• | general economic conditions, both in the United States and in the international markets we serve; |
• | competitive factors within the HVAC/R industry; |
• | effects of supplier concentration, including conditions that impact the supply chain; |
• | fluctuations in certain commodity costs; |
• | consumer spending; |
• | consumer debt levels; |
• | the resurgence of the COVID-19 pandemic; |
• | new housing starts and completions; |
• | capital spending in the commercial construction market; |
• | access to liquidity needed for operations; |
• | seasonal nature of product sales; |
• | weather patterns and conditions; |
• | insurance coverage risks; |
• | federal, state, and local regulations impacting our industry and products; |
• | prevailing interest rates; |
• | the effect of inflation; |
• | foreign currency exchange rate fluctuations; |
• | international risk; |
• | cybersecurity risk; and |
• | the continued viability of our business strategy. |
2022 |
2021 |
2020 |
||||||||||
Revenues |
100.0 |
% |
100.0 | % | 100.0 | % | ||||||
Cost of sales |
72.1 |
73.4 | 75.8 | |||||||||
Gross profit |
27.9 |
26.6 | 24.2 | |||||||||
Selling, general and administrative expenses |
16.8 |
16.9 | 16.5 | |||||||||
Other income |
0.3 |
0.3 | 0.2 | |||||||||
Operating income |
11.4 |
10.0 | 7.9 | |||||||||
Interest expense, net |
0.0 |
0.0 | 0.0 | |||||||||
Income before income taxes |
11.4 |
10.0 | 7.9 | |||||||||
Income taxes |
1.7 |
2.1 | 1.5 | |||||||||
Net income |
9.7 |
7.9 | 6.4 | |||||||||
Less: net income attributable to non-controlling interest |
1.4 |
1.3 | 1.1 | |||||||||
Net income attributable to Watsco, Inc. |
8.3 |
% |
6.7 | % | 5.3 | % | ||||||
Number of Locations |
||||
December 31, 2020 |
600 | |||
Opened |
24 | |||
Acquired |
56 | |||
Closed |
(9 | ) | ||
December 31, 2021 |
671 | |||
Opened |
11 | |||
Closed |
(9 | ) | ||
December 31, 2022 |
673 |
|||
Year Ended December 31, | ||||||||||||||||
(in millions) | 2022 | 2021 | Change | |||||||||||||
Revenues |
$ | 7,274.3 | $ | 6,280.2 | $ | 994.1 | 16 | % |
% of Sales | % Change | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
HVAC equipment |
68 | % | 69 | % | 14 | % | 23 | % | ||||||||
Other HVAC products |
28 | % | 28 | % | 16 | % | 22 | % | ||||||||
Commercial refrigeration products |
4 | % | 3 | % | 24 | % | 29 | % |
Year Ended December 31, | ||||||||||||||||
(in millions) | 2022 | 2021 | Change | |||||||||||||
Same-store sales |
$ | 7,137.4 | $ | 6,267.2 | $ | 870.2 | 14 | % |
% of Same-Store Sales |
% Change | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
HVAC equipment |
68 | % | 69 | % | 13 | % | 18 | % | ||||||||
Other HVAC products |
28 | % | 27 | % | 15 | % | 17 | % | ||||||||
Commercial refrigeration products |
4 | % | 4 | % | 24 | % | 29 | % |
Year Ended December 31, | ||||||||||||||||
(in millions) | 2022 | 2021 | Change | |||||||||||||
Gross profit |
$ | 2,030.3 | $ | 1,667.5 | $ | 362.8 | 22 | % | ||||||||
Gross margin |
27.9 | % | 26.6 | % |
Year Ended December 31, | ||||||||||||||||
(in millions) | 2022 | 2021 | Change | |||||||||||||
Selling, general and administrative expenses |
$ | 1,221.4 | $ | 1,058.3 | $ | 163.1 | 15 | % | ||||||||
Selling, general and administrative expenses as a percentage of revenues |
16.8 | % | 16.9 | % |
Year Ended December 31, | ||||||||||||||||
(in millions) | 2022 | 2021 | Change | |||||||||||||
Operating income |
$ | 831.6 | $ | 628.5 | $ | 203.1 | 32 | % | ||||||||
Operating margin |
11.4 | % | 10.0 | % |
Year Ended December 31, | ||||||||||||||||
(in millions) | 2022 | 2021 | Change | |||||||||||||
Income taxes |
$ | 125.7 | $ | 128.8 | $ | (3.1 | ) | (2 | %) | |||||||
Effective income tax rate |
17.2 | % | 23.4 | % |
Year Ended December 31, | ||||||||
2022 | 2021 | |||||||
Operating income |
$ | 831,578 | $ | 628,528 | ||||
Primarily employment taxes related to the vesting of restricted stock |
3,636 | — | ||||||
Operating income on an adjusted basis |
$ | 835,214 | $ | 628,528 | ||||
Operating margin on an adjusted basis |
11.5 | % | 10.0 | % | ||||
Year Ended December 31, | ||||||||
2022 | 2021 | |||||||
Diluted earnings per share for Common and Class B common stock |
$ | 15.41 | $ | 10.78 | ||||
Primarily employment taxes related to the vesting of restricted stock |
0.08 | |||||||
Tax related benefit from the vesting of restricted stock |
(1.29 | ) | — | |||||
Diluted earnings per share for Common and Class B common stock on an adjusted basis |
$ | 14.20 | $ | 10.78 | ||||
• | cash needed to fund our business (primarily working capital requirements); |
• | borrowing capacity under our revolving credit facility; |
• | the ability to attract long-term capital with satisfactory terms; |
• | acquisitions, including joint ventures and investments in unconsolidated entities; |
• | dividend payments; |
• | capital expenditures; and |
• | the timing and extent of common stock repurchases. |
2022 |
2021 |
Change |
||||||||||
Cash flows provided by operating activities |
$ |
572.0 |
$ | 349.6 | $ | 222.4 | ||||||
Cash flows used in investing activities |
$ |
(33.8 |
) |
$ | (148.6 | ) | $ | 114.8 | ||||
Cash flows used in financing activities |
$ |
(504.0 |
) |
$ | (228.6 | ) | $ | (275.4 | ) |
/s/ KPMG LLP |
/s/ KPMG LLP |
Years Ended December 31, |
||||||||||||
(In thousands, except per share data) |
2022 |
2021 |
2020 |
|||||||||
Revenues |
$ | $ | $ | |||||||||
Cost of sales |
||||||||||||
|
|
|
|
|
|
|||||||
Gross profit |
||||||||||||
Selling, general and administrative expenses |
||||||||||||
Other income |
||||||||||||
|
|
|
|
|
|
|||||||
Operating income |
||||||||||||
Interest expense, net |
||||||||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
||||||||||||
Income taxes |
||||||||||||
|
|
|
|
|
|
|||||||
Net income |
||||||||||||
Less: net income attributable to non-controlling interest |
||||||||||||
|
|
|
|
|
|
|||||||
Net income attributable to Watsco, Inc. |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Earnings per share for Common and Class B common stock: |
||||||||||||
Basic |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Diluted |
$ | $ | $ | |||||||||
|
|
|
|
|
|
Years Ended December 31, |
||||||||||||
(In thousands) |
2022 |
2021 |
2020 |
|||||||||
Net income |
$ | $ | $ | |||||||||
Other comprehensive (loss) income, net of tax |
||||||||||||
Foreign currency translation adjustment |
( |
) | ||||||||||
Unrealized gain on cash flow hedging instruments |
||||||||||||
Reclassification of loss (gain) on cash flow hedging instruments into earnings |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Other comprehensive (loss) income |
( |
) | ||||||||||
Comprehensive income |
||||||||||||
Less: comprehensive income attributable to non-controlling interest |
||||||||||||
|
|
|
|
|
|
|||||||
Comprehensive income attributable to Watsco, Inc. |
$ | $ | $ | |||||||||
|
|
|
|
|
|
December 31, |
||||||||
(In thousands, except share and per share data) |
2022 |
2021 |
||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net |
||||||||
Inventories, net |
||||||||
Other current assets |
||||||||
|
|
|
|
|||||
Total current assets |
||||||||
|
|
|
|
|||||
Property and equipment, net |
||||||||
Operating lease right-of-use |
||||||||
Goodwill |
||||||||
Intangible assets, net |
||||||||
Investment in unconsolidated entity |
||||||||
Other assets |
||||||||
|
|
|
|
|||||
$ | $ | |||||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term obligations |
$ | $ | ||||||
Borrowings under revolving credit agreement (Note 8) |
|
|
|
|
|
|
|
|
Accounts payable |
||||||||
Accrued expenses and other current liabilities |
||||||||
|
|
|
|
|||||
Total current liabilities |
||||||||
|
|
|
|
|||||
Long-term obligations: |
||||||||
Borrowings under revolving credit agreement (Note 8) |
||||||||
Operating lease liabilities, net of current portion |
||||||||
Finance lease liabilities, net of current portion |
||||||||
|
|
|
|
|||||
Total long-term obligations |
||||||||
|
|
|
|
|||||
Deferred income taxes and other liabilities |
||||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Watsco, Inc. shareholders’ equity: |
||||||||
Common stock, $ |
||||||||
Class B common stock, $ |
||||||||
Preferred stock, $ |
||||||||
Paid-in capital |
||||||||
Accumulated other comprehensive loss, net of tax |
( |
) | ( |
) | ||||
Retained earnings |
||||||||
Treasury stock, at cost, |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total Watsco, Inc. shareholders’ equity |
||||||||
Non-controlling interest |
||||||||
|
|
|
|
|||||
Total shareholders’ equity |
||||||||
|
|
|
|
|||||
$ | $ | |||||||
|
|
|
|
(In thousands, except share and per share data) |
Common Stock, Class B Common Stock and Preferred Stock Shares |
Common Stock, Class B Common Stock and Preferred Stock Amount |
Paid-In Capital |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Treasury Stock |
Non- controlling Interest |
Total |
||||||||||||||||||||||||
Balance at December 31, 2019 |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Other comprehensive gain |
||||||||||||||||||||||||||||||||
Issuances of restricted shares of common stock |
( |
) | — | |||||||||||||||||||||||||||||
Forfeitures of restricted shares of common stock |
( |
) | ( |
) | — | |||||||||||||||||||||||||||
Common stock contribution to 401(k) plan |
||||||||||||||||||||||||||||||||
Stock issuances from exercise of stock options and employee stock purchase plan |
||||||||||||||||||||||||||||||||
Retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Share-based compensation |
||||||||||||||||||||||||||||||||
Cash dividends declared and paid on Common and Class B common stock, |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Adjustment to fair value of Common stock issued for N&S Supply of Fishkill, Inc. |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Distributions to non-controlling interest |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2020 |
( |
) |
( |
) |
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share and per share data) |
Common Stock, Class B Common Stock and Preferred Stock Shares |
Common Stock, Class B Common Stock and Preferred Stock Amount |
Paid-In Capital |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Treasury Stock |
Non- controlling Interest |
Total |
||||||||||||||||||||||||
Balance at December 31, 2020 |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Other comprehensive gain |
||||||||||||||||||||||||||||||||
Issuances of restricted shares of common stock |
( |
) | — | |||||||||||||||||||||||||||||
Forfeitures of restricted shares of common stock |
( |
) | ( |
) | — | |||||||||||||||||||||||||||
Common stock contribution to 401(k) plan |
||||||||||||||||||||||||||||||||
Stock issuances from exercise of stock options and employee stock purchase plan |
||||||||||||||||||||||||||||||||
Retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Common stock released from escrow |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Share-based compensation |
||||||||||||||||||||||||||||||||
Cash dividends declared and paid on Common and Class B common stock, $ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Common stock issued for Acme Refrigeration of Baton Rouge LLC |
||||||||||||||||||||||||||||||||
Common stock issued for Makdad Industrial Supply Co., Inc. |
||||||||||||||||||||||||||||||||
Investment in TEC Distribution LLC |
||||||||||||||||||||||||||||||||
Distributions to non-controlling interest |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2021 |
( |
) |
( |
) |
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share and per share data) |
Common Stock, Class B Common Stock and Preferred Stock Shares |
Common Stock, Class B Common Stock and Preferred Stock Amount |
Paid-In Capital |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Treasury Stock |
Non- controlling Interest |
Total |
||||||||||||||||||||||||
Balance at December 31, 2021 |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Other comprehensive loss |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Issuances of restricted shares of common stock |
( |
) | — | |||||||||||||||||||||||||||||
Forfeitures of restricted shares of common stock |
( |
) | ( |
) | — | |||||||||||||||||||||||||||
Common stock contribution to 401(k) plan |
||||||||||||||||||||||||||||||||
Stock issuances from exercise of stock options and employee stock purchase plan |
||||||||||||||||||||||||||||||||
Retirement of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Share-based compensation |
||||||||||||||||||||||||||||||||
Cash dividends declared and paid on Common and Class B common stock, $ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Distributions to non-controlling interest |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2022 |
$ |
$ |
$ |
( |
) | $ |
$ |
( |
) | $ |
$ |
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
||||||||||||
(In thousands) |
2022 |
2021 |
2020 |
|||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
||||||||||||
Share-based compensation |
||||||||||||
Deferred income tax provision |
||||||||||||
Provision for doubtful accounts |
||||||||||||
Non-cash contribution to 401(k) plan |
||||||||||||
(Gain) loss on sale of property and equipment |
( |
) | ||||||||||
Other income from investment in unconsolidated entity |
( |
) | ( |
) | ( |
) | ||||||
Changes in operating assets and liabilities, net of effects of acquisitions: |
||||||||||||
Accounts receivable, net |
( |
) | ( |
) | ( |
) | ||||||
Inventories, net |
( |
) | ( |
) | ||||||||
Accounts payable and other liabilities |
||||||||||||
Other, net |
( |
) | ( |
) | ||||||||
Net cash provided by operating activities |
||||||||||||
Cash flows from investing activities: |
||||||||||||
Capital expenditures |
( |
) | ( |
) | ( |
) | ||||||
Business acquisitions, net of cash acquired |
( |
) | ( |
) | ||||||||
Proceeds from sale of equity securities |
||||||||||||
Other investment |
( |
) | ||||||||||
Proceeds from sale of property and equipment |
||||||||||||
Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
Cash flows from financing activities: |
||||||||||||
Dividends on Common and Class B common stock |
( |
) | ( |
) | ( |
) | ||||||
Repurchases of common stock to satisfy employee withholding tax obligations |
( |
) | ( |
) | ( |
) | ||||||
Distributions to non-controlling interest |
( |
) | ( |
) | ( |
) | ||||||
Net (repayments) proceeds under revolving credit agreement |
( |
) | ( |
) | ||||||||
Net repayments of finance lease liabilities |
( |
) | ( |
) | ( |
) | ||||||
Payment of fees related to revolving credit agreement |
( |
) | ( |
) | ||||||||
Proceeds from non-controlling interest for investment in TEC Distribution LLC |
||||||||||||
Net proceeds from issuances of common stock |
||||||||||||
Net cash used in financing activities |
( |
) | ( |
) | ( |
) | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
( |
) | ( |
) | ||||||||
Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||||||
Cash and cash equivalents at beginning of year |
||||||||||||
Cash and cash equivalents at end of year |
$ | $ | $ | |||||||||
Supplemental cash flow information (Note 2 1 ) |
Level 1 | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
Level 2 | Observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active; or model-driven valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3 | Unobservable inputs for the asset or liability. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability. |
Years Ended December 31, |
2022 |
2021 |
2020 |
|||||||||
Lease cost |
$ |
$ | $ | |||||||||
Short-term lease cost |
||||||||||||
Variable lease cost |
||||||||||||
Sublease income |
( |
) |
( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
$ |
$ | $ | ||||||||||
|
|
|
|
|
|
December 31, |
2022 |
2021 |
||||||
ROU assets |
$ |
$ | ||||||
of operating lease liabilities |
$ |
$ | ||||||
Operating lease liabilities |
||||||||
|
|
|
|
|||||
lease liabilities |
$ |
$ | ||||||
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term (in years) |
||||||||
Weighted Average Discount Rate |
% |
% |
Years Ended December 31, |
2022 |
2021 |
2020 |
|||||||||
Operating cash flows for the measurement of operating lease liabilities |
$ |
$ | $ | |||||||||
Operating lease ROU assets obtained in exchange for operating lease obligations |
$ |
$ | $ |
2023 |
$ | |||
2024 |
||||
2025 |
||||
2026 |
||||
2027 |
||||
Thereafter |
||||
|
|
|||
Total lease payments |
||||
Less imputed interest |
||||
|
|
|||
Total lease liability |
$ |
|||
|
|
Years Ended December 31, |
2022 |
2021 |
2020 |
|||||||||
Primary Geographical Regions: |
||||||||||||
United States |
$ |
$ | $ | |||||||||
Canada |
||||||||||||
Latin America and the Caribbean |
||||||||||||
|
|
|
|
|
|
|||||||
$ |
$ | $ | ||||||||||
|
|
|
|
|
|
|||||||
Major Product Lines: |
||||||||||||
HVAC equipment |
% |
% | % | |||||||||
Other HVAC products |
% |
% | % | |||||||||
Commercial refrigeration products |
% |
% | % | |||||||||
|
|
|
|
|
|
|||||||
% |
% | % | ||||||||||
|
|
|
|
|
|
Years Ended December 31, |
2022 |
2021 |
2020 |
|||||||||
Basic Earnings per Share: |
||||||||||||
Net income attributable to Watsco, Inc. shareholders |
$ |
$ | $ | |||||||||
Less: distributed and undistributed earnings allocated to restricted common stock |
||||||||||||
|
|
|
|
|
|
|||||||
Earnings allocated to Watsco, Inc. shareholders |
$ |
$ | $ | |||||||||
|
|
|
|
|
|
|||||||
Weighted-average common shares outstanding - Basic |
||||||||||||
|
|
|
|
|
|
|||||||
Basic earnings per share for Common and Class B common stock |
$ |
$ | $ | |||||||||
|
|
|
|
|
|
|||||||
Allocation of earnings for Basic: |
||||||||||||
Common stock |
$ |
$ | $ | |||||||||
Class B common stock |
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$ |
$ | $ | ||||||||||
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Diluted Earnings per Share: |
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Net income attributable to Watsco, Inc. shareholders |
$ |
$ | $ | |||||||||
Less: distributed and undistributed earnings allocated to restricted common stock |
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Earnings allocated to Watsco, Inc. shareholders |
$ |
$ | $ | |||||||||
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Weighted-average common shares outstanding - Basic |
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Effect of dilutive stock options |
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Weighted-average common shares outstanding - Diluted |
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Diluted earnings per share for Common and Class B common stock |
$ |
$ | $ | |||||||||
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Years Ended December 31, |
2022 |
2021 |
2020 |
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Foreign currency translation adjustment |
$ |
( |
) |
$ | $ | |||||||
Unrealized gain on cash flow hedging instruments |
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Income tax expense |
( |
) | ( |
) | ||||||||
Unrealized gain on cash flow hedging instruments, net of tax |
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Reclassification of loss (gain) on cash flow hedging instruments into earnings |
( |
) | ||||||||||
Income tax (benefit) expense |
( |
) | ||||||||||
Reclassification of loss (gain) on cash flow hedging instruments into earnings, net of tax |
( |
) | ||||||||||
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Other comprehensive (loss) income |
$ |
( |
) |
$ | $ | |||||||
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Years Ended December 31, |
2022 |
2021 |
2020 |
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Foreign currency translation adjustment: |
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Beginning balance |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
Current period other comprehensive (loss) income |
( |
) |
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Ending balance |
( |
) |
( |
) | ( |
) | ||||||
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Cash flow hedging instruments: |
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Beginning balance |
( |
) | ( |
) | ||||||||
Current period other comprehensive income |
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Reclassification adjustment |
( |
) | ||||||||||
Ending balance |
( |
) | ||||||||||
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Accumulated other comprehensive loss, net of tax |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
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|
December 31, |
2022 |
2021 |
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Land |
$ |
$ | ||||||
Buildings and improvements |
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Machinery, vehicles, and equipment |
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Computer hardware and software |
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Furniture and fixtures |
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Accumulated depreciation and amortization |
( |
) |
( |
) | ||||
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$ |
$ | |||||||
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Years Ended December 31, |
2022 |
2021 |
2020 |
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Current: |
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U.S. Federal |
$ |
$ | $ | |||||||||
State |
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Foreign |
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Deferred: |
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U.S. Federal |
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State |
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Foreign |
( |
) |
( |
) | ( |
) | ||||||
Income tax expense |
$ |
$ | $ | |||||||||
Years Ended December 31, |
2022 |
2021 |
2020 |
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U.S. federal statutory rate |
% |
% | % | |||||||||
State income taxes, net of federal benefit and other |
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Excess tax benefits from share-based compensation |
( |
) |
( |
) | ( |
) | ||||||
Tax effects on foreign income |
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FDII |
( |
) |
( |
) | ||||||||
Change in valuation allowance |
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Tax credits and other |
( |
) |
( |
) | ( |
) | ||||||
Effective income tax rate attributable to Watsco, Inc. |
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Taxes attributable to non-controlling interest |
( |
) |
( |
) | ( |
) | ||||||
Effective income tax rate |
% |
% | % | |||||||||
December 31, |
2022 |
2021 |
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Deferred tax assets: |
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Share-based compensation |
$ |
$ | ||||||
Capitalized inventory costs and adjustments |
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Allowance for doubtful accounts |
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Self-insurance reserves |
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Other |
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Net operating loss carryforwards |
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Valuation allowance |
( |
) |
( |
) | ||||
Total deferred tax assets |
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Deferred tax liabilities: |
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Deductible goodwil l |
( |
) |
( |
) | ||||
Depreciation |
( |
) |
( |
) | ||||
Unremitted earnings of domestic affiliate s |
( |
) |
( |
) | ||||
Other |
( |
) |
( |
) | ||||
Total deferred tax liabilities |
( |
) |
( |
) | ||||
Net deferred tax liabilities (1) |
$ |
( |
) |
$ | ( |
) | ||
(1) |
Net deferred tax liabilities have been included in the consolidated balance sheets in deferred income taxes and other liabilities. |
Balance at December 31, 2019 |
$ | |||
Additions based on tax positions related to the current year |
||||
Reductions due to lapse of applicable statute of limitations |
( |
) | ||
Balance at December 31, 2020 |
||||
Additions based on tax positions related to the current year |
||||
Reductions due to lapse of applicable statute of limitations |
( |
) | ||
Balance at December 31, 2021 |
||||
Additions based on tax positions related to the current year |
||||
Reductions due to lapse of applicable statute of limitations |
( |
) | ||
Balance at December 31, 2022 |
$ |
|||
Options |
Weighted- Average Exercise Price |
Weighted- Average Remaining Contractual Term (in years) |
Aggregate Intrinsic Value |
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Options outstanding at December 31, 2021 |
$ | |||||||||||||||
Granted |
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Exercised |
( |
) | ||||||||||||||
Forfeited |
( |
) | ||||||||||||||
Expired |
( |
) | ||||||||||||||
Options outstanding at December 31, 2022 |
$ |
$ |
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Options exercisable at December 31, 2022 |
$ |
$ |
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Shares |
Weighted- Average Grant Date Fair Value |
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Restricted stock outstanding at December 31, 2021 |
$ | |||||||
Granted |
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Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
Restricted stock outstanding at December 31, 2022 |
$ |
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Years Ended December 31, |
2022 |
2021 |
2020 |
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Expected term in years |
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Risk-free interest rate |
% |
% | % | |||||||||
Expected volatility |
% |
% | % | |||||||||
Expected dividend yield |
% |
% | % | |||||||||
Grant date fair value |
$ |
$ | $ |
Years Ended December 31, |
2022 |
2021 |
2020 |
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Stock options |
$ |
$ | $ | |||||||||
Restricted stock |
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Share-based compensation expense |
$ |
$ | $ | |||||||||
Accounts receivable |
$ | |||
Inventories |
||||
Other current assets |
||||
Property and equipment |
||||
Operating lease ROU assets |
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Goodwill |
||||
Intangibles |
||||
Accounts payable |
( |
) | ||
Accrued expenses and other current liabilities |
( |
) | ||
Operating lease liabilities, net of current portion |
( |
) | ||
Total |
$ | |||
Balance at December 31, 2020 |
$ | |||
Acquired goodwill |
||||
Foreign currency translation adjustment |
||||
Balance at December 31, 2021 |
||||
Acquired goodwill |
||||
Allocation to intangible assets related to 2021 acquisition |
( |
) | ||
Foreign currency translation adjustment |
( |
) | ||
Balance at December 31, 2022 |
$ |
|||
December 31, |
Estimated Useful Lives |
2022 |
2021 |
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Indefinite lived intangible assets—Trade names, trademarks, and distribution rights |
$ |
$ | |||||||||||
Finite lived intangible assets: |
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Customer relationships |
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Patented and unpatented technology |
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Trade name |
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Accumulated amortization |
( |
) |
( |
) | |||||||||
Finite lived intangible assets, net |
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$ |
$ | ||||||||||||
2023 |
$ | |||
2024 |
$ | |||
2025 |
$ | |||
2026 |
$ | |||
2027 |
$ |
Years Ended December 31, |
2022 |
2021 |
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Gain recorded in accumulated other comprehensive loss |
$ |
$ | ||||||
Loss reclassified from accumulated other comprehensive loss into earnings |
$ |
$ |
Asset Derivatives |
Liability Derivatives |
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December 31, |
2022 |
2021 |
2022 |
2021 |
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Derivatives designated as hedging instruments |
$ | $ | $ | $ | ||||||||||||
Derivatives not designated as hedging instruments |
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Total derivative instruments |
$ | $ | $ | $ | ||||||||||||
Balance Sheet Location |
Total |
Fair Value Measurements at December 31, 2022 Using |
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Level 1 |
Level 2 |
Level 3 |
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Assets: |
||||||||||||||||||
Equity securities |
Other assets |
$ |
$ |
— |
— |
|||||||||||||
Private equities |
Other assets |
$ |
— |
— |
$ |
Balance Sheet Location |
Total |
Fair Value Measurements at December 31, 2021 Using |
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Level 1 |
Level 2 |
Level 3 |
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Assets: |
||||||||||||||||||||
Equity securities |
Other assets |
$ |
$ |
— | — | |||||||||||||||
Private equities |
Other assets |
$ |
— |
— |
$ |
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Liabilities: |
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Derivative financial instruments |
Accrued expenses and other current liabilities | $ |
— |
$ |
— |
Years Ended December 31, |
2022 |
2021 |
2020 |
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Revenues: |
||||||||||||
United States |
$ |
$ | $ | |||||||||
Canada |
||||||||||||
Latin America and the Caribbean |
||||||||||||
|
|
|
|
|
|
|||||||
Total revenues |
$ |
$ | $ | |||||||||
|
|
|
|
|
|
December 31, |
2022 |
2021 |
||||||
Long-Lived Assets: |
||||||||
United States |
$ |
$ | ||||||
Canada |
||||||||
Latin America and the Caribbean |
||||||||
|
|
|
|
|||||
Total long-lived assets |
$ |
$ | ||||||
|
|
|
|
Years Ended December 31, |
2022 |
2021 |
2020 |
|||||||||
Interest paid |
$ |
$ | $ | |||||||||
Income taxes net of refunds |
$ |
$ | $ | |||||||||
Common stock issued for MIS |
$ | |||||||||||
Common stock issued for ACME |
$ | |||||||||||
Common stock issued for N&S |
$ | ( |
) |