Forward-Looking Statements
This Quarterly Report on Form
10-Q
contains or incorporates by reference statements that are not historical in
nature and that are intended to be,
and
are hereby identified as, "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Statements which are not historical in
nature, including the words "anticipate," "estimate," "could," "should," "may,"
"plan," "seek," "expect," "believe," "intend," "target," "will," "project,"
"focused," "outlook," "goal," "designed," and variations of these words and
negatives thereof and similar expressions are intended to identify
forward-looking statements, including statements regarding, among others,
(i) economic conditions, (ii) business and acquisition strategies,
(iii) potential acquisitions and/or joint ventures and investments in
unconsolidated entities, (iv) financing plans, and (v) industry, demographic and
other trends affecting our financial condition or results of operations. These
forward-looking statements are based on management's current expectations, are
not guarantees of future performance and are subject to a number of risks,
uncertainties, and changes in circumstances, certain of which are beyond our
control. Actual results could differ materially from these forward-looking
statements as a result of several factors, including, but not limited to:

     •    general economic conditions, both in the United States and in the
          international markets we serve;



  •   competitive factors within the HVAC/R industry;



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  •   effects of supplier concentration;



  •   fluctuations in certain commodity costs;



  •   consumer spending;



  •   consumer debt levels;



  •   the continued impact of the
      COVID-19
      pandemic;



  •   new housing starts and completions;



  •   capital spending in the commercial construction market;



  •   access to liquidity needed for operations;



  •   seasonal nature of product sales;



  •   weather patterns and conditions;



  •   insurance coverage risks;

• federal, state, and local regulations impacting our industry and products;





  •   prevailing interest rates;



  •   foreign currency exchange rate fluctuations;



  •   international risk;



  •   cybersecurity risk; and



  •   the continued viability of our business strategy.


We believe these forward-looking statements are reasonable; however, you should
not place undue reliance on any forward-looking statements, which are based on
current expectations. For additional information regarding important factors
that may affect our operations and could cause actual results to vary materially
from those anticipated in the forward-looking statements, please see the
discussion below under Impact of the
COVID-19
Pandemic, Item 1A "Risk Factors" contained in Part II of this Quarterly Report
on this Form
10-Q
and Item 1A "Risk Factors" of our Annual Report on Form
10-K
for the year ended December 31, 2019, as well as the other documents and reports
that we file with the SEC. Forward-looking statements speak only as of the date
the statements were made. We assume no obligation to update forward-looking
information or the discussion of such risks and uncertainties to reflect actual
results, changes in assumptions, or changes in other factors affecting
forward-looking information, except as required by applicable law. We qualify
any and all of our forward-looking statements by these cautionary factors.
The following information should be read in conjunction with the condensed
consolidated unaudited financial statements, including the notes thereto,
included under Part I, Item 1 of this Quarterly Report on Form
10-Q.
In addition, reference should be made to our audited consolidated financial
statements and notes thereto and the related Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form
10-K
for the year ended December 31, 2019.
Company Overview
Watsco, Inc. was incorporated in Florida in 1956, and, together with its
subsidiaries (collectively, "Watsco," or "we," "us," or "our") is the largest
distributor of air conditioning, heating, and refrigeration equipment, and
related parts and supplies ("HVAC/R") in the HVAC/R distribution industry in
North America. At September 30, 2020, we operated from 603 locations in 38 U.S.
States, Canada, Mexico, and Puerto Rico with additional market coverage on an
export basis to portions of Latin America and the Caribbean.
Revenues primarily consist of sales of air conditioning, heating, and
refrigeration equipment, and related parts and supplies. Selling, general and
administrative expenses primarily consist of selling expenses, the largest
components of which are salaries, commissions, and marketing expenses that are
variable and correlate to changes in sales. Other significant selling, general
and administrative expenses relate to the operation of warehouse facilities,
including a fleet of trucks and forklifts, and facility rent, a majority of
which we operate under
non-cancelable
operating leases.
Sales of residential central air conditioners, heating equipment, and parts and
supplies are seasonal. Furthermore, profitability can be impacted favorably or
unfavorably based on weather patterns, particularly during the Summer and Winter
selling seasons. Demand related to the residential central air conditioning
replacement market is typically highest in the second and third quarters, and
demand for heating equipment is usually highest in the fourth quarter. Demand
related to the new construction sectors throughout most of the markets we serve
tends to be fairly evenly distributed throughout the year and depends largely on
housing completions and related weather and economic conditions.

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Impact of the
COVID-19
Pandemic
A novel strain of coronavirus,
COVID-19,
surfaced in December 2019 and has spread around the world, including to the
United States. In March 2020, the World Health Organization declared
COVID-19
a pandemic. For certain periods of the pandemic thus far, some U.S. states had
been under executive orders requiring that all workers remain at home unless
their work was critical, essential, or life-sustaining. We believe that, based
on the various standards published to date, the work our employees perform is
essential, and as such we continued to operate with certain modifications during
these periods. A few of our locations experienced short-term closures for
COVID-19
employee health concerns or operated at a diminished capacity, which negatively
impacted business during the second quarter of 2020. At the end of the second
quarter of 2020, many of the markets in which we operate had begun to ease
COVID-19
restrictions that had been in place earlier in the period. However, during the
third quarter of 2020, viral infections began to increase, resulting in the
resumption of restrictions in certain markets in which we operate. As of the
date of this filing, all of our locations are operating, and we have instituted
contactless sales and servicing capabilities at many of our locations designed
to safeguard our employees and customers. In light of the continued high rate of
viral infections that exists as of the date of this filing, there remains
significant uncertainty concerning the magnitude of the impact and duration of
the
COVID-19
pandemic.
In response to the pandemic, we have implemented plans intended to preserve
adequate liquidity and ensure that our business can continue to operate during
this uncertain time. In addition, we have taken actions to reduce costs,
including reductions in compensation, rent abatement, changes to vendor terms
and other austerity measures to curtail discretionary spending in light of the
circumstances. Other costs, including hourly wages, overtime, sales commissions,
temporary labor, performance-based compensation, advertising, and delivery
expenses are expected to vary in correlation with our overall business activity.
If and to the extent restrictions ease and normal economic conditions and
operations resume, the various austerity measures to curtail discretionary
spending may ease.
With respect to liquidity, we believe that our balance sheet remains strong
with $92.6 million in cash, $0.7 million in borrowings drawn from our
$560.0 million credit facility and $1.8 billion of shareholders' equity as of
September 30, 2020. Our philosophy toward quarterly dividends remains currently
unchanged, most recently at $1.775 per share. Future dividends and/or changes in
dividend rates are at the sole discretion of the Board of Directors and depend
upon factors including, but not limited to, cash flow generated by operations,
profitability, financial condition, cash requirements, and future prospects.
During these uncertain times, we believe that our scale, our current low
debt-level, conservative leverage ratio, and our historical ability to generate
cash flow positions us well as we work through the impacts of the
COVID-19
pandemic.
The full impact of the
COVID-19
pandemic on our financial condition and results of operations will depend on
future developments, such as the ultimate duration and scope of the pandemic,
its impact on our employees, customers, and suppliers, how quickly normal
economic conditions and operations resume and whether the pandemic exacerbates
other risks disclosed in Item 1A "Risk Factors" of our Annual Report on Form
10-K
for the year ended December 31, 2019. We will continue to actively monitor the
situation and may take further actions that alter our business operations as may
be required by federal, state or local authorities or that we determine are in
the best interests of our employees, customers, suppliers and shareholders.
Joint Ventures with Carrier Global Corporation
On April 3, 2020, United Technologies Corporation completed the
spin-off
of Carrier Corporation into an independent, publicly traded company, named
Carrier Global Corporation ("Carrier").
In 2009, we formed a joint venture with Carrier, which we refer 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 we contributed 15 locations that distributed Carrier products. We have an
80% controlling interest in Carrier Enterprise I, 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.
("PPI"), an HVAC distributor operating from 19 locations in Pennsylvania, New
Jersey, and Delaware.
In 2011, we formed a second joint venture with Carrier, in which Carrier
contributed 28 of its company-owned locations in the Northeast U.S., and we
contributed 14 locations in the Northeast U.S., and we then purchased Carrier's
distribution operations in Mexico, which included seven locations. Collectively,
the Northeast locations and the Mexico operations are referred to as Carrier
Enterprise II. We have an 80% controlling interest in Carrier Enterprise II, and
Carrier has a 20%
non-controlling
interest. Effective May 31, 2019, we purchased an additional 20% ownership
interest in Homans Associates II LLC ("Homans") from Carrier Enterprise II,
following which we owned 100% of Homans. Homans previously operated as a
division of Carrier Enterprise II and now operates as one of our stand-alone,
wholly owned subsidiaries.
In 2012, we formed a third joint venture, which we refer to as Carrier
Enterprise III, with Carrier. Carrier contributed 35 of its company-owned
locations in Canada to Carrier Enterprise III. We have a 60% controlling
interest in Carrier Enterprise III, and Carrier has a 40%
non-controlling
interest.

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Critical Accounting Policies
Management's discussion and analysis of financial condition and results of
operations is based upon the condensed consolidated unaudited financial
statements included in this Quarterly Report on Form
10-Q,
which have been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these condensed consolidated unaudited financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the condensed consolidated unaudited financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results may differ from these estimates under different
assumptions or conditions. At least quarterly, management reevaluates its
judgments and estimates, which are based on historical experience, current
trends, and various other assumptions that are believed to be reasonable under
the circumstances.
Our critical accounting policies are included in our 2019 Annual Report on Form
10-K,
as filed with the SEC on February 28, 2020. We believe that there have been no
significant changes during the quarter ended September 30, 2020 to the critical
accounting policies disclosed in our Annual Report on Form
10-K
for the year ended December 31, 2019.
New Accounting Standards
Refer to Note 1 to our condensed consolidated unaudited financial statements
included in this Quarterly Report on Form
10-Q
for a discussion of recently adopted accounting standards.
Results of Operations
The following table summarizes information derived from our condensed
consolidated unaudited statements of income, expressed as a percentage of
revenues, for the quarters and nine months ended September 30, 2020 and 2019:

                                                      Quarter Ended              Nine Months Ended
                                                      September 30,                September 30,
                                                   2020          2019           2020           2019
Revenues                                            100.0 %       100.0 %         100.0 %       100.0 %
Cost of sales                                        75.7          76.0            75.9          75.8

Gross profit                                         24.3          24.0            24.1          24.2
Selling, general and administrative expenses         14.4          15.3            15.9          15.9
Other income                                          0.3           0.3             0.2           0.2

Operating income                                     10.2           9.0             8.5           8.5
Interest expense, net                                 0.0           0.1             0.0           0.1

Income before income taxes                           10.2           8.9             8.5           8.4
Income taxes                                          2.0           1.7             1.6           1.6

Net income                                            8.2           7.1             6.8           6.8
Less: net income attributable to
non-controlling
interest                                              1.3           1.2             1.1           1.2

Net income attributable to Watsco, Inc.               6.9 %         6.0 %

5.7 % 5.6 %





Note: Due to rounding, percentages may not add up to 100.
The following narratives reflect our acquisition of the HVAC distribution
businesses of N&S Supply of Fishkill, Inc. ("N&S") in November 2019, PPI in
August 2019, Dunphey & Associates Supply Co., Inc. ("DASCO") in April 2019, as
well as the purchase of an additional 1.8% ownership interest in Russell Sigler,
Inc. ("RSI") in April 2019, and the purchase of an additional 20% ownership
interest in Homans effective May 31, 2019. We did not acquire any businesses
during the quarter or nine months ended September 30, 2020.
In the following narratives, computations and other information referring to
"same-store basis" exclude the effects of locations closed, acquired, or
locations opened, in each case during the immediately preceding 12 months,
unless such locations are within close geographical proximity to existing
locations. At September 30, 2020 and 2019, two and 10 locations, respectively,
that we opened were near existing locations and were therefore included in
"same-store basis" information.

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The table below summarizes the changes in our locations for the 12 months ended
September 30, 2020:

                      Number of
                      Locations
September 30, 2019           603
Acquired                       7
Closed                        (4 )

December 31, 2019            606
Opened                         3
Closed                        (6 )

September 30, 2020           603



Third Quarter of 2020 Compared to Third Quarter of 2019
Revenues
Revenues for the third quarter of 2020 increased $141.8 million, or 10%,
including $38.1 million attributable to new locations acquired and $1.3 million
from other locations opened during the preceding 12 months, offset by
$2.4 million from locations closed. Sales of HVAC equipment (70% of sales)
increased 12%, sales of other HVAC products (27% of sales) increased 4% and
sales of commercial refrigeration products (3% of sales) remained flat. On a
same-store basis, revenues increased $104.8 million, or 8%, as compared to the
same period in 2019, reflecting a 10% increase in sales of HVAC equipment (70%
of sales), which included a 17% increase of residential HVAC equipment (19%
increase in U.S. markets and a 3% increase in international markets) and a 17%
decrease in sales of commercial HVAC equipment, a 2% increase in sales of other
HVAC products (27% of sales) and flat sales of commercial refrigeration products
(3% of sales). The increase in same-store revenues of HVAC equipment was
primarily due to strong demand for the replacement of residential HVAC equipment
and an increased mix of high-efficiency air conditioning and heating systems,
which sell at higher unit prices, partially offset by lower sales of commercial
HVAC equipment due to the pandemic-related market disruption. The increase in
residential HVAC equipment was composed of an 18% increase in volume and a 1%
increase in the average selling price.
Gross Profit
Gross profit for the third quarter of 2020 increased $39.1 million, or 12%,
primarily as a result of increased revenues. Gross profit margin for the quarter
ended September 30, 2020 improved 30 basis-points to 24.3% versus 24.0% for the
same period in 2019, primarily due to higher realized gross margins for
residential HVAC equipment.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the third quarter of 2020
increased $8.1 million, or 4%, primarily due to increased revenues. Selling,
general and administrative expenses as a percent of revenues for the third
quarter of 2020 decreased to 14.4% versus 15.3% for the same period in 2019. On
a same-store basis, selling, general and administrative expenses were flat as
compared to the same period in 2019 primarily due to actions taken to improve
operating efficiency and to reduce costs and curtail discretionary spending in
response to the pandemic. Selling, general and administrative expenses included
$0.2 million of additional costs for 2020 in excess of 2019 for ongoing
technology initiatives, including initiatives designed to ameliorate the impact
of, or otherwise address, the pandemic.
Other Income
Other income of $4.1 million and $3.5 million for the third quarters of 2020 and
2019, respectively, represented our share of the net income of RSI.
Interest Expense, Net
Interest expense, net for the third quarter of 2020 decreased $1.3 million, or
92%, primarily as a result of a decrease in average outstanding borrowings and a
lower effective interest rate for the 2020 period, in each case under our
revolving credit facility, as compared to the same period in 2019.
Income Taxes
Income taxes increased to $30.5 million for the third quarter of 2020, as
compared to $24.2 million for the third quarter of 2019 and represent a
composite of the income taxes attributable to our wholly owned operations and
income taxes attributable to the Carrier

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joint ventures, which are primarily taxed as partnerships for income tax
purposes; therefore, Carrier is responsible for its proportionate share of
income taxes attributable to its share of earnings from these joint ventures.
The effective income tax rate attributable to us was consistent at 22.2% for
both quarters ended September 30, 2020 and 2019.
Income Attributable to Watsco, Inc.
Net income attributable to Watsco for the quarter ended September 30, 2020
increased $23.0 million, or 28%, compared to the same period in 2019. The
increase was primarily driven by higher revenues and gross profit, and reduced
selling, general and administrative expenses as a percentage of revenues.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30,
2019
Revenues
Revenues for the nine months ended September 30, 2020 increased $202.2 million,
or 5%, including $165.7 million attributable to new locations acquired and
$3.6 million from other locations opened during the preceding 12 months, offset
by $10.2 million from locations closed. Sales of HVAC equipment (70% of sales)
increased 7%, sales of other HVAC products (27% of sales) increased 2% and sales
of commercial refrigeration products (3% of sales) decreased 5%. On a same-store
basis, revenues increased $43.1 million, or 1%, as compared to the same period
in 2019, reflecting a 3% increase in sales of HVAC equipment (69% of sales),
which included a 7% increase in residential HVAC equipment (8% increase in U.S.
markets and a 4% decrease in international markets) and a 15% decrease in sales
of commercial HVAC equipment, a 2% decrease in sales of other HVAC products (27%
of sales) and a 5% decrease in commercial refrigeration products (4% of sales).
The increase in same-store revenues of HVAC equipment was primarily due to
demand for the replacement of residential HVAC equipment, partially offset by
lower sales of commercial HVAC equipment due to the pandemic-related market
disruption. The increase in residential HVAC equipment was composed of an 8%
increase in volume while the average selling price remained flat.
Gross Profit
Gross profit for the nine months ended September 30, 2020 increased
$44.1 million, or 5%, primarily as a result of increased revenues. Gross profit
margin for the nine months ended September 30, 2020 declined 10 basis-points to
24.1% versus 24.2% for the same period in 2019, primarily due to a shift in
sales mix toward HVAC equipment, which generates a lower gross profit margin
than
non-equipment
products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended
September 30, 2020 increased $29.0 million, or 5%, primarily due to increased
revenues. Selling, general and administrative expenses as a percentage of
revenues remained consistent at 15.9% for the nine months ended September 30,
2020 as compared to the same period in 2019. On a same-store basis, selling,
general and administrative expenses decreased 1% as compared to the same period
in 2019 primarily due to actions taken to improve operating efficiencies and to
reduce costs and curtail discretionary spending in response to the pandemic.
Selling, general and administrative expenses included $1.8 million of additional
costs for 2020 in excess of 2019 for ongoing technology initiatives, including
initiatives designed to ameliorate the impact of, or otherwise address, the
pandemic.
Other Income
Other income of $9.2 million and $7.9 million for the nine months ended
September 30, 2020 and 2019, respectively, represented our share of the net
income of RSI.
Interest Expense, Net
Interest expense, net for the nine months ended September 30, 2020 decreased
$2.2 million, or 65%, primarily as a result of a decrease in average outstanding
borrowings and a lower effective interest rate for the 2020 period, in each case
under our revolving credit facility, as compared to the same period in 2019.
Income Taxes
Income taxes increased to $63.4 million for the nine months ended September 30,
2020, as compared to $60.1 million for the nine months ended September 30, 2019
and represent a composite of the income taxes attributable to our wholly owned
operations and income taxes attributable to the Carrier joint ventures, which
are primarily taxed as partnerships for income tax purposes; therefore, Carrier
is responsible for its proportionate share of income taxes attributable to its
share of earnings from these joint ventures. The effective income tax rates
attributable to us were 22.0% and 22.1% for the nine months ended September 30,
2020 and 2019, respectively. The decrease was primarily due to higher
share-based payment tax benefits in 2020 as compared to the same period in 2019.

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Net Income Attributable to Watsco, Inc.
Net income attributable to Watsco for the nine months ended September 30, 2020
increased $14.9 million, or 7%, compared to the same period in 2019. The
increase was primarily driven by higher revenues and gross profit, and lower
interest expense, net.
Liquidity and Capital Resources
We assess our liquidity in terms of our ability to generate cash to execute our
business strategy and fund operating and investing activities, taking into
consideration the seasonal demand for HVAC/R products, which peaks in the months
of May through August. Significant factors that could affect our liquidity
include the following:

• cash needed to fund our business (primarily working capital requirements);





  •   borrowing capacity under our revolving credit facility;



  •   the ability to attract long-term capital with satisfactory terms;



        •    acquisitions, including joint ventures and investments in
             unconsolidated entities;



  •   dividend payments;



  •   capital expenditures; and



  •   the timing and extent of common stock repurchases.


Sources and Uses of Cash
We rely on cash flows from operations and borrowing capacity under our revolving
credit agreement to fund seasonal working capital needs and for other general
corporate purposes, including dividend payments (if and as declared by our Board
of Directors), capital expenditures, business acquisitions, and development of
our long-term operating and technology strategies. Additionally, we may also
generate cash through the issuance and sale of our Common stock.
As of September 30, 2020, we had $92.6 million of cash and cash equivalents, of
which $64.7 million was held by foreign subsidiaries. The repatriation of cash
balances from our foreign subsidiaries could have adverse tax impacts or be
subject to capital controls; however, these balances are generally available to
fund the ordinary business operations of our foreign subsidiaries without legal
restrictions.
We believe that our operating cash flows, cash on hand, and funds available for
borrowing under our revolving credit agreement are sufficient to meet our
liquidity needs in the foreseeable future. However, there can be no assurance
that our current sources of available funds will be sufficient to meet our cash
requirements.
Our access to funds under our revolving credit agreement depends on the ability
of the syndicate banks to meet their respective funding commitments. Disruptions
in the credit and capital markets could adversely affect our ability to draw on
our revolving credit agreement and may also adversely affect the determination
of interest rates, particularly rates based on LIBOR, which is one of the base
rates under our revolving credit agreement. LIBOR is the subject of recent
proposals for reform that currently provide for the
phase-out
of LIBOR by 2021. The consequences of these developments with respect to LIBOR
cannot be entirely predicted but could result in an increase in the cost of our
debt, as it is currently anticipated that lenders will replace LIBOR with the
Secured Overnight Financing Rate ("SOFR"), which may exceed what would have been
the comparable LIBOR rate. We believe that the transition from LIBOR will not
materially impact our financial position or results of operations. Additionally,
disruptions in the credit and capital markets could also result in increased
borrowing costs and/or reduced borrowing capacity under our revolving credit
agreement.
Working Capital
Working capital decreased to $1,034.6 million at September 30, 2020 from
$1,085.0 million at December 31, 2019, reflecting lower levels of inventory from
inventory optimization activities and due to pandemic-related supply chain
disruptions, resulting in reduced purchases in 2020 versus 2019, higher levels
of accounts payable and accrued expenses, which were offset by higher levels of
accounts receivable due to the seasonality of our business.
Cash Flows
The following table summarizes our cash flow activity for the nine months ended
September 30, 2020 and 2019 (in millions):

                                                2020          2019

Change

Cash flows provided by operating activities $ 372.8 $ 197.5 $

175.3

Cash flows used in investing activities $ (11.5 ) $ (65.0 ) $

53.5

Cash flows used in financing activities $ (342.8 ) $ (155.7 ) $ (187.1 )




The individual items contributing to cash flow changes for the periods presented
are detailed in the condensed consolidated unaudited statements of cash flows
contained in this Quarterly Report on Form
10-Q.

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Operating Activities
The increase in net cash provided by operating activities was primarily due to a
reduction in the level of inventories and the comparative timing of payments for
accrued expenses and other current liabilities in 2020 versus 2019.
Investing Activities
Net cash used in investing activities was lower in 2020 due to cash
consideration paid for acquisitions and the purchase of an additional ownership
interest in RSI in 2019.
Financing Activities
The increase in net cash used in financing activities was primarily attributable
to net repayments under our revolving credit agreement and an increase in
dividends paid in 2020.
Revolving Credit Agreement
We maintain an unsecured, syndicated multicurrency revolving credit agreement,
which we use to fund seasonal working capital needs and for other general
corporate purposes, including acquisitions, dividends (if and as declared by our
Board of Directors), capital expenditures, stock repurchases and issuances of
letters of credit. On April 10, 2020, we increased the aggregate borrowing
capacity of our revolving credit agreement from $500.0 million to
$560.0 million. The credit agreement matures on December 5, 2023.
At September 30, 2020 and December 31, 2019, $0.7 million and $155.7 million,
respectively, were outstanding under the revolving credit agreement. The
revolving credit agreement contains customary affirmative and negative
covenants, including financial covenants with respect to consolidated leverage
and interest coverage ratios, and other customary restrictions. We believe we
were in compliance with all covenants at September 30, 2020.
Purchase of Additional Ownership Interest from Joint Venture
Effective May 31, 2019, we purchased an additional 20% ownership interest in
Homans from Carrier Enterprise II for cash consideration of $32.4 million, which
increased our ownership in Homans to 100%. Homans previously operated as a
division of Carrier Enterprise II and subsequent to the purchase operates as a
wholly owned subsidiary of the Company with 17 locations in the Northeastern
U.S.
Investment in Unconsolidated Entity
On June 21, 2017, Carrier Enterprise I acquired a 34.9% ownership interest in
RSI, an HVAC distributor operating from 30 locations in the Western U.S. for
cash consideration of $63.6 million, of which we contributed $50.9 million, and
Carrier contributed $12.7 million. Effective June 29, 2018, Carrier Enterprise I
acquired an additional 1.4% ownership interest in RSI, which increased Carrier
Enterprise I's ownership interest in RSI to 36.3% for cash consideration of
$3.8 million, of which we contributed $3.0 million and Carrier contributed
$0.8 million. Effective April 22, 2019, Carrier Enterprise I acquired an
additional 1.8% ownership interest in RSI, which increased Carrier Enterprise
I's ownership interest in RSI to 38.1% for cash consideration of $4.9 million,
of which we contributed $3.9 million and Carrier contributed $1.0 million.
Carrier Enterprise I is a party to a shareholders' agreement (the "Shareholders'
Agreement") with RSI and its shareholders. Pursuant to the Shareholders'
Agreement, RSI's shareholders have the right to sell, and Carrier Enterprise I
has the obligation to purchase, their respective shares of RSI for a purchase
price determined based on either book value or a multiple of EBIT, the latter of
which Carrier Enterprise I used to calculate the price paid for its investment
in RSI. RSI's shareholders may transfer their respective shares of RSI common
stock only to members of the Sigler family or to Carrier Enterprise I, and, at
any time from and after the date on which Carrier Enterprise I owns 85% or more
of RSI's outstanding common stock, it has the right, but not the obligation, to
purchase from RSI's shareholders the remaining outstanding shares of RSI common
stock. At September 30, 2020, the estimated purchase amount we would be
contingently liable for was approximately $183.0 million. We believe that our
operating cash flows, cash on hand, and funds available for borrowing under our
revolving credit agreement will be sufficient to purchase any additional
ownership interests in RSI.
Acquisitions
On November 26, 2019, one of our wholly owned subsidiaries acquired certain
assets and assumed certain liabilities of N&S, a distributor of air
conditioning, heating and plumbing products operating from seven locations in
New York and Connecticut. The purchase price was composed of cash consideration
of $12.0 million, the issuance of 22,435 shares of Common stock having a fair
value of $4.0 million and the payment of certain indebtedness.

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On August 1, 2019, Carrier Enterprise I acquired substantially all the HVAC
assets and assumed certain of the liabilities of PPI, an HVAC distributor
operating from 19 locations in Pennsylvania, New Jersey, and Delaware, for
$85.0 million less certain average revolving indebtedness. Consideration for the
net purchase price consisted of $10.0 million in cash, 372,543 shares of Common
stock having a fair value of $58.3 million, net of a discount for lack of
marketability, and the payment of certain average revolving indebtedness.
Carrier contributed cash of $17.0 million to Carrier Enterprise I in connection
with the acquisition of PPI.
On April 2, 2019, one of our wholly owned subsidiaries acquired certain assets
and assumed certain liabilities of DASCO, a distributor of air conditioning and
heating products operating from seven locations in New Jersey, New York and
Connecticut. The purchase price was composed of cash consideration of
$16.8 million and the issuance of 50,952 shares of Common stock having a fair
value of $6.9 million, net of a discount for lack of marketability.
We continually evaluate potential acquisitions and/or joint ventures and
investments in unconsolidated entities. We routinely hold discussions with
several acquisition candidates. Should suitable acquisition opportunities arise
that would require additional financing, we believe our financial position and
earnings history provide a sufficient basis for us to either obtain additional
debt financing at competitive rates and on reasonable terms or raise capital
through the issuance of equity securities.
Common Stock Dividends
We paid cash dividends of $5.15 and $4.80 per share of Common stock and Class B
common stock during the nine months ended September 30, 2020 and 2019,
respectively. On October 1, 2020, our Board of Directors declared a regular
quarterly cash dividend of $1.775 per share of both Common and Class B common
stock that was paid on October 30, 2020 to shareholders of record as of
October 15, 2020. Future dividends and/or changes in dividend rates are at the
sole discretion of the Board of Directors and depend upon factors including, but
not limited to, cash flow generated by operations, profitability, financial
condition, cash requirements, and future prospects.
Company Share Repurchase Program
In September 1999, our Board of Directors authorized the repurchase, at
management's discretion, of up to 7,500,000 shares of common stock in the open
market or via private transactions. Shares repurchased under the program are
accounted for using the cost method and result in a reduction of shareholders'
equity. We last repurchased shares under this plan in 2008. In aggregate,
6,370,913 shares of Common and Class B common stock have been repurchased at a
cost of $114.4 million since the inception of the program. At September 30,
2020, there were 1,129,087 shares remaining authorized for repurchase under the
program.

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