The distributor of air conditioning, heating, and refrigeration
) has announced refinancing of its existing unsecured revolving
credit agreement. The amended deal now offers borrowings worth up
to $600 million against $500 million under the prior agreement.
The amended credit facility will now mature on Jul 1, 2019, instead
of Jul 1, 2018, while other terms under the facility remain
unchanged. JPMorgan Chase Bank - a unit of
JPMorgan Chase & Co.
) - served as the administrative agent of the offering. The credit
facility was also co-led by
Bank of America
) and Wells Fargo Bank - a subsidiary of
Wells Fargo & Company
), as syndication agents. U.S. Bank National Association acted as
The amendment will provide low cost debt capital which is in line
with Watsco's growth strategy. The company will use the proceeds
under this facility for working capital, acquisitions, dividends
and other general corporate purposes.
On Jul 2013, Watsco entered into refinancing of unsecured revolving
credit agreement worth $500 million. The amendment includes
improvement of covenant flexibility and extension of maturity date.
Watsco's adjusted earnings improved 23% year over year to a record
48 cents per share in first-quarter 2014 aided by higher sales,
stronger selling margins and improved operating efficiencies. Total
revenue also increased 7% year over year to a record $763 million.
Watsco recorded cash and cash equivalents of $19.5 million as of
Mar 31, 2014, which remained flat compared with Dec 31, 2013. Cash
flow from operating activities was $24.9 million in the reported
quarter, compared with cash usage of $17.5 million in the
Management outlined its long-term plans to increase revenues to
above $10 billion and margins to above 10%. Watsco will continue to
benefit from demand in the replacement market as old units get
replaced by more energy-efficient units in the coming years.
Watsco believes that its operating cash flows, cash on hand and
funds available for borrowing will be sufficient to meet liquidity
needs in the future. Though, capital markets and credit markets are
also important sources which help to meet financial commitments and
short-term liquidity needs of Watsco.
Thus, disruptions in these markets could adversely affect the
company as it will result in increased borrowing costs and reduced
borrowing capacity. Moreover, the volatility in housing starts and
lack of potential acquisitions remain concerns for Watsco.
Watsco currently has a Zacks Rank #2 (Buy).
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