HVAC distributor Watsco Inc., Coconut Grove, FL, revenues grew 6% in the third quarter 2006, to $507 million. Same-store sales grew 5%. Profit was up 19% to $29.1 million.
For the first nine months of 2006, sales grew 12% to $1.41 billion. Same-store sales were up 11%. The increase in revenues reflects improving sales mix from the introduction of higher-efficiency air conditioning equipment, double-digit gains in commercial refrigeration products and sales at new locations. For the first nine months, profit was up 26%.
Roughly half of Watsco's business volume and related inventory transitioned to new families of products in the past nine months. "We passed along price increases and carried higher levels of inventory to mitigate erratic OEM deliveries," said Albert H. Nahmad, president and CEO.
Sales of unitary air conditioning equipment (representing 28% of third quarter sales) improved 4% comprised of a 22% increase in average sales prices offset by an 18% decline in unit volume. Strong seasonal sales comparisons from a year ago (unit volumes increased approximately 20% in the third quarter of 2005) and late and incomplete OEM deliveries during the 13 SEER product transition contributed to the decline in unit volumes. Sales results also reflect a 30% sales increase to the commercial refrigeration market (11% of sales) and sales at new locations.
"We are glad the heavy lifting caused by the 13 SEER transition is largely over," Nahmad added. "Inventory levels are expected to decline substantially during the fourth quarter, improving working capital and cash flow as product deliveries and lead times have begun to stabilize. From our customers' standpoint, we see growing acceptance of more efficient HVAC products as consumers move to counteract higher energy costs. We believe this is a long-term trend that will benefit everyone in the industry."
New locations in both new and existing markets added $10 million of revenue for the quarter and $23 million of sales for the nine months and in aggregate have produced profits during their first year of operation. About $12 million of working capital has been deployed in the 20 locations.
Watsco has added 20 branches during the past 12 months. The company said its plan is to continue growing by adding new branches (by green fielding and acquisitions), expanding its product offering and further expanding margins.
Watsco is a distributor of air conditioning, heating and refrigeration equipment and related parts and supplies in the HVAC industry, currently operating 361 locations serving over 38,000 customers in 32 states.