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Watsco Reports 2008 Operating Results
Boosts Dividends on Record Cash Flow
COCONUT GROVE, Florida (BUSINESS WIRE), February 17, 2009 Watsco, Inc. (NYSE:WSO) today reported its results for the year and fourth quarter ended December 31, 2008. Watsco is the largest independent distributor of air conditioning, heating and refrigeration products.
Full Year Results
Earnings per share were $2.18 per diluted share on net income of $60.4 million. Revenues were $1.7 billion, a 3% decrease versus last year. On a same-store basis, revenues declined 10%, reflecting a 10% decline in sales of HVAC equipment (44% of sales), an 11% decline in sales in other HVAC products (43% of sales) and a 5% decline in sales of commercial refrigeration products (13% of sales). Sales results also reflect an improving revenue mix of high-efficiency and environmentally-sensitive air conditioning and heating systems. From an end-market point of view, results include flat sales to the residential replacement market, a single-digit decline in the commercial market and a sharp decrease in sales to new housing.
Gross profit was $442 million, a 1% decline versus last year, and gross profit margin improved 60 basis-points to a record 26.0% (26.1% on a same-store basis). Selling, general and administrative (SG&A) expenses were $343 million and declined 5% on a same-store basis. Operating income was $99 million with operating margin of 5.8% (6.0% on a same-store basis). Interest expense decreased 36% to $2.0 million from lower average daily borrowings.
Albert H. Nahmad, Watscos President & Chief Executive Officer stated, We are pleased with Watscos financial performance in this unprecedented market environment and our ability to once again generate record annual cash flow. We are also encouraged by the improving sales mix of more energy-efficient and environmentally friendly products, which bodes well for the long-term potential of the replacement market for HVAC products. Watsco has placed a strong focus on promoting these products and the improved sales mix in 2008 is a direct result of these efforts. We are also pleased that our balance sheet and our overall financial position strengthened further in 2008, allowing us to act and think conservatively with a long-term focus, and also positions us to take advantage of investment opportunities to grow our business.
These 2008 results reflect the benefit of profit-improvement activities, including programs to enhance gross profit margin, facility rationalization, cost reduction and other efficiency initiatives. The Company estimates these activities contributed approximately $30 million to pre-tax income during 2008 and expects another $8 million of savings during the first half of 2009. In light of the current market environment, the Company continues to take additional profit-improvement activities incremental to those implemented in 2008.
Mr. Nahmad added: The new economic stimulus legislation also provides opportunities for us and our industry. The legislation provides tax credits to homeowners for adding high-efficiency air conditioners or furnaces, covering 30% of the costs up to a total of $1,500. This tax credit, along with local utility rebates currently offered to consumers for upgrading their air conditioning systems, provides us and our contractor customer an additional opportunity to enhance the sales penetration of high-efficiency systems.
Fourth Quarter Results
Earnings per share were 12 cents per diluted share on net income of $3.3 million. Revenues were $335 million and declined 15% on a same-store basis. Gross profit was $86 million and gross profit margin improved 40 basis-points to a record 25.8%. Selling, general and administrative (SG&A) expenses were $81 million, a 10% decline in comparison to last year. Operating income was $5.8 million with operating margin of 1.7%. Interest expense decreased 63% to $.4 million from lower average daily borrowings.
The following information was filed by Watsco Inc (WSO) on Tuesday, February 17, 2009 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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