Watsco (WSO) 10-Q 6 May 21 2021 Q1 Quarterly report Financial data

Cover Page

Cover Page - shares	3 Months Ended
	Mar. 31, 2021	May 03, 2021
Document Information [Line Items]
Document Type	10-Q
Document Period End Date	Mar. 31, 2021
Document Fiscal Year Focus	2021
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 Tax Identification Number	59-0778222
Entity Address, Address Line One	2665 South Bayshore Drive
Entity Address, City or Town	Miami
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		32,913,087
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		5,768,007

Condensed Consolidated Unaudite

Condensed Consolidated Unaudited Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues	$ 1,136,118	$ 1,008,156
Cost of sales	841,297	760,541
Gross profit	294,821	247,615
Selling, general and administrative expenses	217,612	203,386
Other income	4,671	1,014
Operating income	81,880	45,243
Interest expense, net	88	790
Income before income taxes	81,792	44,453
Income taxes	15,665	8,206
Net income	66,127	36,247
Less: net income attributable to non-controlling interest	11,035	5,745
Net income attributable to Watsco, Inc.	$ 55,092	$ 30,502
Earnings per share for Common and Class B common stock:
Basic and Diluted	$ 1.39	$ 0.72

Condensed Consolidated Unaudi_2

Condensed Consolidated Unaudited Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Net income	$ 66,127	$ 36,247
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment	3,457	(21,929)
Unrealized gain on cash flow hedging instruments arising during the period	76	2,534
Reclassification of loss on cash flow hedging instruments into earnings	243	115
Other comprehensive income (loss)	3,776	(19,280)
Comprehensive income	69,903	16,967
Less: comprehensive income (loss) attributable to non-controlling interest	12,337	(796)
Comprehensive income attributable to Watsco, Inc.	$ 57,566	$ 17,763

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 93,875	$ 146,067
Accounts receivable, net	596,513	535,288
Inventories, net	986,648	781,299
Other current assets	18,319	21,791
Total current assets	1,695,355	1,484,445
Property and equipment, net	100,378	98,225
Operating lease right-of-use assets	203,603	209,169
Goodwill	413,082	412,486
Intangible assets, net	169,931	169,929
Investment in unconsolidated entity	102,518	97,847
Other assets	7,397	12,246
Total assets	2,692,264	2,484,347
Current liabilities:
Current portion of long-term obligations	72,767	71,804
Accounts payable	384,109	251,553
Accrued expenses and other current liabilities	173,944	163,788
Total current liabilities	630,820	487,145
Long-term obligations:
Borrowings under revolving credit agreement	48,900	0
Operating lease liabilities, net of current portion	132,829	139,527
Finance lease liabilities, net of current portion	5,742	4,811
Total long-term obligations	187,471	144,338
Deferred income taxes and other liabilities	77,146	73,103
Commitments and contingencies
Watsco, Inc. shareholders' equity:
Preferred stock, $0.50 par value	0	0
Paid-in capital	966,536	950,915
Accumulated other comprehensive loss, net of tax	(32,393)	(34,867)
Retained earnings	622,944	636,373
Treasury stock, at cost	(87,440)	(87,440)
Total Watsco, Inc. shareholders' equity	1,491,407	1,486,678
Non-controlling interest	305,420	293,083
Total shareholders' equity	1,796,827	1,779,761
Total liabilities and shareholders' equity	2,692,264	2,484,347
Common Stock
Watsco, Inc. shareholders' equity:
Common stock, $0.50 par value	18,863	18,851
Class B Common Stock
Watsco, Inc. shareholders' equity:
Common stock, $0.50 par value	$ 2,897	$ 2,846

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2021	Dec. 31, 2020
Preferred stock, par value	$ 0.50	$ 0.50
Common Stock
Common stock, par value	0.50	0.50
Class B Common Stock
Common stock, par value	$ 0.50	$ 0.50

Condensed Consolidated Unaudi_3

Condensed Consolidated Unaudited Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock, Class B Common Stock and Preferred Stock	Paid-In Capital	Accumulated Other Comprehensive Loss	Retained Earnings	Treasury Stock	Non-controlling Interest
Beginning balance at Dec. 31, 2019	$ 1,714,767	$ 21,533	$ 907,877	$ (39,050)	$ 632,507	$ (87,440)	$ 279,340
Beginning balance (in shares) at Dec. 31, 2019		38,194,056
Net income	36,247				30,502		5,745
Other comprehensive (loss) income	(19,280)			(12,739)			(6,541)
Issuances of non-vested restricted shares of common stock		$ 57	(57)
Issuances of non-vested restricted shares of common stock (in shares)		113,765
Common stock contribution to 401(k) plan	4,543	$ 13	4,530
Common stock contribution to 401(k) plan (in shares)		25,216
Stock issuances from exercise of stock options and employee stock purchase plan	2,541	$ 9	2,532
Stock issuances from exercise of stock options and employee stock purchase plan (in shares)		18,674
Retirement of common stock	(791)	$ (2)	(789)
Retirement of common stock (in shares)		(4,828)
Share-based compensation	6,097		6,097
Cash dividends declared and paid on Common and Class B common stock	(61,238)				(61,238)
Ending balance at Mar. 31, 2020	1,682,886	$ 21,610	920,190	(51,789)	601,771	(87,440)	278,544
Ending balance (in shares) at Mar. 31, 2020		38,346,883
Beginning balance at Dec. 31, 2020	1,779,761	$ 21,697	950,915	(34,867)	636,373	(87,440)	293,083
Beginning balance (in shares) at Dec. 31, 2020		38,521,694
Net income	66,127				55,092		11,035
Other comprehensive (loss) income	3,776			2,474			1,302
Issuances of non-vested restricted shares of common stock		$ 61	(61)
Issuances of non-vested restricted shares of common stock (in shares)		121,934
Forfeitures of non-vested restricted shares of common stock		$ (21)	21
Forfeitures of non-vested restricted shares of common stock (in shares)		(43,000)
Common stock contribution to 401(k) plan	5,154	$ 11	5,143
Common stock contribution to 401(k) plan (in shares)		22,752
Stock issuances from exercise of stock options and employee stock purchase plan	3,874	$ 12	3,862
Stock issuances from exercise of stock options and employee stock purchase plan (in shares)		24,735
Share-based compensation	6,656		6,656
Cash dividends declared and paid on Common and Class B common stock	(68,521)				(68,521)
Ending balance at Mar. 31, 2021	$ 1,796,827	$ 21,760	$ 966,536	$ (32,393)	$ 622,944	$ (87,440)	$ 305,420
Ending balance (in shares) at Mar. 31, 2021		38,648,115

Condensed Consolidated Unaudi_4

Condensed Consolidated Unaudited Statements of Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash dividends declared and paid, common stock	$ 1.775	$ 1.60

Condensed Consolidated Unaudi_5

Condensed Consolidated Unaudited Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities:
Net income	$ 66,127	$ 36,247
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	6,898	6,479
Share-based compensation	5,892	4,912
Non-cash contribution to 401(k) plan	5,154	4,543
Provision for doubtful accounts	393	2,005
Other income from investment in unconsolidated entity	(4,671)	(1,014)
Other, net	1,042	668
Changes in operating assets and liabilities:
Accounts receivable	(61,072)	(46,534)
Inventories, net	(204,593)	(27,280)
Accounts payable and other liabilities	149,914	66,049
Other, net	(2,829)	(4,216)
Net cash (used in) provided by operating activities	(37,745)	41,859
Cash flows from investing activities:
Proceeds from sale of equity securities	5,993
Proceeds from sale of property and equipment	50	10
Capital expenditures	(4,822)	(3,859)
Net cash provided by (used in) investing activities	1,221	(3,849)
Cash flows from financing activities:
Dividends on Common and Class B common stock	(68,521)	(61,238)
Repayments of finance lease liabilities	(503)	(343)
Repurchases of common stock to satisfy employee withholding tax obligations		(791)
Net proceeds from issuances of common stock	3,874	2,541
Net proceeds under revolving credit agreement	48,900	443
Net cash used in financing activities	(16,250)	(59,388)
Effect of foreign exchange rate changes on cash and cash equivalents	582	(1,840)
Net decrease in cash and cash equivalents	(52,192)	(23,218)
Cash and cash equivalents at beginning of period	146,067	74,454
Cash and cash equivalents at end of period	$ 93,875	$ 51,236

BASIS OF PRESENTATION

BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2021
BASIS OF PRESENTATION	1. BASIS OF PRESENTATION Basis of Consolidation Watsco, Inc. (collectively with its subsidiaries, “Watsco,” “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, 2021 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 2020 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 joint ventures with Carrier Global Corporation, which we refer to as Carrier, the accounts of Carrier InterAmerica Corporation, of which we have an 80% controlling interest and Carrier has a 20% non-controlling interest and our 38.1% investment in Russell Sigler, Inc. (“RSI”), 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, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021. 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. 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. Impact of COVID-19 The COVID-19 e COVID-19 COVID-19 COVID-19 COVID-19

REVENUES

REVENUES	3 Months Ended
	Mar. 31, 2021
REVENUES	2. REVENUES Disaggregation of Revenues The following table presents our revenues disaggregated by primary geographical regions and major product lines within our single reporting segment: Quarters Ended March 31, 2021 2020 Primary Geographical Regions: United States $ 1,011,266 $ 899,545 Canada 74,492 55,341 Latin America and the Caribbean 50,360 53,270 $ 1,136,118 $ 1,008,156 Major Product Lines: HVAC equipment 67 % 66 % Other HVAC products 29 % 30 % Commercial refrigeration products 4 % 4 % 100 % 100 %

EARNINGS PER SHARE

EARNINGS PER SHARE	3 Months Ended
	Mar. 31, 2021
EARNINGS PER SHARE	3. EARNINGS PER SHARE The following ta b Quarters Ended March 31, 2021 2020 Basic Earnings per Share: Net income attributable to Watsco, Inc. shareholders $ 55,092 $ 30,502 Less: distributed and undistributed earnings allocated to non-vested 6,054 5,233 Earnings allocated to Watsco, Inc. shareholders $ 49,038 $ 25,269 Weighted-average common shares outstanding – Basic 35,179,521 34,995,048 Basic earnings per share for Common and Class B common stock $ 1.39 $ 0.72 Allocation of earnings for Basic: Common stock $ 45,452 $ 23,409 Class B common stock 3,586 1,860 $ 49,038 $ 25,269 Diluted Earnings per Share: Net income attributable to Watsco, Inc. shareholders $ 55,092 $ 30,502 Less: distributed and undistributed earnings allocated to non-vested 6,054 5,233 Earnings allocated to Watsco, Inc. shareholders $ 49,038 $ 25,269 Weighted-average common shares outstanding – Basic 35,179,521 34,995,048 Effect of dilutive stock options 150,312 28,941 Weighted-average common shares outstanding – Diluted 35,329,833 35,023,989 Diluted earnings per share for Common and Class B common stock $ 1.39 $ 0.72 Anti-dilutive stock options not included above 5,911 164,130 Diluted earnings per share for our Common stock assumes the conversion of all of 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, 2021 and 2020, our outstanding Class B common stock was convertible into 2,572,536 and 2,575,740 shares of our Common stock, respectively.

OTHER COMPREHENSIVE INCOME (LOS

OTHER COMPREHENSIVE INCOME (LOSS)	3 Months Ended
	Mar. 31, 2021
OTHER COMPREHENSIVE INCOME (LOSS)	4. OTHER COMPREHENSIVE INCOME (LOSS) Other comprehensive income (loss) comprehensive income (loss) were as follows: Quarters Ended March 31, 2021 2020 Foreign currency translation adjustment $ 3,457 $ (21,929 ) Unrealized gain on cash flow hedging instruments 103 3,473 Income tax expense (27 ) (939 ) Unrealized gain on cash flow hedging instruments, net of tax 76 2,534 Reclassification of loss on cash flow hedging instruments into earnings 333 157 Income tax benefit (90 ) (42 ) Reclassification of loss on cash flow hedging instruments into earnings, net of tax 243 115 Other comprehensive income (loss) $ 3,776 $ (19,280 ) The changes in each component of accumulated other comprehensive loss, net of tax, were as follows: Quarters Ended March 31, 2021 2020 Foreign currency translation adjustment: Beginning balance $ (34,694 ) $ (38,599 ) Current period other comprehensive income (loss) 2,282 (14,328 ) Ending balance (32,412 ) (52,927 ) Cash flow hedging instruments: Beginning balance (173 ) (451 ) Current period other comprehensive income 46 1,520 Reclassification adjustment 146 69 Ending balance 19 1,138 Accumulated other comprehensive loss, net of tax $ (32,393 ) $ (51,789 )

DERIVATIVES

DERIVATIVES	3 Months Ended
	Mar. 31, 2021
DERIVATIVES	5. 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. Cash Flow Hedging Instruments We enter into foreign currency forward contracts that are designated as cash flow hedges. The settlement of these derivatives results in reclassifications from accumulated other comprehensive loss to earnings for the period in which the settlement of these instruments occurs. The maximum period for which we hedge our cash flow using these instruments is months. At March 31, 2021, no foreign currency forward contracts were designated as cash flow hedges. The impact from foreign exchange derivative instrument s Quarters Ended March 31, 2021 2020 Gain recorded in accumulated other comprehensive loss $ 103 $ 3,473 Loss reclassified from accumulated other comprehensive loss into earnings $ 333 $ 157 At March 31, 2021, we expected an estimated $34 pre-tax hedging within the next 12 months. Derivatives Not Designated as Hedging Instruments We have also 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, 2021, the total notional value of which was and such contract subsequently expired in We recognized gain s The following table summarizes the fair value of derivative instruments, which consist solely of foreign exchange contracts, included in accrued expenses and other current liabilities in our condensed consolidated unaudited balance sheets. See Note 6. Asset Derivatives Liability Derivatives March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 Derivatives designated as hedging instruments $ — $ — $ — $ 91 Derivatives not designated as hedging instruments — — 5 10 Total derivative instruments $ — $ — $ 5 $ 101

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	3 Months Ended
	Mar. 31, 2021
FAIR VALUE MEASUREMENTS	6. 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 Balance Sheet Location Level 1 Level 2 Level 3 Assets: Equity securities Other assets $ 1,412 $ 1,412 $ — $ — Liabilities: Deriv a Accrued expenses and other $ 5 $ — $ 5 $ — Fair Value Measurements at December 31, 2020 Using Balance Sheet Location Total Level 1 Level 2 Level 3 Assets: Equity securities Other assets $ 6,065 $ 6,065 — — Liabilities: Derivative financial instruments Accrued expenses and other $ 101 — $ 101 — 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: Equity securities Derivative financial instruments

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY	3 Months Ended
	Mar. 31, 2021
SHAREHOLDERS' EQUITY	7. SHAREHOLDERS’ EQUITY Common Stock Dividends We paid cash dividends of $1.775 and $1.60 per share of both Common and Class B common stock during the quarters ended March 31, 2021 and 2020, respectively. Non-Vested There were no shares of non-vested 4,828 shares of Common and Class B common stock with an aggregate fair market value of 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. Exerci s Cash received from the exercis e Employee Stock Purchase Plan During the quarters ended March 31, 2021 and 2020, we received net proceeds of $405 and $353, respectively, for shares of our Common stock purchased under our employee stock purchase plan.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2021
COMMITMENTS AND CONTINGENCIES	8. 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 a number of 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 $6,453 and $5,404 at March 31, 2021 and December 31, 2020, respectively, were established related to such programs and are included in accrued expenses and other current liabilities in our condensed consolidated unaudited balance sheets.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Mar. 31, 2021
RELATED PARTY TRANSACTIONS	9. RELATED PARTY TRANSACTIONS Purchases from Carrier and its affiliates comprised 61% and 57% of all inventory purchases made during the quarters ended March 31, 2021 and 2020, respectively. At March 31, 2021 and December 31, 2020, approximately $140,000 and $81,000, respectively, was payable to Carrier and its affiliates, net of receivables. W e 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, 2021 and 2020, fees to this firm for services performed were $ 66 0 63 8

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Mar. 31, 2021
SUBSEQUENT EVENTS	10. SUBSEQUENT EVENT On April 9, 2021, we acquired certain assets and assumed certain liabilities comprising the HVAC distribution business of Temperature Equipment Corporation, an HVAC distributor operating from locations in Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri and Wisconsin. We formed a new, stand-alone joint venture with Carrier, TEC Distribution LLC (“TEC”), that will operate this business. We have an % controlling interest in TEC and Carrier has a % non-controlling interest. Consideration for the purchase was paid in cash, consisting of $ paid to Temperature Equipment Corporation (Carrier contributed $ and we contributed $ ) and $ for repayment of indebtedness .

BASIS OF PRESENTATION (Policies

BASIS OF PRESENTATION (Policies)	3 Months Ended
	Mar. 31, 2021
Basis of Consolidation	Basis of Consolidation Watsco, Inc. (collectively with its subsidiaries, “Watsco,” “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, 2021 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 2020 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 joint ventures with Carrier Global Corporation, which we refer to as Carrier, the accounts of Carrier InterAmerica Corporation, of which we have an 80% controlling interest and Carrier has a 20% non-controlling interest and our 38.1% investment in Russell Sigler, Inc. (“RSI”), 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, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021. 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.
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.
Impact of COVID-19 Pandemic	Impact of COVID-19 The COVID-19 e COVID-19 COVID-19 COVID-19 COVID-19

REVENUES (Tables)

REVENUES (Tables)	3 Months Ended
	Mar. 31, 2021
Summary of Disaggregated Revenue	Disaggregation of Revenues The following table presents our revenues disaggregated by primary geographical regions and major product lines within our single reporting segment: Quarters Ended March 31, 2021 2020 Primary Geographical Regions: United States $ 1,011,266 $ 899,545 Canada 74,492 55,341 Latin America and the Caribbean 50,360 53,270 $ 1,136,118 $ 1,008,156 Major Product Lines: HVAC equipment 67 % 66 % Other HVAC products 29 % 30 % Commercial refrigeration products 4 % 4 % 100 % 100 %

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2021
Schedule of Basic and Diluted Earnings Per Common Share	Quarters Ended March 31, 2021 2020 Basic Earnings per Share: Net income attributable to Watsco, Inc. shareholders $ 55,092 $ 30,502 Less: distributed and undistributed earnings allocated to non-vested 6,054 5,233 Earnings allocated to Watsco, Inc. shareholders $ 49,038 $ 25,269 Weighted-average common shares outstanding – Basic 35,179,521 34,995,048 Basic earnings per share for Common and Class B common stock $ 1.39 $ 0.72 Allocation of earnings for Basic: Common stock $ 45,452 $ 23,409 Class B common stock 3,586 1,860 $ 49,038 $ 25,269 Diluted Earnings per Share: Net income attributable to Watsco, Inc. shareholders $ 55,092 $ 30,502 Less: distributed and undistributed earnings allocated to non-vested 6,054 5,233 Earnings allocated to Watsco, Inc. shareholders $ 49,038 $ 25,269 Weighted-average common shares outstanding – Basic 35,179,521 34,995,048 Effect of dilutive stock options 150,312 28,941 Weighted-average common shares outstanding – Diluted 35,329,833 35,023,989 Diluted earnings per share for Common and Class B common stock $ 1.39 $ 0.72 Anti-dilutive stock options not included above 5,911 164,130

OTHER COMPREHENSIVE INCOME (L_2

OTHER COMPREHENSIVE INCOME (LOSS) (Tables)	3 Months Ended
	Mar. 31, 2021
Schedule of Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss)	The tax effects allocated to each component of other comprehensive income (loss) were as follows: Quarters Ended March 31, 2021 2020 Foreign currency translation adjustment $ 3,457 $ (21,929 ) Unrealized gain on cash flow hedging instruments 103 3,473 Income tax expense (27 ) (939 ) Unrealized gain on cash flow hedging instruments, net of tax 76 2,534 Reclassification of loss on cash flow hedging instruments into earnings 333 157 Income tax benefit (90 ) (42 ) Reclassification of loss on cash flow hedging instruments into earnings, net of tax 243 115 Other comprehensive income (loss) $ 3,776 $ (19,280 )
Schedule of Accumulated Other Comprehensive Loss	The changes in each component of accumulated other comprehensive loss, net of tax, were as follows: Quarters Ended March 31, 2021 2020 Foreign currency translation adjustment: Beginning balance $ (34,694 ) $ (38,599 ) Current period other comprehensive income (loss) 2,282 (14,328 ) Ending balance (32,412 ) (52,927 ) Cash flow hedging instruments: Beginning balance (173 ) (451 ) Current period other comprehensive income 46 1,520 Reclassification adjustment 146 69 Ending balance 19 1,138 Accumulated other comprehensive loss, net of tax $ (32,393 ) $ (51,789 )

DERIVATIVES (Tables)

DERIVATIVES (Tables)	3 Months Ended
	Mar. 31, 2021
Impact from Foreign Exchange Derivative Instruments Designated as Cash Flow Hedges	The impact from foreign exchange derivative instrument s Quarters Ended March 31, 2021 2020 Gain recorded in accumulated other comprehensive loss $ 103 $ 3,473 Loss reclassified from accumulated other comprehensive loss into earnings $ 333 $ 157
Fair Value of Derivative Instruments and Location in the Balance Sheets	The following table summarizes the fair value of derivative instruments, which consist solely of foreign exchange contracts, included in accrued expenses and other current liabilities in our condensed consolidated unaudited balance sheets. See Note 6. Asset Derivatives Liability Derivatives March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 Derivatives designated as hedging instruments $ — $ — $ — $ 91 Derivatives not designated as hedging instruments — — 5 10 Total derivative instruments $ — $ — $ 5 $ 101

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)	3 Months Ended
	Mar. 31, 2021
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 Balance Sheet Location Level 1 Level 2 Level 3 Assets: Equity securities Other assets $ 1,412 $ 1,412 $ — $ — Liabilities: Deriv a Accrued expenses and other $ 5 $ — $ 5 $ — Fair Value Measurements at December 31, 2020 Using Balance Sheet Location Total Level 1 Level 2 Level 3 Assets: Equity securities Other assets $ 6,065 $ 6,065 — — Liabilities: Derivative financial instruments Accrued expenses and other $ 101 — $ 101 —

Basis of Presentation - Additio

Basis of Presentation - Additional Information (Detail)	Mar. 31, 2021Entity
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of Joint Ventures	3

Revenues - Summary of Disaggreg

Revenues - Summary of Disaggregated Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	100.00%	100.00%
Revenues	$ 1,136,118	$ 1,008,156
United States
Disaggregation of Revenue [Line Items]
Revenues	1,011,266	899,545
Canada
Disaggregation of Revenue [Line Items]
Revenues	74,492	55,341
Latin America and the Caribbean
Disaggregation of Revenue [Line Items]
Revenues	$ 50,360	$ 53,270
HVAC Equipment
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	67.00%	66.00%
Other HVAC Products
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	29.00%	30.00%
Commercial Refrigeration Products
Disaggregation of Revenue [Line Items]
Revenues from product lines, percentage	4.00%	4.00%

Earnings Per Share - Schedule o

Earnings Per Share - Schedule of Basic and Diluted Earnings per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income attributable to Watsco, Inc. shareholders	$ 55,092	$ 30,502
Less: distributed and undistributed earnings allocated to non-vested restricted common stock	6,054	5,233
Earnings allocated to Watsco, Inc. shareholders – Basic	$ 49,038	$ 25,269
Weighted-average common shares outstanding – Basic	35,179,521	34,995,048
Basic earnings per share for Common and Class B common stock	$ 1.39	$ 0.72
Net income attributable to Watsco, Inc. shareholders	$ 55,092	$ 30,502
Less: distributed and undistributed earnings allocated to non-vested restricted common stock – Diluted	6,054	5,233
Earnings allocated to Watsco, Inc. shareholders – Diluted	$ 49,038	$ 25,269
Weighted-average common shares outstanding – Basic	35,179,521	34,995,048
Effect of dilutive stock options	150,312	28,941
Weighted-average common shares outstanding – Diluted	35,329,833	35,023,989
Diluted earnings per share for Common and Class B common stock	$ 1.39	$ 0.72
Anti-dilutive stock options not included above	5,911	164,130
Common Stock
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Earnings allocated to Watsco, Inc. shareholders – Basic	$ 45,452	$ 23,409
Class B Common Stock
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Earnings allocated to Watsco, Inc. shareholders – Basic	$ 3,586	$ 1,860

Earnings Per Share - Additional

Earnings Per Share - Additional Information (Detail) - shares	Mar. 31, 2021	Mar. 31, 2020
Earnings Per Share [Line Items]
Class B common stock conversion, number of shares	2,572,536	2,575,740

Other Comprehensive Income (L_3

Other Comprehensive Income (Loss) - Schedule of Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Components Of Other Comprehensive Income Loss [Line Items]
Foreign currency translation adjustment	$ 3,457	$ (21,929)
Unrealized gain on cash flow hedging instruments	103	3,473
Income tax expense	(27)	(939)
Unrealized gain on cash flow hedging instruments, net of tax	76	2,534
Reclassification of loss on cash flow hedging instruments into earnings	333	157
Income tax benefit	(90)	(42)
Reclassification of loss on cash flow hedging instruments into earnings, net of tax	243	115
Other comprehensive income (loss)	$ 3,776	$ (19,280)

Other Comprehensive Income (L_4

Other Comprehensive Income (Loss) - Schedule of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (34,867)
Ending balance	(32,393)	$ (51,789)
Foreign Currency Translation Adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(34,694)	(38,599)
Current period other comprehensive income (loss)	2,282	(14,328)
Ending balance	(32,412)	(52,927)
Cash Flow Hedging Instruments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(173)	(451)
Current period other comprehensive income (loss)	46	1,520
Reclassification adjustment	146	69
Ending balance	$ 19	$ 1,138

Derivatives - Impact from Forei

Derivatives - Impact from Foreign Exchange Derivative Instruments Designated as Cash Flow Hedges (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Derivative Instruments, Gain (Loss) [Line Items]
Gain recorded in accumulated other comprehensive loss	$ 103	$ 3,473
Foreign Currency Forward Contracts | Cash Flow Hedge
Derivative Instruments, Gain (Loss) [Line Items]
Gain recorded in accumulated other comprehensive loss	103	3,473
Loss reclassified from accumulated other comprehensive loss into earnings	$ 333	$ 157

Derivatives - Fair Value of Der

Derivatives - Fair Value of Derivative Instruments and Location in the Balance Sheets (Detail) - Foreign Exchange Forward And Option Contracts [Member] - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Derivatives, Fair Value [Line Items]
Derivative instruments, liabilities derivatives	$ 5	$ 101
Derivatives Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Derivative instruments, liabilities derivatives		91
Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Derivative instruments, liabilities derivatives	$ 5	$ 10

Derivatives - Additional Inform

Derivatives - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Foreign Currency Forward Contracts | Cash Flow Hedge
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Maximum length of time hedged in cash flow hedge	12 months
Pre-tax gain to be reclassified into earnings within the next 12 months	$ 34,000
Foreign Exchange Forward And Option Contracts [Member] | Not Designated as Hedging Instrument, Economic Hedge [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional value of derivatives	$ 4,600,000
Contract expiring terms	2021-04
(Loss) gain from foreign currency forward and option contracts not designated as hedging instruments	$ 27,000	$ 829,000

Fair Value Measurements - Asset

Fair Value Measurements - Assets and Liabilities Carried at Fair Value Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Assets:
Equity securities	$ 1,412	$ 6,065
Liabilities:
Derivative financial instruments	5	101
Fair Value Measurements, Level 1 | Other assets
Assets:
Equity securities	1,412	6,065
Fair Value Measurements, Level 2 | Accrued expenses and other current liabilities
Liabilities:
Derivative financial instruments	$ 5	$ 101

Shareholders' Equity - Addition

Shareholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Stockholders Equity Note [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, market value		$ 791
Common and Class B Common Stock | Non-Vested Restricted Stock
Stockholders Equity Note [Line Items]
Shares withheld as payment for tax withholdings related to share based compensation, market value		$ 791
Shares withheld as payment for tax withholdings related to share based compensation, shares		4,828
Common Stock | Stock Option
Stockholders Equity Note [Line Items]
Net proceeds from the sale of Common stock	$ 3,469	$ 2,188
Common Stock | Employee Stock Purchase Plan [Member]
Stockholders Equity Note [Line Items]
Net proceeds from shares purchased under ESPP	$ 405	$ 353
Common Stock | Class B Common Stock
Stockholders Equity Note [Line Items]
Cash dividends paid per share of Common and Class B common stock	$ 1.775	$ 1.60

Commitments and Contingencies -

Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Commitments and Contingencies Disclosure [Line Items]
Self-insurance reserves	$ 6,453	$ 5,404

Related Party Transactions - Ad

Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Greenberg Traurig, P.A.
Related Party Transaction [Line Items]
Amount payable to related party	$ 63		$ 8
Related Party Transaction	66	$ 0
Carrier and Its Affiliates | Supplier Concentration Risk
Related Party Transaction [Line Items]
Amount payable to Carrier and its affiliates, net of receivables	140,000		$ 81,000
Revenues from sales to Carrier and its affiliates	$ 23,000	$ 22,000
Carrier and Its Affiliates | Supplier Concentration Risk | Cost of Goods, Total
Related Party Transaction [Line Items]
Percentage of purchases from key suppliers	61.00%	57.00%

Subsequent Events - Additional

Subsequent Events - Additional Information (Detail) - Subsequent Event - Temperature Equipment Corporation [member] $ in Thousands	Apr. 09, 2021USD ($)Location
Subsequent Event [Line Items]
Number of locations in which the company operates | Location | Location	32
Cash consideration for Business Acquisition	$ 105,200
Carrier Global Corporation [Member]
Subsequent Event [Line Items]
Cash consideration for Business Acquisition	$ 21,040
Ownership percentage, by non-controlling owners	20.00%
Watsco, Inc. [member]
Subsequent Event [Line Items]
Cash consideration for Business Acquisition	$ 84,160
Ownership percentage by parent	80.00%
Repayment of indebtedness for Business Acquisition	$ 1,497