Key dates
1947: The company, Wagner Tool & Supply Corp., is founded in New YorkCompany history
Organization and development of the company
Watsco was organized in 1947 in New York, as a parts manufacturer, originally known as Wagner Tool & Supply Corp. Watsco, Inc. was incorporated in Florida on July 14, 1956 and went public in 1963. In 1968, Watsco was listed on the NYSE MKT LLC, formerly known as the American Stock Exchange. In 1969, Watsco merged with Sun Engineering, and began its acquisition strategy.A small player through the 1970s
After 1969, Watsco bought several small companies in different industries and scattered locations. Headquartered in Hialeah, Florida, an industrial area in greater Miami, the company operated principally in three industries in the 1970s: 1) the manufacture of climate control components for the heating, air conditioning, and refrigeration industry; 2) the manufacture of components for doors and windows in the building industry; and 3) the production and sale of professional hair care products for the beauty salon industry. In 1971, Watsco acquired Chicago-based Wabash Corp., and Kesco Products of New York. The company acquired Allin Manufacturing Company in 1973, a Chicago-based manufacturer of specialty air conditioning components called “sight glasses” (devices used to observe the clarity of refrigerants). In 1974, the company bought Mumma Tool & Die Company. In 1977, Watsco paid Clairol, Inc. approximately US$275,000 for its Sybil Ives Division, which included hair care products such as permanent waves, hair sprays, hair coloring, shampoos, and conditioners. Watsco's Professional Hair Care division, consisting of Sybil Ives and Winslow Manufacturing, Inc., was working until 1982. In a profile on Watsco in Florida Trend magazine (October 1992), the company's sales and earnings throughout the 1970s were characterized as “unspectacular.” The company in many ways fits the model of the corporate conglomerate, that dominated that era, with operations spread across several market segments—hair care and air conditioning could hardly be more different. The company came under the control of a new leader in December 1972, Albert H. Nahmad, when he acquired a controlling interest in the company from its founder, William Wagner. He became chairman, president, and chief executive officer, and eventually took the company in a new direction. Nahmad had a background both in business and in engineering. He earned a Bachelor of Science degree in Mechanical Engineering from the University of New Mexico, and a Master of Science degree in Industrial Administration from Purdue University. He then worked for several years for the conglomerate W.R. Grace & Co., and for the accounting firm Arthur Young & Co. (now known as Ernst & Young). For several years, Nahmad's leadership at Watsco did not create lasting positive change: the company continued merging smaller manufacturing firms, including Del Mar Engineering Co. in 1977, Rho Sigma, Inc. in 1979 and Cam-Stat, Inc. of Los Angeles in 1981. In 1982 the company sold its Professional Hair Care division for US$540,000, nearly twice what it had paid for the Clairol division five years earlier. In addition, Nahmad made several moves to strengthen Watsco's operations. In 1982, Watsco's Los Angeles-based subsidiaries Del Mar Engineering and Rho Sigma moved to Hialeah, where they became part of the Production Enterprises division. In 1984, another California subsidiary, Cam-Stat, also moved to Hialeah, so that Watsco's operations were not so far-flung. The company also made a significant investment in 1982, buying an approximate 8.5% interest in Florida Commercial Banks, Inc., a bank holding company, for approximately US$3 million. Two years later, Watsco sold its interest in the bank for approximately US$8.6 million.Beginning to move in the 1980s
By the mid-1980s, Watsco's revenues had grown to approximately US$14 million. Watsco's air conditioning business was successfully developing. The U.S. Sun Belt had seen a boom in housing in the 1970s as many people migrated south, and Watsco continued to thrive, even as the boom flattened, because it sold replacement parts. Air conditioners, used almost year-round in the Sun Belt, usually wore out within 8–10 years, so the replacement cycle was in full swing in the 1980s even as new home construction slowed. By 1986, Nahmad was anxious to expand Watsco, which had considerable cash to invest. Nahmad made it known that he was looking for acquisitions, and even took out an advertisement in '' The Wall Street Journal'' asking people with companies to sell to contact him. Then Watsco took an unexpected step. Its first major acquisition of the mid-1980s was not related to its air conditioning business any more than hair care had been. In May 1988, Watsco acquired a temporary help and permanent placement services firm called Dunhill Personnel System, Inc. Dunhill had revenue of roughly US$21 million annually, and personnel services was expected to be a high growth business. Nahmad first announced that he would spin off the division for a profit within a few years, but Dunhill continued to be a part of Watsco through 2007 when it was sold to ATS Group LLC. In 1988, Watsco revenues reached US$22 million.Entry into HVAC distribution
The real key to Watsco's growth, and the foundation that would be built upon thereafter, came in 1989 when Watsco invested in an air conditioning distribution business. In 1989, Watsco bought 80% of the largest distributor of central air conditioning equipment under the Rheem brand nameSteady growth in the 1990s
A long-term replacement cycle was underway in the Sun Belt for central air conditioners following the housing boom in the Sun Belt during the 1970s. Watsco also grew by expanding into new, high-growth markets. It opened a location in Las Vegas in 1991, anticipating vigorous population growth there. The company also benefited from the rebuilding effort in the wake ofImproved operating efficiencies and continued growth in the 2000s
In 2000, the company entered another mode, concentrating on improving operating efficiency and enhancing profitability in its existing locations instead of focusing on growth through acquisitions. It announced that it would eliminate some product lines that were not selling well or that had poor profit margins. Watsco also implemented several initiatives including the closure of certain underperforming locations (25 locations closed in 2000 and 7 closed in 2001) and the integration of operating subsidiaries, which resulted in a more simplified operating structure. The company looked for other ways to cut costs too. It restructured the business it had bought from Kaufman Supply, which sold heating and cooling to mobile homes and other manufactured housing. Watsco also invested in new technology in the early 2000s by introducing ACDoctor.com, a consumer-friendly website that provides consumers a resource for heating and air conditioning, including information on energy efficiency, product comparisons and tax and utility credits, as well as a way to find a licensed HVAC contractor to service their repair and replacement needs. Watsco reported sales of US$1.3 billion in 2000, up slightly from the previous year. Revenues for 2001 shrank slightly yet Watsco still saw opportunities for future growth in the HVAC/R distribution market. Company analysts perceived the HVAC/R distribution industry as undercapitalized and fragmented, suggesting there was still a place for a well-heeled consolidator. Watsco continued its acquisition strategy in the 2000s acquiring a number of other businesses including 52 locations from a former competitor, Pameco, in 2003. It also acquired Goodman Manufacturing's largest distributor, East Coast Metal Distributors, Inc., in 2005 with 27 locations in the Southeast. East Coast had been owned by the same family for more than 50 years. Watsco then acquired Houston-based ACR Group, Inc. in 2007, a public company with 54 locations throughout the Sun Belt and annual revenues of approximately US$240 million. Despite the economic slowdown that began in 2008, Watsco completed its largest acquisition to date with the formation of a joint venture with Carrier in the second half of 2009.Joint ventures with Carrier Global Corporation
In July 2009, Watsco formed a joint venture (Carrier Enterprise I) with Carrier to distribute Carrier products throughout the U.S. Sun Belt, Latin America and the Caribbean. Carrier contributed to Carrier Enterprise 95 locations in the U.S. Sunbelt and Puerto Rico and Carrier's export division located in Miami, Florida, and Watsco contributed 15 locations that distributed Carrier products. Watsco purchased a 60% controlling interest in the joint venture for US$181 million with options to purchase up to an additional 20% interest from Carrier (10% beginning in July 2012 and an additional 10% in July 2014). This represented a transformational event in Watsco's history. The transaction doubled Watsco's already market-leading position and expanded its product lines and brands. The company was also able to expand its presence in the U.S. Sun Belt, where its products are of critical importance. In particular, Carrier Enterprise added product depth to Watsco's markets with premium level residential products, commercial products and the latest energy-efficient technology. Likewise, Carrier Enterprise locations were provided the opportunity to sell additional parts, supplies and other complementary accessories through its existing operating structure, leveraging existing customer relationships and costs. Carrier Enterprise is structured similar to Watsco's other acquisitions, with a decentralized management structure that keeps the existing management team in place; a cornerstone of Watsco's operating philosophy. The Carrier Enterprise joint venture resulted in an expansion of Watsco's revenues by approximately US$1.3 billion in 2010. “For its part, Carrier found a powerful new partner with extensive distribution expertise that would expand sales of its product lines.” Effective July 2, 2012, Watsco exercised their first option to acquire an additional 10% ownership interest in Carrier Enterprise I, which increased the company's ownership interest to 70%. On July 1, 2014, Watsco exercised their last remaining option to acquire an additional 10% ownership interest in Carrier Enterprise I, which increased the company's ownership interest to 80%. The export division, Carrier InterAmerica Corporation, redomesticated from the U.S. Virgin Islands to Delaware effective December 31, 2019, following which Carrier InterAmerica Corporation became a separate operating entity in which Watsco has an 80% controlling interest and Carrier has a 20% non-controlling interest. On August 1, 2019, Carrier Enterprise I acquired substantially all of the HVAC assets and assumed certain of the liabilities of Peirce-Phelps, Inc., an HVAC distributor operating from 19 locations in Pennsylvania, New Jersey, and Delaware. In April 2011, Watsco formed a second joint venture with Carrier, Carrier Enterprise II, to distribute Carrier products throughout the Northeast U.S. in largely new markets for the company. In July 2011, the company added Carrier's distribution operations in Mexico to the second joint venture. In November 2016, Watsco purchased an additional 10% ownership interest in Carrier Enterprise II, and, on February 13, 2017, again purchased an additional 10% ownership interest in Carrier Enterprise II, which together increased their controlling interest to 80%. Effective May 31, 2019, Watsco purchased an additional 20% ownership interest in Homans Associates II LLC (“Homans”) from Carrier Enterprise II, following which Watsco owned 100% of Homans. Homans previously operated as a division of Carrier Enterprise II and now operates as one of Watsco's stand-alone, wholly owned subsidiaries. In April 2012, Watsco formed a third joint venture, Carrier Enterprise III, with UTC Canada Corporation, an affiliate of Carrier, to distribute Carrier products from 35 locations throughout all of the provinces and territories in Canada. Watsco has a 60% controlling interest in this joint venture and UTC Canada has a 40% noncontrolling interest. In April 2021, Watsco acquired certain assets and assumed certain liabilities comprising the HVAC distribution business of Temperature Equipment Corporation, an HVAC distributor operating from 28 locations in Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri and Wisconsin. The Company formed a new, stand-alone joint venture with Carrier, TEC Distribution LLC (“TEC”), that operates this business. Watsco has an 80% controlling interest in TEC, and Carrier has a 20% non-controlling interest. Combined, the joint ventures with Carrier represented 56% of Watsco's revenues for 2021.Growth of distribution operations
Residential HVAC distribution industry
The HVAC/R distribution industry is highly fragmented with approximately 6,700 distribution companies. The industry in the U.S. and Canada is well-established, having had its primary period of growth during the post-World War II era with the advent of affordable central air conditioning and heating systems for both residential and commercial applications. The advent of HVAC/R products in Latin America and theAcquisition strategy
The company focuses on acquiring businesses that either complement its current presence in existing markets or establish a presence in new geographic markets. Since 1989, Watsco has acquired 66 HVAC/R distribution businesses, some of which operate as primary operating subsidiaries. The other smaller acquired distributors have been integrated into or are under the management of the primary operating subsidiaries.Products
The products the company distributes consist of: (i) equipment, including residential ducted and ductless air conditioners ranging from 1 to 5 tons, gas, electric, and oil furnaces ranging from 50,000 to 150,000 BTUs, commercial air conditioning and heating equipment and systems ranging from 1-1/2 to 25 tons and other specialized equipment, (ii) parts, including replacement compressors, evaporator coils, motors and other component parts, (iii) supplies, including thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tape, adhesives and other ancillary supplies, and (iv) plumbing and bathroom remodeling supplies in a limited number of stores. The refrigeration products Watsco distributes include condensing units, compressors, evaporators, valves, refrigerant, walk-in coolers and ice machines for industrial and commercial applications.Distribution and sales
The largest market Watsco serves is the U.S., in which the most significant markets for HVAC/R products are in theBusiness units
''Baker Distributing Company''
Founded in 1945 in Jacksonville, Florida, Baker provides HVAC, refrigeration, food service equipment, and parts and supplies for residential, commercial and marine applications from more than 200 locations in 24 states.''Carrier Enterprise''
Carrier Enterprise sells a variety of products manufactured by Carrier from more than 160 locations in 23 states, Puerto Rico and on an export basis to the Caribbean and portions of Latin America.''Carrier Enterprise Mexico''
Carrier Enterprise Mexico distributes Carrier's complete product line of HVAC equipment and commercial refrigeration products and supplies servicing both the residential and applied commercial markets from more than 10 locations throughout all of Mexico.''Carrier Enterprise Canada''
Carrier Enterprise Canada distributes Carrier, Bryant and Payne branded residential, light-commercial and applied commercial HVAC products from more than 35 locations throughout all of the territories and provinces in Canada.''East Coast Metal Distributors''
Established in 1954 in Durham, North Carolina, East Coast distributes Amana, Goodman, Daikin and Gree HVAC products from more than 45 locations in 9 states.''Gemaire Distributors''
Founded in 1969 in Florida, Gemaire provides Rheem, American Standard and Mitsubishi HVAC products from more than 110 locations in 13 states.''Homans Associates''
Homans Associates operates from 25 locations in Massachusetts, New York, Maine, New Jersey, Connecticut, New Hampshire, Rhode Island and Vermont.''N&S Supply''
Founded in 1946, N&S Supply operates seven locations in the Hudson Valley of New York and Connecticut.''Peirce-Phelps''
Founded in 1926 in Philadelphia, Pennsylvania, Peirce-Phelps has 19 locations in Pennsylvania, New Jersey and Delaware and their product offering includes residential and commercial HVAC equipment made by Carrier.''TEC Distribution''
Founded in 1935 in Chicago, Illinois, TEC has 28 locations in Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri and Wisconsin and their product offering includes residential, light-commercial and applied HVAC systems made by Carrier.References
{{Authority control Companies listed on the New York Stock Exchange Companies based in Miami