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 Perio

Ended June 30, 2022

☐	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 August 1, 2022 comprised (i) 33,206,880 shares of Common stock, $0.50 par value per share, excluding 4,823,988 treasury shares and (ii) 5,785,409 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 Six Months Ended June 30, 2022 and 2021		3

	Condensed Consolidated Unaudited Statements of Comprehensive Income – Quarters and Six Months Ended June 30, 2022 and 2021		4

	Condensed Consolidated Unaudited Balance Sheets – June 30, 2022 and December 31, 2021		5

	Condensed Consolidated Unaudited Statements of Shareholders’ Equity – Quarters and Six Months Ended June 30, 2022 and 2021		6

	Condensed Consolidated Unaudited Statements of Cash Flows – Six Months Ended June 30, 2022 and 2021		8

	Notes to Condensed Consolidated Unaudited Financial Statements		9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		23

Item 4.	Controls and Procedures		23

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		23

Item 1A.	Risk Factors		23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23

Item 6.	Exhibits		24

SIGNATURE			25

EXHIBITS

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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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues	$	2,133,755	$	1,849,640	$	3,657,325	$	2,985,758
Cost of sales		1,538,222		1,371,699		2,611,434		2,212,996

Gross profit		595,533		477,941		1,045,891		772,762
Selling, general and administrative expenses		314,753		266,697		598,107		484,309
Other income		6,317		5,539		10,362		10,210

Operating income		287,097		216,783		458,146		298,663
Interest expense, net		1,110		448		1,668		536

Income before income taxes		285,987		216,335		456,478		298,127
Income taxes		60,481		44,202		96,082		59,867

Net income		225,506		172,133		360,396		238,260
Less: net income attributable to non-controlling interest		32,949		28,031		54,541		39,066

Net income attributable to Watsco, Inc.	$	192,557	$	144,102	$	305,855	$	199,194

Earnings per share for Common and Class B common stock:
Basic	$	4.94	$	3.73	$	7.86	$	5.16

Diluted	$	4.93	$	3.71	$	7.83	$	5.13

See accompanying notes to condensed consolidated unaudited financial statements.

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Table of Contents

WATSCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)


	Quarter Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net income	$	225,506		$	172,133		$	360,396		$	238,260
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment		(9,381	)		4,016			(5,000	)		7,473
Unrealized (loss) gain on cash flow hedging instruments		—			(6	)		—			70
Reclassification of (gain) loss on cash flow hedging instruments into earnings		—			(22	)		—			221

Other comprehensive (loss) income		(9,381	)		3,988			(5,000	)		7,764

Comprehensive income		216,125			176,121			355,396			246,024
Less: comprehensive income attributable to non-controlling interest		29,833			29,370			52,871			41,707

Comprehensive income attributable to Watsco, Inc.	$	186,292		$	146,751		$	302,525		$	204,317

See accompanying notes to condensed consolidated unaudited financial statements.

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Table of Contents

WATSCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(In thousands, except per share data)


	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	129,049	$	118,268
Accounts receivable, net		983,033		698,456
Inventories, net		1,480,519		1,115,469
Other current assets		31,330		29,207

Total current assets		2,623,931		1,961,400
Property and equipment, net		119,525		111,019
Operating lease right-of-use assets		298,223		268,528
Goodwill		432,777		434,019
Intangible assets, net		183,133		186,896
Investment in unconsolidated entity		122,831		114,808
Other assets		8,172		9,191

	$	3,788,592	$	3,085,861

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term obligations	$	88,600	$	84,501
Accounts payable		625,962

SEC Form 10-Q filed by Watsco Inc.