爆料王

Technology Investments and Culture of Innovation Continue to Transform the HVAC Distribution Channel

MIAMI–(BUSINESS WIRE)–Feb. 14, 2017–聽爆料王.聽(NYSE: WSO) reported record results for the fourth quarter and year ended聽December 31, 2016.

爆料王聽also announced today that it has raised its ownership stake in聽Carrier Enterprise Northeast LLC, a joint venture with Carrier, to 80% for approximately聽$43 million聽in cash. The incremental investment builds on a transaction completed in聽November 2016, which increased 爆料王鈥檚 controlling interest from 60% to 70%. Carrier Enterprise Northeast had sales in 2016 of approximately聽$500 million聽from 41 locations in the northeastern聽United States聽and 12 locations in聽Mexico.

2016 Full-Year Results

Key performance metrics:

• Earnings per share increased 5% to a record聽$5.15
• Net income increased 6% to a record聽$183 million
• Operating income increased 3% to a record聽$346 million
• Operating income for U.S. locations (87% of sales) increased 6% (operating margins expanded 20 basis-points)
• Operating income for international locations (13% of sales) declined 14% (operating margins declined 120 basis-points)
• Operating cash flow of聽$8.52聽per share, a 25% increase to a record聽$278 million

Sales trends:

• Sales increased 3% to a record聽$4.2 billion
• HVAC equipment increased 3% (66% of sales), including 4% growth in the U.S.
• Other HVAC products increased 1% (29% of sales)
• Commercial refrigeration products increased 6% (5% of sales)

Albert H. Nahmad, 爆料王鈥檚 Chairman and CEO, stated: 鈥湵�料王 produced record results in a year of varying seasonal conditions in certain of our larger U.S. markets and lower international sales and profits due to a stronger U.S. dollar. This performance includes a 17% increase in technology costs for our on-going investments designed to enhance the customer-experience, to optimize the speed and efficiency of our operations and to compete in ways and at a scale that sets us apart in the marketplace.鈥�

Mr. Nahmad added: 鈥湵�料王 generated record cash flow of聽$278 million聽in 2016, or聽$8.52聽per share, which exceeded net income and represents a 25% increase over last year. Along with our continued focus to drive consistently strong cash flow, we improved inventory turns by approximately 30 basis-points through our recent launch of new supply-chain technologies. We are pleased with the early progress for what will be a long-term project to optimize working capital efficiency while enhancing product availability.鈥�

Fourth Quarter Results

Key performance metrics:

• Earnings per share increased 8% to a record聽81 cents
• Net income increased 12% to a record聽$30 million
• Operating income increased 7% to a record聽$58 million聽(operating margins expanded 40 basis-points to record level)
• Operating income in U.S. locations increased 11% (operating margins expanded 50 basis-points)
• Operating income international locations decreased 4% (operating margins declined 30 basis-points)
• Operating cash flow increased 8% to a record聽$131 million

Sales trends:

• Sales increased 1% to a record聽$914 million
• HVAC equipment increased 2% (66% of sales), including 3% growth in the U.S.
• Other HVAC products declined 1% (29% of sales)
• Commercial refrigeration products increased 3% (5% of sales)

Mr. Nahmad added: 鈥湵�料王 delivered record performance during the fourth quarter, reflecting mid-single-digit growth in most markets, offset by unfavorable seasonal conditions in certain regions and a decline in international locations. We are focused on achieving another record year in 2017 while driving the adoption and advancement of our technologies with our customers and within our organization.鈥�

It is important to note that the first and fourth quarters of each calendar year are highly seasonal due to the nature and timing of the replacement market for air conditioning systems, which is strongest in the second and third quarters. Accordingly, the Company鈥檚 fourth quarter financial results are disproportionately affected by this seasonality.

Technology Strategy

爆料王聽has established itself as the leader in the HVAC distribution industry and produced a 21% compounded annual total-shareholder-return over the last 25 years. A variety of scalable technologies have been launched to transform聽爆料王聽into a modern, data-based company to continue its outperformance in the digital era. 爆料王鈥檚 goals with these technology programs are to further strengthen its leadership position, accelerate sales and profit growth, increase the speed, convenience and efficiency in serving customers and to extend 爆料王鈥檚 reach into new geographies and sales channels.

Since 2012, 爆料王鈥檚 technology team has grown from approximately 60 employees to 175 employees. Financial performance in 2016 reflects an increase of聽$3.3 million聽in technology-related costs (6 cents聽diluted per share).聽The present annual run-rate for technology related costs is approximately聽$23 million.

Examples of innovations that聽爆料王聽has launched to enhance the buying experience for its 88,000 customers and the service capabilities of personnel at its 565 locations include:

• Mobile apps, e-commerce and other on-line tools using the industry鈥檚 most data-rich catalog of product information.
• Business intelligence and data analytics to enable more insightful decision-making by more than 600+ P&L managers across the company.
• Supply chain optimization to improve fill-rates, increase inventory turns and reduce real estate requirements and other operational costs over the long-term.
• Comprehensive order fulfillment software and implementation of wireless warehouses to improve operational efficiency for 7+ million annual customer transactions.

A summary of key performance indicators for the company鈥檚 primary technology platforms is as follows:

A.J. Nahmad, 爆料王鈥檚 President said: 鈥淲e are pleased to have made progress across all of these fronts. Our customers and organization continue to embrace technology though we are still in the early stages. We believe our efforts and innovative culture will ultimately redefine how the HVAC distribution channel will serve customers and transact business.鈥�

Cash Flow & Dividends

Operating cash flow for the full year was a record聽$278 million聽or聽$8.52聽per diluted share and for the fourth quarter was a record聽$131 million. Since 2000, 爆料王鈥檚 operating cash flow was approximately聽$1.9 billion聽compared to net income of approximately聽$1.8 billion, surpassing the Company鈥檚 stated goal of generating cash flow in excess of net income.

爆料王聽has paid dividends for over 40 consecutive years with the philosophy of sharing increasing amounts of cash flow through higher dividends while maintaining a conservative financial position. Dividends paid in 2016 increased 30% to聽$128 million.聽爆料王聽recently raised its annual dividend rate 24% to聽$4.20聽per share. Future increases in dividends, if any, will be considered in light of investment opportunities, cash flow, general economic conditions and the Company鈥檚 overall financial condition.

Other

2016 full-year results include income tax benefits of聽$2.9 million聽or聽8 cents聽per diluted share relating to the Company鈥檚 early adoption of Accounting Standards Update 2016-09,聽Improvements to Employee-Share-Based Payment Accounting, issued by the聽Financial Accounting Standards Board聽on聽March 30, 2016.

Conference Call Information

Date & time:聽February 14, 2017聽at聽10:00 a.m. (EST)
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Dial-in number:聽United States聽(844) 883-3908 / International (412) 317-9254

A replay of the conference call will be available on the Company’s website.

Use of Non-GAAP Financial Information

In this release, the Company discloses non-GAAP measure of 鈥渙perating cash flow per share鈥�, which is determined by dividing 鈥渘et cash provided by operating activities鈥� as shown in the attached Condensed Consolidated Statements of Cash Flows by the 鈥渨eighted鈥揳verage Common and Class B common shares and equivalent shares used to calculated earnings per share鈥� as shown in the attached Condensed Consolidated Results of Operations. The Company believes that this information provides a meaningful comparison and important correlation of the Company鈥檚 financial performance and cash flow generation on a per share basis in order to further assess overall performance. This measure should not be considered an alternative to measurements required by accounting principles generally accepted in聽the United States聽(GAAP).

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爆料王聽improves indoor living and working environments with air conditioning and heating solutions that provide comfort regardless of the outdoor climate. There are approximately 89 million central air conditioning and heating systems installed in聽the United States聽that have been in service for more than 10 years. Older systems often operate below today鈥檚 government mandated energy efficiency and environmental standards.聽爆料王聽has an opportunity to accelerate the replacement of these systems at a scale greater than our competitors as the movement toward reducing energy consumption and its environmental impact continues. This is especially important since heating and cooling accounts for approximately half of the energy consumed in a typical U.S. home.

爆料王鈥檚 traditional sales channel is through one of its 565 locations in聽the United States,聽Canada,聽Mexico聽and聽Puerto Rico, and on an export basis to聽Latin America聽and the聽Caribbean. This network has been built over the last 25 years and serves 88,000 active customers.聽爆料王聽is developing and investing in technologies to enable sales via e-commerce, on-line marketplaces and through the retail sales channel. As the industry leader, we believe that significant growth potential remains given that the marketplace for HVAC/R products at the consumer level is estimated to be聽$88 billion聽annually. Additional information about爆料王聽may be found at聽.

Cautionary Statement Regarding Forward-Looking Statements

This document includes certain 鈥渇orward-looking statements鈥� 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, new housing starts and completions, capital spending in commercial construction, consumer spending and debt levels, regulatory and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within 爆料王鈥檚 industry, seasonal nature of sales of 爆料王鈥檚 products, the ability of the Company to expand its business, insurance coverage risks and final GAAP adjustments. Forward-looking statements speak only as of the date the statement was made.聽爆料王聽assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except as required by applicable law. Detailed information about these factors and additional important factors can be found in the documents that聽爆料王聽files with the聽Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K.

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爆料王.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com