to be less than the carrying value, a second step is performed to measure the amount of impairment loss. On January 1, 2018, we performed our annual evaluation of goodwill impairment and determined that the estimated fair value of our reporting unit significantly exceeded its carrying value.

Intangible assets primarily consist of the value of trade names and trademarks, distributor agreements, customer relationships and non-compete agreements. Indefinite lived intangibles not subject to amortization are assessed for impairment at least annually, or more frequently if events or changes in circumstances indicate they may be impaired, by comparing the fair value of the intangible asset to its carrying amount to determine if a write-down to fair value is required. Finite lived intangible assets are amortized using the straight-line method over their respective estimated useful lives.

We perform our annual impairment tests each year and have determined there to be no impairment for any of the periods presented. There were no events or circumstances identified from the date of our assessment that would require an update to our annual impairment tests.

Long-Lived Assets

Long-lived assets, other than goodwill and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability is evaluated by determining whether the amortization of the balance over its remaining life can be recovered through undiscounted future operating cash flows. We measure the impairment loss based on projected discounted cash flows using a discount rate reflecting the average cost of funds and compared to the asset’s carrying value. As of December 31, 2017 there were no such events or circumstances.

Fair Value Measurements

We carry various assets and liabilities at fair value in the consolidated balance sheets. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are classified based on the following fair value hierarchy:


Level 1		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2		Observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active; or model-driven valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3		Unobservable inputs for the asset or liability. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability.

Revenue Recognition

Revenue primarily consists of sales of air conditioning, heating and refrigeration equipment and related parts and supplies and is recorded when shipment of products or delivery of services has occurred. Substantially all customer returns relate to products that are returned under warranty obligations underwritten by manufacturers, effectively mitigating our risk of loss for customer returns. Taxes collected from our customers and remitted to governmental authorities are presented in our consolidated statements of income on a net basis.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2017, 2016 and 2015, were $24,677, $22,242 and $21,150, respectively.

Shipping and Handling

Shipping and handling costs associated with inbound freight are capitalized to inventories and relieved through cost of sales as inventories are sold. Shipping and handling costs associated with the delivery of products is included in selling, general and administrative expenses. Shipping and handling costs included in selling, general and administrative expenses for the years ended December 31, 2017, 2016 and 2015, were $47,670, $42,809 and $41,345, respectively.

Share-Based Compensation

The fair value of stock option and non-vested restricted stock awards are expensed net of estimated forfeitures on a straight-line basis over the vesting period of the awards. Share-based compensation expense is included in selling, general and administrative expenses in our consolidated statements of income. Cash flows from the tax benefits resulting from tax deductions in excess of the compensation expense recognized for those options (windfall tax benefits) were classified as financing cash flows for the year ended December 31, 2015. Tax benefits resulting from tax deductions in excess of share-based compensation expense realized in 2017 and 2016 are recognized in our provision for income taxes in the consolidated statements of income. Tax benefits resulting from tax deductions in excess of share-based compensation expense recognized were credited to paid-in capital in the consolidated balance sheet for the year ended December 31, 2015.

Income Taxes

We record U.S. federal, state and foreign income taxes currently payable, as well as deferred taxes due to temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities reflect the temporary differences between the financial statement and income tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date. We and our eligible subsidiaries file a consolidated U.S. federal income tax return. As income tax returns are generally not filed until well after the closing process for the December 31 financial statements is complete, the amounts recorded at December 31 reflect estimates of what the final amounts will be when the actual income tax returns are filed for that calendar year. In addition, estimates are often required with respect to, among other things, the appropriate state income tax rates to use in the various states that we and our subsidiaries are required to file, the potential utilization of operating loss carryforwards and valuation allowances required, if any, for tax assets that may not be realizable in the future.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

Earnings per Share

We compute earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Shares of our non-vested restricted stock are considered participating securities because these awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest. Under the two-class method, earnings per common share for our Common and Class B common stock is computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted-average number of shares of Common and Class B common stock outstanding for the period. In applying the two-class method, undistributed earnings are allocated to Common stock, Class B common stock and participating securities based on the weighted-average shares outstanding during the period.

Diluted earnings per share reflects the dilutive effect of potential common shares from stock options. The dilutive effect of outstanding stock options is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the exercise of stock options, would be used to purchase common stock at the average market price for the period. The assumed proceeds include the purchase price the optionee pays, the windfall tax benefit that we receive upon assumed exercise and the unrecognized compensation expense at the end of each period.

Derivative Instruments and Hedging Activity

We have used derivative instruments, including forward and option contracts and swaps, to manage our exposure to fluctuations in foreign currency exchange rates and interest rates. The use of these derivative instruments modifies the exposure of these risks with the intent to reduce the risk or cost to us. We use derivative instruments as risk management tools and not for trading purposes. All derivatives, whether designated as hedging relationships or not, are recorded on the balance sheet at fair value. Cash flows from derivative instruments are classified in the consolidated statements of cash flows in the same category as the cash flows from the items subject to the designated hedge or undesignated (economic) hedge relationships. The hedging designation may be classified as one of the following:

No Hedging Designation. The gain or loss on a derivative instrument not designated as an accounting hedging instrument is recognized in earnings within selling, general and administrative expenses.

Cash Flow Hedge. A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability is considered a cash flow hedge. The effective portion of the change in the fair value of a derivative that is designated as a cash flow hedge is recorded in other comprehensive income and reclassified to earnings as a component of cost of sales in the period for which the hedged transaction affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.

Fair Value Hedge. A hedge of a recognized asset or liability or an unrecognized firm commitment is considered a fair value hedge. Fair value hedges, both the effective and ineffective portions of the changes in the fair value of the derivative, along with the gain or loss on the hedged item that is attributable to the hedged risk, are recorded in earnings.

See Note 14 for additional information pertaining to derivative instruments.

New Accounting Standards

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a standard on revenue recognition that provides a single, comprehensive revenue recognition model for all contracts with customers. The standard is principle-based and provides a five-step model to determine the measurement of revenue and timing of when it is recognized. In 2015 and 2016, the FASB issued various updates to this standard. The standard and its related amendments (collectively, the “New Revenue Standard”) are effective for interim and annual reporting periods beginning after December 15, 2017. The New Revenue Standard is effective for us on January 1, 2018. We will adopt the New Revenue Standard using the modified retrospective approach.

The adoption of the New Revenue Standard will not have a material impact on the amount and timing of our revenue recognition. The New Revenue Standard requires ongoing incremental disclosures, including the disaggregation of revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Measurement of Inventory

In July 2015, the FASB issued guidance that simplifies the measurement of inventory by replacing the lower of cost or market test with a lower of cost and net realizable value test. The guidance applies to all inventory that is measured using first-in, first-out or average cost methods. This guidance must be applied prospectively and became effective for interim and annual reporting periods beginning after December 15, 2016. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Classification of Deferred Taxes

In November 2015, the FASB issued guidance that requires deferred tax assets and liabilities to be classified as noncurrent in a classified balance sheet. This guidance may be applied either prospectively or retrospectively and became effective for interim and annual reporting periods beginning after December 15, 2016. The adoption of this guidance on January 1, 2017 using the prospective approach did not have a material impact on our consolidated financial statements.

Financial Instruments

In January 2016, the FASB issued guidance related to certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Most prominent among the changes to the standard is the requirement for changes in the fair value of equity investments, with certain exceptions, to be recognized through net income rather than other comprehensive income. This guidance will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings and is effective for interim and annual periods beginning after December 15, 2017. A cumulative-effect adjustment will capture any previously held unrealized gains and losses related to our equity investments carried at fair value. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Leases

In February 2016, the FASB issued guidance on accounting for leases, which requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. This guidance will be applied using a modified retrospective approach and is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted. We will adopt this guidance on January 1, 2019. While we are still evaluating the impact of adopting this guidance on our consolidated financial statements, including the option to elect certain practical expedients, we expect that, upon adoption, the right-of-use assets and lease liabilities recorded could be material to our consolidated balance sheets. However, we do not expect a material impact on our consolidated statements of income.

Intangibles—Goodwill and Other

In January 2017, the FASB issued guidance to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this updated standard, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity also should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if any. This guidance is effective prospectively and is effective for interim and annual periods beginning after December 15, 2019 with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Stock Compensation

In May 2017, the FASB issued guidance to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This guidance is effective prospectively and is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Derivatives and Hedging

In August 2017, the FASB issued guidance to simplify the accounting for hedging derivatives. This guidance is effective prospectively and is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2017

EARNINGS PER SHARE

2. EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per share for our Common and Class B common stock:


*Years Ended December 31,*	2017		2016		2015
Basic Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	208,221	$	182,810	$	172,929
Less: distributed and undistributed earnings allocated to non-vested restricted common stock		17,430		14,806		13,634

Earnings allocated to Watsco, Inc. shareholders	$	190,791	$	168,004	$	159,295

Weighted-average common shares outstanding—Basic		32,824,947		32,582,385		32,435,961

Basic earnings per share for Common and Class B common stock	$	5.81	$	5.16	$	4.91

Allocation of earnings for Basic:
Common stock	$	175,667	$	154,021	$	146,037
Class B common stock		15,124		13,983		13,258

	$	190,791	$	168,004	$	159,295

Diluted Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	208,221	$	182,810	$	172,929
Less: distributed and undistributed earnings allocated to non-vested restricted common stock		17,427		14,801		13,626

Earnings allocated to Watsco, Inc. shareholders	$	190,794	$	168,009	$	159,303

Weighted-average common shares outstanding—Basic		32,824,947		32,582,385		32,435,961
Effect of dilutive stock options		37,686		34,119		44,395

Weighted-average common shares outstanding—Diluted		32,862,633		32,616,504		32,480,356

Diluted earnings per share for Common and Class B common stock	$	5.81	$	5.15	$	4.90

Diluted earnings per share for our Common stock assumes the conversion of all of our Class B common stock into Common stock as of the beginning of the fiscal year; therefore, no allocation of earnings to Class B common stock is required. At December 31, 2017, 2016 and 2015, our outstanding Class B common stock was convertible into 2,601,996, 2,711,811 and 2,699,710 shares of our Common stock, respectively.

Diluted earnings per share excluded 11,664, 31,839 and 67,014 shares for the years ended December 31, 2017, 2016 and 2015, respectively, related to stock options with an exercise price per share greater than the average market value, resulting in an anti-dilutive effect on diluted earnings per share.

OTHER COMPREHENSIVE GAIN (LOSS)

12 Months Ended

Dec. 31, 2017

OTHER COMPREHENSIVE GAIN (LOSS)

3. OTHER COMPREHENSIVE GAIN (LOSS)

Other comprehensive gain (loss) consists of the foreign currency translation adjustment associated with our Canadian operations’ use of the Canadian dollar as its functional currency and changes in the unrealized gains (losses) on cash flow hedging instruments and available-for-sale securities. The tax effects allocated to each component of other comprehensive loss were as follows:


*Years Ended December 31,*	2017			2016			2015
Foreign currency translation adjustment	$	15,993		$	6,211		$	(39,378	)

Unrealized (loss) gain on cash flow hedging instruments		(961	)		(1,321	)		3,716
Income tax benefit (expense)		259			356			(1,003	)

Unrealized (loss) gain on cash flow hedging instruments, net of tax		(702	)		(965	)		2,713


Reclassification of (gain) loss on cash flow hedging instruments into earnings		(491	)		442			(2,730	)
Income tax expense (benefit)		133			(119	)		737

Reclassification of (gain) loss on cash flow hedging instruments into earnings, net of tax		(358	)		323			(1,993	)


Unrealized gain (loss) on available-for-sale securities		51			27			(12	)
Income tax (expense) benefit		(66	)		(13	)		4

Unrealized (loss) gain on available-for-sale securities, net of tax		(15	)		14			(8	)


Other comprehensive gain (loss)	$	14,918		$	5,583		$	(38,666	)

The changes in each component of accumulated other comprehensive loss, net of tax, were as follows:


*Years Ended December 31,*	2017			2016			2015
Foreign currency translation adjustment:
Beginning balance	$	(43,459	)	$	(47,204	)	$	(23,623	)
Current period other comprehensive gain (loss)		9,960			3,745			(23,581	)

Ending balance		(33,499	)		(43,459	)		(47,204	)

Cash flow hedging instruments:
Beginning balance		215			600			168
Current period other comprehensive (loss) income		(421	)		(579	)		1,628
Less reclassification adjustment		(215	)		194			(1,196	)

Ending balance		(421	)		215			600

Available-for-sale securities:
Beginning balance		(286	)		(300	)		(292	)
Current period other comprehensive (loss) income		(15	)		14			(8	)

Ending balance		(301	)		(286	)		(300	)

Accumulated other comprehensive loss, net of tax	$	(34,221	)	$	(43,530	)	$	(46,904	)

PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2017

PROPERTY AND EQUIPMENT

5. PROPERTY AND EQUIPMENT

Property and equipment, net, consists of:


*December 31,*	2017			2016
Land	$	820		$	820
Buildings and improvements		74,486			71,082
Machinery, vehicles and equipment		76,117			74,640
Furniture and fixtures		15,282			15,090
Computer hardware and software		47,377			42,515

		214,082			204,147
Accumulated depreciation and amortization		(122,884	)		(113,645	)

	$	91,198		$	90,502

Depreciation and amortization expense related to property and equipment included in selling, general and administrative expenses for the years ended December 31, 2017, 2016 and 2015, were $16,770, $14,853 and $13,802, respectively.

DEBT

12 Months Ended

Dec. 31, 2017

DEBT

6. DEBT

We maintain an unsecured, syndicated revolving credit agreement, which we use to fund seasonal working capital needs and for other general corporate purposes, including acquisitions, dividends (if and as declared by our Board of Directors), capital expenditures, stock repurchases and issuances of letters of credit. Effective February 5, 2018, we decreased the borrowing capacity under this credit agreement from $600,000 to $300,000. Included in the credit facility are a $90,000 swingline subfacility, a $10,000 letter of credit subfacility and a $75,000 multicurrency borrowing sublimit. The credit agreement matures on July 1, 2019.

Borrowings under the credit facility bear interest at either LIBOR-based rates plus a spread, which ranges from 87.5 to 250.0 basis-points (LIBOR plus 87.5 basis-points at December 31, 2017), depending on our ratio of total debt to EBITDA, or on rates based on the higher of the Prime rate or the Federal Funds Rate, in each case plus a spread which ranges from 0 to 150.0 basis-points (0 basis-points at December 31, 2017), depending on our ratio of total debt to EBITDA. We pay a variable commitment fee on the unused portion of the commitment under the revolving credit agreement, ranging from 12.5 to 35.0 basis-points (12.5 basis-points at December 31, 2017).

At December 31, 2017 and 2016, $21,800 and $235,294, respectively, were outstanding under the revolving credit agreement. The revolving credit agreement contains customary affirmative and negative covenants, including financial covenants with respect to consolidated leverage and interest coverage ratios, and other customary restrictions. We believe we were in compliance with all covenants at December 31, 2017.

INCOME TAXES

12 Months Ended

Dec. 31, 2017

INCOME TAXES

7. INCOME TAXES

On December 22, 2017, Public Law 115-97 “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” was enacted. This law is commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA”). The TCJA made broad and complex changes to the U.S. tax code including but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018 and requiring a one-time repatriation transition tax on certain undistributed earnings of foreign subsidiaries. The TCJA also put in place new tax laws that will apply prospectively, which include, but are not limited to, generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries and a new provision designed to tax U.S. allocated expenses as well as currently taxing certain global intangible low-taxed income (“GILTI”) of foreign subsidiaries. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. We have not yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future years, or in the period in which that tax was incurred.

U.S. GAAP requires the impact of tax legislation to be recorded in the period of enactment. As a result, our 2017 effective income tax rate reflects a net income tax benefit of $9,955 attributable to the passage of the TCJA. This amount includes an income tax benefit from the revaluation of U.S. deferred income taxes, partially offset by an estimate for income tax expense to record U.S. federal, state and foreign withholding tax on previously undistributed earnings of our foreign subsidiaries. Due to the enactment date and tax complexities of the TCJA, we have not completed the accounting related to these items. In accordance with Staff Accounting Bulletin 118, provisional amounts have been recorded for the U.S. income tax attributable to the TCJA’s deemed repatriation provision and the revaluation of U.S. deferred taxes. These estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations, and state tax conformity to federal tax changes.

The components of income tax expense from our wholly-owned operations and investments and our controlling interest in joint ventures with Carrier are as follows:


*Years Ended December 31,*	2017			2016		2015
U.S. Federal	$	69,079		$	86,719	$	85,585
State		10,643			9,801		9,431
Foreign		10,499			9,416		9,661

	$	90,221		$	105,936	$	104,677


Current	$	100,956		$	103,216	$	99,990
Deferred		(10,735	)		2,720		4,687

	$	90,221		$	105,936	$	104,677

We calculate our income tax expense and our effective tax rate for 100% of income attributable to our wholly-owned operations and for our controlling interest of income attributable to our joint ventures with Carrier, which are primarily taxed as partnerships for income tax purposes.

Following is a reconciliation of the effective income tax rate:


*Years Ended December 31,*	2017			2016			2015
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit and other		2.4			2.3			2.4
Excess tax benefits from share-based compensation		(2.7	)		(1.0	)		—
Tax effects on foreign income		(1.0	)		(0.1	)		(0.3	)
Tax credits and other		(0.6	)		(0.2	)		(0.1	)
Repatriation transition tax		3.0			—			—
Deferred tax impact of enacted tax rate changes		(6.3	)		—			—

Effective income tax rate attributable to Watsco, Inc.		29.8			36.0			37.0
Taxes attributable to non-controlling interest		(3.8	)		(5.0	)		(5.4	)

Effective income tax rate		26.0	%		31.0	%		31.6	%

The following is a summary of the significant components of our net deferred tax liabilities:


*December 31,*	2017			2016
Deferred tax assets:
Share-based compensation	$	18,977		$	26,239
Capitalized inventory costs and inventory reserves		2,107			2,301
Allowance for doubtful accounts		929			1,379
Self-insurance reserves		153			500
Other		2,423			2,227
Net operating loss carryforwards		291			209

		24,880			32,855
Valuation allowance		—			—

Total deferred tax assets		24,880			32,855


Deferred tax liabilities:
Deductible goodwill		(67,246	)		(88,581	)
Depreciation		(5,519	)		(5,883	)
Other		(5,189	)		(1,633	)

Total deferred tax liabilities		(77,954	)		(96,097	)

Net deferred tax liabilities (1)	$	(53,074	)	$	(63,242	)

(1)

At December 31, 2017, net deferred tax liabilities have been included in the consolidated balance sheet in deferred income taxes and other liabilities. At December 31, 2016, net current deferred tax assets and liabilities of $5,485 are included in the consolidated balance sheet in other current assets and net long-term deferred tax assets and liabilities of $68,727 are included in the consolidated balance sheet in deferred income taxes and other liabilities.

Prior to enactment of the TCJA, U.S. income taxes had not been provided on undistributed earnings of our foreign subsidiaries as we had intended to reinvest such earnings permanently outside the U.S. or to repatriate such earnings only when it was tax effective to do so. As a result of the enactment of the TCJA, we have provided an estimate related to the repatriation transition tax and foreign withholding tax on certain undistributed earnings of our foreign subsidiaries at December 31, 2017. Our intent going forward is to indefinitely reinvest undistributed earnings outside of the U.S. or to repatriate the earnings only when it is tax effective to do so.

Valuation allowances are provided to reduce the related deferred income tax assets to an amount which will, more likely than not, be realized. As a result of our assessment of the realization of deferred income tax assets, we have concluded that it is more likely than not that all of our deferred income tax assets will be realized and thus no valuation allowance was necessary at both December 31, 2017 and 2016. At December 31, 2017, there were state net operating loss carryforwards of $7,606, which expire in varying amounts from 2018 through 2037. These amounts are available to offset future taxable income. There were no federal net operating loss carryforwards at December 31, 2017.

We are subject to United States federal income tax, income tax of multiple state jurisdictions and foreign income tax. We are subject to tax audits in the various jurisdictions until the respective statutes of limitations expire. We are no longer subject to United States federal tax examinations for tax years prior to 2014. For the majority of states and foreign jurisdictions, we are no longer subject to tax examinations for tax years prior to 2013.

As of December 31, 2017 and 2016, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $4,225 and $3,695, respectively. Of these totals, $3,457 and $2,573, respectively, (net of the federal benefit received from state positions) represent the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate. Our continuing practice is to recognize penalties within selling, general and administrative expenses and interest related to income tax matters in income tax expense in the consolidated statements of income. As of December 31, 2017 and 2016, the cumulative amount of estimated accrued interest and penalties resulting from such unrecognized tax benefits was $540 and $414, respectively, and is included in deferred income taxes and other liabilities in the accompanying consolidated balance sheets.

The changes in gross unrecognized tax benefits are as follows:


Balance at December 31, 2014	$	3,719
Additions based on tax positions related to the current year		871
Reductions due to lapse of applicable statute of limitations and tax assessments		(1,077	)

Balance at December 31, 2015		3,513
Additions based on tax positions related to the current year		547
Reductions due to lapse of applicable statute of limitations		(365	)

Balance at December 31, 2016		3,695
Additions based on tax positions related to the current year		801
Reductions due to lapse of applicable statute of limitations		(271	)

Balance at December 31, 2017	$	4,225

SHARE-BASED COMPENSATION AND BENEFIT PLANS

12 Months Ended

Dec. 31, 2017

SHARE-BASED COMPENSATION AND BENEFIT PLANS

8. SHARE-BASED COMPENSATION AND BENEFIT PLANS

Share-Based Compensation Plans

We maintain the 2014 Incentive Compensation Plan (the “2014 Plan”) that provides for the award of a broad variety of share-based compensation alternatives such as non-vested restricted stock, non-qualified stock options, incentive stock options, performance awards, dividend equivalents, deferred stock and stock appreciation rights at no less than 100% of the market price on the date the award is granted. To date, awards under the 2014 Plan consist of non-qualified stock options and non-vested restricted stock. The 2014 Plan replaced the Watsco, Inc. Amended and Restated 2001 Incentive Compensation Plan (the “2001 Plan”) upon its expiration in 2014.

Under the 2014 Plan, the number of shares of Common and Class B common stock available for issuance is (i) 2,000,000, plus (ii) 45,421 shares of Common stock or Class B common stock that remained available for grant in connection with awards under the 2001 Plan as of the date our shareholders approved the 2014 Plan plus (iii) shares underlying currently outstanding awards issued under the 2001 Plan, which shares become reissuable under the 2014 Plan to the extent that such underlying shares are not issued due to their forfeiture, expiration, termination or otherwise. A total of 439,534 shares of Common stock, net of cancellations, and 493,522 shares of Class B common stock, had been awarded under the 2014 Plan as of December 31, 2017. As of December 31, 2017, 1,112,365 shares of common stock were reserved for future grants under the 2014 Plan. Options under the 2014 Plan vest over two to four years of service and have contractual terms of five years. Awards of non-vested restricted stock, which are granted at no cost to the employee, vest upon attainment of a specified age, generally toward the end of an employee’s career at age 62 or older. Vesting may be accelerated in certain circumstances prior to the original vesting date.

The 2001 Plan expired during 2014; therefore, no additional options may be granted. There were 12,750 options to exercise common stock outstanding under the 2001 Plan at December 31, 2017. Options under the 2001 Plan vest over two to four years of service and have contractual terms of five years.

The following is a summary of stock option activity under the 2014 Plan and the 2001 Plan as of and for the year ended December 31, 2017:


	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Options outstanding at December 31, 2016		294,250		$	122.80
Granted		179,750			150.35
Exercised		(39,751	)		98.05
Forfeited		(34,166	)		139.40
Expired		(1,250	)		67.25

Options outstanding at December 31, 2017		398,833		$	136.44		3.47	$	13,401

Options exercisable at December 31, 2017		33,919		$	121.65		2.80	$	1,641

The following is a summary of non-vested restricted stock activity as of and for the year ended December 31, 2017:


	Shares			Weighted- Average Grant Date Fair Value
Non-vested restricted stock outstanding at December 31, 2016		2,898,890		$	54.13
Granted		176,899			149.47
Vested		(80,550	)		50.05
Forfeited		(10,000	)		134.71

Non-vested restricted stock outstanding at December 31, 2017		2,985,239		$	51.22

The weighted-average grant date fair value of non-vested restricted stock granted during 2017, 2016 and 2015 was $149.47, $130.01 and $114.55, respectively. The fair value of non-vested restricted stock that vested during 2017, 2016 and 2015 was $11,580, $10,096 and $2,468, respectively.

During 2017, 32,454 shares of Common stock with an aggregate fair market value of $4,664 were withheld as payment in lieu of cash to satisfy tax withholding obligations in connection with the vesting of restricted stock. During 2016, 30,413 shares of Common and Class B common stock with an aggregate fair market value of $3,967 were withheld as payment in lieu of cash to satisfy tax withholding obligations in connection with the vesting of restricted stock. During 2015, 7,206 shares of Common stock with an aggregate fair market value of $889 were withheld as payment in lieu of cash to satisfy tax withholding obligations in connection with the vesting of restricted stock. These shares were retired upon delivery.

Share-Based Compensation Fair Value Assumptions

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing valuation model based on the weighted-average assumptions noted in the table below. The fair value of each stock option award, which is subject to graded vesting, is expensed, net of estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the stock option. We use historical data to estimate stock option forfeitures. The expected term of stock option awards granted represents the period of time that stock option awards granted are expected to be outstanding and was calculated using the simplified method for plain vanilla options, which we believe provides a reasonable estimate of expected life based on our historical data. The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon United States Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award. Expected volatility is based on historical volatility of our stock.

The following table presents the weighted-average assumptions used for stock options granted:


*Years Ended December 31,*	2017			2016			2015
Expected term in years		4.25			4.25			4.25
Risk-free interest rate		1.77	%		1.24	%		1.25	%
Expected volatility		17.41	%		18.65	%		20.96	%
Expected dividend yield		2.82	%		2.54	%		2.29	%
Grant date fair value	$	17.23		$	16.37		$	17.17

Exercise of Stock Options

The total intrinsic value of stock options exercised during 2017, 2016 and 2015 was $2,296, $4,123 and $6,691, respectively. Cash received from the exercise of stock options during 2017, 2016 and 2015 was $3,855, $4,447 and $4,850, respectively. During 2017, 2016 and 2015, 350 shares of Common stock with an aggregate fair market value of $53, 348 shares of Common stock with an aggregate fair market value of $51 and 26,006 shares of Class B common stock with an aggregate fair market value of $3,251, respectively, were withheld as payment in lieu of cash for stock option exercises and related tax withholdings. These shares were retired upon delivery.

Share-Based Compensation Expense

The following table provides information on share-based compensation expense:


*Years Ended December 31,*	2017		2016		2015
Stock options	$	1,451	$	1,149	$	952
Non-vested restricted stock		11,842		11,170		11,644

Share-based compensation expense	$	13,293	$	12,319	$	12,596

At December 31, 2017, there was $2,703 of unrecognized pre-tax compensation expense related to stock options granted under the 2014 Plan and 2001 Plan, which is expected to be recognized over a weighted-average period of approximately 1.8 years. The total fair value of stock options that vested during 2017, 2016 and 2015 was $754, $736 and $856, respectively.

At December 31, 2017, there was $109,297 of unrecognized pre-tax compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of approximately 11 years. Of this amount, approximately $59,000 is related to awards granted to our Chief Executive Officer (“CEO”), of which approximately $11,000 and $48,000 vest in approximately 5 and 9 years upon his attainment of age 82 and 86, respectively. In the event that vesting is accelerated for any circumstance, as defined in the related agreements, the remaining unrecognized share-based compensation expense would be immediately recognized as a charge to earnings with a corresponding tax benefit. At December 31, 2017, we were obligated to issue 42,871 shares of non-vested restricted stock to our CEO that vest in 9 years and 13,779 shares of non-vested restricted stock to our President that vest in 26 years in connection with 2017 performance based incentive compensation.

Employee Stock Purchase Plan

The Watsco, Inc. Fourth Amended and Restated 1996 Qualified Employee Stock Purchase Plan (the “ESPP”) provides for up to 1,500,000 shares of Common stock to be available for purchase by our full-time employees with at least 90 days of service. The ESPP allows participating employees to purchase shares of Common stock at a 5% discount to the fair market value at specified times. During 2017, 2016 and 2015, employees purchased 5,571, 5,956 and 6,463 shares of Common stock at an average price of $144.58, $125.84 and $112.53 per share, respectively. Cash dividends received by the ESPP were reinvested in Common stock and resulted in the issuance of 3,844, 3,442 and 3,183 additional shares during 2017, 2016 and 2015, respectively. We received net proceeds of $1,389, $1,206 and $1,107, respectively, during 2017, 2016 and 2015, for shares of our Common stock purchased under the ESPP. At December 31, 2017, 486,745 shares remained available for purchase under the ESPP.

401(k) Plan

We have a profit sharing retirement plan for our employees that is qualified under Section 401(k) of the Internal Revenue Code. Annual matching contributions are made based on a percentage of eligible employee compensation deferrals. The contribution has historically been made with the issuance of Common stock to the plan on behalf of our employees. For the years ended December 31, 2017, 2016 and 2015, we issued 16,389, 20,045 and 18,343 shares of Common stock, respectively, to the plan, representing the Common stock discretionary matching contribution of $2,428, $2,348 and $1,963, respectively.

INVESTMENT IN UNCONSOLIDATED ENTITY

12 Months Ended

Dec. 31, 2017

INVESTMENT IN UNCONSOLIDATED ENTITY

10. INVESTMENT IN UNCONSOLIDATED ENTITY

On June 21, 2017, our first joint venture with Carrier, Carrier Enterprise, LLC, which we refer to as Carrier Enterprise I, acquired an approximately 35% ownership interest in Russell Sigler, Inc. (“RSI”), an HVAC distributor with annual sales of approximately $650,000, operating from 30 locations in the Western U.S. We have an 80% controlling interest in Carrier Enterprise I, and Carrier has a 20% non-controlling interest. Carrier Enterprise I acquired its ownership interest in RSI for cash consideration of $63,600, of which we contributed $50,880 and Carrier contributed $12,720. Carrier Enterprise I entered into a shareholders agreement (the “Shareholders Agreement”) with RSI and its shareholders. Pursuant to the Shareholders Agreement, RSI’s shareholders have the right to sell, and Carrier Enterprise I has the obligation to purchase, their respective shares of RSI for a purchase price determined based on either book value or a multiple of EBIT, the latter of which Carrier Enterprise I used to calculate the price paid for its investment in RSI. RSI’s shareholders may transfer their respective shares of RSI common stock only to members of the Sigler family or to Carrier Enterprise I, and, at any time from and after the date on which Carrier Enterprise I owns 85% or more of RSI’s outstanding common stock, it has the right, but not the obligation, to purchase from RSI’s shareholders the remaining outstanding shares of RSI common stock. Additionally, Carrier Enterprise I has the right to appoint two of RSI’s six board members. Given Carrier Enterprise I’s 35% voting equity interest in RSI and its right to appoint two out of RSI’s six board members, this investment in RSI is accounted for under the equity method.

GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

GOODWILL AND INTANGIBLE ASSETS

11. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill are as follows:


Balance at December 31, 2015	$	378,310
Foreign currency translation adjustment		1,427

Balance at December 31, 2016		379,737
Foreign currency translation adjustment		2,992

Balance at December 31, 2017	$	382,729

Intangible assets are comprised of the following:


*December 31,*	Estimated Useful Lives		2017			2016
Indefinite lived intangible assets—Trade names, trademarks and distribution rights			$	125,194		$	120,288
Finite lived intangible assets:
Customer relationships		10-15 years		73,053			70,194
Trade name		10 years		1,150			1,150
Non-compete agreements		7 years		—			369
Accumulated amortization				(38,332	)		(33,437	)

Finite lived intangible assets, net				35,871			38,276

			$	161,065		$	158,564

Amortization expense related to finite lived intangible assets included in selling, general and administrative expenses for the years ended December 31, 2017, 2016 and 2015, were $5,263, $5,213 and $5,315, respectively. Annual amortization of finite lived intangible assets for the next five years is expected to approximate the following:


2018	$	4,900
2019	$	4,900
2020	$	4,900
2021	$	4,200
2022	$	3,500

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2017

SHAREHOLDERS' EQUITY

12. SHAREHOLDERS’ EQUITY

Common Stock

Common stock and Class B common stock share equally in earnings and are identical in most other respects except (i) Common stock is entitled to one vote on most matters and each share of Class B common stock is entitled to ten votes; (ii) shareholders of Common stock are entitled to elect 25% of the Board of Directors (rounded up to the nearest whole number) and Class B shareholders are entitled to elect the balance of the Board of Directors; (iii) cash dividends may be paid on Common stock without paying a cash dividend on Class B common stock and no cash dividend may be paid on Class B common stock unless at least an equal cash dividend is paid on Common stock and (iv) Class B common stock is convertible at any time into Common stock on a one-for-one basis at the option of the shareholder.

Preferred Stock

We are authorized to issue preferred stock with such designation, rights and preferences as may be determined from time to time by our Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our Common stock and Class B common stock and, in certain instances, could adversely affect the market price of this stock. We had no preferred stock outstanding at December 31, 2017 or 2016.

At-the-Market Offering Program

On August 23, 2017, we entered into a sales agreement with Robert W. Baird & Co. Inc., which enabled the Company to issue and sell shares of Common stock in one or more negotiated transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), for a maximum aggregate offering amount of up to $250,000 (the “ATM Program”). The offer and sale of our Common stock pursuant to the ATM Program was registered under the Securities Act pursuant to our automatically effective shelf registration statement on Form S-3 (File No. 333-207831).

During 2017, we sold 1,498,662 shares of Common stock under the ATM Program for net proceeds of $247,744. Direct costs of $311 incurred in connection with the offering were charged against the proceeds from the sale of Common stock and reflected as a reduction of paid-in capital. As of December 31, 2017, we had completed the offering of shares under the ATM Program. The net proceeds were primarily used to repay outstanding debt and for general corporate purposes.

Stock Repurchase Plan

In September 1999, our Board of Directors authorized the repurchase, at management’s discretion, of up to 7,500,000 shares of common stock in the open market or via private transactions. Shares repurchased under the program are accounted for using the cost method and result in a reduction of shareholders’ equity. No shares were repurchased during 2017, 2016 or 2015. In aggregate, 6,322,650 shares of Common stock and 48,263 shares of Class B common stock have been repurchased at a cost of $114,425 since the inception of the program. At December 31, 2017, there were 1,129,087 shares remaining authorized for repurchase under the program.

FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2017

FINANCIAL INSTRUMENTS

13. FINANCIAL INSTRUMENTS

Recorded Financial Instruments

Recorded financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, the current portion of long-term obligations, borrowings under our revolving credit agreement and debt instruments included in other long-term obligations. At December 31, 2017 and 2016, the fair values of cash and cash equivalents, accounts receivable, accounts payable and the current portion of long-term obligations approximated their carrying values due to the short-term nature of these instruments.

The fair values of variable rate borrowings under our revolving credit agreement and debt instruments included in long-term obligations also approximate their carrying value based upon interest rates available for similar instruments with consistent terms and remaining maturities.

Off-Balance Sheet Financial Instruments

At both December 31, 2017 and 2016, we were contingently liable under standby letters of credit aggregating $2,430, which are primarily used as collateral to cover any contingency related to additional risk assessments pertaining to our self-insurance programs. Additionally, at December 31, 2017 and 2016, we were contingently liable under various performance bonds aggregating approximately $4,000 and $8,000, respectively, which are used as collateral to cover any contingencies related to our nonperformance under agreements with certain customers. We do not expect that any material losses or obligations will result from the issuance of the standby letters of credit or performance bonds because we expect to meet our obligations under our self-insurance programs and to certain customers in the ordinary course of business. Accordingly, the estimated fair value of these instruments is zero.

Concentrations of Credit Risk

Financial instruments which potentially subject us to concentrations of credit risk consist principally of accounts receivable. Concentrations of credit risk are limited due to the large number of customers comprising the customer base and their dispersion across many different geographical regions. We also have access to credit insurance programs which are used as an additional means to mitigate credit risk.

DERIVATIVES

12 Months Ended

Dec. 31, 2017

DERIVATIVES

14. DERIVATIVES

We enter into foreign currency forward and option contracts to offset the earnings impact that foreign exchange rate fluctuations would otherwise have on certain monetary liabilities that are denominated in nonfunctional currencies.

Cash Flow Hedging Instruments

We enter into foreign currency forward contracts that are designated as cash flow hedges. The settlement of these derivatives results in reclassifications from accumulated other comprehensive loss to earnings for the period in which the settlement of these instruments occurs. The maximum period for which we hedge our cash flow using these instruments is 12 months. Accordingly, at December 31, 2017, all of our open foreign currency forward contracts had maturities of one year or less. The total notional value of our foreign currency exchange contracts designated as cash flow hedges at December 31, 2017 was $29,500, and such contracts have varying terms expiring through September 2018.

The impact from foreign exchange derivative instruments designated as cash flow hedges was as follows:


*Years Ended December 31,*	2017			2016
Loss recorded in accumulated other comprehensive loss	$	(961	)	$	(1,321	)
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	$	(491	)	$	442

At December 31, 2017, we expected an estimated $962 pre-tax loss to be reclassified into earnings to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months.

Derivatives Not Designated as Hedging Instruments

We have also entered into foreign currency forward and option contracts that are either not designated as hedges or did not qualify for hedge accounting. These derivative instruments were effective economic hedges for all of the periods presented. The fair value gains and losses on these contracts are recognized in earnings as a component of selling, general and administrative expenses. The total notional value of our foreign currency exchange contracts not designated as hedging instruments at December 31, 2017 was $11,200, and such contracts have varying terms expiring through August 2018.

We recognized (losses) gains of $(829), $(306) and $2,552 from foreign currency forward and option contracts not designated as hedging instruments in our consolidated statements of income for 2017, 2016 and 2015, respectively.

The following table summarizes the fair value of derivative instruments, which consist solely of foreign exchange contracts, included in other current assets and accrued expenses and other current liabilities in our consolidated balance sheets. See Note 15.


	Asset Derivatives				Liability Derivatives
*December 31,*	2017		2016		2017		2016
Derivatives designated as hedging instruments	$	70	$	227	$	773	$	35
Derivatives not designated as hedging instruments		180		14		184		4

Total derivative instruments	$	250	$	241	$	957	$	39

FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2017

FAIR VALUE MEASUREMENTS

15. FAIR VALUE MEASUREMENTS

The following tables present our assets and liabilities carried at fair value that are measured on a recurring basis:

Total

Fair Value Measurements
at December 31, 2017 Using

Balance Sheet Location

Level 1

Level 2

Level 3

Assets:

Available-for-sale securities

Other assets

332

—

Derivative financial instruments

Other current assets

250

—

250

—

Liabilities:

Derivative financial instruments

Accrued expenses and other current liabilities

957

—

957

—


		Total		Fair Value Measurements at December 31, 2016 Using
	Balance Sheet Location	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale securities	Other assets	$	281	$	281		—		—
Derivative financial instruments	Other current assets	$	241		—	$	241		—
Liabilities:
Derivative financial instruments	Accrued expenses and other current liabilities	$	39		—	$	39		—

The following is a description of the valuation techniques used for these assets and liabilities, as well as the level of input used to measure fair value:

Available-for-sale securities – these investments are exchange-traded equity securities. Fair values for these investments are based on closing stock prices from active markets and are therefore classified within Level 1 of the fair value hierarchy.

Derivative financial instruments – these derivatives are foreign currency forward and option contracts. See Note 14. Fair value is based on observable market inputs, such as forward rates in active markets; therefore, we classify these derivatives within Level 2 of the valuation hierarchy.

There were no transfers in or out of Level 1 and Level 2 during 2017 or 2016.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2017

COMMITMENTS AND CONTINGENCIES

16. COMMITMENTS AND CONTINGENCIES

Litigation, Claims and Assessments

In December 2015, a purported Watsco shareholder, Nelson Gaskins (the “Plaintiff”), filed a derivative lawsuit in the U.S. District Court for the Southern District of Florida (the “Court”) against Watsco’s Board of Directors. The Company was a nominal defendant. The lawsuit alleged breach of fiduciary duties regarding CEO incentive compensation and sought to recover alleged excessive incentive compensation and unspecified damages. The Court dismissed this action, and the Plaintiff filed a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit (the “Appellate Court”). In May 2017, the Appellate Court dismissed the Plaintiff’s appeal and the action with prejudice. Neither the Plaintiff nor the Plaintiff’s lawyers received any payment from, or on behalf of, Watsco or its Directors in connection with this lawsuit and the related appeal.

We are involved in litigation incidental to the operation of our business. We vigorously defend all matters in which we or our subsidiaries are named defendants and, for insurable losses, maintain significant levels of insurance to protect against adverse judgments, claims or assessments that may affect us. Although the adequacy of existing insurance coverage and the outcome of any legal proceedings cannot be predicted with certainty, based on the current information available, we do not believe the ultimate liability associated with any known claims or litigation will have a material adverse effect on our financial condition or results of operations.

Self-Insurance

Self-insurance reserves are maintained relative to company-wide casualty insurance and health benefit programs. The level of exposure from catastrophic events is limited by the purchase of stop-loss and aggregate liability reinsurance coverage. When estimating the self-insurance liabilities and related reserves, management considers a number of factors, which include historical claims experience, demographic factors, severity factors and valuations provided by independent third-party actuaries. Management reviews its assumptions with its independent third-party actuaries to evaluate whether the self-insurance reserves are adequate. If actual claims or adverse development of loss reserves occur and exceed these estimates, additional reserves may be required. Reserves in the amounts of $2,344 and $2,951 at December 31, 2017 and 2016, respectively, were established related to such programs and are included in accrued expenses and other current liabilities in our consolidated balance sheets.

Variable Interest Entity

As of December 31, 2017, in conjunction with our casualty insurance programs, limited equity interests are held in a captive insurance entity. The programs permit us to self-insure a portion of losses, to gain access to a wide array of safety-related services, to pool insurance risks and resources in order to obtain more competitive pricing for administration and reinsurance and to limit risk of loss in any particular year. The entity meets the definition of Variable Interest Entity (“VIE”); however, we do not meet the requirements to include this entity in the consolidated financial statements. The maximum exposure to loss related to our involvement with this entity is limited to approximately $4,200. See “Self-Insurance” above for further information on commitments associated with the insurance programs and Note 13, under the caption “Off-Balance Sheet Financial Instruments,” for further information on standby letters of credit. At December 31, 2017, there were no other entities that met the definition of a VIE.

Operating Leases

We are obligated under various non-cancelable operating lease agreements for real property, equipment and vehicles used in our operations with varying terms through 2028. We are committed to pay a portion of the actual operating expenses under certain of these lease agreements. These operating expenses are not included in the table below. Some of these arrangements have free or escalating rent payment provisions. We recognize rent expense under such arrangements on a straight-line basis over the lease term.

At December 31, 2017, future minimum payments under non-cancelable operating leases over each of the next five years and thereafter were as follows:


2018	$	69,136
2019		51,645
2020		36,127
2021		22,434
2022		12,985
Thereafter		5,824

Total minimum payments	$	198,151

Rental expense for the years ended December 31, 2017, 2016 and 2015, was $84,076, $83,260 and $82,581, respectively.

Purchase Obligations

At December 31, 2017, we were obligated under various non-cancelable purchase orders with our key suppliers for goods aggregating approximately $11,000.

RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2017

RELATED PARTY TRANSACTIONS

17. RELATED PARTY TRANSACTIONS

Purchases from Carrier and its affiliates comprised 62% of all inventory purchases made during 2017, 2016 and 2015. At December 31, 2017 and 2016, approximately $75,000 and $63,000, respectively, was payable to Carrier and its affiliates, net of receivables. Our joint ventures with Carrier also sell HVAC products to Carrier and its affiliates. Revenues in our consolidated statements of income for 2017, 2016 and 2015 included approximately $64,000, $56,000 and $62,000, respectively, of sales to Carrier and its affiliates. We believe these transactions are conducted on terms equivalent to an arm’s-length basis in the ordinary course of business.

A member of our Board of Directors is the Chairman and Chief Executive Officer of Moss & Associates LLC, which serves as general contractor for the remodeling of our Miami headquarters. We paid Moss & Associates LLC $951 and $291 for construction services performed during 2017 and 2016, respectively, and $131 was payable at December 31, 2017.

A member of our Board of Directors is the Senior Chairman of Greenberg Traurig, P.A., which serves as our principal outside counsel and receives customary fees for legal services. During 2017, we paid this firm $475 for services performed and $0 was payable at December 31, 2017.

INFORMATION ABOUT GEOGRAPHIC AREAS

12 Months Ended

Dec. 31, 2017

INFORMATION ABOUT GEOGRAPHIC AREAS

18. INFORMATION ABOUT GEOGRAPHIC AREAS

Our operations are primarily within the United States, including Puerto Rico, Canada and Mexico. Products are also sold from the United States on an export-only basis to portions of Latin America and the Caribbean Basin. The following tables set forth revenues and long-lived assets by geographical area:


*Years Ended December 31,*	2017		2016		2015
Revenues:
United States	$	3,919,684	$	3,813,204	$	3,710,977
Canada		269,603		267,220		263,908
Mexico		152,668		140,278		138,354

Total revenues	$	4,341,955	$	4,220,702	$	4,113,239


*December 31,*	2017		2016
Long-Lived Assets:
United States	$	540,136	$	467,728
Canada		163,944		155,758
Mexico		5,400		5,317

Total long-lived assets	$	709,480	$	628,803

Revenues are attributed to countries based on the location of the store from which the sale occurred. Long-lived assets consist primarily of goodwill and intangible assets, property and equipment, and our investment in an unconsolidated entity.

SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2017

SUBSEQUENT EVENTS

20. SUBSEQUENT EVENTS

On January 2, 2018, our Board of Directors declared a regular quarterly cash dividend of $1.25 per share of Common and Class B common stock that was paid on January 31, 2018 to shareholders of record as of January 16, 2018.

Effective February 5, 2018, we decreased the borrowing capacity under our credit agreement from $600,000 to $300,000. See Note 6.

On February 6, 2018, our Board of Directors approved an increase to the quarterly cash dividend per share of Common and Class B common stock to $1.45 per share from $1.25 per share, beginning with the dividend that will be paid in April 2018.

SELECTED QUARTERLY FINANCIAL DATA

12 Months Ended

Dec. 31, 2017

SELECTED QUARTERLY FINANCIAL DATA

WATSCO, INC. AND SUBSIDIARIES

SELECTED QUARTERLY FINANCIAL DATA

(UNAUDITED)


*(In thousands, except per share data)*	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total
Year Ended December 31, 2017
Revenues (1)	$	872,095	$	1,275,924	$	1,229,591	$	964,345	$	4,341,955
Gross profit	$	218,556	$	310,278	$	295,895	$	240,930	$	1,065,659
Net income attributable to Watsco, Inc.	$	26,181	$	73,756	$	65,029	$	43,255	$	208,221

Earnings per share for Common and Class B common stock (2):
Basic	$	0.71	$	2.07	$	1.82	$	1.19	$	5.81

Diluted	$	0.71	$	2.07	$	1.82	$	1.19	$	5.81

Year Ended December 31, 2016
Revenues (1)	$	851,424	$	1,214,435	$	1,241,232	$	913,611	$	4,220,702
Gross profit	$	212,447	$	291,861	$	302,204	$	228,072	$	1,034,584
Net income attributable to Watsco, Inc.	$	25,537	$	64,621	$	63,099	$	29,553	$	182,810

Earnings per share for Common and Class B common stock (2):
Basic	$	0.71	$	1.82	$	1.78	$	0.81	$	5.16

Diluted	$	0.71	$	1.82	$	1.78	$	0.81	$	5.15

(1)

(2)	Quarterly and year-to-date earnings per share are calculated on an individual basis; therefore, the sum of earnings per share amounts for the quarters may not equal earnings per share amounts for the year.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation

Organization, Consolidation and Presentation

Foreign Currency Translation and Transactions

Foreign Currency Translation and Transactions

Equity Method Investments

Equity Method Investments

Reclassifications

Reclassifications

Certain reclassifications of prior year amounts have been made to conform to the 2017 presentation. These reclassifications had no effect on net income or earnings per share as previously reported.

Use of Estimates

Use of Estimates

Cash Equivalents

Cash Equivalents

All highly liquid instruments purchased with original maturities of three months or less are considered to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Inventories

Inventories

Vendor Rebates

Vendor Rebates

Marketable Securities

Marketable Securities

Property and Equipment

Property and Equipment

Goodwill and Other Intangible Assets

Goodwill and Intangible Assets

Derivative Instruments and Hedging Activity

Long-Lived Assets

Fair Value Measurements

Fair Value Measurements


Level 1		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2		Observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active; or model-driven valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3		Unobservable inputs for the asset or liability. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability.

Revenue Recognition

Revenue Recognition

Advertising Costs

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2017, 2016 and 2015, were $24,677, $22,242 and $21,150, respectively.

Shipping and Handling

Shipping and Handling

Share-Based Compensation

Share-Based Compensation

Income Taxes

Income Taxes

Earnings per Share

Earnings per Share

Derivative Instruments and Hedging Activity

No Hedging Designation. The gain or loss on a derivative instrument not designated as an accounting hedging instrument is recognized in earnings within selling, general and administrative expenses.

See Note 14 for additional information pertaining to derivative instruments.

New Accounting Standards

New Accounting Standards

Revenue Recognition

Measurement of Inventory

Classification of Deferred Taxes

Financial Instruments

Leases

Intangibles—Goodwill and Other

Stock Compensation

Derivatives and Hedging

Self-Insurance

Self-Insurance

EARNINGS PER SHARE (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Basic and Diluted Earnings Per Common Share

The following table presents the calculation of basic and diluted earnings per share for our Common and Class B common stock:


*Years Ended December 31,*	2017		2016		2015
Basic Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	208,221	$	182,810	$	172,929
Less: distributed and undistributed earnings allocated to non-vested restricted common stock		17,430		14,806		13,634

Earnings allocated to Watsco, Inc. shareholders	$	190,791	$	168,004	$	159,295

Weighted-average common shares outstanding—Basic		32,824,947		32,582,385		32,435,961

Basic earnings per share for Common and Class B common stock	$	5.81	$	5.16	$	4.91

Allocation of earnings for Basic:
Common stock	$	175,667	$	154,021	$	146,037
Class B common stock		15,124		13,983		13,258

	$	190,791	$	168,004	$	159,295

Diluted Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	208,221	$	182,810	$	172,929
Less: distributed and undistributed earnings allocated to non-vested restricted common stock		17,427		14,801		13,626

Earnings allocated to Watsco, Inc. shareholders	$	190,794	$	168,009	$	159,303

Weighted-average common shares outstanding—Basic		32,824,947		32,582,385		32,435,961
Effect of dilutive stock options		37,686		34,119		44,395

Weighted-average common shares outstanding—Diluted		32,862,633		32,616,504		32,480,356

Diluted earnings per share for Common and Class B common stock	$	5.81	$	5.15	$	4.90

OTHER COMPREHENSIVE GAIN (LOSS) (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss)

The tax effects allocated to each component of other comprehensive loss were as follows:


*Years Ended December 31,*	2017			2016			2015
Foreign currency translation adjustment	$	15,993		$	6,211		$	(39,378	)

Unrealized (loss) gain on cash flow hedging instruments		(961	)		(1,321	)		3,716
Income tax benefit (expense)		259			356			(1,003	)

Unrealized (loss) gain on cash flow hedging instruments, net of tax		(702	)		(965	)		2,713


Reclassification of (gain) loss on cash flow hedging instruments into earnings		(491	)		442			(2,730	)
Income tax expense (benefit)		133			(119	)		737

Reclassification of (gain) loss on cash flow hedging instruments into earnings, net of tax		(358	)		323			(1,993	)


Unrealized gain (loss) on available-for-sale securities		51			27			(12	)
Income tax (expense) benefit		(66	)		(13	)		4

Unrealized (loss) gain on available-for-sale securities, net of tax		(15	)		14			(8	)


Other comprehensive gain (loss)	$	14,918		$	5,583		$	(38,666	)

Schedule of Accumulated Other Comprehensive Loss

The changes in each component of accumulated other comprehensive loss, net of tax, were as follows:


*Years Ended December 31,*	2017			2016			2015
Foreign currency translation adjustment:
Beginning balance	$	(43,459	)	$	(47,204	)	$	(23,623	)
Current period other comprehensive gain (loss)		9,960			3,745			(23,581	)

Ending balance		(33,499	)		(43,459	)		(47,204	)

Cash flow hedging instruments:
Beginning balance		215			600			168
Current period other comprehensive (loss) income		(421	)		(579	)		1,628
Less reclassification adjustment		(215	)		194			(1,196	)

Ending balance		(421	)		215			600

Available-for-sale securities:
Beginning balance		(286	)		(300	)		(292	)
Current period other comprehensive (loss) income		(15	)		14			(8	)

Ending balance		(301	)		(286	)		(300	)

Accumulated other comprehensive loss, net of tax	$	(34,221	)	$	(43,530	)	$	(46,904	)

PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2017

Property and Equipment, Net

Property and equipment, net, consists of:


*December 31,*	2017			2016
Land	$	820		$	820
Buildings and improvements		74,486			71,082
Machinery, vehicles and equipment		76,117			74,640
Furniture and fixtures		15,282			15,090
Computer hardware and software		47,377			42,515

		214,082			204,147
Accumulated depreciation and amortization		(122,884	)		(113,645	)

	$	91,198		$	90,502

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

Components of Income Tax Expense

The components of income tax expense from our wholly-owned operations and investments and our controlling interest in joint ventures with Carrier are as follows:


*Years Ended December 31,*	2017			2016		2015
U.S. Federal	$	69,079		$	86,719	$	85,585
State		10,643			9,801		9,431
Foreign		10,499			9,416		9,661

	$	90,221		$	105,936	$	104,677


Current	$	100,956		$	103,216	$	99,990
Deferred		(10,735	)		2,720		4,687

	$	90,221		$	105,936	$	104,677

Reconciliation of Effective Income Tax Rate

Following is a reconciliation of the effective income tax rate:


*Years Ended December 31,*	2017			2016			2015
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit and other		2.4			2.3			2.4
Excess tax benefits from share-based compensation		(2.7	)		(1.0	)		—
Tax effects on foreign income		(1.0	)		(0.1	)		(0.3	)
Tax credits and other		(0.6	)		(0.2	)		(0.1	)
Repatriation transition tax		3.0			—			—
Deferred tax impact of enacted tax rate changes		(6.3	)		—			—

Effective income tax rate attributable to Watsco, Inc.		29.8			36.0			37.0
Taxes attributable to non-controlling interest		(3.8	)		(5.0	)		(5.4	)

Effective income tax rate		26.0	%		31.0	%		31.6	%

Significant Components of Net Deferred Tax Liabilities

The following is a summary of the significant components of our net deferred tax liabilities:


*December 31,*	2017			2016
Deferred tax assets:
Share-based compensation	$	18,977		$	26,239
Capitalized inventory costs and inventory reserves		2,107			2,301
Allowance for doubtful accounts		929			1,379
Self-insurance reserves		153			500
Other		2,423			2,227
Net operating loss carryforwards		291			209

		24,880			32,855
Valuation allowance		—			—

Total deferred tax assets		24,880			32,855


Deferred tax liabilities:
Deductible goodwill		(67,246	)		(88,581	)
Depreciation		(5,519	)		(5,883	)
Other		(5,189	)		(1,633	)

Total deferred tax liabilities		(77,954	)		(96,097	)

Net deferred tax liabilities (1)	$	(53,074	)	$	(63,242	)

(1)

Changes in Gross Unrecognized Tax Benefits

The changes in gross unrecognized tax benefits are as follows:


Balance at December 31, 2014	$	3,719
Additions based on tax positions related to the current year		871
Reductions due to lapse of applicable statute of limitations and tax assessments		(1,077	)

Balance at December 31, 2015		3,513
Additions based on tax positions related to the current year		547
Reductions due to lapse of applicable statute of limitations		(365	)

Balance at December 31, 2016		3,695
Additions based on tax positions related to the current year		801
Reductions due to lapse of applicable statute of limitations		(271	)

Balance at December 31, 2017	$	4,225

SHARE-BASED COMPENSATION AND BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Stock Option Activity

The following is a summary of stock option activity under the 2014 Plan and the 2001 Plan as of and for the year ended December 31, 2017:


	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Options outstanding at December 31, 2016		294,250		$	122.80
Granted		179,750			150.35
Exercised		(39,751	)		98.05
Forfeited		(34,166	)		139.40
Expired		(1,250	)		67.25

Options outstanding at December 31, 2017		398,833		$	136.44		3.47	$	13,401

Options exercisable at December 31, 2017		33,919		$	121.65		2.80	$	1,641

Summary of Non-Vested Restricted Stock Activity

The following is a summary of non-vested restricted stock activity as of and for the year ended December 31, 2017:


	Shares			Weighted- Average Grant Date Fair Value
Non-vested restricted stock outstanding at December 31, 2016		2,898,890		$	54.13
Granted		176,899			149.47
Vested		(80,550	)		50.05
Forfeited		(10,000	)		134.71

Non-vested restricted stock outstanding at December 31, 2017		2,985,239		$	51.22

Valuation Assumptions Used for Stock Option Awards

The following table presents the weighted-average assumptions used for stock options granted:


*Years Ended December 31,*	2017			2016			2015
Expected term in years		4.25			4.25			4.25
Risk-free interest rate		1.77	%		1.24	%		1.25	%
Expected volatility		17.41	%		18.65	%		20.96	%
Expected dividend yield		2.82	%		2.54	%		2.29	%
Grant date fair value	$	17.23		$	16.37		$	17.17

Share-Based Compensation Expense

The following table provides information on share-based compensation expense:


*Years Ended December 31,*	2017		2016		2015
Stock options	$	1,451	$	1,149	$	952
Non-vested restricted stock		11,842		11,170		11,644

Share-based compensation expense	$	13,293	$	12,319	$	12,596

GOODWILL AND INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2017

Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill are as follows:


Balance at December 31, 2015	$	378,310
Foreign currency translation adjustment		1,427

Balance at December 31, 2016		379,737
Foreign currency translation adjustment		2,992

Balance at December 31, 2017	$	382,729

Indefinite Lived Intangible Assets

Intangible assets are comprised of the following:


*December 31,*	Estimated Useful Lives		2017			2016
Indefinite lived intangible assets—Trade names, trademarks and distribution rights			$	125,194		$	120,288
Finite lived intangible assets:
Customer relationships		10-15 years		73,053			70,194
Trade name		10 years		1,150			1,150
Non-compete agreements		7 years		—			369
Accumulated amortization				(38,332	)		(33,437	)

Finite lived intangible assets, net				35,871			38,276

			$	161,065		$	158,564

Finite lived intangible assets

Intangible assets are comprised of the following:


*December 31,*	Estimated Useful Lives		2017			2016
Indefinite lived intangible assets—Trade names, trademarks and distribution rights			$	125,194		$	120,288
Finite lived intangible assets:
Customer relationships		10-15 years		73,053			70,194
Trade name		10 years		1,150			1,150
Non-compete agreements		7 years		—			369
Accumulated amortization				(38,332	)		(33,437	)

Finite lived intangible assets, net				35,871			38,276

			$	161,065		$	158,564

Amortization Expense Related to Finite Lived Intangible Assets

Annual amortization of finite lived intangible assets for the next five years is expected to approximate the following:


2018	$	4,900
2019	$	4,900
2020	$	4,900
2021	$	4,200
2022	$	3,500

DERIVATIVES (Tables)

12 Months Ended

Dec. 31, 2017

Impact from Foreign Exchange Derivative Instruments Designated as Cash Flow Hedges

The impact from foreign exchange derivative instruments designated as cash flow hedges was as follows:


*Years Ended December 31,*	2017			2016
Loss recorded in accumulated other comprehensive loss	$	(961	)	$	(1,321	)
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	$	(491	)	$	442

Fair Value of Derivative Instruments and Location in the Balance Sheets


	Asset Derivatives				Liability Derivatives
*December 31,*	2017		2016		2017		2016
Derivatives designated as hedging instruments	$	70	$	227	$	773	$	35
Derivatives not designated as hedging instruments		180		14		184		4

Total derivative instruments	$	250	$	241	$	957	$	39

FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2017

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present our assets and liabilities carried at fair value that are measured on a recurring basis:

Total

Fair Value Measurements
at December 31, 2017 Using

Balance Sheet Location

Level 1

Level 2

Level 3

Assets:

Available-for-sale securities

Other assets

332

—

Derivative financial instruments

Other current assets

250

—

250

—

Liabilities:

Derivative financial instruments

Accrued expenses and other current liabilities

957

—

957

—


		Total		Fair Value Measurements at December 31, 2016 Using
	Balance Sheet Location	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale securities	Other assets	$	281	$	281		—		—
Derivative financial instruments	Other current assets	$	241		—	$	241		—
Liabilities:
Derivative financial instruments	Accrued expenses and other current liabilities	$	39		—	$	39		—

INFORMATION ABOUT GEOGRAPHIC AREAS (Tables)

12 Months Ended

Dec. 31, 2017

Revenues and Long-Lived Assets by Geographical Area

The following tables set forth revenues and long-lived assets by geographical area:


*Years Ended December 31,*	2017		2016		2015
Revenues:
United States	$	3,919,684	$	3,813,204	$	3,710,977
Canada		269,603		267,220		263,908
Mexico		152,668		140,278		138,354

Total revenues	$	4,341,955	$	4,220,702	$	4,113,239


*December 31,*	2017		2016
Long-Lived Assets:
United States	$	540,136	$	467,728
Canada		163,944		155,758
Mexico		5,400		5,317

Total long-lived assets	$	709,480	$	628,803

SELECTED QUARTERLY FINANCIAL DATA (Tables)

12 Months Ended

Dec. 31, 2017

Selected Quarterly Financial Data

WATSCO, INC. AND SUBSIDIARIES

SELECTED QUARTERLY FINANCIAL DATA

(UNAUDITED)


*(In thousands, except per share data)*	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total
Year Ended December 31, 2017
Revenues (1)	$	872,095	$	1,275,924	$	1,229,591	$	964,345	$	4,341,955
Gross profit	$	218,556	$	310,278	$	295,895	$	240,930	$	1,065,659
Net income attributable to Watsco, Inc.	$	26,181	$	73,756	$	65,029	$	43,255	$	208,221

Earnings per share for Common and Class B common stock (2):
Basic	$	0.71	$	2.07	$	1.82	$	1.19	$	5.81

Diluted	$	0.71	$	2.07	$	1.82	$	1.19	$	5.81

Year Ended December 31, 2016
Revenues (1)	$	851,424	$	1,214,435	$	1,241,232	$	913,611	$	4,220,702
Gross profit	$	212,447	$	291,861	$	302,204	$	228,072	$	1,034,584
Net income attributable to Watsco, Inc.	$	25,537	$	64,621	$	63,099	$	29,553	$	182,810

Earnings per share for Common and Class B common stock (2):
Basic	$	0.71	$	1.82	$	1.78	$	0.81	$	5.16

Diluted	$	0.71	$	1.82	$	1.78	$	0.81	$	5.15

(1)

(2)	Quarterly and year-to-date earnings per share are calculated on an individual basis; therefore, the sum of earnings per share amounts for the quarters may not equal earnings per share amounts for the year.

Summary of Significant Accounting Policies - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2017 USD ($) Entity State Store	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Significant Accounting Policies [Line Items]
Number of joint ventures \| Entity	3
Allowance for doubtful accounts	$ 6,049,000	$ 6,169,000
Capitalized vendor rebates	11,621,000	9,926,000
Goodwill and intangible assets impairment	0	0	$ 0
Advertising expense	24,677,000	22,242,000	21,150,000
Shipping and handling costs	$ 47,670,000	$ 42,809,000	$ 41,345,000
Minimum \| Buildings and Improvements
Significant Accounting Policies [Line Items]
Estimated useful lives in years	3 years
Minimum \| Other Depreciable Assets
Significant Accounting Policies [Line Items]
Estimated useful lives in years	3 years
Minimum \| Furniture and Fixtures
Significant Accounting Policies [Line Items]
Estimated useful lives in years	5 years
Maximum \| Buildings and Improvements
Significant Accounting Policies [Line Items]
Estimated useful lives in years	40 years
Maximum \| Other Depreciable Assets
Significant Accounting Policies [Line Items]
Estimated useful lives in years	10 years
Maximum \| Furniture and Fixtures
Significant Accounting Policies [Line Items]
Estimated useful lives in years	7 years
Watsco, Inc.
Significant Accounting Policies [Line Items]
Number of locations from which entity operates \| Store	560
Number of states in which entity operates \| State	37

Schedule of Basic and Diluted Earnings per Common Share (Detail) - USD ($)
$ / shares in Units, $ in Thousands

3 Months Ended

12 Months Ended

Dec. 31, 2017

Sep. 30, 2017

Jun. 30, 2017

Mar. 31, 2017

Dec. 31, 2016

Sep. 30, 2016

Jun. 30, 2016

Mar. 31, 2016

Dec. 31, 2017

Dec. 31, 2016

Dec. 31, 2015

Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]

Net income attributable to Watsco, Inc. shareholders

$ 43,255

$ 65,029

$ 73,756

$ 26,181

$ 29,553

$ 63,099

$ 64,621

$ 25,537

$ 208,221

$ 182,810

$ 172,929

Less: distributed and undistributed earnings allocated to non-vested restricted common stock

17,430

14,806

13,634

Earnings allocated to Watsco, Inc. shareholders-Basic

$ 190,791

$ 168,004

$ 159,295

Weighted-average common shares outstanding-Basic

32,824,947

32,582,385

32,435,961

Basic earnings per share for Common and Class B common stock

$ 1.19

^[1]

$ 1.82

^[1]

$ 2.07

^[1]

$ 0.71

^[1]

$ 0.81

^[1]

$ 1.78

^[1]

$ 1.82

^[1]

$ 0.71

^[1]

$ 5.81

^[1]

$ 5.16

^[1]

$ 4.91

Net income attributable to Watsco, Inc. shareholders

$ 43,255

$ 65,029

$ 73,756

$ 26,181

$ 29,553

$ 63,099

$ 64,621

$ 25,537

$ 208,221

$ 182,810

$ 172,929

Less: distributed and undistributed earnings allocated to non-vested restricted common stock

17,427

14,801

13,626

Earnings allocated to Watsco, Inc. shareholders-Diluted

$ 190,794

$ 168,009

$ 159,303

Weighted-average common shares outstanding-Basic

32,824,947

32,582,385

32,435,961

Effect of dilutive stock options

37,686

34,119

44,395

Weighted-average common shares outstanding-Diluted

32,862,633

32,616,504

32,480,356

Diluted earnings per share for Common and Class B common stock

$ 1.19

^[1]

$ 1.82

^[1]

$ 2.07

^[1]

$ 0.71

^[1]

$ 0.81

^[1]

$ 1.78

^[1]

$ 1.82

^[1]

$ 0.71

^[1]

$ 5.81

^[1]

$ 5.15

^[1]

$ 4.90

Common Stock

Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]

Earnings allocated to Watsco, Inc. shareholders-Basic

$ 175,667

$ 154,021

$ 146,037

Class B Common Stock

Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]

Earnings allocated to Watsco, Inc. shareholders-Basic

$ 15,124

$ 13,983

$ 13,258

[1]	Quarterly and year-to-date earnings per share are calculated on an individual basis; therefore, the sum of earnings per share amounts for the quarters may not equal earnings per share amounts for the year.

Earnings Per Share - Additional Information (Detail) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share [Line Items]
Convertible Class B common stock outstanding	2,601,996	2,711,811	2,699,710
Anti-dilutive stock options excluded from earnings per share	11,664	31,839	67,014

Schedule of Tax Effects Allocated to Each Component of Other Comprehensive Gain (Loss) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Components Of Other Comprehensive Income Loss [Line Items]
Foreign currency translation adjustment	$ 15,993	$ 6,211	$ (39,378)
Unrealized (loss) gain on cash flow hedging instruments	(961)	(1,321)	3,716
Income tax benefit (expense)	259	356	(1,003)
Unrealized (loss) gain on cash flow hedging instruments, net of tax	(702)	(965)	2,713
Reclassification of (gain) loss on cash flow hedging instruments into earnings	(491)	442	(2,730)
Income tax expense (benefit)	133	(119)	737
Reclassification of (gain) loss on cash flow hedging instruments into earnings, net of tax	(358)	323	(1,993)
Unrealized gain (loss) on available-for-sale securities	51	27	(12)
Income tax (expense) benefit	(66)	(13)	4
Unrealized (loss) gain on available-for-sale securities, net of tax	(15)	14	(8)
Other comprehensive gain (loss)	$ 14,918	$ 5,583	$ (38,666)

Schedule of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (43,530)	$ (46,904)
Ending balance	(34,221)	(43,530)	$ (46,904)
Foreign Currency Translation Adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(43,459)	(47,204)	(23,623)
Current period other comprehensive (loss) income	9,960	3,745	(23,581)
Ending balance	(33,499)	(43,459)	(47,204)
Cash Flow Hedging Instruments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	215	600	168
Current period other comprehensive (loss) income	(421)	(579)	1,628
Less reclassification adjustment	(215)	194	(1,196)
Ending balance	(421)	215	600
Available-for-sale Securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(286)	(300)	(292)
Current period other comprehensive (loss) income	(15)	14	(8)
Ending balance	$ (301)	$ (286)	$ (300)

Supplier Concentration - Additional Information (Detail) - Supplier Concentration Risk - Vendor	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Concentration Risk [Line Items]
Number of key suppliers	10
Cost of Goods, Total
Concentration Risk [Line Items]
Percentage of purchases from key suppliers	84.00%	85.00%	84.00%
Carrier and Its Affiliates \| Cost of Goods, Total
Concentration Risk [Line Items]
Percentage of purchases from key suppliers	62.00%	62.00%	62.00%

Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 214,082	$ 204,147
Accumulated depreciation and amortization	(122,884)	(113,645)
Property and equipment, net	91,198	90,502
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	820	820
Buildings and Improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	74,486	71,082
Machinery, Vehicles and Equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	76,117	74,640
Furniture and Fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	15,282	15,090
Computer Hardware and Software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 47,377	$ 42,515

Debt - Additional Information (Detail) - USD ($)	12 Months Ended
Debt - Additional Information (Detail) - USD ($)	Dec. 31, 2017	Feb. 05, 2018	Dec. 31, 2016
Debt Instrument [Line Items]
Revolving credit agreement maturity date	Jul. 01, 2019
Revolving credit agreement maximum borrowing capacity	$ 600,000,000
Commitment fee percentage on unused portion of the commitment	0.125%
Borrowings under revolving credit agreement	$ 21,800,000		$ 235,294,000
Swingline Subfacility
Debt Instrument [Line Items]
Revolving credit agreement maximum borrowing capacity	90,000,000
Multicurrency Borrowing Sublimit
Debt Instrument [Line Items]
Revolving credit agreement maximum borrowing capacity	75,000,000
Letter of Credit
Debt Instrument [Line Items]
Revolving credit agreement maximum borrowing capacity	$ 10,000,000
Subsequent Event
Debt Instrument [Line Items]
Revolving credit agreement maximum borrowing capacity		$ 300,000,000
Minimum
Debt Instrument [Line Items]
Commitment fee percentage on unused portion of the commitment	0.125%
Maximum
Debt Instrument [Line Items]
Commitment fee percentage on unused portion of the commitment	0.35%
London Interbank Offer Rate
Debt Instrument [Line Items]
Basis spread	0.875%
London Interbank Offer Rate \| Minimum
Debt Instrument [Line Items]
Basis spread	0.875%
London Interbank Offer Rate \| Maximum
Debt Instrument [Line Items]
Basis spread	2.50%
Prime Rate
Debt Instrument [Line Items]
Basis spread	0.00%
Prime Rate \| Minimum
Debt Instrument [Line Items]
Basis spread	0.00%
Prime Rate \| Maximum
Debt Instrument [Line Items]
Basis spread	1.50%

Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Line Items]
U.S. federal statutory rate		35.00%	35.00%	35.00%
Net income tax benefit attributable to passage of the TCJA		$ 9,955
Percentage of income attributable to wholly-owned operations and investments for which income tax expense and effective tax rate calculated		100.00%
Valuation allowance		$ 0	$ 0
Gross unrecognized tax benefits		4,225	3,695	$ 3,513	$ 3,719
Unrecognized tax benefits that, if recognized, would affect the effective tax rate		3,457	2,573
Estimated accrued interest and penalties resulting from unrecognized tax benefits		$ 540	$ 414
Scenario, Forecast
Income Taxes [Line Items]
U.S. federal statutory rate	21.00%
Minimum
Income Taxes [Line Items]
State and other net operating loss carry forwards expiration date		2018
Maximum
Income Taxes [Line Items]
State and other net operating loss carry forwards expiration date		2037
State and other
Income Taxes [Line Items]
Net operating loss carry forwards		$ 7,606
Federal
Income Taxes [Line Items]
Net operating loss carry forwards		$ 0

Components of Income Tax Expense (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Components Of Income Tax Expense Benefit [Line Items]
U.S. Federal	$ 69,079	$ 86,719	$ 85,585
State	10,643	9,801	9,431
Foreign	10,499	9,416	9,661
Income tax expense	90,221	105,936	104,677
Current	100,956	103,216	99,990
Deferred	(10,735)	2,720	4,687
Income tax expense	$ 90,221	$ 105,936	$ 104,677

Reconciliation of Effective Income Tax Rate (Detail)	12 Months Ended
Reconciliation of Effective Income Tax Rate (Detail)	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of Effective Income Tax Rate [Line Items]
U.S. federal statutory rate	35.00%	35.00%	35.00%
State income taxes, net of federal benefit and other	2.40%	2.30%	2.40%
Excess tax benefits from share-based compensation	(2.70%)	(1.00%)
Tax effects on foreign income	(1.00%)	(0.10%)	(0.30%)
Tax credits and other	(0.60%)	(0.20%)	(0.10%)
Repatriation transition tax	3.00%
Deferred tax impact of enacted tax rate changes	(6.30%)
Effective income tax rate attributable to Watsco, Inc.	29.80%	36.00%	37.00%
Taxes attributable to non-controlling interest	(3.80%)	(5.00%)	(5.40%)
Effective income tax rate	26.00%	31.00%	31.60%

Significant Components of Net Deferred Tax Liabilities (Detail) - USD ($)
$ in Thousands

Dec. 31, 2017

Dec. 31, 2016

Components of Net Deferred Tax Liabilities [Line Items]

Share-based compensation

$ 18,977

$ 26,239

Capitalized inventory costs and inventory reserves

2,107

2,301

Allowance for doubtful accounts

929

1,379

Self-insurance reserves

153

500

Other

2,423

2,227

Net operating loss carryforwards

291

209

Total deferred tax assets, gross

24,880

32,855

Valuation allowance

Total deferred tax assets

24,880

32,855

Deductible goodwill

(67,246)

(88,581)

Depreciation

(5,519)

(5,883)

Other

(5,189)

(1,633)

Total deferred tax liabilities

(77,954)

(96,097)

Net deferred tax liabilities

^[1]

$ (53,074)

$ (63,242)

[1]

Significant Components of Net Deferred Tax Liabilities (Parenthetical) (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Components of Net Deferred Tax Liabilities [Line Items]
Net current deferred tax assets and liabilities	$ 5,485
Net long-term deferred tax assets and liabilities	$ 68,727

Changes in Gross Unrecognized Tax Benefits (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Contingency [Line Items]
Beginning balance	$ 3,695	$ 3,513	$ 3,719
Additions based on tax positions related to the current year	801	547	871
Reductions due to lapse of applicable statute of limitations	(271)	(365)	(1,077)
Ending balance	$ 4,225	$ 3,695	$ 3,513

Share-Based Compensation and Benefit Plans - Additional Information (Detail) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) Age $ / shares shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options of common stock outstanding	398,833	294,250
Shares withheld as payment for tax withholdings related to share based compensation, market value \| $	$ 4,674	$ 3,975	$ 1,465
Total intrinsic value of stock options exercised \| $	2,296	4,123	6,691
Cash received from Common stock issued \| $	3,855	4,447	4,850
Common stock contribution to 401(k) plan \| $	$ 2,428	$ 2,348	$ 1,963
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate shares of common stock that may be granted	1,500,000
Shares reserved for future grant	486,745
Number of days of service required for an employee to purchase shares	90 days
Discount to employees to purchase shares	5.00%
Shares purchased under ESPP	5,571	5,956	6,463
Average price of the shares purchased by employees \| $ / shares	$ 144.58	$ 125.84	$ 112.53
Additional shares issued resulting from cash dividends reinvested in common stock	3,844	3,442	3,183
Net proceeds from shares purchased under ESPP \| $	$ 1,389	$ 1,206	$ 1,107
2014 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percent of market price that share-based compensation awards are granted at	100.00%
Aggregate shares of common stock that may be granted	2,000,000
Shares reserved for future grant	45,421
Shares reserved for future grant	1,112,365
Contractual term of stock option awards	5 years
2014 Plan \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Years in which options plan vest	2 years
2014 Plan \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Years in which options plan vest	4 years
2014 Plan \| Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares awarded under plan	439,534
2014 Plan \| Class B Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares awarded under plan	493,522
401(k) Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock contribution to 401(k) Plan, shares	16,389	20,045	18,343
Common stock contribution to 401(k) plan \| $	$ 2,428	$ 2,348	$ 1,963
2001 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate shares of common stock that may be granted	0
Contractual term of stock option awards	5 years
Options of common stock outstanding	12,750
2001 Plan \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Years in which options plan vest	2 years
2001 Plan \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Years in which options plan vest	4 years
Non-Vested Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value of non-vested (restricted) stock \| $ / shares	$ 149.47	$ 130.01	$ 114.55
Fair value of non-vested stock that vested \| $	$ 11,580	$ 10,096	$ 2,468
Unrecognized share-based compensation expense \| $	$ 109,297
Weighted-average period for recognition of share-based compensation expense, in years	11 years
Non-Vested Restricted Stock \| Chief Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation expense \| $	$ 59,000
Weighted-average period for recognition of share-based compensation expense, in years	9 years
Shares of non-vested (restricted) stock obligated to issue in connection with incentive compensation agreements	42,871
Non-Vested Restricted Stock \| Chief Executive Officer \| Share-based Compensation Award, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation expense \| $	$ 11,000
Weighted-average period for recognition of share-based compensation expense, in years	5 years
Age of Chief Executive Officer when non-vested (restricted) stock vests \| Age	82
Non-Vested Restricted Stock \| Chief Executive Officer \| Share-based Compensation Award, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation expense \| $	$ 48,000
Weighted-average period for recognition of share-based compensation expense, in years	9 years
Age of Chief Executive Officer when non-vested (restricted) stock vests \| Age	86
Non-Vested Restricted Stock \| President
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average period for recognition of share-based compensation expense, in years	26 years
Shares of non-vested (restricted) stock obligated to issue in connection with incentive compensation agreements	13,779
Non-Vested Restricted Stock \| Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Age of employee when non-vested (restricted) stock vests \| Age	62
Non-Vested Restricted Stock \| Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, shares	32,454		7,206
Shares withheld as payment for tax withholdings related to share based compensation, market value \| $	$ 4,664		$ 889
Non-Vested Restricted Stock \| Common and Class B Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, shares		30,413
Shares withheld as payment for tax withholdings related to share based compensation, market value \| $		$ 3,967
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation expense \| $	$ 2,703
Weighted-average period for recognition of share-based compensation expense, in years	1 year 9 months 18 days
Fair value of stock options vested \| $	$ 754	$ 736	$ 856
Stock Options \| Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, shares	350	348
Shares withheld as payment for tax withholdings related to share based compensation, market value \| $	$ 53	$ 51
Stock Options \| Class B Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, shares			26,006
Shares withheld as payment for tax withholdings related to share based compensation, market value \| $			$ 3,251

Summary of Stock Option Activity (Detail) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Outstanding beginning balance \| shares	294,250
Options, Granted \| shares	179,750
Options, Exercised \| shares	(39,751)
Options, Forfeited \| shares	(34,166)
Options, Expired \| shares	(1,250)
Options, Outstanding ending balance \| shares	398,833
Options, Exercisable \| shares	33,919
Weighted-Average Exercise Price, Outstanding beginning balance \| $ / shares	$ 122.80
Weighted-Average Exercise Price, Granted \| $ / shares	150.35
Weighted-Average Exercise Price, Exercised \| $ / shares	98.05
Weighted-Average Exercise Price, Forfeited \| $ / shares	139.40
Weighted-Average Exercise Price, Expired \| $ / shares	67.25
Weighted-Average Exercise Price, Outstanding ending balance \| $ / shares	136.44
Weighted-Average Exercise Price, Exercisable \| $ / shares	$ 121.65
Weighted-Average Remaining Contractual Term (in years), Outstanding	3 years 5 months 20 days
Weighted-Average Remaining Contractual Term (in years), Exercisable	2 years 9 months 18 days
Aggregate Intrinsic Value, Outstanding \| $	$ 13,401
Aggregate Intrinsic Value, Exercisable \| $	$ 1,641

Summary of Non-Vested Restricted Stock Activity (Detail) - Non-Vested Restricted Stock - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Non-vested beginning balance	2,898,890
Shares, Granted	176,899
Shares, Vested	(80,550)
Shares, Forfeited	(10,000)
Shares, Non-vested ending balance	2,985,239	2,898,890
Weighted-Average Grant Date Fair Value, Non-vested beginning balance	$ 54.13
Weighted-Average Grant Date Fair Value, Granted	149.47	$ 130.01	$ 114.55
Weighted-Average Grant Date Fair Value, Vested	50.05
Weighted-Average Grant Date Fair Value, Forfeited	134.71
Weighted-Average Grant Date Fair Value, Non-vested ending balance	$ 51.22	$ 54.13

Weighted-Average Assumptions Used for Stock Options Granted (Detail) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term in years	4 years 2 months 30 days	4 years 2 months 30 days	4 years 2 months 30 days
Risk-free interest rate	1.77%	1.24%	1.25%
Expected volatility	17.41%	18.65%	20.96%
Expected dividend yield	2.82%	2.54%	2.29%
Grant date fair value	$ 17.23	$ 16.37	$ 17.17

Share-Based Compensation Expense (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 13,293	$ 12,319	$ 12,596
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	1,451	1,149	952
Non-Vested Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 11,842	$ 11,170	$ 11,644

Purchase of Additional Ownership Interest in Joint Ventures - Additional Information (Detail)
$ in Thousands

3 Months Ended

12 Months Ended

Feb. 13, 2017

USD ($)

Nov. 29, 2016

USD ($)

Dec. 31, 2017

USD ($)

^[1]

Sep. 30, 2017

USD ($)

^[1]

Jun. 30, 2017

USD ($)

^[1]

Mar. 31, 2017

USD ($)

^[1]

Dec. 31, 2016

USD ($)

^[1]

Sep. 30, 2016

USD ($)

^[1]

Jun. 30, 2016

USD ($)

^[1]

Mar. 31, 2016

USD ($)

^[1]

Dec. 31, 2017

USD ($)

Location

Dec. 31, 2016

USD ($)

Dec. 31, 2015

USD ($)

Jul. 31, 2011

$ 964,345

$ 1,229,591

$ 1,275,924

$ 872,095

$ 913,611

$ 1,241,232

$ 1,214,435

$ 851,424

$ 4,341,955

^[1]

$ 4,220,702

^[1]

$ 4,113,239

MEXICO

152,668

$ 140,278

$ 138,354

Carrier Enterprise II

Additional ownership interest acquired

10.00%

Controlling interest, ownership percentage

$ 545,000

Cash consideration

$ 42,688

$ 42,909

80.00%

60.00%

Carrier Enterprise II | Northeast U.S.

Number of locations | Location

Carrier Enterprise II | MEXICO

Number of locations | Location

[1]

Investment in Unconsolidated Affiliate - Additional Information (Detail) $ in Thousands		12 Months Ended
	Jun. 21, 2017 USD ($) board_member Location	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Schedule of Equity Method Investments [Line Items]
Investment in unconsolidated entity		$ 63,600
Proceeds from non-controlling interest for investment in unconsolidated entity		$ 12,720
Carrier Enterprise I
Schedule of Equity Method Investments [Line Items]
Ownership interest acquired	35.00%
Ownership percentage by parent	80.00%
Ownership percentage, by non-controlling owners	20.00%
Investment in unconsolidated entity	$ 63,600
Contribution to investment in unconsolidated entity by controlling interest	50,880
Proceeds from non-controlling interest for investment in unconsolidated entity	$ 12,720
Russell Sigler Inc \| Western United States [Member]
Schedule of Equity Method Investments [Line Items]
Number of locations \| Location	30
Russell Sigler sales			$ 650,000
Russell Sigler Inc \| Carrier Enterprise I
Schedule of Equity Method Investments [Line Items]
Ownership percentage needed for right to purchase up to 100%	85.00%
Total number of board members \| board_member	6
Number of board members that can be appointed based on ownership \| board_member	2

Changes in Carrying Amount of Goodwill (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Goodwill [Line Items]
Goodwill, Beginning Balance	$ 379,737	$ 378,310
Foreign currency translation adjustment	2,992	1,427
Goodwill, Ending Balance	$ 382,729	$ 379,737

Intangible Assets (Detail) - USD ($) $ in Thousands	12 Months Ended
Intangible Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Intangible Assets [Line Items]
Indefinite lived intangible assets - Trade names, trademarks and distribution rights	$ 125,194	$ 120,288
Finite lived intangible assets:
Accumulated amortization	(38,332)	(33,437)
Finite lived intangible assets, net	35,871	38,276
Intangible assets, net	161,065	158,564
Customer Relationships
Finite lived intangible assets:
Finite lived intangible assets	$ 73,053	70,194
Customer Relationships \| Minimum
Intangible Assets [Line Items]
Finite lived intangible assets, Estimated Useful lives, years	10 years
Customer Relationships \| Maximum
Intangible Assets [Line Items]
Finite lived intangible assets, Estimated Useful lives, years	15 years
Trade Name
Intangible Assets [Line Items]
Finite lived intangible assets, Estimated Useful lives, years	10 years
Finite lived intangible assets:
Finite lived intangible assets	$ 1,150	1,150
Non-compete Agreements
Intangible Assets [Line Items]
Finite lived intangible assets, Estimated Useful lives, years	7 years
Finite lived intangible assets:
Finite lived intangible assets		$ 369

Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Goodwill And Intangible Assets [Line Items]
Amortization expense related to finite lived intangible assets	$ 5,263	$ 5,213	$ 5,315

Amortization Expense Related to Finite Lived Intangible Assets (Detail) $ in Thousands	Dec. 31, 2017 USD ($)
2018	$ 4,900
2019	4,900
2020	4,900
2021	4,200
2022	$ 3,500

Shareholders' Equity - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Aug. 23, 2017	Sep. 30, 1999
Stockholders Equity Note [Line Items]
Preferred stock outstanding	0	0
Maximum aggregate offering price under sales agreement				$ 250,000,000
Net proceeds from the sale of Common stock	$ 247,744,000
Direct stock issuance costs	$ 311,000
Number of shares authorized to be repurchased					7,500,000
Treasury stock, shares repurchased	0	0	0
Cost of repurchased shares	$ 87,440,000	$ 114,425,000
Remaining number of shares authorized to be repurchased	1,129,087
Common Stock
Stockholders Equity Note [Line Items]
Sale of common stock, shares	1,498,662
Common Stock
Stockholders Equity Note [Line Items]
Amount of votes common stock is entitled	One
Percentage of Board entitled to elect	25.00%
Treasury stock, shares	4,823,988	6,322,650
Class B Common Stock
Stockholders Equity Note [Line Items]
Amount of votes common stock is entitled	Ten
Treasury stock, shares	48,263	48,263

Financial Instruments - Additional Information (Detail) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Financial Instrument [Line Items]
Estimated fair value of contingent liability	$ 0
Standby Letters of Credit
Financial Instrument [Line Items]
Fair value of contingent liability	2,430,000	$ 2,430,000
Performance Bonds
Financial Instrument [Line Items]
Fair value of contingent liability	$ 4,000,000	$ 8,000,000

Derivatives - Additional Information (Detail) - Foreign Currency Forward Contracts - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Derivatives not Designated as Hedging Instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional value of derivatives	$ 11,200
Contract expiring terms	2018-08
(Loss) gain from foreign currency forward and option contracts not designated as hedging instruments	$ (829)	$ (306)	$ 2,552
Cash Flow Hedge
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional value of derivatives	$ 29,500
Contract maturity period	One year or less
Contract expiring terms	2018-09
Pre-tax loss to be reclassified into earnings within the next 12 months	$ (962)

Impact from Foreign Exchange Derivative Instruments Designated as Cash Flow Hedges (Detail) - Cash Flow Hedge - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Loss recorded in accumulated other comprehensive loss	$ (961)	$ (1,321)
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	$ (491)	$ 442

Fair Value of Derivative Instruments and Location in the Balance Sheets (Detail) - Foreign Currency Forward Contracts - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Derivatives, Fair Value [Line Items]
Derivative instruments, assets derivatives	$ 250	$ 241
Derivative instruments, liabilities derivatives	957	39
Derivatives Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Derivative instruments, assets derivatives	70	227
Derivative instruments, liabilities derivatives	773	35
Derivatives not Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Derivative instruments, assets derivatives	180	14
Derivative instruments, liabilities derivatives	$ 184	$ 4

Assets and Liabilities Carried at Fair Value Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Other assets
Assets:
Available-for-sale securities	$ 332	$ 281
Other Current Assets
Assets:
Derivative financial instruments	250	241
Accrued expenses and other current liabilities
Liabilities:
Derivative financial instruments	957	39
Fair Value Measurements, Level 1 \| Other assets
Assets:
Available-for-sale securities	332	281
Fair Value Measurements, Level 2 \| Other Current Assets
Assets:
Derivative financial instruments	250	241
Fair Value Measurements, Level 2 \| Accrued expenses and other current liabilities
Liabilities:
Derivative financial instruments	$ 957	$ 39

Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Commitments and Contingencies Disclosure [Line Items]
Self-insurance reserves	$ 2,344	$ 2,951
Maximum exposure to loss related to involvement with variable interest entity	$ 4,200
Operating leases maximum maturity date	2028
Rental expense	$ 84,076	$ 83,260	$ 82,581
Non-cancelable purchase obligations for goods	$ 11,000

Future Minimum Leases Payments under Non-Cancelable Operating Leases (Detail) $ in Thousands	Dec. 31, 2017 USD ($)
Operating Leases Future Minimum Payments Due [Line Items]
2018	$ 69,136
2019	51,645
2020	36,127
2021	22,434
2022	12,985
Thereafter	5,824
Total minimum payments	$ 198,151

Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Supplier Concentration Risk \| Cost of Goods, Total
Related Party Transaction [Line Items]
Percentage of purchases from key suppliers	84.00%	85.00%	84.00%
Moss & Associates LLC \| Customary Payments for Remodeling of Corporate Headquarters
Related Party Transaction [Line Items]
Payment for related party transaction	$ 951	$ 291
Amount payable to related party	131
Greenberg Traurig, P.A. \| Customary Fees for Legal Services
Related Party Transaction [Line Items]
Payment for related party transaction	475
Amount payable to related party	0
Carrier and Its Affiliates \| Supplier Concentration Risk
Related Party Transaction [Line Items]
Amount payable to Carrier and its affiliates, net of receivables	75,000	63,000
Revenues from sales to Carrier and its affiliates	$ 64,000	$ 56,000	$ 62,000
Carrier and Its Affiliates \| Supplier Concentration Risk \| Cost of Goods, Total
Related Party Transaction [Line Items]
Percentage of purchases from key suppliers	62.00%	62.00%	62.00%

Revenues and Long-Lived Assets by Geographical Area (Detail) - USD ($)
$ in Thousands

3 Months Ended

12 Months Ended

Dec. 31, 2017

Sep. 30, 2017

^[1]

Jun. 30, 2017

^[1]

Mar. 31, 2017

^[1]

Dec. 31, 2016

Sep. 30, 2016

^[1]

Jun. 30, 2016

^[1]

Mar. 31, 2016

^[1]

Dec. 31, 2017

Dec. 31, 2016

Dec. 31, 2015

$ 964,345

^[1]

$ 1,229,591

$ 1,275,924

$ 872,095

$ 913,611

^[1]

$ 1,241,232

$ 1,214,435

$ 851,424

$ 4,341,955

^[1]

$ 4,220,702

^[1]

$ 4,113,239

709,480

628,803

709,480

628,803

UNITED STATES

3,919,684

3,813,204

3,710,977

540,136

467,728

540,136

467,728

CANADA

269,603

267,220

263,908

163,944

155,758

163,944

155,758

MEXICO

152,668

140,278

$ 138,354

Quarterly Financial Data [Line Items]

$ 5,400

$ 5,317

$ 5,400

$ 5,317

[1]

Supplemental Cash Flow Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash Flow Supplemental Disclosures [Line Items]
Interest paid	$ 5,773	$ 3,362	$ 4,993
Income taxes net of refunds	$ 48,056	$ 99,006	$ 103,261

Subsequent Events - Additional Information (Detail) - USD ($)			12 Months Ended
	Feb. 06, 2018	Jan. 02, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Feb. 05, 2018
Subsequent Event [Line Items]
Cash dividend			$ 4.60	$ 3.60	$ 2.80
Revolving credit agreement maximum borrowing capacity			$ 600,000,000
Subsequent Event
Subsequent Event [Line Items]
Revolving credit agreement maximum borrowing capacity						$ 300,000,000
Common Stock \| Subsequent Event
Subsequent Event [Line Items]
Cash dividend		$ 1.25
Dividends, date declared		Jan. 02, 2018
Dividends Payable, Date to be Paid		Jan. 31, 2018
Dividends, date of record		Jan. 16, 2018
Date new dividend rate will be effective	2018-04
Cash dividend	$ 1.45
Class B Common Stock \| Subsequent Event
Subsequent Event [Line Items]
Cash dividend		$ 1.25
Dividends, date declared		Jan. 02, 2018
Dividends Payable, Date to be Paid		Jan. 31, 2018
Dividends, date of record		Jan. 16, 2018
Date new dividend rate will be effective	2018-04
Cash dividend	$ 1.45

Selected Quarterly Financial Data (Detail) - USD ($)
$ / shares in Units, $ in Thousands

3 Months Ended

12 Months Ended

Dec. 31, 2017

Sep. 30, 2017

Jun. 30, 2017

Mar. 31, 2017

Dec. 31, 2016

Sep. 30, 2016

Jun. 30, 2016

Mar. 31, 2016

Dec. 31, 2017

Dec. 31, 2016

Dec. 31, 2015