Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
Page No. |
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Item 1. |
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6 |
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9 |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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25 |
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EXHIBITS |
ITEM 1. |
CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS |
Quarter Ended June 30, |
Six Months Ended June 30, |
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2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues |
$ |
$ | $ |
$ | ||||||||||||
Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Other income |
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Operating income |
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Interest expense, net |
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Income before income taxes |
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Income taxes |
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Net income |
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Less: net income attributable to non-controlling interest |
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Net income attributable to Watsco, Inc. |
$ |
$ | $ |
$ | ||||||||||||
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Earnings per share for Common and Class B common stock: |
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Basic |
$ |
$ | $ |
$ | ||||||||||||
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Diluted |
$ |
$ | $ |
$ | ||||||||||||
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Quarter Ended June 30, |
Six Months Ended June 30, |
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2022 | 2021 | 2022 | 2021 | |||||||||||||
Net income |
$ |
$ | $ |
$ | ||||||||||||
Other comprehensive (loss) income, net of tax |
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Foreign currency translation adjustment |
( |
) |
( |
) |
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Unrealized (loss) gain on cash flow hedging instruments |
( |
) | ||||||||||||||
Reclassification of (gain) loss on cash flow hedging instruments into earnings |
( |
) | ||||||||||||||
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Other comprehensive (loss) income |
( |
) |
( |
) |
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Comprehensive income |
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Less: comprehensive income attributable to non-controlling interest |
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Comprehensive income attributable to Watsco, Inc. |
$ |
$ | $ |
$ | ||||||||||||
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June 30, 2022 |
December 31, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
$ | ||||||
Accounts receivable, net |
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Inventories, net |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use |
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Goodwill |
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Intangible assets, net |
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Investment in unconsolidated entity |
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Other assets |
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$ |
$ | |||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of long-term obligations |
$ |
$ | ||||||
Accounts payable |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Long-term obligations: |
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Borrowings under revolving credit agreement |
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Operating lease liabilities, net of current portion |
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Finance lease liabilities, net of current portion |
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Total long-term obligations |
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Deferred income taxes and other liabilities |
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Commitments and contingencies |
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Watsco, Inc. shareholders’ equity: |
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Common stock, $ |
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Class B common stock, $ |
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Preferred stock, $ |
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Paid-in capital |
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Accumulated other comprehensive loss, net of tax |
( |
) |
( |
) | ||||
Retained earnings |
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Treasury stock, at cost |
( |
) |
( |
) | ||||
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Total Watsco, Inc. shareholders’ equity |
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Non-controlling interest |
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Total shareholders’ equity |
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$ |
$ | |||||||
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(In thousands, except share and per share data) |
Common Stock, Class B Common Stock and Preferred Stock Shares |
Common Stock, Class B Common Stock and Preferred Stock Amount |
Paid-In Capital |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Treasury Stock |
Non- Interest |
Total |
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Balance at December 31, 2021 |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
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Net income |
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Other comprehensive income |
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Issuances of non-vested restricted shares of common stock |
( |
) | — | |||||||||||||||||||||||||||||
Common stock contribution to 401(k) plan |
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Stock issuances from exercise of stock options and employee stock purchase plan |
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Share-based compensation |
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Cash dividends declared and paid on Common and Class B common stock, $ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Balance at March 31, 2022 |
( |
) |
( |
) |
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Net income |
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Other comprehensive (loss) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Issuances of non-vested restricted shares of common stock |
( |
) | — | |||||||||||||||||||||||||||||
Forfeitures of non-vested restricted shares of common stock |
( |
) | ( |
) | — | |||||||||||||||||||||||||||
Common stock contribution to 401(k) plan |
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Stock issuances from exercise of stock options and employee stock purchase plan |
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Retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Share-based compensation |
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Cash dividends declared and paid on Common and Class B common stock, $ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Balance at June 30, 2022 |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
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( In thousands, except share and per sharedata) |
Common Stock, Class B Common Stock and Preferred Stock Shares |
Common Stock, Class B Common Stock and Preferred Stock Amount |
Paid-In Capital |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Treasury Stock |
Non- Interest |
Total |
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Balance at December 31, 2020 |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
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Net income |
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Other comprehensive income |
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Issuances of non-vested restricted shares of common stock |
( |
) | — | |||||||||||||||||||||||||||||
Forfeitures of non-vested restricted shares of common stock |
( |
) | ( |
) | — | |||||||||||||||||||||||||||
Common stock contribution to 401(k) plan |
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Stock issuances from exercise of stock options and employee stock purchase plan |
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Share-based compensation |
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Cash dividends declared and paid on Common and Class B common stock, $ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Balance at March 31, 2021 |
( |
) |
( |
) |
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Net income |
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Other comprehensive income |
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Issuances of non-vested restricted shares of common stock |
( |
) | — | |||||||||||||||||||||||||||||
Forfeitures of non-vested restricted shares of common stock |
( |
) | ( |
) | — | |||||||||||||||||||||||||||
Stock issuances from exercise of stock options and employee stock purchase plan |
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Retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Share-based compensation |
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Common stock issued for Acme Refrigeration of Baton Rouge LLC |
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Investment in TEC Distribution LLC |
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Cash dividends declared and paid on Common and Class B common stock, $ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Balance at June 30, 2021 |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
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Six Months Ended June 30, |
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2022 |
2021 |
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Cash flows from operating activities: |
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Net income |
$ |
$ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Share-based compensation |
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Provision for doubtful accounts |
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Deferred income tax provision |
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Other income from investment in unconsolidated entity |
( |
) |
( |
) | ||||
Other, net |
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Changes in operating assets and liabilities, net of effects of acquisitions: |
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Accounts receivable, net |
( |
) |
( |
) | ||||
Inventories, net |
( |
) |
( |
) | ||||
Accounts payable and other liabilities |
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Other, net |
( |
) | ||||||
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Capital expenditures |
( |
) |
( |
) | ||||
Business acquisitions, net of cash acquired |
( |
) |
( |
) | ||||
Proceeds from sale of equity securities |
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Proceeds from sale of property and equipment |
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Net cash used in investing activities |
( |
) |
( |
) | ||||
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Cash flows from financing activities: |
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Dividends on Common and Class B common stock |
( |
) |
( |
) | ||||
Repurchases of common stock to satisfy employee withholding tax obligations |
( |
) |
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Net repayments of finance lease liabilities |
( |
) |
( |
) | ||||
Proceeds from non-controlling interest for investment in TEC Distribution LLC |
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Net proceeds from issuances of common stock |
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Net proceeds under revolving credit agreement |
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Net cash used in financing activities |
( |
) |
( |
) | ||||
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Effect of foreign exchange rate changes on cash and cash equivalents |
( |
) |
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Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ |
$ | ||||||
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Supplemental cash flow information: |
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Common stock issued for Acme Refrigeration of Baton Rouge LLC |
— | $ |
1. |
BASIS OF PRESENTATION |
Quarter Ended June 30, |
Six Months Ended June 30, |
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2022 | 2021 | 2022 | 2021 | |||||||||||||
Primary Geographical Regions: |
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United States |
$ |
$ | $ |
$ | ||||||||||||
Canada |
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Latin America and the Caribbean |
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$ |
$ | $ |
$ | |||||||||||||
Major Product Lines: |
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HVAC equipment |
% |
% | % |
% | ||||||||||||
Other HVAC products |
% |
% | % |
% | ||||||||||||
Commercial refrigeration products |
% |
% | % |
% | ||||||||||||
% |
% | % |
% | |||||||||||||
3. |
EARNINGS PER SHARE |
Quarter Ended June 30, |
Six Months Ended June 30, |
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2022 | 2021 | 2022 | 2021 | |||||||||||||
Basic Earnings per Share: |
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Net income attributable to Watsco, Inc. shareholders |
$ |
$ | $ |
$ | ||||||||||||
Less: distributed and undistributed earnings allocated to non-vested restricted common stock |
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Earnings allocated to Watsco, Inc. shareholders |
$ |
$ | $ |
$ | ||||||||||||
Weighted-average common shares outstanding - Basic |
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Basic earnings per share for Common and Class B common stock |
$ |
$ | $ |
$ | ||||||||||||
Allocation of earnings for Basic: |
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Common stock |
$ |
$ | $ |
$ | ||||||||||||
Class B common stock |
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$ |
$ | $ |
$ | |||||||||||||
Diluted Earnings per Share: |
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Net income attributable to Watsco, Inc. shareholders |
$ |
$ | $ |
$ | ||||||||||||
Less: distributed and undistributed earnings allocated to non-vested restricted common stock |
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Earnings allocated to Watsco, Inc. shareholders |
$ |
$ | $ |
$ | ||||||||||||
Weighted-average common shares outstanding - Basic |
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Effect of dilutive stock options |
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Weighted-average common shares outstanding - Diluted |
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Diluted earnings per share for Common and Class B common stock |
$ |
$ | $ |
$ | ||||||||||||
Anti-dilutive stock options not included above |
4. |
OTHER COMPREHENSIVE (LOSS) INCOME |
Quarter Ended June 30, |
Six Months Ended June 30, |
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2022 | 2021 | 2022 | 2021 | |||||||||||||
Foreign currency translation adjustment |
$ |
( |
) |
$ | $ |
( |
) |
$ | ||||||||
Unrealized (loss) gain on cash flow hedging instruments |
( |
) | ||||||||||||||
Income tax expense |
( |
) | ||||||||||||||
Unrealized (loss) gain on cash flow hedging instruments, net of tax |
( |
) | ||||||||||||||
Reclassification of (gain) loss on cash flow hedging instruments into earnings |
( |
) | ||||||||||||||
Income tax expense (benefit) |
( |
) | ||||||||||||||
Reclassification of (gain) loss on cash flow hedging instruments into earnings, net of tax |
( |
) | ||||||||||||||
Other comprehensive (loss) income |
$ |
( |
) |
$ | $ |
( |
) |
$ | ||||||||
Six Months Ended June 30, |
2022 | 2021 | ||||||
Foreign currency translation adjustment: |
||||||||
Beginning balance |
$ |
( |
) |
$ | ( |
) | ||
Current period other comprehensive (loss) income |
( |
) |
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Ending balance |
( |
) |
( |
) | ||||
Cash flow hedging instruments: |
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Beginning balance |
( |
) | ||||||
Current period other comprehensive income |
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Reclassification adjustment |
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Ending balance |
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Accumulated other comprehensive loss, net of tax |
$ |
( |
) |
$ | ( |
) | ||
5. |
ACQUISITIONS |
Accounts receivable |
$ | |||
Inventories |
||||
Other current assets |
||||
Property and equipment |
||||
Operating lease ROU assets |
||||
Goodwill |
||||
Intangibles |
||||
Accounts payable |
( |
) | ||
Accrued expenses and other current liabilities |
( |
) | ||
Operating lease liabilities, net of current portion |
( |
) | ||
Total |
$ | |
||
6. |
DERIVATIVES |
Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(Loss) gain recorded in accumulated other comprehensive loss |
$ | ( |
) | $ | ||||||||||||
(Gain) loss reclassified from accumulated other comprehensive loss into earnings |
$ | ( |
) | $ |
Asset Derivatives |
Liability Derivatives |
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June 30, 2022 |
December 31, 2021 |
June 30, 2022 |
December 31, 2021 |
|||||||||||||
Derivatives designated as hedging instruments |
$ |
$ | $ |
$ | ||||||||||||
Derivatives not designated as hedging instruments |
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Total derivative instruments |
$ |
$ | $ |
$ | ||||||||||||
7. |
FAIR VALUE MEASUREMENTS |
Fair Value Measurements at June 30, 2022 Using |
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Balance Sheet Location |
Total |
Level 1 |
Level 2 |
Level 3 |
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Assets: |
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Derivative financial instruments |
Other current assets | $ |
— |
$ |
— |
|||||||||||||
Equity securities |
Other assets | $ |
$ |
— |
— |
|||||||||||||
Private equities |
Other assets | $ |
— |
— |
$ |