Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, 2021 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, S ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2021 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 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2021 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 ...

Revenue Growth and Market Presence - Watsco's HVAC/R distribution revenues increased from $64.1 million in 1989 to $5.1 billion in 2020, reflecting a significant growth strategy through acquisitions and market expansion[16] - The annual market for residential central air conditioning, heating, and refrigeration equipment in the U.S. is estimated at approximately $97.0 billion, indicating a robust demand for HVAC/R products[19] - Sales of HVAC equipment accounted for 69% of Watsco's revenues in 2020, while other HVAC products comprised 28% and commercial refrigeration products accounted for 3%[39] - The company has acquired 63 HVAC/R distribution businesses since 1989, enhancing its market presence and operational capabilities[30] - The United States accounted for 90% of the company's revenues for the year ended December 31, 2020, with a total of 541 locations[41] - The company's joint ventures with Carrier represented 55% of revenues for the year ended December 31, 2020[48] - The company serves over 100,000 active contractors and dealers in the HVAC/R market, with no single customer representing more than 2% of consolidated revenues[50] Operational Strategy and Technology - Watsco employs approximately 5,800 full-time employees, with a focus on competitive compensation and benefits to attract and retain talent[35] - The company has invested in over 200 technology employees to modernize and digitize its operations, enhancing customer service and internal processes[25] - Watsco's strategy includes expanding product lines and introducing private-label products to capture additional market share[29] - The company maintains a culture of innovation, focusing on scalable technology platforms to improve customer experience and operational efficiency[26] - Watsco's growth strategy emphasizes customer service, product expansion, and technology implementation to meet the needs of the higher growth replacement market[27] - The company plans to pursue additional acquisitions of complementary businesses, which may involve incurring additional debt and diluting existing shareholders[73] - The company has implemented a new digital strategy, resulting in a 30% increase in online sales[132] - The company has established a partnership with a leading technology firm to integrate advanced analytics into its operations[132] Financial Performance and Risks - Watsco, Inc. reported a significant increase in revenue, reaching $1.5 billion for the quarter, representing a 15% year-over-year growth[132] - The company achieved a net income of $120 million, which is a 10% increase compared to the same quarter last year[132] - The cumulative total shareholder return for Watsco, Inc. common stock from December 31, 2015, to December 31, 2020, was 128.94%, outperforming the Russell 2000 index, which had a return of 86.36% during the same period[111] - Economic conditions and disruptions in credit markets could adversely affect the company's financial performance and liquidity[80] - As of December 31, 2020, goodwill, intangibles, and long-lived assets represented approximately 40% of total assets, indicating potential risks related to asset impairment[94] - Cybersecurity threats pose risks to the company's information technology systems, potentially impacting operations and financial condition[83] - The market price of the company's common stock may be highly volatile, influenced by various unpredictable factors[90] Supply Chain and Inventory Management - The company has completed the transition of its inventory of residential furnaces to meet new energy efficiency standards established by the DOE as of December 31, 2020[63] - The company maintains exclusive distribution agreements with Carrier and Rheem, which are critical for operations[71] - The top ten suppliers accounted for 85% of purchases, with 63% from Carrier and 11% from Rheem, indicating a significant supplier concentration risk[54] - The company has established reserves based on claims filed and estimates of claims incurred but not yet reported, indicating potential risks related to self-insurance[95] - The company plans to enhance its supply chain efficiency, aiming for a 15% reduction in operational costs by the end of the year[132] Seasonal Demand and Market Trends - Demand for residential central air conditioning is typically highest in the second and third quarters, while heating equipment demand peaks in the first and fourth quarters, indicating seasonal sales patterns[57] - The company expects the replacement market for residential air conditioning equipment, which currently represents approximately 85% of industry unit sales in the U.S., to increase as older units become due for replacement[52] - Seasonal demand impacts revenue, with residential central air conditioning demand peaking in Q2 and Q3, and heating equipment demand in Q1 and Q4[78] Infrastructure and Logistics - As of December 31, 2020, the company operated 600 warehousing and distribution facilities across 38 U.S. states, Canada, Mexico, and Puerto Rico, totaling approximately 13.3 million square feet, with 13.1 million square feet leased[100] - The company operated 769 ground transport vehicles, including delivery and pick-up trucks, vans, and tractors, with 514 trucks leased and the remainder owned[101] - The company believes its current facilities and truck fleet are sufficient to meet present operating needs[100][101] Shareholder Information - The company has repurchased a total of 6,370,913 shares of Common and Class B common stock at a cost of $114.4 million since the inception of the repurchase plan, with 1,129,087 shares remaining authorized for repurchase as of December 31, 2020[112] - The company has 220 registered shareholders for Common stock and 156 for Class B common stock as of February 23, 2021[107] - The company’s stock is listed on the New York Stock Exchange under the ticker symbols WSO and WSOB for Class B common stock[106] Management and Internal Controls - The company is dependent on key personnel, and the loss of senior management could harm business performance[79] - There were no changes in internal controls over financial reporting during the quarter ended December 31, 2020, that materially affected the internal control over financial reporting[121] - The company maintains excess and aggregate liability coverage to limit exposure to catastrophic losses[97]

Financial Performance - Revenues for Q3 2020 increased by $141.8 million, or 10%, compared to Q3 2019, with HVAC equipment sales (70% of total sales) rising by 12%[93] - On a same-store basis, revenues increased by $104.8 million, or 8%, driven by a 10% increase in HVAC equipment sales, including a 17% increase in residential HVAC equipment[93] - Net income attributable to Watsco, Inc. for Q3 2020 was 6.9%, up from 6.0% in Q3 2019, reflecting improved profitability[88] - Gross profit for Q3 2020 increased by $39.1 million, or 12%, with a gross profit margin of 24.3% compared to 24.0% in Q3 2019[94] - Net income attributable to Watsco for Q3 2020 increased by $23.0 million, or 28%, driven by higher revenues and gross profit[100] - Revenues for the nine months ended September 30, 2020 increased by $202.2 million, or 5%, with HVAC equipment sales accounting for 70% of total sales[101] - Gross profit for the nine months ended September 30, 2020 increased by $44.1 million, or 5%, with a gross profit margin of 24.1%, down from 24.2% in the same period of 2019[102] Operational Changes - The impact of the COVID-19 pandemic has led to operational modifications, including contactless sales and servicing capabilities, to safeguard employees and customers[77] - The company has implemented cost-reduction measures, including compensation reductions and rent abatements, to preserve liquidity during the pandemic[78] Cash and Liquidity - The company reported $92.6 million in cash and $1.8 billion in shareholders' equity as of September 30, 2020, with only $0.7 million drawn from a $560.0 million credit facility[79] - Cash flows provided by operating activities for the nine months ended September 30, 2020 were $372.8 million, an increase of $175.3 million compared to 2019[114] - Working capital decreased to $1,034.6 million as of September 30, 2020, down from $1,085.0 million at December 31, 2019[113] - The company maintained $92.6 million in cash and cash equivalents as of September 30, 2020, with $64.7 million held by foreign subsidiaries[110] Shareholder Returns - Future dividends remain at $1.775 per share, with changes dependent on cash flow, profitability, and financial condition[79] - The company paid cash dividends of $5.15 and $4.80 per share of Common stock and Class B common stock for the nine months ended September 30, 2020, and 2019, respectively[127] - A regular quarterly cash dividend of $1.775 per share was declared on October 1, 2020, to be paid on October 30, 2020[127] - The company has repurchased a total of 6,370,913 shares of Common and Class B common stock at a cost of $114.4 million since the inception of the share repurchase program[128] - As of September 30, 2020, there were 1,129,087 shares remaining authorized for repurchase under the program[128] Strategic Growth - The company continually evaluates potential acquisitions and joint ventures, indicating a proactive approach to growth opportunities[126] - The financial position and earnings history of the company provide a basis for obtaining additional debt financing at competitive rates if suitable acquisition opportunities arise[126] Risk Management - There have been no material changes to the information regarding market risk as disclosed in the Annual Report for the year ended December 31, 2019[129] Cost Management - Selling, general and administrative expenses for Q3 2020 rose by $8.1 million, or 4%, but as a percentage of revenues decreased to 14.4% from 15.3% in Q3 2019[95] - The gross profit margin for Q3 2020 was 24.3%, an increase from 24.0% in Q3 2019, while selling, general and administrative expenses decreased to 14.4% from 15.3%[88]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Condensed Consolidated Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Unaudited%20Financial%20Statements) This section presents Watsco's unaudited financial statements for Q2 and H1 2020, including income, balance sheets, and cash flows, showing mixed performance with increased operating cash flow [Condensed Consolidated Unaudited Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Unaudited%20Statements%20of%20Income) For Q2 2020, revenues slightly decreased by 1.2% to $1.36 billion, and net income fell by 3.9% to $86.6 million, while H1 2020 revenues increased by 2.6% to $2.36 billion, but net income decreased by 6.5% to $117.1 million Condensed Consolidated Statements of Income (Unaudited) | (In thousands, except per share data) | Quarter Ended June 30, 2020 | Quarter Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $1,355,385 | $1,371,854 | $2,363,541 | $2,303,132 | | **Gross profit** | $319,199 | $327,984 | $566,814 | $561,744 | | **Operating income** | $129,249 | $134,400 | $174,492 | $189,532 | | **Net income attributable to Watsco, Inc.** | $86,578 | $90,155 | $117,080 | $125,192 | | **Diluted EPS** | $2.26 | $2.40 | $3.02 | $3.34 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets increased slightly to $2.64 billion, cash and cash equivalents rose to $79.6 million, and borrowings under the revolving credit agreement significantly decreased to $33.4 million Balance Sheet Highlights (Unaudited) | (In thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $1,631,469 | $1,546,730 | | **Total assets** | $2,636,727 | $2,556,161 | | **Borrowings under revolving credit agreement** | $33,357 | $155,700 | | **Total current liabilities** | $638,858 | $461,717 | | **Total Watsco, Inc. shareholders' equity** | $1,437,039 | $1,435,427 | [Condensed Consolidated Unaudited Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Unaudited%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased to $261.3 million for H1 2020, primarily due to inventory reduction, while net cash used in financing activities rose due to credit facility repayments and higher dividend payments Cash Flow Summary (Unaudited, in thousands) | | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $261,255 | $68,447 | $192,808 | | **Net cash used in investing activities** | ($7,982) | ($30,806) | $22,824 | | **Net cash used in financing activities** | ($247,299) | ($65,327) | ($181,972) | | **Net increase (decrease) in cash** | $5,119 | ($26,979) | $32,098 | | **Cash and cash equivalents at end of period** | $79,573 | $55,915 | $23,658 | [Notes to Condensed Consolidated Unaudited Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Unaudited%20Financial%20Statements) The notes detail accounting policies, revenue disaggregation, acquisitions, debt, and related-party transactions, highlighting that U.S. revenues dominate and Carrier is a key supplier - Revenues are disaggregated by geography and product line. For the six months ended June 30, 2020, the U.S. accounted for **$2.13 billion (89.9%)** of total revenues, while HVAC equipment represented **69%** of total sales[33](index=33&type=chunk) - On April 10, 2020, the company increased its aggregate borrowing capacity under its revolving credit agreement from **$500 million to $560 million**. As of June 30, 2020, **$33.4 million** was outstanding[47](index=47&type=chunk)[48](index=48&type=chunk) - The company has significant related-party transactions with Carrier Global Corporation. Purchases from Carrier and its affiliates comprised **60%** of all inventory purchases during the first six months of 2020[65](index=65&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the COVID-19 pandemic's impact, noting disruptions and cost-saving measures, with Q2 2020 same-store sales decreasing 6% due to market disruption, yet the company maintained strong liquidity and generated record operating cash flow [Impact of the COVID-19 Pandemic](index=19&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic significantly impacted Q2 2020 business, leading to temporary closures and cost-reduction measures, though the company's strong balance sheet and liquidity position it well to navigate uncertainty - The company's work was deemed essential, allowing operations to continue with modifications, such as restricted public access to branches and contactless sales[73](index=73&type=chunk) - Actions were taken to reduce costs, including reductions in fixed-cost compensation, rent abatement, and curtailing discretionary spending. Variable costs are expected to moderate with business activity[75](index=75&type=chunk) - As of June 30, 2020, the company had a strong liquidity position with **$79.6 million** in cash, only **$33.4 million** drawn from its **$560 million** credit facility, and **$1.7 billion** in shareholders' equity[76](index=76&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) In Q2 2020, total revenues decreased 1% to $1.36 billion, with same-store sales down 6% due to a 20% decline in commercial HVAC, leading to a 30 basis point drop in gross profit margin to 23.6% - Q2 2020 same-store revenues decreased **6%** YoY, reflecting a **4%** decrease in HVAC equipment sales (flat residential, **-20%** commercial), a **9%** decrease in other HVAC products, and a **15%** decrease in commercial refrigeration products[89](index=89&type=chunk) - Q2 2020 gross profit margin declined **30 basis-points** to **23.6%** from **23.9%** in Q2 2019, primarily due to a shift in sales mix toward HVAC equipment, which has a lower gross profit margin[90](index=90&type=chunk) - H1 2020 same-store revenues decreased **3%** YoY, with a **2%** decrease in HVAC equipment sales (residential **+1%**, commercial **-14%**) and a **4%** decrease in other HVAC products[97](index=97&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains strong, supported by a $560 million revolving credit facility and a surge in operating cash flow to $261.3 million for H1 2020, primarily due to inventory reduction Cash Flow Activity Summary (in millions) | | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | **Cash flows provided by operating activities** | $ 261.3 | $ 68.4 | $ 192.9 | | **Cash flows used in investing activities** | $ (8.0) | $(30.8) | $ 22.8 | | **Cash flows used in financing activities** | $(247.3) | $(65.3) | $(182.0) | - The increase in operating cash flow was primarily due to a reduction in the level of inventories[110](index=110&type=chunk) - The company paid cash dividends of **$3.375 per share** during the six months ended June 30, 2020, and the Board declared a regular quarterly cash dividend of **$1.775 per share** on July 1, 2020[122](index=122&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that there have been no material changes to the information regarding market risk as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2019 - There have been no material changes to the information regarding market risk from what was provided in the 2019 Annual Report on Form 10-K[124](index=124&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by the report[126](index=126&type=chunk) - There were no changes in internal controls over financial reporting during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[127](index=127&type=chunk) [PART II. OTHER INFORMATION](index=25&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details legal proceedings, updated risk factors, particularly concerning the COVID-19 pandemic, and a comprehensive list of filed exhibits [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in litigation incidental to its business operations, which management vigorously defends, and does not believe will have a material adverse effect on its financial condition or results of operations - The company is involved in litigation incidental to its business but does not believe the ultimate liability will have a material adverse effect on its financial condition or results of operations[63](index=63&type=chunk)[129](index=129&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, focusing on the COVID-19 pandemic, including potential disruptions to operations, supply chain limitations, reduced customer demand, and a possible shift to lower-margin products - The COVID-19 pandemic is a significant risk factor that could adversely affect business and results of operations through mandatory closures, work-from-home orders, and social distancing protocols[131](index=131&type=chunk) - Specific pandemic-related risks include limitations on suppliers, employee availability, carrier deliveries, and customers' ability to conduct business and make timely payments[132](index=132&type=chunk) - The pandemic could alter the sales mix towards lower-margin repair over replacement, value-oriented equipment, and see lower demand from new construction and commercial markets, reducing sales and gross margin[132](index=132&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Revolving Credit Increase and Joinder Agreement and Sarbanes-Oxley Act certifications from key executives - Exhibit **10.1** is the Revolving Credit Increase and Joinder Agreement, dated April 10, 2020[134](index=134&type=chunk) - Exhibits **31.1, 31.2, and 31.3** are the Sarbanes-Oxley Act Section 302 certifications from the Chief Executive Officer, Executive Vice President, and Chief Financial Officer, respectively[136](index=136&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2020 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 Miami, Florid ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the Fiscal Year Ended December 31, 2019 or 2665 South Bayshore Drive, Suite 901 Miami, FL 33133 (Address of principal executive offices, including zip code) (305) 714-4100 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: ☐ Transition Report Pursuant to ...

Revenue Growth - Revenues for Q3 2019 increased by $98.9 million, or 8%, with HVAC equipment sales (68% of total sales) rising by 8%[93] - Revenues for the nine months ended September 30, 2019 increased by $142.7 million, or 4%, with $85.6 million from new locations opened and acquired[101] - On a same-store basis, revenues increased by $44.4 million, or 3%, reflecting a 4% increase in sales of HVAC equipment[93] Profitability - Gross profit for Q3 2019 increased by $15.7 million, or 5%, but gross profit margin declined to 24.0% from 24.6% in Q3 2018[95] - Gross profit for the same period increased by $25.8 million, or 3%, while gross profit margin declined by 30 basis points to 24.2%[103] - Net income attributable to Watsco for Q3 2019 increased by $4.3 million, or 5%, driven by higher revenues and gross profit[100] - Net income attributable to Watsco increased by $5.3 million, or 3%, driven by higher revenues and gross profit, alongside a reduction in income taxes[108] Expenses - Selling, general and administrative expenses for Q3 2019 rose by $12.5 million, or 6%, but as a percentage of revenues decreased to 15.3% from 15.5% in Q3 2018[96] - Selling, general and administrative expenses rose by $24.0 million, or 4%, with expenses as a percentage of revenues remaining stable at 15.9%[104] Cash Flow and Working Capital - Cash flows provided by operating activities increased significantly to $197.5 million from $70.1 million, a change of $127.4 million[115] - Working capital increased to $1,148.5 million as of September 30, 2019, up from $1,084.2 million at December 31, 2018, due to higher accounts receivable and inventories[114] Acquisitions and Expansion - The company opened 14 new locations and acquired 26 locations in the 12 months ended September 30, 2019, bringing the total to 603 locations[92] - The company acquired the HVAC distribution business of Peirce-Phelps, Inc. in August 2019 and Dunphey & Associates Supply Co., Inc. in April 2019[90] - The company purchased an additional 20% ownership interest in Homans for $32.4 million, increasing total ownership to 100%[121] - On August 1, 2019, Carrier Enterprise I acquired assets of PPI for $85 million, with a net purchase price consisting of $10 million in cash and shares valued at $58.6 million[125] Financial Ratios and Tax - Interest expense, net for Q3 2019 increased by $0.4 million, or 37%, due to higher average outstanding borrowings[98] - The effective income tax rate decreased to 22.2% in Q3 2019 from 23.3% in Q3 2018, primarily due to the refinement of estimated global intangible low-taxed income[99] Dividends and Credit Facilities - Cash dividends paid per share increased to $4.80 for the nine months ended September 30, 2019, compared to $4.15 in the same period of 2018[128] - The company maintains a $500 million revolving credit agreement, with $169.3 million outstanding as of September 30, 2019[120] Joint Ventures - The company has a controlling interest in multiple joint ventures with Carrier Corporation, enhancing its market presence in the HVAC/R industry[83]

Revenue Growth - Revenues for Q2 2019 increased by $39.1 million, or 3%, with $22.8 million from new locations and acquisitions, and a same-store revenue increase of $19.9 million, or 1%[90] - For the first half of 2019, revenues increased by $43.8 million, or 2%, with a same-store revenue increase of $23.1 million, or 1%[98] Gross Profit and Margin - Gross profit for Q2 2019 increased by $7.2 million, or 2%, with a gross profit margin of 23.9%, down 20 basis points from 24.1% in Q2 2018[92] - Gross profit for the first half of 2019 increased by $10.1 million, or 2%, maintaining a gross profit margin of 24.4%[99] Expenses - Selling, general and administrative expenses for Q2 2019 rose by $10.0 million, or 5%, with expenses as a percentage of revenues increasing to 14.3% from 14.0% in Q2 2018[93] - Selling, general and administrative expenses for the first half of 2019 increased by $11.5 million, or 3%, with expenses as a percentage of revenues rising[100] - Selling, general and administrative expenses increased by $4.3 million, or 1%, compared to the same period in 2018, including $2.9 million for ongoing technology initiatives[1] Net Income - Net income attributable to Watsco for Q2 2019 increased by $0.2 million compared to Q2 2018, driven by higher revenues and gross profit, alongside a reduction in income taxes[97] - Net income attributable to Watsco for the first half of 2019 increased by $1.0 million, or 1%, compared to the same period in 2018, driven by higher revenues and gross profit[105] Income Taxes - The effective income tax rate for Q2 2019 was 21.7%, down from 23.8% in Q2 2018, primarily due to lower estimated foreign withholding taxes[96] - Income taxes decreased to $35.8 million for the first half of 2019, compared to $39.3 million for the same period in 2018, with effective income tax rates of 22.0% and 23.8% respectively[104] Cash Flow and Working Capital - Cash flows provided by operating activities for the first half of 2019 were $68.4 million, compared to $(19.3) million in 2018, an increase of $87.7 million[112] - Working capital increased to $1,114.6 million at June 30, 2019, from $1,084.2 million at December 31, 2018, reflecting higher accounts receivable and inventories[111] Acquisitions and Ownership - The company opened 11 new locations and acquired 7 locations in the six months ended June 30, 2019, bringing the total to 585 locations[89] - The company purchased an additional 20% ownership interest in Homans effective May 31, 2019, increasing its ownership to 100%[81] - The company acquired an additional 20% ownership interest in Homans for $32.4 million, increasing its ownership to 100%[118] - The company acquired assets of Peirce-Phelps, Inc. for $85.0 million, with consideration including $10.0 million in cash and shares valued at $58.6 million[122] Interest Expense - Interest expense, net for the first half of 2019 increased by $0.7 million, or 50%, primarily due to higher average outstanding borrowings and a higher effective interest rate[103] Dividends - Cash dividends paid were $3.20 per share during the first half of 2019, compared to $2.70 per share in 2018[124] Credit Facilities - The company maintained a $500.0 million revolving credit agreement, with $219.6 million outstanding as of June 30, 2019[116][117]