Watsco, Inc. and its subsidiaries operate as a distributor of air conditioning, heating and refrigeration equipment and related parts and supplies (HVAC/R) in the HVAC/R distribution industry in North America. As of December 31, 2013, the company operated from 569 locations in 38 U.S. states, Canada, Mexico, and Puerto Rico with additional market coverage on an export basis to Latin America and the Caribbean, through which the company serves approximately 50,000 contractors and dealers that service the replacement and new construction markets. Products The company sells a line of products and maintains a mix of inventory to meet its customers’ needs and intends to provide products a contractor would require when installing or repairing a central air conditioner, furnace or refrigeration system on short notice. The products that the company distributes consist of equipment, including residential central air conditioners ranging from 1-1/2 to 5 tons, gas, electric and oil furnaces ranging from 50,000 to 150,000 British thermal units, commercial air conditioning and heating equipment and systems ranging from 1-1/2 to 25 tons, and other specialized equipment; parts, including replacement compressors, evaporator coils, motors, and other component parts; and supplies, including thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tape, adhesives, and other ancillary supplies. The company also sells commercial refrigeration products. These products include condensing units, compressors, evaporators, valves, refrigerant, walk-in coolers, and ice machines for industrial and commercial applications. The company distributes products manufactured by Copeland Compressor Corporation, a subsidiary of Emerson Electric Co.; E. I. Du Pont De Nemours and Company; Mueller Industries, Inc.; Owens Corning Insulating Systems, LLC; and The Manitowoc Company, Inc. Joint Ventures The company has a joint venture with Carrier Corporation (Carrier), which it refers to as Carrier Enterprise I, in which Carrier contributed 95 of its company-owned locations in 13 Sun Belt states and Puerto Rico and its export division in Miami, Florida, and the company contributed 15 locations that distributed Carrier products. The company exercised its option to acquire an additional 10% ownership interest in Carrier Enterprise I, which increased its ownership interest to 70%. It has an option to purchase from Carrier an additional 10% interest in Carrier Enterprise I, which becomes exercisable in 2014. The company has a second joint venture with Carrier and completed two additional transactions. Carrier contributed 28 of its company-owned locations in 8 Northeast U.S states, and the company contributed 14 locations in the Northeast United States. The company owns Carrier’s distribution operations in Mexico, which included 7 locations. Collectively, the Northeast locations and the Mexico operations are referred to as Carrier Enterprise II. The company has a 60% controlling interest in Carrier Enterprise II, and Carrier has a 40% noncontrolling interest. The company has a third joint venture, which it refers to as Carrier Enterprise III, with UTC Canada Corporation (UTC Canada), an affiliate of Carrier. Carrier contributed 35 of its company-owned locations in Canada to Carrier Enterprise III. The company has a 60% controlling interest in Carrier Enterprise III, and UTC Canada has a 40% noncontrolling interest. Suppliers The company has relationships with Carrier; Rheem Manufacturing Company; Goodman Manufacturing Company, L.P.; Nordyne Corporation; Emerson Electric Co.; The Manitowoc Company, Inc.; and E. I. Du Pont De Nemours and Company, each of which is a primary manufacturer of HVAC/R products in the United States. Business Strategy The company has a ‘buy and build’ strategy that has produced substantial long-term growth in revenues and profits. The ‘buy’ component of the strategy focuses on acquiring market leaders to either expand into new geographic areas or gain additional market share in existing markets. The ‘build’ component of the strategy focuses on implementing a growth culture at acquired companies, by adding products and locations to better serve customers, exchanging ideas and business concepts amongst the executive management teams and investing in new technologies. The company’s strategy for growth in existing markets focuses on customer service and product expansion to satisfy the needs of the higher growth, higher margin replacement market, in which customers demand immediate, convenient, and reliable service. It focuses on acquiring businesses that either complement its current presence in existing markets or establish a presence in new geographic markets. The company continues to pursue additional strategic acquisitions and/or joint ventures to allow further penetration in existing markets and expansion into new geographic markets. Its business strategy includes product line expansion and operating philosophy. Government Regulations, Environmental and Health and Safety Matters The company’s business is subject to federal, state and local laws and regulations relating to the storage, handling, transportation and release of hazardous materials into the environment. These laws and regulations include the Clean Air Act, relating to minimum energy efficiency standards of HVAC systems and the production, servicing and disposal of certain ozone-depleting refrigerants used in such systems, including those established at the Montreal Protocol in 1992 concerning the phase-out of the production of CFC-based refrigerants on January 1, 2010 for use in new equipment. The company is also subject to regulations concerning the transport of hazardous materials, including regulations adopted pursuant to the Motor Carrier Safety Act of 1990. Its operations are also subject to health and safety requirements including the Occupational, Safety and Health Act. History Watsco, Inc. was founded in 1945. The company was incorporated in Florida in 1956.
watsco inc (WSO:New York)
2665 South Bayshore Drive
Miami, FL 33133
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