0001193125-24-130664 | 10-Q | XBRL Viewer

Other comprehensive (loss) income - Schedule of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (42,331)
Ending balance	(47,870)
Foreign Currency Translation Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(42,331)	$ (47,710)
Current period other comprehensive (loss) income	(5,539)	170
Ending balance	$ (47,870)	$ (47,540)

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

Amount, after tax, of accumulated increase (decrease) in equity from transaction and other event and circumstance from nonowner source.

+ References + Details

DERIVATIVES

3 Months Ended

Mar. 31, 2024

DERIVATIVES

6.	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.

Derivatives Not Designated as Hedging Instruments

We have 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. We had only one foreign currency exchange contract not designated as a hedging instrument at March 31, 2024, the total notional value of which was $15,700. Such contract expired in April 2024.

We recognized losses

of $

147

and $

394

from foreign currency forward and option contracts not designated as hedging instruments in our condensed consolidated unaudited statements of income for the quarters ended March 31, 2024 and 2023, respectively.

Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Related Party Transaction [Line Items]
Accounts payable	$ 687,637		$ 369,396
Revenues	1,564,991	$ 1,550,641
Greenberg Traurig, P.A. [Member] \| Customary Fees for Legal Services [Member]
Related Party Transaction [Line Items]
Fees for related party transaction	75	13
Greenberg Traurig, P.A. [Member] \| Customary Fees for Legal Services [Member] \| Related Party [Member] \| Accounts Payable [Member]
Related Party Transaction [Line Items]
Amount payable to related party	67		3
Carrier and Its Affiliates [Member] \| Supplier Concentration Risk [Member] \| Related Party [Member]
Related Party Transaction [Line Items]
Accounts payable	202,000		$ 100,000
Revenues	$ 18,000	$ 22,000
Carrier and Its Affiliates [Member] \| Supplier Concentration Risk [Member] \| Cost of Goods, Total [Member]
Related Party Transaction [Line Items]
Percentage of purchases from key suppliers	58.00%	62.00%

BASIS OF PRESENTATION (Policies)	3 Months Ended
BASIS OF PRESENTATION (Policies)	Mar. 31, 2024
Accounting Policies [Abstract]
Basis of Consolidation	Basis of Consolidation Watsco, Inc. (collectively with its subsidiaries, “Watsco,” the “Company,” “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. The accompanying March 31, 2024 interim condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, but we believe the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation have been included in the condensed consolidated unaudited financial statements included herein. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2023 Annual Report on Form 10-K. The condensed consolidated unaudited financial statements include the accounts of Watsco, all of its wholly owned subsidiaries, the accounts of four joint ventures with Carrier Global Corporation, which we refer to as Carrier, in which we have a controlling interest, the accounts of Carrier InterAmerica Corporation and Carrier (Puerto Rico), Inc., in each of which we have an 80% controlling interest, and Carrier has a 20% non-controlling interest, and our 38.4% investment in Russell Sigler, Inc., which is accounted for under the equity method of accounting. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the quarter ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024. Sales of residential central air conditioners, heating equipment, and parts and supplies are seasonal. Furthermore, profitability can be impacted favorably or unfavorably based on weather patterns, particularly during the Summer and Winter selling seasons. 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 first and fourth quarters. Demand related to the new construction sectors throughout most of the markets we serve tends to be fairly evenly distributed throughout the year and depends largely on housing completions and related weather and economic conditions.
Short-Term Cash Investments	Short-Term Cash Investments Short-term cash investments consist of a certificate of deposit that matures in September 2024.
Equity Method Investments	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 investment in unconsolidated entity in our condensed consolidated unaudited 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 condensed consolidated unaudited 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.
Use of Estimates	Use of Estimates The preparation of condensed consolidated unaudited 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 condensed consolidated unaudited financial statements and the reported amounts of revenues and expenses for the reporting period. Significant estimates include valuation reserves for accounts receivable, net realizable value adjustments to inventories, income taxes, reserves related to loss contingencies and the valuation of goodwill, indefinite-lived intangible assets, and long-lived assets. While we believe that these estimates are reasonable, actual results could differ from such estimates.
Recently Issued Accounting Standards	Recently Adopted Accounting Standards Segment Reporting In September 2023, the Financial Accounting Standards Board (“FASB”) issued guidance that enhances segment reporting primarily by expanding the disclosures about significant segment expenses. Under the new standard, an entity will be required to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), how the CODM assesses segment performance and decides how to allocate resources, the title and position of the CODM, and certain other disclosures. This guidance is effective prospectively and is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. The adoption of this guidance on January 1, 2024 did not have a material impact on our consolidated financial statements. Recently Issued Accounting Standards Not Yet Adopted Income Taxes In December 2023, the FASB issued guidance that enhances annual income tax disclosures primarily by disaggregating the existing disclosures related to the effective tax rate reconciliation and income taxes paid. Under the new guidance , an entity will be required to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. An entity will also be required to disclose the amount of income taxes paid disaggregated by federal, state and foreign, and by individual jurisdictions equal or greater than five percent of total income taxes paid. This guidance is effective prospectively and is effective for annual periods beginning after December 15, 2024. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. Climate Disclosures In March 2024, the Securities and Exchange Commission (“SEC”) adopted rules to enhance and standardize disclosures related to the impacts and risks of climate-related matters. Under the new rules, an entity will be required to disclose information about climate-related risks that have materially impacted, or are likely to have a material impact, on its business strategy, results of operations, or financial condition. In addition, certain disclosures related to severe weather events, other natural conditions, and greenhouse gas emissions will be required in the audited financial statements. These rules are effective prospectively and are effective for annual periods beginning with the year ending December 31, 2025. On April 4, 2024, the SEC announced that it will stay implementation of its final rules pending the results of a legal challenge. We will continue to assess the impact of these rules on our consolidated financial statements while the stay is in place.

Earnings Per Share - Additional Information (Detail) - shares	Mar. 31, 2024	Mar. 31, 2023
Earnings Per Share [Line Items]
Class B common stock conversion, number of shares	3,220,567	3,232,844

Condensed Consolidated Unaudited Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Net income	$ 104,262	$ 130,371
Other comprehensive income, net of tax
Foreign currency translation adjustment	(8,000)	260
Other comprehensive (loss) income	(8,000)	260
Comprehensive income	96,262	130,631
Less: comprehensive income attributable to non-controlling interest	14,797	20,388
Comprehensive income attributable to Watsco, Inc.	$ 81,465	$ 110,243

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income (loss) and other comprehensive income (loss), attributable to noncontrolling interests. Excludes changes in equity resulting from investments by owners and distributions to owners.

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- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

Amount after tax and reclassification adjustments of other comprehensive income (loss).

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2024

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 March 31, 2024 Using
	Balance Sheet Location		Total		Level 1		Level 2		Level 3
Assets:
Certificate of deposit		Short-term cash investments	$	200,000		—	$	200,000		—
Derivative financial instruments		Other current assets	$	55		—	$	55		—
Equity securities		Other assets	$	1,235	$	1,235		—		—
Private equities		Other assets	$	1,500		—		—	$	1,500


			Total		Fair Value Measurements at December 31, 2023 Using
	Balance Sheet Location		Total		Level 1		Level 2		Level 3
Assets:
Derivative financial instruments		Other current assets	$	5		—	$	5		—
Equity securities		Other assets	$	1,044	$	1,044		—		—
Private equities		Other assets	$	1,500		—		—	$	1,500

OTHER COMPREHENSIVE (LOSS) INCOME

3 Months Ended

Mar. 31, 2024

OTHER COMPREHENSIVE (LOSS) INCOME

4.	OTHER COMPREHENSIVE (LOSS) INCOME

Other comprehensive (loss) income consists of the foreign currency translation adjustment associated with our Canadian operations’ use of the Canadian dollar as their functional currency.

The change in accumulated other comprehensive loss, net of tax, was as follows:


Quarters Ended March 31,	2024			2023
Foreign currency translation adjustment:
Beginning balance	$	(42,331	)	$	(47,710	)
Current period other comprehensive (loss) income		(5,539	)		170

Ending balance	$	(47,870	)	$	(47,540	)

EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2024

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:


Quarters Ended March 31,	2024		2023
Basic Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	87,004	$	110,073
Less: distributed and undistributed earnings allocated to restricted common stock		6,836		7,414

Earnings allocated to Watsco, Inc. shareholders	$	80,168	$	102,659


Weighted-average common shares outstanding – Basic		36,875,549		36,192,597
Basic earnings per share for Common and Class B common stock	$	2.17	$	2.84
Allocation of earnings for Basic:
Common stock	$	73,166	$	93,489
Class B common stock		7,002		9,170

	$	80,168	$	102,659

Diluted Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	87,004	$	110,073
Less: distributed and undistributed earnings allocated to restricted common stock		6,836		7,411

Earnings allocated to Watsco, Inc. shareholders	$	80,168	$	102,662


Weighted-average common shares outstanding – Basic		36,875,549		36,192,597
Effect of dilutive stock options		123,999		109,231

Weighted-average common shares outstanding – Diluted		36,999,548		36,301,828

Diluted earnings per share for Common and Class B common stock	$	2.17	$	2.83

Anti-dilutive stock options not included above		46,456		169,916

Acquisitions - Additional Information (Detail) $ in Thousands	Feb. 01, 2024 USD ($) shares	Sep. 01, 2023 USD ($) Location shares	Mar. 03, 2023 USD ($)
Commercial Specialists Inc [Member]
Business Acquisition [Line Items]
Cash consideration for business acquisition	$ 6,042
Stock issued for acquisition \| shares	1,904
Fair value of equity shares issued or issuable	$ 752
Cash acquired	1,426
Repayment of indebtedness	562
Annual sales	$ 13,000
Gateway Supply Company, Inc. [Member]
Business Acquisition [Line Items]
Cash consideration for business acquisition		$ 4,000
Stock issued for acquisition \| shares		280,215
Fair value of equity shares issued or issuable		$ 101,645
Goodwill and intangibles acquired		70,029
Cash acquired		3,102
Intangible assets acquired		44,000
Annual sales		$ 180,000
Stock issued for acquisition / shares subject to a contractual restriction \| shares		21,228
Gateway Supply Company, Inc. [Member] \| NORTH CAROLINA [Member]
Business Acquisition [Line Items]
Number of locations in which the company operates \| Location		1
Gateway Supply Company, Inc. [Member] \| SOUTH CAROLINA [Member]
Business Acquisition [Line Items]
Number of locations in which the company operates \| Location		15
Gateway Supply Company, Inc. [Member] \| Customer Relationships [Member]
Business Acquisition [Line Items]
Intangible assets acquired		$ 25,400
Finite-Lived Intangible Assets, Remaining Amortization Period		18 years
Gateway Supply Company, Inc. [Member] \| Trademarks and Trade Names [Member]
Business Acquisition [Line Items]
Intangible assets acquired		$ 18,600
Capitol District Supply Co Inc [Member]
Business Acquisition [Line Items]
Cash consideration for business acquisition			$ 1,217
Goodwill and intangibles acquired			$ 1,055
Businesss acquistion goodwill expected period of tax deduction			15 years
Cash acquired			$ 144
Intangible assets acquired			606
Repayment of indebtedness			1,851
Annual sales			13,000
Capitol District Supply Co Inc [Member] \| Customer Relationships [Member]
Business Acquisition [Line Items]
Intangible assets acquired			$ 176
Finite-Lived Intangible Assets, Remaining Amortization Period			18 years
Capitol District Supply Co Inc [Member] \| Trademarks and Trade Names [Member]
Business Acquisition [Line Items]
Intangible assets acquired			$ 430

REVENUES

3 Months Ended

Mar. 31, 2024

REVENUES

Disaggregation of Revenues

The following table presents our revenues disaggregated by primary geographical regions and major product lines within our single reportable segment:


Quarters Ended March 31,	2024			2023
Primary Geographical Regions:
United States	$	1,398,686		$	1,395,004
Canada		79,798			81,263
Latin America and the Caribbean		86,507			74,374

	$	1,564,991		$	1,550,641

Major Product Lines:
HVAC equipment		67	%		68	%
Other HVAC products		29	%		28	%
Commercial refrigeration products		4	%		4	%

		100	%		100	%

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Condensed Consolidated Unaudited Statements of Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash dividends declared and paid, common stock	$ 2.45	$ 2.45

Derivatives - Additional Information (Detail) - Foreign Exchange Forward And Option Contracts and Not Designated As Hedging Instrument Economic Hedge [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional value of derivatives	$ 15,700
Contract expiring terms	2024-04
Loss from foreign currency forward and option contracts not designated as hedging instruments	$ (147)	$ (394)

Condensed Consolidated Unaudited Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Revenues	$ 1,564,991	$ 1,550,641
Cost of sales	1,134,366	1,102,484
Gross profit	430,625	448,157
Selling, general and administrative expenses	309,548	287,057
Other income	5,460	3,640
Operating income	126,537	164,740
Interest (income) expense, net	(2,470)	615
Income before income taxes	129,007	164,125
Income taxes	24,745	33,754
Net income	104,262	130,371
Less: net income attributable to non-controlling interest	17,258	20,298
Net income attributable to Watsco, Inc.	$ 87,004	$ 110,073
Earnings per share for Common and Class B common stock:
Basic	$ 2.17	$ 2.84
Diluted	$ 2.17	$ 2.83

Condensed Consolidated Unaudited Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 278,864	$ 210,112
Short-term cash investments	200,000	0
Accounts receivable, net	832,119	797,832
Inventories, net	1,655,635	1,347,289
Other current assets	31,754	36,698
Total current assets	2,998,372	2,391,931
Property and equipment, net	138,486	136,230
Operating lease right-of-use assets	383,434	368,748
Goodwill	459,440	457,148
Intangible assets, net	214,055	218,146
Investment in unconsolidated entity	151,698	146,238
Other assets	11,633	10,741
Total assets	4,357,118	3,729,182
Current liabilities:
Current portion of lease liabilities	102,897	100,265
Accounts payable	687,637	369,396
Accrued expenses and other current liabilities	235,592	242,351
Total current liabilities	1,026,126	712,012
Long-term obligations:
Borrowings under revolving credit agreement	0	15,400
Operating lease liabilities, net of current portion	290,951	276,913
Finance lease liabilities, net of current portion	15,362	12,214
Total long-term obligations	306,313	304,527
Deferred income taxes and other liabilities	97,106	96,453
Commitments and contingencies
Watsco, Inc. shareholders' equity:
Preferred stock, $0.50 par value	0	0
Paid-in capital	1,452,450	1,153,459
Accumulated other comprehensive loss, net of tax	(47,870)	(42,331)
Retained earnings	1,173,446	1,183,207
Treasury stock, at cost	(73,810)	(86,630)
Total Watsco, Inc. shareholders' equity	2,526,425	2,229,839
Non-controlling interest	401,148	386,351
Total shareholders' equity	2,927,573	2,616,190
Total liabilities and shareholders' equity	4,357,118	3,729,182
Common Stock [Member]
Watsco, Inc. shareholders' equity:
Common stock	19,408	19,353
Class B Common Stock [Member]
Watsco, Inc. shareholders' equity:
Common stock	$ 2,801	$ 2,781

SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2024

SUBSEQUENT EVENTS

11.	SUBSEQUENT EVENT

As previously reported, on August 6, 2021, we entered into a Sales Agreement (as amended, the “Original Sales Agreement”) with Baird, relating to our ATM Program. On May 3, 2024, we and Baird entered into a third amended and restated sales agreement, which amended the Original Sales Agreement to increase the dollar amount of shares of our Common stock that we may issue and sell thereunder by an additional $400,000. Except for the additional capacity under the ATM Program provided by the third amended and restated sales agreement, the material terms of the Original Sales Agreement remain unmodified.

BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2024

BASIS OF PRESENTATION

1.	BASIS OF PRESENTATION

Basis of Consolidation

Watsco, Inc. (collectively with its subsidiaries, “Watsco,” the “Company,” “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. The accompanying March 31, 2024 interim condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, but we believe the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation have been included in the condensed consolidated unaudited financial statements included herein. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2023 Annual Report on Form

10-K.

The condensed consolidated unaudited financial statements include the accounts of Watsco, all of its wholly owned subsidiaries, the accounts of four joint ventures with Carrier Global Corporation, which we refer to as Carrier, in which we have a controlling interest, the accounts of Carrier InterAmerica Corporation and Carrier (Puerto Rico), Inc., in

each of

which we have an 80% controlling interest, and Carrier has a 20%

non-controlling

interest, and our 38.4% investment in Russell Sigler, Inc., which is accounted for under the equity method of accounting. All significant intercompany balances and transactions have been eliminated in consolidation.

The results of operations for the quarter ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024. Sales of residential central air conditioners, heating equipment, and parts and supplies are seasonal. Furthermore, profitability can be impacted favorably or unfavorably based on weather patterns, particularly during the Summer and Winter selling seasons. 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 first and fourth quarters. Demand related to the new construction sectors throughout most of the markets we serve tends to be fairly evenly distributed throughout the year and depends largely on housing completions and related weather and economic conditions.

Short-Term Cash Investments

Short-term cash investments consist of a certificate of deposit that matures in September 2024.

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 investment in unconsolidated entity in our condensed consolidated unaudited 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 condensed consolidated unaudited 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.

Use of Estimates

The preparation of condensed consolidated unaudited 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 condensed consolidated unaudited financial statements and the reported amounts of revenues and expenses for the reporting period. Significant estimates include valuation reserves for accounts receivable, net realizable value adjustments to inventories, income taxes, reserves related to loss contingencies and the valuation of goodwill, indefinite-lived intangible assets, and long-lived assets. While we believe that these estimates are reasonable, actual results could differ from such estimates.

Recently Adopted Accounting Standards

Segment Reporting

In September 2023, the Financial Accounting Standards Board (“FASB”) issued guidance that enhances segment reporting primarily by expanding the disclosures about significant segment expenses. Under the new standard, an entity will be required to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), how the CODM assesses segment performance and decides how to allocate resources, the title and position of the CODM, and certain other disclosures. This guidance is effective prospectively and is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. The adoption of this guidance on January 1, 2024 did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

Income Taxes

In December 2023, the FASB issued guidance that enhances annual income tax disclosures primarily by disaggregating the existing disclosures related to the effective tax rate reconciliation and income taxes paid. Under the new

guidance

, an entity will be required to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. An entity will also be required to disclose the amount of income taxes paid disaggregated by federal, state and foreign, and by individual jurisdictions equal or greater than

five

percent of total income taxes paid. This guidance is effective prospectively and is effective for annual periods beginning after December 15, 2024. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Climate Disclosures

In March 2024, the Securities and Exchange Commission (“SEC”) adopted rules to enhance and standardize disclosures related to the impacts and risks of climate-related matters. Under the new rules, an entity will be required to disclose information about climate-related risks that have materially impacted, or are likely to have a material impact, on its business strategy, results of operations, or financial condition. In addition, certain disclosures related to severe weather events, other natural conditions, and greenhouse gas emissions will be required in the audited financial statements. These rules are effective prospectively and are effective for annual periods beginning with the year ending December 31, 2025. On April 4, 2024, the SEC announced that it will stay implementation of its final rules pending the results of a legal challenge. We will continue to assess the impact of these rules on our consolidated financial statements while the stay is in place.

Earnings Per Share - Schedule of Basic and Diluted Earnings per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Basic Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$ 87,004	$ 110,073
Basic earnings per share for Common and Class B common stock	$ 2.17	$ 2.84
Diluted Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$ 87,004	$ 110,073
Diluted earnings per share for Common and Class B common stock	$ 2.17	$ 2.83
Class B Common Stock [Member]
Basic Earnings per Share:
Earnings allocated to Watsco, Inc. shareholders - Basic	$ 7,002	$ 9,170
Common Stock [Member]
Basic Earnings per Share:
Earnings allocated to Watsco, Inc. shareholders - Basic	73,166	93,489
Common Stock [Member] \| Class B Common Stock [Member]
Basic Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	87,004	110,073
Less: distributed and undistributed earnings allocated to restricted common stock	6,836	7,414
Earnings allocated to Watsco, Inc. shareholders - Basic	$ 80,168	$ 102,659
Weighted-average common shares outstanding – Basic	36,875,549	36,192,597
Basic earnings per share for Common and Class B common stock	$ 2.17	$ 2.84
Diluted Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$ 87,004	$ 110,073
Less: distributed and undistributed earnings allocated to restricted common stock	6,836	7,411
Earnings allocated to Watsco, Inc. shareholders - Diluted	$ 80,168	$ 102,662
Weighted-average common shares outstanding – Basic	36,875,549	36,192,597
Effect of dilutive stock options	123,999	109,231
Weighted-average common shares outstanding – Diluted	36,999,548	36,301,828
Diluted earnings per share for Common and Class B common stock	$ 2.17	$ 2.83
Anti-dilutive stock options not included above	46,456	169,916

RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2024

RELATED PARTY TRANSACTIONS

10.	RELATED PARTY TRANSACTIONS

Purchases from Carrier and its affiliates comprised 58% and 62% of all inventory purchases made during the quarters ended March 31, 2024 and 2023, respectively. At March 31, 2024 and December 31, 2023, approximately $202,000 and $100,000, respectively, was payable to Carrier and its affiliates, net of receivables. We also sell HVAC products to Carrier and its affiliates. Revenues in our condensed consolidated unaudited statements of income for the quarters ended March 31, 2024 and 2023 included approximately $18,000 and $22,000, 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 Senior Chairman of Greenberg Traurig, P.A., which serves as our principal outside counsel for compliance and acquisition-related legal services. During the quarters ended March 31, 2024 and 2023, fees for services performed were $75 and $13, respectively, and $67 and $3 was payable at March 31, 2024 and

December

31, 2023, respectively.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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-Name Accounting Standards Codification
-Section 50
-Paragraph 5
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-URI https://asc.fasb.org//1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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-Paragraph 1
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-Name Accounting Standards Codification
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

+ Details

Subsequent Events - Additional Information (Detail) $ in Thousands	May 03, 2024 USD ($)
Subsequent Event [Member] \| Sales Agreement For ATM Program [Member]
Subsequent Event [Line Items]
Maximum Aggregate Offering Amount Of Stock	$ 400,000

Acquisitions - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023	Sep. 01, 2023
Business Acquisition [Line Items]
Operating lease ROU assets	$ 383,434	$ 368,748
Gateway Supply Company, Inc. [Member]
Business Acquisition [Line Items]
Accounts receivable			$ 21,159
Inventories			37,098
Other current assets			319
Property and equipment			3,213
Operating lease ROU assets			15,737
Goodwill			26,029
Intangibles			44,000
Other assets			86
Current portion of long-term liabilities			(3,633)
Accounts payable			(8,306)
Accrued expenses and other current liabilities			(4,934)
Operating lease liabilities, net of current portion			(12,434)
Finance lease liabilities, net of current portion			(1,431)
Other liabilities			(14,360)
Total			$ 102,543

Basis of Presentation - Additional Information (Detail)	3 Months Ended
Basis of Presentation - Additional Information (Detail)	Mar. 31, 2024 Entity
Income Tax [Line Items]
Number of Joint Ventures	4
Minimum [Member] \| Individual Tax Jurisdictions [Member]
Income Tax [Line Items]
Percentage threshold to disclose the amount of income taxes paid by individual jurisdictions	5.00%

FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2024

FAIR VALUE MEASUREMENTS

7.	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 March 31, 2024 Using
	Balance Sheet Location		Total		Level 1		Level 2		Level 3
Assets:
Certificate of deposit		Short-term cash investments	$	200,000		—	$	200,000		—
Derivative financial instruments		Other current assets	$	55		—	$	55		—
Equity securities		Other assets	$	1,235	$	1,235		—		—
Private equities		Other assets	$	1,500		—		—	$	1,500


			Total		Fair Value Measurements at December 31, 2023 Using
	Balance Sheet Location		Total		Level 1		Level 2		Level 3
Assets:
Derivative financial instruments		Other current assets	$	5		—	$	5		—
Equity securities		Other assets	$	1,044	$	1,044		—		—
Private equities		Other assets	$	1,500		—		—	$	1,500

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:

Short-term cash investments

– these investments consist of a certificate of deposit that matures in September 2024.

Derivative financial instruments

– these derivatives are foreign currency forward and option contracts. See Note 6. 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.

Equity 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.

Private equities

– other investments in which fair value inputs are unobservable and are therefore classified within Level 3 of the fair value hierarchy.

- 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

Shareholders' Equity - Additional Information (Detail) - USD ($) $ in Thousands			3 Months Ended
	May 03, 2024	Aug. 06, 2021	Mar. 31, 2024	Mar. 31, 2023
Stockholders Equity Note [Line Items]
Net proceeds from the sale of Common stock			$ 281,784	$ 0
Shares withheld as payment for tax withholdings related to share based compensation, market value			442	$ 2,216
ATM Program [Member]
Stockholders Equity Note [Line Items]
Net proceeds from the sale of Common stock			281,784
Maximum aggregate offering amount of stock		$ 300,000
Direct costs			33
Available for sale under ATM Program			$ 1,545
Number of shares sold and issued under ATM			712,000
Sales Agreement For ATM Program [Member] \| Subsequent Event [Member]
Stockholders Equity Note [Line Items]
Maximum aggregate offering amount of stock	$ 400,000
Dividend Reinvestment Plan [Member]
Stockholders Equity Note [Line Items]
Stock issued during period, shares, employee stock purchase plans			0
Common and Class B Common Stock [Member] \| Restricted Stock [Member]
Stockholders Equity Note [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, shares			999	6,047
Shares withheld as payment for tax withholdings related to share based compensation, market value			$ 390	$ 1,664
Common Stock [Member] \| Stock Option [Member]
Stockholders Equity Note [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, shares			426	15,655
Shares withheld as payment for tax withholdings related to share based compensation, market value			$ 175	$ 4,788
Cash received from the exercise of stock options			10,040	8,168
Common Stock [Member] \| Employee Stock Purchase Plan [Member]
Stockholders Equity Note [Line Items]
Net proceeds from shares purchased under ESPP			$ 583	$ 579

OTHER COMPREHENSIVE (LOSS) INCOME (Tables)

3 Months Ended

Mar. 31, 2024

Schedule of Accumulated Other Comprehensive Loss

The change in accumulated other comprehensive loss, net of tax, was as follows:


Quarters Ended March 31,	2024			2023
Foreign currency translation adjustment:
Beginning balance	$	(42,331	)	$	(47,710	)
Current period other comprehensive (loss) income		(5,539	)		170

Ending balance	$	(47,870	)	$	(47,540	)

Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Commitments and Contingencies Disclosure [Line Items]
Self-insurance reserves	$ 9,658	$ 9,747

Condensed Consolidated Unaudited Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities:
Net income	$ 104,262	$ 130,371
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	9,882	8,183
Share-based compensation	8,127	6,701
Non-cash contribution to 401(k) plan	8,735	8,862
Provision for doubtful accounts	862	1,043
Other income from investment in unconsolidated entity	(5,460)	(3,640)
Other, net	1,245	1,160
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	(33,502)	(64,691)
Inventories, net	(307,219)	(240,758)
Accounts payable and other liabilities	315,087	101,813
Other, net	1,687	3,535
Net cash provided by (used in) operating activities	103,706	(47,421)
Cash flows from investing activities:
Purchases of short-term cash investments	(200,000)	0
Capital expenditures	(5,845)	(7,505)
Business acquisitions, net of cash acquired	(5,178)	(2,989)
Proceeds from sale of property and equipment	58	56
Net cash used in investing activities	(210,965)	(10,438)
Cash flows from financing activities:
Net proceeds from the sale of Common stock	281,784	0
Net proceeds from issuances of Common stock under employee related plans	10,623	8,747
Net repayments under prior revolving credit agreement	0	(56,400)
Payment of fees related to revolving credit agreement	0	(580)
Repurchases of common stock to satisfy employee withholding tax obligations	(442)	(2,216)
Net repayments of finance lease liabilities	(1,399)	(880)
Net (repayments) proceeds under current revolving credit agreement	(15,400)	197,600
Dividends on Common and Class B common stock	(96,765)	(94,970)
Net cash provided by financing activities	178,401	51,301
Effect of foreign exchange rate changes on cash and cash equivalents	(2,390)	8
Net increase (decrease) in cash and cash equivalents	68,752	(6,550)
Cash and cash equivalents at beginning of period	210,112	147,505
Cash and cash equivalents at end of period	278,864	140,955
Supplemental cash flow information:
Common stock issued for Commercial Specialists, Inc.	$ 752	$ 0

Condensed Consolidated Unaudited Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock, Class B Common Stock and Preferred Stock [Member]	Paid-In Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Non-controlling Interest [Member]
Beginning balance at Dec. 31, 2022	$ 2,248,278	$ 21,811	$ 973,060	$ (47,710)	$ 1,029,516	$ (87,440)	$ 359,041
Beginning balance (in shares) at Dec. 31, 2022		38,749,887
Net income	130,371				110,073		20,298
Other comprehensive income (loss)	260			170			90
Issuances of restricted shares of common stock		$ 58	(58)
Issuances of restricted shares of common stock (in shares)		116,510
Forfeitures of restricted shares of common stock		$ (1)	1
Forfeitures of restricted shares of common stock (in shares)		(2,000)
Common stock contribution to 401(k) plan	8,862	$ 18	8,844
Common stock contribution to 401(k) plan (in shares)		35,533
Stock issuances from exercise of stock options and employee stock purchase plan	12,985	$ 38	12,947
Stock issuances from exercise of stock options and employee stock purchase plan (in shares)		75,186
Issuance of Class B common stock	200	$ 0	200
Issuance of Class B common stock (in shares)		632
Retirement of common stock	(6,452)	$ (11)	(6,441)
Retirement of common stock (in shares)		(21,702)
Share-based compensation	8,763		8,763
Cash dividends declared and paid on Common and Class B common stock	(94,970)				(94,970)
Ending balance at Mar. 31, 2023	2,308,297	$ 21,913	997,316	(47,540)	1,044,619	(87,440)	379,429
Ending balance (in shares) at Mar. 31, 2023		38,954,046
Beginning balance at Dec. 31, 2023	2,616,190	$ 22,134	1,153,459	(42,331)	1,183,207	(86,630)	386,351
Beginning balance (in shares) at Dec. 31, 2023		39,441,280
Net income	104,262				87,004		17,258
Other comprehensive income (loss)	(8,000)			(5,539)			(2,461)
Issuances of restricted shares of common stock		$ 44	(44)
Issuances of restricted shares of common stock (in shares)		87,660
Forfeitures of restricted shares of common stock		$ (6)	6
Forfeitures of restricted shares of common stock (in shares)		(12,064)
Common stock contribution to 401(k) plan	8,735	$ 10	8,725
Common stock contribution to 401(k) plan (in shares)		20,387
Stock issuances from exercise of stock options and employee stock purchase plan	10,746	$ 27	10,719
Stock issuances from exercise of stock options and employee stock purchase plan (in shares)		53,029
Retirement of common stock	(565)	$ (1)	(564)
Retirement of common stock (in shares)		(1,425)
Net proceeds from the sale of Common stock	281,751		268,931			12,820
Net proceeds from the sale of Common stock (in shares)		712,000
Common stock issued for Commercial Specialists, Inc.	752	$ 1	751
Common stock issued for Commercial Specialists, Inc. (in shares)		1,904
Share-based compensation	10,467		10,467
Cash dividends declared and paid on Common and Class B common stock	(96,765)				(96,765)
Ending balance at Mar. 31, 2024	$ 2,927,573	$ 22,209	$ 1,452,450	$ (47,870)	$ 1,173,446	$ (73,810)	$ 401,148
Ending balance (in shares) at Mar. 31, 2024		40,302,771

ACQUISITIONS (Tables)

3 Months Ended

Mar. 31, 2024

Gateway Supply Company, Inc. [Member]

Summary of tangible and intangible assets acquired and liabilities assumed

The table below presents the allocation of the total consideration to tangible and intangible assets acquired and liabilities assumed from the acquisition of GWS based on their respective fair values as of September 1, 2023:


Accounts receivable	$	21,159
Inventories		37,098
Other current assets		319
Property and equipment		3,213
Operating lease ROU assets		15,737
Goodwill		26,029
Intangibles		44,000
Other assets		86
Current portion of long-term liabilities		(3,633	)
Accounts payable		(8,306	)
Accrued expenses and other current liabilities		(4,934	)
Operating lease liabilities, net of current portion		(12,434	)
Finance lease liabilities, net of current portion		(1,431	)
Other liabilities		(14,360	)

Total	$	102,543

Condensed Consolidated Unaudited Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2024	Dec. 31, 2023
Preferred stock, par value	$ 0.5	$ 0.5
Common Stock [Member]
Common stock, par value	0.5	0.5
Class B Common Stock [Member]
Common stock, par value	$ 0.5	$ 0.5

EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2024

EARNINGS PER SHARE

3.	EARNINGS PER SHARE

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


Quarters Ended March 31,	2024		2023
Basic Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	87,004	$	110,073
Less: distributed and undistributed earnings allocated to restricted common stock		6,836		7,414

Earnings allocated to Watsco, Inc. shareholders	$	80,168	$	102,659


Weighted-average common shares outstanding – Basic		36,875,549		36,192,597
Basic earnings per share for Common and Class B common stock	$	2.17	$	2.84
Allocation of earnings for Basic:
Common stock	$	73,166	$	93,489
Class B common stock		7,002		9,170

	$	80,168	$	102,659

Diluted Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	87,004	$	110,073
Less: distributed and undistributed earnings allocated to restricted common stock		6,836		7,411

Earnings allocated to Watsco, Inc. shareholders	$	80,168	$	102,662


Weighted-average common shares outstanding – Basic		36,875,549		36,192,597
Effect of dilutive stock options		123,999		109,231

Weighted-average common shares outstanding – Diluted		36,999,548		36,301,828

Diluted earnings per share for Common and Class B common stock	$	2.17	$	2.83

Anti-dilutive stock options not included above		46,456		169,916

Diluted earnings per share for our Common stock assumes the conversion of all 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 March 31, 2024 and 2023, our outstanding Class B common stock was convertible into 3,220,567 and 3,232,844 shares of our Common stock, respectively.

SHAREHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2024

SHAREHOLDERS' EQUITY

8.	SHAREHOLDERS’ EQUITY

Dividend Reinvestment Plan

On March 29, 2024, we implemented the Watsco, Inc. Dividend Reinvestment Plan (the “Plan”), under which existing shareholders may, in accordance with the Plan, acquire shares of the Company’s Common stock or Class B Common stock, as applicable (collectively “common stock”), by reinvesting all or a portion of the cash dividends paid on such shareholders’ shares of common stock. The Plan has been registered under the Securities Act

of 1933, as amended (the “Securities Act”),

pursuant to our automatically effective shelf registration statement on Form

S-3

(File

No. 333-260758).

As of March 31, 2024, no shares of common stock

had

been issued under the Plan.

At-the-Market

Offering Program

We are party to a sales agreement with Robert W. Baird & Co. Inc

. (“Baird”),

which enables the Company to issue and sell shares of Common stock in one or more negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act for a maximum aggregate offering amount of up to $300,000 (the “ATM Program”). The offer and sale of our Common stock pursuant to the ATM Program has been registered under the Securities Act pursuant to our automatically effective shelf registration statement on Form

S-3

(File

No. 333-260758).

During the quarter ended March 31, 2024, we issued and sold 712,000 shares of Common stock under the ATM Program for net proceeds of $281,784. Direct costs of $33 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. At March 31, 2024, $1,545 remained available for sale under the ATM Program.

On May 3, 2024, we entered into an amendment to the sales agreement for the ATM Program, which increased the maximum aggregate offering amount under the ATM Program by an additional $400,000. See Note 11.

Restricted Stock

During the quarter ended March 31, 2024, a total of 999 shares of Class B common stock with an aggregate fair market value of $390 were withheld as payment in lieu of cash to satisfy tax withholding obligations in connection with the vesting of restricted stock. During the quarter ended March 31, 2023, a total of 6,047 shares of Common and Class B common stock with an aggregate fair market value of $1,664 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.

Exercise of Stock Options

Cash received from Common stock issued as a result of stock options exercised during the quarters ended March 31, 2024 and 2023 was $10,040 and $8,168, respectively.

During quarters ended March 31, 2024 and 2023, a total of 426 shares of Common stock with an aggregate fair market value of $175 and a total of 15,655 shares of Common stock with an aggregate fair market value of $4,788, respectively, were withheld as payment in lieu of cash for stock option exercises and related tax withholdings. These shares were retired upon delivery.

Employee Stock Purchase Plan

During the quarters ended March 31, 2024 and 2023, we received net proceeds of $583 and $579, respectively, for shares of our Common stock purchased under our employee stock purchase plan.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Revenues - Summary of Disaggregated Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	100.00%	100.00%
Revenues	$ 1,564,991	$ 1,550,641
United States [Member]
Disaggregation of Revenue [Line Items]
Revenues	1,398,686	1,395,004
Canada [Member]
Disaggregation of Revenue [Line Items]
Revenues	79,798	81,263
Latin America and the Caribbean [Member]
Disaggregation of Revenue [Line Items]
Revenues	$ 86,507	$ 74,374
HVAC Equipment [Member]
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	67.00%	68.00%
Other HVAC Products [Member]
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	29.00%	28.00%
Commercial Refrigeration Products [Member]
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	4.00%	4.00%

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

+ References

+ Details

REVENUES (Tables)

3 Months Ended

Mar. 31, 2024

Summary of Disaggregated Revenue

The following table presents our revenues disaggregated by primary geographical regions and major product lines within our single reportable segment:


Quarters Ended March 31,	2024			2023
Primary Geographical Regions:
United States	$	1,398,686		$	1,395,004
Canada		79,798			81,263
Latin America and the Caribbean		86,507			74,374

	$	1,564,991		$	1,550,641

Major Product Lines:
HVAC equipment		67	%		68	%
Other HVAC products		29	%		28	%
Commercial refrigeration products		4	%		4	%

		100	%		100	%

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2024

COMMITMENTS AND CONTINGENCIES

9.	COMMITMENTS AND CONTINGENCIES

Litigation, Claims, and Assessments

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 several 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 $9,658 and $9,747 at March 31, 2024 and December 31, 2023, respectively, were established related to such programs and are included in accrued expenses and other current liabilities in our condensed consolidated unaudited balance sheets.

Fair Value Measurements - Assets and Liabilities Carried at Fair Value Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Short-term cash investments [Member]
Assets:
Certificate of deposit	$ 200,000
Other Current Assets [Member]
Assets:
Derivative financial instruments	55	$ 5
Other assets [Member]
Assets:
Equity securities	1,235	1,044
Private equities	1,500	1,500
Fair Value Measurements, Level 1 [Member] \| Other assets [Member]
Assets:
Equity securities	1,235	1,044
Fair Value Measurements, Level 2 [Member] \| Short-term cash investments [Member]
Assets:
Certificate of deposit	200,000
Fair Value Measurements, Level 2 [Member] \| Other Current Assets [Member]
Assets:
Derivative financial instruments	55	5
Fair Value Measurements, Level 3 [Member] \| Other assets [Member]
Assets:
Private equities	$ 1,500	$ 1,500

ACQUISITIONS

3 Months Ended

Mar. 31, 2024

ACQUISITIONS

5.	ACQUISITIONS

Commercial Specialists, Inc.

On February 1, 2024, one of our wholly owned subsidiaries acquired Commercial Specialists, Inc., a distributor of HVAC products with annual sales of approximately $13,000, operating from two locations in Kentucky and Ohio. Consideration for the purchase consisted of $6,042 in cash, 1,904 shares of Common stock having a fair value of $752, and $562 for repayment of indebtedness, net of cash acquired of $1,426.

Gateway Supply Company, Inc.

On September 1, 2023, we acquired substantially all the assets and assumed certain of the liabilities of Gateway Supply Company, Inc. (“GWS”), a plumbing and HVAC distributor with annual sales of approximately $180,000, operating from 15 locations in South Carolina and one location in Charlotte, North Carolina. We formed a new, wholly owned subsidiary, Gateway Supply LLC, that operates this business. Consideration for the net purchase price consisted of $4,000 in cash, net of cash acquired of $3,102, and 280,215 shares of Common stock having a fair value of $101,645, net of a discount for lack of marketability. Of the 280,215 shares of Common stock issued, 21,228 shares are subject to a contractual restriction that generally prohibits the sale or other transfer of such shares by GWS and its permitted transferees for a period of one year following the closing date with respect to half of such shares, and two years following the closing date with respect to the other half of such shares. The preliminary purchase price resulted in the recognition of $70,029 in goodwill and intangibles. The fair value of the identified intangible assets was $44,000 and consisted of $18,600 in trade names and distribution rights, and $25,400 in customer relationships to be amortized over an

18-year

period. The tax basis of the acquired goodwill recognized is not deductible for income tax purposes.


Accounts receivable	$	21,159
Inventories		37,098
Other current assets		319
Property and equipment		3,213
Operating lease ROU assets		15,737
Goodwill		26,029
Intangibles		44,000
Other assets		86
Current portion of long-term liabilities		(3,633	)
Accounts payable		(8,306	)
Accrued expenses and other current liabilities		(4,934	)
Operating lease liabilities, net of current portion		(12,434	)
Finance lease liabilities, net of current portion		(1,431	)
Other liabilities		(14,360	)

Total	$	102,543

Capitol District Supply Co., Inc.

On March 3, 2023, one of our wholly owned subsidiaries acquired Capitol District Supply Co., Inc., a distributor of plumbing and air conditioning and heating products with annual sales of approximately $13,000, operating from three locations in New York. Consideration for the purchase consisted of $1,217 in cash, net of cash acquired of $144, and $1,851 for repayment of indebtedness. The purchase price resulted in the recognition of $1,055 in goodwill and intangibles. The fair value of the identified intangible assets was $606 and consisted of $430 in trade names and distribution rights, and $176 in customer relationships to be amortized over an

18-year

period. The tax basis of such goodwill is deductible for income tax purposes over 15 years.

The results of operations of these acquisitions have been included in the condensed consolidated unaudited financial statements from their respective dates of acquisition. The pro forma effect of these acquisitions was not deemed significant to our condensed consolidated unaudited financial statements.

Cover Page - shares	3 Months Ended
Cover Page - shares	Mar. 31, 2024	Apr. 29, 2024
Document Information [Line Items]
Document Type	10-Q
Document Period End Date	Mar. 31, 2024
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Entity Registrant Name	WATSCO, INC.
Entity Central Index Key	0000105016
Entity File Number	1-5581
Entity Incorporation, State or Country Code	FL
Document Quarterly Report	true
Document Transition Report	false
Entity Address, City or Town	Miami
Entity Tax Identification Number	59-0778222
Entity Address, Address Line One	2665 South Bayshore Drive
Entity Address, Postal Zip Code	33133
Entity Address, Address Line Two	Suite 901
Entity Address, State or Province	FL
City Area Code	305
Local Phone Number	714-4100
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Common Stock [Member]
Document Information [Line Items]
Trading Symbol	WSO
Security Exchange Name	NYSE
Title of 12(b) Security	Common stock, $0.50 par value
Entity Common Stock, Shares Outstanding		34,747,547
Common Class B [Member]
Document Information [Line Items]
Trading Symbol	WSOB
Security Exchange Name	NYSE
Title of 12(b) Security	Class B common stock, $0.50 par value
Entity Common Stock, Shares Outstanding		5,552,467