10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2021

☐	Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From

Commission file number

1-5581

I.R.S. Employer Identification Number

59-0778222

WATSCO, INC.

(a Florida

Corporation)

2665 South Bayshore Drive, Suite 901

Miami, Florida 33133

Telephone:

(305) 714-4100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.50 par value	WSO	New York Stock Exchange
Class B common stock, $0.50 par value	WSOB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐ No ☒

The registrant’s common stock outstanding as of November 1, 2021 comprised (i) 33,025,976 shares of Common stock, $0.50 par value per share, excluding 4,823,988 treasury shares and (ii) 5,746,980 shares of Class B common stock, $0.50 par value per share, excluding 48,263 treasury shares.

Table of Contents

WATSCO, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM

10-Q

TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Unaudited Financial Statements

	Condensed Consolidated Unaudited Statements of Income – Quarters and Nine Months Ended September 30, 2021 and 2020		3

	Condensed Consolidated Unaudited Statements of Comprehensive Income – Quarters and Nine Months Ended September 30, 2021 and 2020		4

	Condensed Consolidated Balance Sheets – September 30, 2021 (Unaudited) and December 31, 2020		5

	Condensed Consolidated Unaudited Statements of Shareholders’ Equity – Quarters and Nine Months Ended September 30, 2021 and 2020		6

	Condensed Consolidated Unaudited Statements of Cash Flows – Nine Months Ended September 30, 2021 and 2020		8

	Notes to Condensed Consolidated Unaudited Financial Statements		9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		24

Item 4.	Controls and Procedures		24

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		24

Item 1A.	Risk Factors		24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25

Item 6.	Exhibits		25

SIGNATURE			26

EXHIBITS

2 of 26

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.

CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

WATSCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF INCOME

(In thousands, except per share data)


	Quarter Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	1,782,569	$	1,536,671	$	4,768,327	$	3,900,212
Cost of sales		1,299,905		1,162,908		3,512,901		2,959,635

Gross profit		482,664		373,763		1,255,426		940,577
Selling, general and administrative expenses		281,922		221,037		766,231		618,476
Other income		6,057		4,055		16,267		9,172

Operating income		206,799		156,781		505,462		331,273
Interest expense, net		221		108		757		1,181

Income before income taxes		206,578		156,673		504,705		330,092
Income taxes		41,734		30,467		101,601		63,397

Net income		164,844		126,206		403,104		266,695
Less: net income attributable to non-controlling interest		23,979		19,717		63,045		43,126

Net income attributable to Watsco, Inc.	$	140,865	$	106,489	$	340,059	$	223,569

Earnings per share for Common and Class B common stock:
Basic	$	3.64	$	2.77	$	8.80	$	5.83

Diluted	$	3.62	$	2.76	$	8.75	$	5.82

See accompanying notes to condensed consolidated unaudited financial statements.

3 of 26

Table of Contents

WATSCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)


	Quarter Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income	$	164,844		$	126,206		$	403,104		$	266,695
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment		(8,219	)		5,514			(746	)		(6,592	)
Unrealized (loss) gain on cash flow hedging instruments		—			(416	)		70			948
Reclassification of (gain) loss on cash flow hedging instruments into earnings		—			(509	)		221			(691	)

Other comprehensive (loss) income		(8,219	)		4,589			(455	)		(6,335	)

Comprehensive income		156,625			130,795			402,649			260,360
Less: comprehensive income attributable to non-controlling interest		21,114			21,283			62,821			40,986

Comprehensive income attributable to Watsco, Inc.	$	135,511		$	109,512

SEC Form 10-Q filed by Watsco, Inc.