July 30, 2012: Watsco Sets Records for Sales, Operating Profit, and EPS During Second Quarter
Gross profit increased 12 percent to a record $238 million. Gross profit margin (on an overall and same-store basis) declined 50 basis-points to 23.6 percent, reflecting primarily a higher sales mix of HVAC equipment and growth in sales of commercial products, both of which generate lower gross margins than non-equipment products.
Operating income increased 14 percent to a record $86 million with operating margins of 8.5 percent. Same-store operating income increased 4 percent to $79 million with a 20 basis-point increase in operating margin to 8.8 percent. Selling, general, and administrative (SG&A) expenses increased 11 percent to $153 million. SG&A excluding new locations decreased 4 percent for the quarter and was 14.8 percent as a percentage of sales.
Earnings per share increased 6 percent to a record $1.15 per diluted share on record net income of $39 million, compared to $1.09 per diluted share on net income of $36 million in 2011.
Albert Nahmad, Watsco’s president and CEO, said, “Watsco had a good quarter posting all-time records for sales and profits. Our commercial sales were up double digits, far outpacing the industry. The trend for sales of low efficiency residential equipment continued with market demand strongest in the Midwest and Northeast. Most importantly, we were able to build on market share gains from the first quarter.”
Nahmad added, “Our goal is to continue to improve our competitive posture and gain share with our expanded footprint and product offering. We are pleased with our expanded market coverage in Latin America and, recently, Canada. Our strong financial position enables us to continue to seek additional investments to further enhance our industry position.”
Second quarter results include locations added from joint venture transactions with Carrier Corp. in the northeast United States, Mexico, and Canada.
Publication date: 7/30/2012
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