Quarterly Report Under Section 13 or 15(d)
of the Securities
Exchange Act of 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2003
OR
o
Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From ____________ to ____________
Commission file number 1-5581
I.R.S. Employer Identification Number 59-0778222
WATSCO, INC.
(a Florida Corporation)
2665 South
Bayshore Drive, Suite 901
Coconut Grove, Florida 33133
Telephone: (305) 714-4100
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 x NO o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 22,352,262 shares of the Company’s Common Stock ($.50 par value), excluding treasury shares of 5,151,050 and 3,573,913 shares of the Company’s Class B Common Stock ($.50 par value) excluding treasury shares of 48,263 were outstanding as of April 30, 2003.
WATSCO, INC.
Index to Quarterly Report on Form 10-Q
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| PART I |
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FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements |
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Condensed Consolidated Balance Sheets – March 31, 2003 (Unaudited) and December 31, 2002 |
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Condensed Consolidated Statements of Income (Unaudited) – Quarters Ended March 31, 2003 and 2002 |
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Condensed Consolidated Statements of Cash Flows (Unaudited) – Quarters Ended March 31, 2003 and 2002 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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15 | |
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| PART II |
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OTHER INFORMATION |
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Item 1. |
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16 | |
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Item 6. |
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2 of 19
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WATSCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2003 and December 31, 2002
(In thousands, except
per share data)
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March 31, |
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December 31, |
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(Unaudited) |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
19,138 |
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$ |
25,880 |
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| Accounts receivable, net |
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133,256 |
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129,396 |
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| Inventories |
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190,620 |
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176,407 |
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| Other current assets |
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11,576 |
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13,878 |
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| Total current assets |
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354,590 |
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345,561 |
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| Property and equipment, net |
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24,416 |
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25,850 |
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| Goodwill, net |
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125,533 |
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125,536 |
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| Other assets |
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6,173 |
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6,772 |
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$ |
510,712 |
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$ |
503,719 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Current portion of long-term obligations |
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$ |
249 |
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$ |
272 |
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| Accounts payable |
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75,715 |
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59,965 |
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| Accrued liabilities |
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19,059 |
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26,215 |
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| Total current liabilities |
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95,023 |
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86,452 |
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| Long-term obligations: |
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| Borrowings under revolving credit agreement |
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50,000 |
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50,000 |
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| Long-term notes |
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30,000 |
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30,000 |
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| Bank and other debt |
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195 |
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233 |
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| Total long-term obligations |
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80,195 |
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80,233 |
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| Deferred income taxes and other liabilities |
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6,012 |
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7,833 |
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| Shareholders’ equity: |
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| Common Stock, $.50 par value |
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13,739 |
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13,734 |
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| Class B Common Stock, $.50 par value |
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1,812 |
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1,767 |
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| Paid-in capital |
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217,511 |
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216,124 |
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| Unearned compensation related to outstanding restricted stock |
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(10,150 |
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(9,067 |
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| Accumulated other comprehensive loss, net of tax |
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(3,196 |
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(3,399 |
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| Retained earnings |
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172,411 |
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169,649 |
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| Treasury stock, at cost |
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(62,645 |
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(59,607 |
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| Total shareholders’ equity |
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329,482 |
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329,201 |
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$ |
510,712 |
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$ |
503,719 |
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See accompanying notes to condensed consolidated financial statements.
3 of 19
WATSCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended March 31, 2003 and 2002
(In thousands, except per share data)
(Unaudited)
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2003 |
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2002 |
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| Revenue |
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$ |
257,398 |
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$ |
256,815 |
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| Cost of sales |
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193,612 |
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193,840 |
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| Gross profit |
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63,786 |
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62,975 |
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| Selling, general and administrative expenses |
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56,232 |
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56,344 |
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| Operating income |
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7,554 |
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6,631 |
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| Interest expense, net |
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1,512 |
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1,867 |
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| Income before income taxes |
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6,042 |
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4,764 |
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| Income taxes |
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2,236 |
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1,722 |
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| Net income |
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$ |
3,806 |
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$ |
3,042 |
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| Earnings per share: |
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| Basic |
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$ |
0.15 |
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$ |
0.12 |
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| Diluted |
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$ |
0.15 |
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$ |
0.11 |
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| Weighted average shares and equivalent shares used to calculate earnings per share |
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| Basic |
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25,122 |
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25,837 |
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| Diluted |
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25,778 |
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27,549 |
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See accompanying notes to condensed consolidated financial statements.
4 of 19
WATSCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarters Ended March 31, 2003 and 2002
(In thousands)
(Unaudited)
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2003 |
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2002 |
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| Cash flows from operating activities: |
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| Net income |
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$ |
3,806 |
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$ |
3,042 |
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| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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| Depreciation and amortization |
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1,954 |
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2,025 |
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| Tax benefit from exercise of stock options |
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19 |
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2,165 |
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| Provision for doubtful accounts |
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1,148 |
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1,613 |
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| Other, net |
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(243 |
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(143 |
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| Changes in operating assets and liabilities, net of effects of acquisitions: |
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| Accounts receivable |
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(5,008 |
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5,871 |
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| Inventories |
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(14,213 |
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(7,711 |
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| Accounts payable and accrued liabilities |
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8,704 |
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447 |
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| Other, net |
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2,806 |
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(7,223 |
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| Net cash provided by (used in) operating activities |
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(1,027 |
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86 |
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| Cash flows from investing activities: |
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| Business acquisitions, net of cash acquired |
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— |
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(687 |
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| Capital expenditures |
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(642 |
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(679 |
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| Proceeds from sale of property and equipment |
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34 |
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116 |
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| Purchase of minority interest in consolidated subsidiary |
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(1,294 |
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| Net cash used in investing activities |
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(1,902 |
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(1,250 |
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| Cash flows from financing activities: |
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| Purchase of treasury stock |
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(2,850 |
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(2,591 |
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| Common stock dividends |
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(1,031 |
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(666 |
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| Net repayments of bank and other debt |
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(61 |
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(114 |
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| Net proceeds from issuances of common stock |
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129 |
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1,714 |
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| Net cash used in financing activities |
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(3,813 |
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(1,657 |
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| Net decrease in cash and cash equivalents |
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(6,742 |
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(2,821 |
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| Cash and cash equivalents at beginning of period |
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25,880 |
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9,132 |
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| Cash and cash equivalents at end of period |
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$ |
19,138 |
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$ |
6,311 |
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