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 Pursuant To Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
or
[ ] 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: shares 23,686,765 of the
Company's Common Stock ($.50 par value), excluding treasury shares of 2,541,413
and 3,228,306 shares of the Company's Class B Common Stock ($.50 par value) were
outstanding as of August 14, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
WATSCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ----------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 7,858 $ 7,484
Accounts receivable, net 206,018 167,335
Inventories 251,079 222,853
Other current assets 14,756 17,397
---------- ----------
Total current assets 479,711 415,069
---------- ----------
Property, plant and equipment, net 32,185 31,427
Intangible assets, net 129,947 131,556
Other assets 14,045 10,854
---------- ----------
$655,888 $588,906
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 1,937 $ 5,915
Accounts payable 126,029 89,997
Accrued liabilities 30,844 26,895
---------- ----------
Total current liabilities 158,810 122,807
---------- ----------
Long-term obligations:
Borrowings under revolving credit agreement 183,310 155,000
Bank and other debt 4,054 4,415
---------- ----------
Total long-term obligations 187,364 159,415
---------- ----------
Deferred income taxes and other liabilities 4,897 4,968
---------- ----------
Shareholders' equity:
Common Stock, $.50 par value 13,092 13,036
Class B Common Stock, $.50 par value 1,614 1,591
Paid-in capital 203,144 202,106
Unearned compensation related to
outstanding restricted stock (6,048) (5,998)
Unrealized loss on investments, net of tax (852) (669)
Retained earnings 120,262 105,971
Treasury stock, at cost (26,395) (14,321)
---------- ----------
Total shareholders' equity 304,817 301,716
---------- ----------
$655,888 $588,906
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
WATSCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Quarter and Six Months Ended June 30, 2000 and 1999
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 370,832 $ 346,124 $ 657,176 $ 606,507
Cost of sales 283,052 265,345 501,929 464,454
--------- --------- --------- ----------
Gross profit 87,780 80,779 155,247 142,053
Selling, general and administrative expenses 64,467 58,914 123,896 113,029
--------- --------- --------- ----------
Operating income 23,313 21,865 31,351 29,024
Interest expense, net 3,218 3,431 6,394 6,693
--------- --------- --------- ----------
Income before income taxes 20,095 18,434 24,957 22,331
Income taxes 7,475 6,857 9,284 8,307
--------- --------- --------- ----------
Net income $ 12,620 $ 11,577 $ 15,673 $ 14,024
========= ======== ========= =========
Basic earnings per share $ 0.47 $ 0.40 $ 0.57 $ 0.49
------ ------ ------ ------
Diluted earnings per share $ 0.45 $ 0.39 $ 0.55 $ 0.48
------ ------ ------ ------
Weighted average shares and equivalent shares
used to calculate earnings per share:
Basic 26,940 28,704 27,315 28,652
====== ====== ====== ======
Diluted 28,325 29,580 28,476 29,554
====== ====== ====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
WATSCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,673 $ 14,024
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 6,078 5,438
Provision for doubtful accounts 2,150 1,948
Deferred income taxes (60) (33)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (40,833) (37,666)
Inventories (28,226) (35,298)
Accounts payable and accrued liabilities 40,124 26,456
Other, net (1,011) 1,679
---------- -----------
Net cash used in operating activities (6,105) (23,452)
---------- -----------
Cash flows from investing activities:
Business acquisitions, net of cash acquired - (18,009)
Capital expenditures, net (4,615) (3,459)
Purchases of marketable securities - (1,042)
---------- -----------
Net cash used in investing activities (4,615) (22,510)
---------- -----------
Cash flows from financing activities:
Net borrowings under revolving credit agreement 28,310 45,700
Borrowings (repayments) of bank and other debt (4,339) 486
Net proceeds from issuances of common stock 564 644
Common stock dividends (1,367) (1,428)
Acquisition of common stock (12,074) -
---------- ----------
Net cash provided by financing activities 11,094 45,402
---------- ----------
Net increase (decrease) in cash and cash equivalents 374 (560)
Cash and cash equivalents at beginning of period 7,484 7,249
---------- ----------
Cash and cash equivalents at end of period $ 7,858 $ 6,689
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
WATSCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(In thousands, except share data)
(Unaudited)
1. The condensed consolidated balance sheet as of December 31, 1999, which has
been derived from the Company's audited financial statements, and the
unaudited interim condensed consolidated financial statements, have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in the annual financial statements prepared in accordance with
accounting principles generally accepted in the United States have been
condensed or omitted pursuant to those rules and regulations, although the
Company believes the disclosures made are adequate to make the information
presented not misleading. In the opinion of management, all adjustments
necessary for a fair presentation have been included in the condensed
consolidated financial statements herein. As discussed in Note 6, amounts
in the condensed consolidated statements of income and statements of cash
flows have been restated in 1999 to include Dunhill Staffing Systems Inc.
("Dunhill") as continuing operations.
2. The results of operations for the quarter and six months ended June 30,
2000, are not necessarily indicative of the results for the year ending
December 31, 2000. The sale of the Company's products and services is
seasonal with revenue generally increasing during the months of May through
August.
3. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
4. Basic earnings per share is computed by dividing net income by the total of
the weighted average shares outstanding. Diluted earnings per share
additionally assumes, if dilutive, any added dilution from common stock
equivalents. Shares used to calculate earnings per share are as follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
------------------------ ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 26,940,397 28,703,641 27,315,433 28,652,176
Dilutive stock options 1,384,200 876,074 1,160,555 901,806
---------- ---------- ---------- ----------
Shares for diluted earnings per share 28,324,597 29,579,715 28,475,988 29,553,982
========== ========== ========== ==========
Options outstanding which are not included in the
calculation of diluted earnings per share because
their impact is antidilutive 2,547,378 291,025 2,499,628 676,513
=========== ========== ========== ========
</TABLE>
5. The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for the reporting and display of comprehensive income
and its components in the financial statements. Comprehensive income
consists of net income and changes in the value of available-for-sale
securities at June 30, 2000 and 1999. The components of the Company's
comprehensive income are as follows for the quarter and six months ended
June 30, 2000 and 1999:
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<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 12,620 $ 11,577 $ 15,673 $ 14,024
Unrealized holding gains (losses) on investments
arising during the period, net of income taxes (103) 3,612 (183) 3,005
--------- --------- --------- ---------
Comprehensive income $ 12,517 $ 15,189 $ 15,490 $ 17,029
========= ========= ========= =========
</TABLE>
6. In November 1997, the Company's Board of Directors approved a plan to
dispose of its staffing service subsidiary, Dunhill. During the period in
which it was reported as a discontinued operation, the Company did not
receive any acceptable offers for Dunhill. Therefore, in 1999, the Company
decided to retain Dunhill as part of its continuing operations and has
accordingly restated operating results and net cash flows in 1999 to
include Dunhill in continuing operations. Unaudited summarized financial
information for the quarter and six month period that Dunhill was reported
as a discontinued operation is as follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, 1999 June 30, 1999
------------- ----------------
<S> <C> <C>
Revenue $15,113 $28,119
Operating profit $ 704 $ 952
</TABLE>
7. During 1999, the Company completed the acquisition of six wholesale
distributors of air conditioning and heating products and one staffing
service franchise. Acquisitions have been accounted for under the purchase
method of accounting and, accordingly, their results of operations have
been included in the unaudited condensed consolidated statement of income
and retained earnings beginning on their respective dates of acquisition.
The Company's unaudited pro forma consolidated results of operations
assuming all significant acquisitions occurred on January 1, 1999 are as
follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, 1999 June 30, 1999
------------- -------------
<S> <C> <C>
Revenue $ 358,010 $ 627,470
Net income $ 12,653 $ 15,928
Diluted earnings per share $ 0.42 $ 0.54
</TABLE>
The unaudited pro forma consolidated results of operations is not
necessarily indicative of either the results of operations that would have
occurred had the above companies been acquired on January 1, 1999 for the
period presented or of future results of operations.
8. In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements." SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements. In June
2000, the SEC issued SAB 101B to defer for six months the effective date of
implementation of SAB 101. The Company is required to adopt SAB 101 in the
fourth quarter of 2000. The Company does not expect the adoption of SAB 101
to have a material effect on its financial position or results of
operations.
9. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS No. 133 also requires
that changes in derivatives' fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The impact of SFAS No.
133 on the Company's consolidated financial statements will depend on a
variety of factors, including future interpretive guidance from the FASB,
the extent of the Company's hedging
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<PAGE>
activities, the type of hedging instruments used and the effectiveness of
such instruments. The Company has not quantified the impact of adopting
SFAS No. 133. In June 1999, the FASB issued SFAS 137, "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the effective
date of FASB Statement 133 - an amendment to FASB Statement No. 133," which
delayed the implementation date for SFAS 133 for one year to fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which includes additional guidance on specific transactions.
10. In September 1999, a lawsuit was filed in the Circuit Court for the First
Judicial District of Jasper County, Mississippi against the Company and a
group of companies now operating as a subsidiary of the Company, Kaufman
Supply, Inc. ("Kaufman"), and an employee of Kaufman. The lawsuit pertains
to a vehicle accident involving a Kaufman vehicle and three individuals who
sustained significant injuries resulting from the accident. In the lawsuit,
the plaintiffs allege that Kaufman and its employee are liable for damages
resulting from their injuries and further allege that Kaufman and its
employee were grossly negligent in the operation of the vehicle and seek
unspecified actual and punitive damages. Based on discovery performed
during recent months, the Company believes that plaintiffs in this action,
may assert a significant claim during trial. Further discovery in this
matter is currently on-going with a trial date set for October 2000. The
Company intends to vigorously defend itself in this matter and has filed
claims with its insurance carriers for any and all insurable losses under
the liability policies in force at the time of the accident. At this time,
due to the preliminary nature of the proceedings, the Company is unable to
predict with any certainty as to whether an adverse judgment will be less
than or exceed the Company's insurable limits.
The Company is involved in other litigation incidental to the operation of
its business and vigorously defends all matters in which the Company or its
subsidiaries are named defendants.
In the opinion of the Company, the ultimate liability associated with the
legal matters described above will not materially affect the Company's
financial position but could be material to the results of operations in
any one accounting period.
11. Certain reclassifications have been made to the 1999 balances to conform to
the 2000 presentation.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table presents the Company's consolidated financial results for
the quarter and six months ended June 30, 2000 and 1999, expressed as a percent
of revenue:
<TABLE>
<CAPTION>
Quarter Six Months
Ended June 30, Ended June 30,
--------------------- -------------------
2000 1999 2000 1999
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of sales 76.3 76.7 76.4 76.6
------- ------- ------- -------
Gross profit 23.7 23.3 23.6 23.4
Selling, general and administrative expenses 17.4 17.0 18.8 18.6
------- ------- ------- -------
Operating income 6.3 6.3 4.8 4.8
Interest expense, net (0.9) (1.0) (1.0) (1.1)
Income taxes (2.0) (2.0) (1.4) (1.4)
------- ------- ------- -------
Net income 3.4% 3.3% 2.4% 2.3%
======= ======= ====== =======
</TABLE>
The above table and the following narratives include the results of
operations acquired during 1999. These acquisitions were accounted for under the
purchase method of accounting and, accordingly, their results of operations have
been included in the consolidated results of the Company beginning on their
respective dates of acquisition. Data presented in the following narratives
referring to "same-store basis" excludes the effects of operations acquired or
locations opened and closed during the prior twelve months. Amounts in 1999 have
been restated to include Dunhill in continuing operations.
QUARTER ENDED JUNE 30, 2000 VS. QUARTER ENDED JUNE 30, 1999
Revenue for the three months ended June 30, 2000 increased $24.7 million, or
7%, compared to the same period in 1999. Such results were due to a same-store
basis increase of $14.1 million, or 4%, driven by a 7% increase in the Company's
residential and commercial air conditioning, refrigeration and heating product
lines, offset in part, by a decrease in products sold by the manufactured
housing operations.
Gross profit for the three months ended June 30, 2000 increased $7.0 million,
or 9%, as compared to the same period in 1999, primarily as a result of the
aforementioned revenue increases. Gross profit margin in the second quarter
increased to 23.7% in 2000 from 23.3% in 1999. Increases in gross profit margin
are primarily attributable to enhanced focus on margins in certain markets and
contribution from expanded vendor programs. On a same-store basis, gross profit
increased $4.0 million, or 5%, and gross profit margin increased to 23.6% in
2000 from 23.4% in 1999.
Selling, general and administrative expenses for the three months ended June
30, 2000 increased $5.6 million, or 9%, compared to the same period in 1999,
primarily due to selling and delivery costs related to acquired companies and
increased sales. Selling, general and administrative expenses as a percent of
revenue increased to 17.4% in 2000 from 17.0% in 1999. Such increase was
primarily due to the inability to leverage the fixed cost structures against the
volatile sales demand experienced during the quarter in certain subsidiaries of
the Company. On a same-store basis, selling, general and administrative expenses
increased $3.7 million, or 6%, primarily due to revenue increases and the
inability to leverage the fixed costs structures in the manufactured housing
operations. Selling, general and administrative expenses on a same-store basis
and as a percent of revenue increased to 17.3% in 2000 from 16.9% in 1999.
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<PAGE>
Interest expense, net for the second quarter in 2000 decreased $0.2
million, or 6%, compared to the same period in 1999, primarily due to lower
average borrowings during the quarter, offset by a rise in interest rates.
The effective tax rate for the three months ended June 30, 2000 and 1999 was
37.2%.
SIX MONTHS ENDED JUNE 30, 2000 VS. SIX MONTHS ENDED JUNE 30, 1999
Revenue for the six months ended June 30, 2000 increased $50.7 million, or
8%, compared to the same period in 1999. Such results were due to a same-store
basis increase of $31.0 million, or 5% driven by an 8% increase in the Company's
residential and commercial air conditioning, refrigeration and heating product
lines, offset in part by a decrease in products sold by the manufactured housing
operations.
Gross profit for the six months ended June 30, 2000 increased $13.2 million,
or 9%, as compared to the same period in 1999, primarily as a result of the
aforementioned revenue increases. Gross profit margin for the six-month period
increased to 23.6% in 2000 from 23.4% in 1999. On same-store basis, gross profit
increased $7.7 million, or 6%, while gross profit margin increased to 23.5% in
2000 from 23.4% in 1999.
Selling, general and administrative expenses for the six months ended June
30, 2000 increased $10.9 million, or 10%, compared to the same period in 1999,
primarily due to higher selling and delivery costs related to acquired companies
and increased sales. Selling, general and administrative expenses as a percent
of revenue increased to 18.8% in 2000 from 18.6% in 1999. On same-store basis,
selling, general and administrative expenses increased $7.2 million, or 6%,
primarily due to revenue increases and the inability to leverage the fixed costs
structures in the manufactured housing operations.
Interest expense, net for the six months ended June 30, 2000 decreased $0.3
million, or 4%, compared to the same period in 1999, primarily due to lower
average borrowings during the period, offset by a rise in interest rates.
The effective tax rate for the six months ended June 30, 2000 and 1999 was
37.2%.
Liquidity and Capital Resources
The Company maintains a bank-syndicated revolving credit agreement that
provides for borrowings of up to $315.0 million, expiring on August 8, 2002.
Borrowings under the unsecured agreement are used to fund seasonal working
capital needs and for other general corporate purposes, including acquisitions.
Borrowings under the agreement, which aggregated $183.3 million at June 30,
2000, bear interest at primarily LIBOR-based rates plus a spread that is
dependent upon the Company's financial performance (LIBOR plus .6% at June 30,
2000). The revolving credit agreement contains customary affirmative and
negative covenants including certain financial covenants with respect to the
Company's consolidated net worth, interest and debt coverage ratios and limits
capital expenditures and dividends in addition to other restrictions. The
Company was in compliance with all covenants at June 30, 2000.
On January 31, 2000, the Company entered into a $125.0 million private
placement shelf facility. The uncommitted loan facility provides the Company a
source of long-term, fixed-rate financing as a complement to the variable rate
borrowings available under its existing revolving credit facility. There were no
outstanding borrowings under the agreement as of June 30, 2000.
The Company's Board of Directors has authorized the repurchase, at
management's discretion, of up to 3.0 million shares of the Company's stock in
the open market or via private transactions. As of June 30, 2000, the Company
had approximately 2.5 million shares at a cost of $26.4 million.
Working capital increased to $320.9 million at June 30, 2000 from $292.3
million at December 31, 1999 primarily due to the Company's seasonal build-up of
inventory in preparation for the summer selling season. This increase was funded
primarily by borrowings under the Company's revolving credit agreement.
Cash and cash equivalents increased $0.4 million during the six month period
ended June 30, 2000. The revolving credit agreement provided the principal
source of cash during the period. The principal uses of
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<PAGE>
cash were seasonal working capital needs, acquisition of the Company's common
stock, repayments of bank and other debt, and capital expenditures.
The Company has adequate availability of capital from operations and its
revolving credit agreement to fund present operations and anticipated growth,
including expansion in its current and targeted market areas. The Company
continually evaluates potential acquisitions and has held discussions with a
number of acquisition candidates; however, the Company currently has no binding
agreement with respect to any acquisition candidates. Should suitable
acquisition opportunities or working capital needs arise that would require
additional financing, the Company believes that its financial position and
earnings history provide a solid base for obtaining additional financing
resources at competitive rates and terms.
Quantitative and Qualitative Disclosures about Market Risk
The Company's primary market risk exposure consists of interest rate risk.
The Company's objective in managing the exposure to interest rate changes is to
limit the impact of interest rate changes on earnings and cash flows and to
lower its overall borrowing costs. To achieve its objectives, the Company uses
interest rate swaps to manage its net exposure to interest rate changes to its
borrowings. These swaps are entered into with a group of financial institutions
with investment grade credit ratings, thereby minimizing the risk of credit
loss. All items described below are non-trading.
At June 30, 2000, the Company had various interest rate swap agreements with
an aggregate notional amount of $60.0 million to manage its net exposure to
interest rate changes related to a portion of the borrowings under the revolving
credit agreement. The interest rate swap agreements effectively convert a
portion of the Company's LIBOR-based variable rate borrowings into fixed rate
borrowings with a weighted average pay rate of 6.4%.
Safe Harbor Statement
This quarterly report contains statements which, to the extent they are not
historical fact, constitute "forward looking statements" under the securities
laws, including statements regarding acquisitions, financing agreements and
industry, demographic and other trends affecting the Company. All forward
looking statements involve risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company to differ
materially from those contemplated or projected, forecasted, estimated,
budgeted, expressed or implied by or in such forward looking statements. The
forward looking statements in this document are intended to be subject to the
safe harbor protection provided under the securities laws.
The Company's shareholders should also be aware that while the Company does,
at various times, communicate with securities analysts, it is against the
Company's policies to disclose to such analysts any material non-public
information or other confidential information. Accordingly, our shareholders
should not assume that the Company agrees with all statements or reports issued
by such analysts. To the extent statements or reports issued by analysts contain
projections, forecasts or opinions by such analysts about our Company, such
reports are not the responsibility of the Company.
For additional information identifying some other important factors which
may affect the Company's operations and markets and could cause actual results
to vary materially from those anticipated in the forward looking statements, see
the Company's Securities and Exchange Commission filings, including but not
limited to, the discussion included in the Business section of the Company's
Form 10-K under the heading "Other Information."
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In September 1999, a lawsuit was filed in the Circuit Court for the
First Judicial District of Jasper County, Mississippi against the
Company and a group of companies now operating as a subsidiary of the
Company, Kaufman Supply, Inc. ("Kaufman"), and an employee of
Kaufman. The lawsuit pertains to a vehicle accident involving a
Kaufman vehicle and three individuals who sustained significant
injuries resulting from the accident. In the lawsuit, the plaintiffs
allege that Kaufman and its employee are liable for damages resulting
from their injuries and further allege that Kaufman and its employee
were grossly negligent in the operation of the vehicle and seek
unspecified actual and punitive damages. Based on discovery performed
during recent months, the Company believes that plaintiffs in this
action, may assert a significant claim during trial. Further
discovery in this matter is currently on-going with a trial date set
for October 2000. The Company intends to vigorously defend itself in
this matter and has filed claims with its insurance carriers for any
and all insurable losses under the liability policies in force at the
time of the accident. At this time, due to the preliminary nature of
the proceedings, the Company is unable to predict with any certainty
as to whether an adverse judgment will be less than or exceed the
Company's insurable limits.
The Company is involved in other litigation incidental to the
operation of its business and vigorously defends all matters in which
the Company or its subsidiaries are named defendants.
In the opinion of the Company, the ultimate liability associated with
the legal matters described above will not materially affect the
Company's financial position but could be material to the results of
operations in any one accounting period.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
(a) The Company's 2000 Annual Meeting of Shareholders was held on
June 5, 2000.
(b) The Company's management solicited proxies pursuant to Regulation
14 under the Securities Exchange Act of 1934. There was no
solicitation in opposition to the management's nominees as listed
in the proxy statement. The following nominees were elected as
indicated in the proxy statement pursuant to the vote of the
shareholders as follows:
For Withheld
--------- ---------
Common Stock
Alan H. Potamkin 17,927,171 1,141,167
Class B Common Stock
Roberto Motta 29,997,840 78,500
Ira Harris 29,920,350 155,990
(c) A proposal was voted upon at the Annual Meeting of Shareholders
to ratify the action of the Board of Directors amending the
Company's Second Amended and Restated 1991 Stock Option Plan.
The combined vote of the Company's Common Stock and Class B
Common Stock was as follows:
For 48,663,474
Against 147,321
Withheld 333,883
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WATSCO, INC.
--------------------------
(Registrant)
By: /s/ Barry S. Logan
Barry S. Logan
Vice President and Secretary
(Chief Financial Officer)
August 14, 2000
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