Watsco (WSO) 8-K Watsco Reports Record 2005 Fourth Quarter & Full-Year Results

Exhibit 99.1

Watsco Reports Record 2005 Fourth Quarter & Full-Year Results

Fourth Quarter EPS More than Doubles to 50 Cents Per Share

Annual EPS Climbs 41% to $2.52 on 28% Sales Growth

COCONUT GROVE, FLORIDA, February 14, 2006 – Watsco, Inc. (NYSE:WSO), the largest distributor of air conditioning and heating products, today announced record operating results for the fourth quarter and year ended December 31, 2005. Sales, gross profit and operating profit reached record levels and combined to produce improved operating margins, record net income and earnings per share for the quarter and for the year.

Earnings per share for the fourth quarter more than doubled to 50 cents per diluted share on net income of $14.1 million, compared to 23 cents per diluted share on net income of $6.2 million during the same period last year. Revenues grew $110 million, or 36%, to $416 million, with HVAC revenues increasing 16% on a same-store basis. Operating income increased $12.1 million to $23.4 million with operating margins rising 190 basis-points to a record 5.6%. On a same-store basis, operating profit increased 73% and operating margins improved 180 basis-points to 5.5%.

Earnings per share for the year increased 41% to $2.52 per diluted share on net income of $70.0 million, compared to $1.79 cents per diluted share on net income of $48.1 million a year ago. Revenues grew $368 million, or 28%, to $1.68 billion with HVAC revenues increasing 11% on a same-store basis. Operating income increased 42% to $116.5 million, with operating margins expanding 70 basis-points to 6.9%. On a same-store basis, operating profit increased 25% and operating margins improved 80 basis-points to 7.0%.

Mr. Albert H. Nahmad, Watsco’s President and Chief Executive Officer, stated: “By all measures, 2005 was a year of outstanding performance for Watsco. We delivered strong rates of growth in sales and earnings and also increased our operating margins to record levels. While we are pleased with these results, we are still a work in process as our approximate 7% share of the $26 billion domestic HVAC market remains relatively small. We are focused on growing our network and adding products and talent to enhance the service and convenience provided to our contractor customers.”

Operating cash flow during the year was $34 million and reflects an additional investment of approximately $20 million of HVAC equipment held at year-end to enhance product availability during the industry’s first quarter 2006 transition to the new minimum efficiency standards. Debt declined 17% to $50.3 million and the Company’s debt-to-total capitalization ratio improved to 10% from 13% from a year ago. During 2005, the dividends paid per share increased 63% to 62 cents per share. In October 2005, the Company announced its quarterly dividend rate would increase 43% to 20 cents per share. Additionally, the Company repurchased 347,600 shares of stock for $17.7 million during 2005.

Watsco will be holding its investor conference call today, February 14, 2006 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 largest distributor of air conditioning, heating and refrigeration equipment and related parts and supplies in the distribution segment of the HVAC industry, currently operating 353 locations serving over 38,000 customers in 31 states. The Company’s goal is to build a national network of locations that provide the finest service and product availability for HVAC contractors, assisting and supporting them as they serve the country’s homeowners and businesses. 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, insurance coverage risks and final GAAP adjustments. 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,						Percentage Change		Year Ended December 31,						Percentage Change
	2005			2004					2005			2004
Revenues	$	416,189		$	306,307		36	%	$	1,682,724		$	1,315,024		28	%
Cost of sales		312,227			229,448					1,259,694			978,089
Gross profit		103,962			76,859		35	%		423,030			336,935		26	%
Gross profit margin		25.0	%		25.1	%				25.1	%		25.6	%
SG&A expenses		80,583			65,539		23	%		306,572			254,883		20	%
Operating income		23,379			11,320		107	%		116,458			82,052		42	%
Operating margin		5.6	%		3.7	%				6.9	%		6.2	%
Interest expense, net		571			915		(38	)%		3,342			4,413		(24	)%
Income before income taxes		22,808			10,405		119	%		113,116			77,639		46	%
Income tax expense		8,690			4,214					43,097			29,534
Net income	$	14,118		$	6,191		128	%	$	70,019		$	48,105		46	%
Basic earnings per share	$	0.54		$	0.24		125	%	$	2.69		$	1.89		42	%
Diluted earnings per share	$	0.50		$	0.23		117	%	$	2.52		$	1.79		41	%
Weighted average shares and equivalent shares used to calculate:
Basic earnings per share		26,187			25,697					26,049			25,507
Diluted earnings per share		27,969			27,178					27,769			26,931

(Note: The 2005 results include the results of East Coast Metal Distributors (“East Coast”), a Sunbelt-based HVAC distributor with 27 locations acquired in January 2005. Information in the attached press release referring to “same-store basis” excludes the effects of East Coast and other locations acquired or locations opened or closed during the prior twelve months.)

Condensed Consolidated Balance Sheets (in thousands)

	December 31, 2005		December 31, 2004
Cash and cash equivalents	$	27,650	$	85,144
Accounts receivable, net		191,747		145,213
Inventories		266,543		218,704
Other		8,051		8,638
Total current assets		493,991		457,699
Property and equipment, net		17,244		15,093
Other		167,496		135,497
Total assets	$	678,731	$	608,289
Accounts payable and accrued liabilities	$	169,219	$	137,103
Current portion of long-term obligations		10,079		10,056
Total current liabilities		179,298		147,159
Borrowings under revolving credit agreement		30,000		30,000
Long-term notes, net of current portion		10,000		20,000
Other long-term obligations		8,783		8,392
Total liabilities		228,081		205,551
Shareholders’ equity		450,650		402,738
Total liabilities and shareholders’ equity	$	678,731	$	608,289

(Note: Debt-to-total capitalization is computed by dividing total debt into total debt plus shareholders’ equity.)

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