Exhibit 99.1
WATSCO REPORTS RECORD 2003 FOURTH QUARTER
AND FULL-YEAR RESULTS
Record Fourth Quarter Diluted EPS of 17 Cents vs.
5 Cents Last Year on a 7% Sales Increase
MIAMI, FLORIDA, February 19, 2004 – Watsco, Inc. (NYSE:WSO) announced today record performance for the fourth quarter and for the year ended December 31, 2003.
Fourth Quarter Results
Diluted earnings per share more than tripled to a record 17 cents in 2003 on record net income of $4.4 million as compared to 5 cents in 2002 on net income of $1.2 million. Operating profit increased by 230% to $8.5 million compared to $2.6 million a year ago and operating margins improved 200 basis-points to 3.0% from 1.0%. Interest expense declined 32% or $539,000 from a 25% reduction in average daily borrowings.
Sales increased 7% to $286.4 million from $266.9 million in 2002, including a 5% same-store sales increase in residential and light-commercial products and a contribution of $13 million from locations acquired and opened earlier in 2003. Gross profit increased 13% to $71.1 million from $62.9 million a year ago with gross profit margins increasing 120 basis-points to 24.8% from 23.6%. Selling, general and administrative expenses increased $2.3 million or 4%, and on a same-store basis declined 1% on increased revenues as compared to 2002.
2003 Full-Year Results
Diluted earnings per share increased 25% to $1.34 in 2003 from $1.07 in 2002, on record net income of $34.9 million as compared to $28.5 million in 2002. Operating profit increased 20% to a record $61.2 million in 2003 as compared to $50.9 million in 2002, and operating margins increased 70 basis-points to 5.0% from 4.3%. Interest expense declined 23% or $1.7 million from a 20% reduction in average daily borrowings.
Sales increased 4% to $1.23 billion in 2003 from $1.18 billion in 2002, including a 4% same-store sales increase in residential and light-commercial products and a contribution of $41 million from locations acquired and opened during 2003. Gross profit increased 6% to $305.1 million in 2003 compared with $287.3 million in 2002 with gross selling margins increasing 40 basis-points to 24.7% from 24.3% in 2002. Selling, general and administrative expenses increased $7.5 million or 3%, and on a same store-sales basis, remained flat with increased revenues as compared to 2002.
Cash Flow
Cash flow from operations was $20.9 million for the quarter and $60.3 million during 2003 as compared to $24.5 million for the quarter and $66.9 million during 2002. Long-term debt at December 31, 2003 declined 25% to $60.0 million compared to $80.0 million a year ago. The Company’s debt-to-total capitalization ratio improved to 14% at December
31, 2003 versus 20% a year ago. Common stock dividends paid during 2003 increased 71%, or $2.1 million, on 2% fewer outstanding shares, the third consecutive year of increases. During 2003, the Company also repurchased 442,900 shares for $6.7 million. Since beginning its share repurchase program in 1999, the Company has repurchased 5.4 million shares for $66.3 million.
Mr. Albert Nahmad, Watsco’s President & Chief Executive Officer stated, “2003’s record results reflect several consistent themes that were achieved throughout the year – sales growth, higher selling margins, containment of operating costs from a variety of efficiency and productivity initiatives and lower borrowing costs. As a result, operating margins advanced at the highest rate in our history. We are also pleased with the consistency of cash flow as 2003 marks the fifth consecutive year of surpassing our stated goal of cash flow from operations exceeding net income.”
Watsco will be holding its investor conference call today, February 19, 2004 at 10:00 a.m. Eastern Time. Shareholders interested in participating may call (877) 391-0532. Internet users can listen to a live webcast of the conference call on the Investor Relations section of Watsco’s website athttp://www.watsco.com.
Watsco is the nation’s largest independent distributor of air conditioning, heating and refrigeration equipment and related products in the distribution segment of the HVAC/R industry, currently operating 318 locations serving customers in 31 states. Additional information about Watsco may be found on the Internet athttp://www.watsco.com.
This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive market, regulatory and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within Watsco’s industry, seasonal nature of sales of Watsco’s products and insurance coverage risks. Forward-looking statements speak only as of the date the statement was made. Watsco assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Detailed information about these factors and additional important factors can be found in the documents that Watsco files from time to time with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K.
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WATSCO, INC.
Consolidated Results of Operations
(In thousands, except per share data)
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||
Revenue | $ | 286,397 | $ | 266,865 | $ | 1,232,908 | $ | 1,181,136 | |||||||
Cost of sales | 215,276 | 203,919 | 927,825 | 893,860 | |||||||||||
Gross profit | 71,121 | 62,946 | 305,083 | 287,276 | |||||||||||
SG&A expenses | 62,644 | 60,376 | 243,894 | 236,352 | |||||||||||
Operating income | 8,477 | 2,570 | 61,189 | 50,924 | |||||||||||
Interest expense, net | 1,131 | 1,670 | 5,509 | 7,190 | |||||||||||
Income before income taxes | 7,346 | 900 | 55,680 | 43,734 | |||||||||||
Income taxes (expense) benefit | (2,901 | ) | 286 | (20,785 | ) | (15,198 | ) | ||||||||
Net income | $ | 4,445 | $ | 1,186 | $ | 34,895 | $ | 28,536 | |||||||
Basic earnings per share | $ | 0.18 | $ | 0.05 | $ | 1.39 | $ | 1.12 | |||||||
Diluted earnings per share | $ | 0.17 | $ | 0.05 | $ | 1.34 | $ | 1.07 | |||||||
Weighted average shares and equivalent shares used to calculate: | |||||||||||||||
Basic earnings per share | 25,149 | 25,018 | 25,086 | 25,558 | |||||||||||
Diluted earnings per share | 26,387 | 25,926 | 26,037 | 26,674 |
Segment Information:
Quarter Ended Dec. 31, | Year Ended Dec. 31, | |||||||||||||||
Revenue: | 2003 | 2002 | 2003 | 2002 | ||||||||||||
Distribution | $ | 279,925 | $ | 258,595 | $ | 1,206,526 | $ | 1,147,561 | ||||||||
Staffing | 6,472 | 8,270 | 26,382 | 33,575 | ||||||||||||
Total | $ | 286,397 | $ | 266,865 | $ | 1,232,908 | $ | 1,181,136 | ||||||||
Operating income (loss): | ||||||||||||||||
Distribution | $ | 12,231 | $ | 7,569 | $ | 75,856 | $ | 64,562 | ||||||||
Staffing | (69 | ) | (1,038 | ) | (1,268 | ) | (1,739 | ) | ||||||||
Corporate | (3,685 | ) | (3,961 | ) | (13,399 | ) | (11,899 | ) | ||||||||
Total | $ | 8,477 | $ | 2,570 | $ | 61,189 | $ | 50,924 | ||||||||
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WATSCO, INC.
Consolidated Balance Sheets
(In thousands)
December 31, 2003 | December 31, 2002 | |||||
Cash and cash equivalents | $ | 36,339 | $ | 25,880 | ||
Accounts receivable, net | 137,678 | 129,396 | ||||
Inventories | 194,267 | 176,407 | ||||
Other current assets | 9,244 | 13,878 | ||||
Total current assets | 377,528 | 345,561 | ||||
Property and equipment, net | 22,066 | 25,850 | ||||
Other non-current assets | 135,501 | 132,308 | ||||
Total assets | $ | 535,095 | $ | 503,719 | ||
Accounts payable and accrued liabilities | $ | 108,667 | $ | 86,180 | ||
Current portion of long-term obligations | 172 | 272 | ||||
108,839 | 86,452 | |||||
Borrowings under revolving credit agreement | 30,000 | 50,000 | ||||
Long-term notes | 30,000 | 30,000 | ||||
Other long-term obligations | 6,223 | 8,066 | ||||
Total liabilities | 175,062 | 174,518 | ||||
Shareholders’ equity | 360,033 | 329,201 | ||||
Total liabilities and shareholders’ equity | $ | 535,095 | $ | 503,719 | ||
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