Exhibit 99 NEWS RELEASE WATSCO Barry S. Logan Watsco, Inc. Chief Financial Officer 2665 S. Bayshore Drive - Suite 901 (305) 714-4102 Coconut Grove, FL 33133 e-mail: blogan@watsco.com (305) 714-4100 Fax: (305) 858-4492 www.watsco.com For Immediate Release: WATSCO REPORTS THIRD QUARTER RESULTS ------------------ MIAMI, FLORIDA, October 25, 2001 - Watsco, Inc. (NYSE: WSO) today announced operating and cash flow results for the quarter and nine-month period ended September 30, 2001. The following performance data excludes third-quarter restructuring costs and other charges of 14 cents per share ($3.8 million after-taxes) related to the Company's manufactured housing and personnel staffing operations more fully discussed in the attached financial tables. For the third quarter, earnings per share was 43 cents on net income of $11.9 million, even with last year. Sales were $336 million, including a 3% same-store sales decrease in the Company's primary HVAC channel. Sales results also include a 14% sales decrease in the Company's manufactured housing operation, 35 location closures completed during last year and the discontinuance of certain product lines. Gross profit was $82 million with gross selling margins improving 40 basis-points to 24.3%. Selling, general and administrative expenses decreased 6% to $60 million. Operating profit was $21.3 million with operating margin improving 10 basis-points to 6.3%. Interest expense decreased 30% to $2.4 million from lower borrowings and lower interest rates. For the nine-month period, earnings per share was a record $1.00 on net income of $27.2 million. Sales were $965 million, including a 1% same-store sales decrease in the Company's primary HVAC channel, and also reflect 19% lower sales in the manufactured housing operation, location closures and discontinued product lines. Gross profit was $235 million with gross selling margins improving 50 basis-points to 24.3%. Selling, general and administrative costs decreased 3% to $183 million. Operating profit was $51.1 million with operating margins of 5.3%, even with last year. Interest expense decreased 19% to $7.9 million from lower borrowings and rates. Watsco's sales performance during 2001 compares favorably to industry data compiled by the Air Conditioning and Refrigeration Institute (ARI). According to ARI's most recent report, distributor shipments through August 2001 declined 4% in the United States. In contrast, Watsco's same-store sales increased 1% in the Company's primary HVAC channel during the same period, a strong indicator that market share increases have been achieved. Cash flow from operations for the third quarter more than doubled increasing from $11.9 million in 2000 to $33.5 million in 2001. For the nine-month period, cash flow from operations increased sharply to $29.1 million in 2001 versus $5.8 million in 2000. Free cash flow (operating cash flow less capital expenditures) for the quarter tripled to $32.7 million versus $10.6 million last year and, for the nine-months, improved to $26.4 million versus negative $.1 million in 2000. Watsco's debt-to-total capitalization at September 30, 2001 stands at 28% versus 37% a year ago. -2- Albert Nahmad, President and Chief Executive Officer commented: "A number of negative factors have affected the HVAC marketplace this year and we have worked our way through them, generating record earnings per share so far this year. We are also very pleased with record levels of cash flow and debt reduction. It is hard to predict how market conditions will continue to be affected by these dynamics. However, after factoring out this quarter's charges - all key measures that will improve our ongoing operating effectiveness, we are confident in our ability to achieve record earnings per share this year." In September 2001, the Company adopted a plan to integrate the operations of its manufactured housing subsidiaries, close underperforming locations and exit certain relationships in its personnel staffing operation. In addition, the Company incurred other charges related to these operations in response to lower overall business volume. During the third quarter, the Company recorded restructuring and other charges of $3.8 million after-taxes (14 cents per share) related to these activities. Mr. Nahmad added: "Our key products, central air conditioning systems, furnaces and related parts and accessories, are necessities in virtually all homes and businesses. Most consumers will not tolerate or incur the health-risk of living without the warmth of a furnace in winter or the cool, low-humidity environment provided by air conditioning in summer. The consumer-spending landscape has obviously been affected by recent events, but we believe our products are necessary to maintain a basic standard of life." 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 290 locations serving customers in 30 states. Additional information about Watsco may be found on the Internet at http://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 and regulatory factors. More detailed information about those factors is contained in Watsco's filings with the Securities and Exchange Commission. WATSCO, INC. Consolidated Results of Operations (In thousands, except share data) (Unaudited) Nine Months Ended September 30, ------------------------------------------------ As Pro-forma, as As Reported adjusted Reported 2001 2001 (C) 2000 ---------- ------------- ---------- Revenue $ 965,270 $ 965,270 $1,020,520 Cost of sales 731,776 (A) 730,762 777,217 ---------- ------------- ---------- Gross profit 233,494 234,508 243,303 SG&A expenses 188,369 (B) 183,361 189,559 ---------- ------------- ---------- Operating profit 45,125 51,147 53,744 Interest expense, net (7,936) (7,936) (9,818) ---------- ------------- ---------- Income before income taxes 37,189 43,211 43,926 Income tax provision (13,759) (15,987) (16,340) ---------- ------------- ---------- Net income $ 23,430 $ 27,224 $ 27,586 Basic earnings per share $ 0.90 $ 1.05 $ 1.03 Diluted earnings per share $ 0.86 $ 1.00 $ 0.99 Weighted average shares used to calculate earnings per share: Basic 25,956 25,956 26,707 Diluted 27,299 27,299 27,962 Three Months Ended September 30, ------------------------------------------------ As Pro-forma, as As Reported adjusted Reported 2001 2001 (C) 2000 ---------- ------------- ---------- Revenue $ 336,008 $ 336,008 $ 361,723 Cost of sales 255,287 (A) 254,273 275,288 ---------- ------------- ---------- Gross profit 80,721 81,735 86,435 SG&A expenses 65,488 (B) 60,480 64,042 ---------- ------------- ---------- Operating profit 15,233 21,255 22,393 Interest expense, net (2,408) (2,408) (3,424) ---------- ------------- ---------- Income before income taxes 12,825 18,847 18,969 Income tax provision (4,745) (6,973) (7,056) ---------- ------------- ---------- Net income $ 8,080 $ 11,874 $ 11,913 Basic earnings per share $ 0.31 $ 0.46 $ 0.45 Diluted earnings per share $ 0.29 $ 0.43 $ 0.43 Weighted average shares used to calculate earnings per share: Basic 25,971 25,971 26,426 Diluted 27,424 27,424 27,748 (A) Cost of sales includes restructuring charges of $328 related to the elimination of unproductive SKUs in the manufactured housing operation and $686 related to a terminated licensee's workers compensation program in the personnel staffing operation. (B) SG&A includes restructuring charges of $3,096 related to location integration and closures in the manufactured housing and personnel staffing operations. Also includes other charges of $827 related to accounts receivable reserves and settlement costs of a terminated licensee in the personnel staffing operation and an asset write-off of $1,085 related to a supply arrangement in the manufactured housing operation. (C) Excludes the impact for items in (A) and (B). Consolidated Balance Sheets (In thousands) September 30, December 31, 2001 2000 ------------ ------------ (Unaudited) Cash and cash equivalents $ 8,399 $ 4,781 Accounts receivable, net 173,719 163,770 Inventories 210,234 205,805 Other current assets 12,415 18,179 ------------ ------------ Total current assets 404,767 392,535 Property & equipment, net 32,670 30,258 Other non-current assets 133,295 140,677 ------------ ------------ Total assets $ 570,732 $ 563,470 ============ ============ Accounts payable & accrued liabilities $ 117,109 $ 112,207 Other current liabilities 548 1,887 ------------ ------------ 117,657 114,094 Borrowings under revolving credit agreement 90,000 138,000 Long-term notes 30,000 -- Other long-term obligations 10,622 7,212 ------------ ------------ Total liabilities 248,279 259,306 Shareholders' equity 322,453 304,164 ------------ ------------ Total liabilities and equity $ 570,732 $ 563,470 ============ ============