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What changed in WATSCO INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of WATSCO INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+122 added−113 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-28)

Top changes in WATSCO INC's 2025 10-K

122 paragraphs added · 113 removed · 101 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

68 edited+13 added−9 removed51 unchanged
Biggest changeClimate Change and Reductions in CO 2 e Emissions We believe that our business plays an important and significant role in the drive to lower CO2e emissions. According to the DOE, heating and air conditioning accounts for roughly half of household energy consumption in the United States.
Biggest changeThe Company continues to sell components of 410A Systems separately as permitted under the regulations and will assess its ability of offering matching 410A Systems once the EPA finalizes the rule change, which is expected in early 2026. 13 Table of Contents Climate Change and Reductions in CO 2 e Emissions We believe that our business plays an important and significant role in the drive to lower CO2e emissions.
The Boards are each composed of five directors, of whom three directors represent our controlling interest and two directors represent Carrier’s non-controlling interest.
The Boards are each composed of five directors, three of whom represent our controlling interest and two represent Carrier’s non-controlling interest.
See “Business Risk Factors” in Item 1A of this Annual Report on Form 10-K for further discussion. Distribution Agreements We maintain trade name and distribution agreements with Carrier, Rheem, and Mitsubishi that provide us with distribution rights on an exclusive basis in specified territories and are not subject to a stated term or expiration date.
See “Business Risk Factors” in Item 1A of this Annual Report on Form 10-K for further discussion. Distribution Agreements We maintain trade name and distribution agreements with Carrier, Rheem, Mitsubishi, and others, that provide us with distribution rights on an exclusive basis in specified territories and are not subject to a stated term or expiration date.
We maintain large inventories at each of our warehouse locations and either deliver products to customers using our trucks or third-party logistics providers, or we make products available for pick-up at the location nearest to the particular customer. We have approximately 1,100 salespeople, averaging 11 years of experience in the HVAC/R distribution industry.
We maintain large inventories at each of our warehouse locations and either deliver products to customers using our trucks or third-party logistics providers. We also make products available for pick-up at the location nearest to the particular customer. We have approximately 1,100 salespeople, averaging 11 years of experience in the HVAC/R distribution industry.
In 2021, we and Carrier formed a new joint venture and acquired certain assets and assumed certain liabilities comprising the HVAC distribution business of Temperature Equipment Corporation (“TEC”), one of Carrier’s independent distributors with locations in Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri and Wisconsin. We have an 80% controlling interest in TEC, and Carrier has a 20% non-controlling interest.
In 2021, Watsco and Carrier formed a new joint venture and acquired certain assets and assumed certain liabilities comprising the HVAC distribution business of Temperature Equipment Corporation (“TEC”), one of Carrier’s independent distributors with locations in Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri and Wisconsin. We have an 80% controlling interest in TEC, and Carrier has a 20% non-controlling interest.
DESCRIPTION OF BUSINESS Products We sell an expansive line of products and maintain a diverse mix of inventory to meet our customers’ immediate needs, and we seek to provide products a contractor would generally require when installing or repairing a central air conditioner, furnace, or refrigeration system on short notice.
DESCRIPTION OF BUSINESS Products We sell an expansive line of products and maintain a diverse mix of inventory to meet our customers’ immediate needs, and we seek to provide products a contractor would generally require when installing or repairing a central air conditioner, ductless system, furnace, or refrigeration system on short notice.
We estimate that the replacement market for residential air conditioning equipment is approximately 85%-90% of industry unit sales in the United States, and we expect this percentage to increase as units installed in the past 20 years wear out or otherwise become practical to replace sooner with newer, more energy-efficient models.
We estimate that the replacement market for residential air conditioning equipment is approximately 80%-90% of industry unit sales in the United States, and we expect this percentage to increase as units installed in the past 20 years wear out or otherwise become practical to replace sooner with newer, more energy-efficient models.
We currently serve more than 130,000 active contractors who service the replacement and new construction markets for residential and commercial central air conditioning, heating, and refrigeration systems. No single customer in 2024, 2023, or 2022 represented more than 2% of our consolidated revenues.
We currently serve more than 130,000 active contractors who service the replacement and new construction markets for residential and commercial central air conditioning, heating, and refrigeration systems. No single customer in 2025, 2024, or 2023 represented more than 2% of our consolidated revenues.
The residential replacement market has increased in size and importance over the past several years as a result of the aging of the installed base of residential central air conditioners and furnaces, the introduction of new higher energy efficient models to address both regulatory mandates as well as consumer optionality, the remodeling and expansion of existing homes, the addition of central air conditioning to homes that previously had only heating products, and consumers’ overall unwillingness to live without air conditioning or heating products.
The residential replacement market has increased in size and importance over the past several years as a result of a meaningful growth in the installed base of residential central air conditioners and furnaces over the years, the subsequent aging of that installed base, the introduction of new higher energy efficient models to address both regulatory mandates as well as consumer optionality, the remodeling and expansion of existing homes, the addition of central air conditioning to homes that previously had only heating products, and consumers’ overall unwillingness to live without air conditioning or heating products.
Accordingly, most of our distribution locations are in the Sun Belt, with the highest concentration in Florida and Texas.
Accordingly, most of our distribution locations and sales are in the Sun Belt, with the highest concentration in Florida and Texas.
Many installed units operate well below current minimum efficiency standards and are currently reaching the end of their useful lives, which we believe long-term provides a growing and stable replacement market. Additionally, we sell a variety of non-equipment products including parts, ductwork, air movement products, insulation, tools, installation supplies, thermostats, and air quality products.
Many installed units operate well below current minimum efficiency standards and are currently reaching the end of their useful lives, which we believe long-term provides a growing and stable replacement market. Additionally, we sell a variety of non-equipment products including parts, supplies, ductwork, air movement products, insulation, tools, installation supplies, thermostats, and air quality products, to name a few.
Amendments to either code of conduct or any grant of a waiver requiring disclosure under applicable SEC rules will be disclosed on our website, www.watsco.com . There were no amendments to or waivers from either code of conduct in 2024.
Amendments to either code of conduct or any grant of a waiver requiring disclosure under applicable SEC rules will be disclosed on our website, www.watsco.com . There were no amendments to or waivers from either code of conduct in 2025.
We distribute products manufactured by Flexible Technologies, Inc., a subsidiary of Smiths Group plc (“Flexible Technologies”), Resideo Technologies, Inc. (“Resideo”), Southwark Metal Mfg. Co. (“Southwark”), Johns Manville, a subsidiary of Berkshire Hathaway, Inc. (“Johns Manville”), and Owens Corning Insulating Systems, LLC (“Owens Corning”), among others. We also sell products to the commercial refrigeration market.
We distribute products manufactured by Flexible Technologies, Inc., a subsidiary of Smiths Group plc (“Flexible Technologies”), Resideo Technologies, Inc. (“Resideo”), Southwark Metal Mfg. Co. (“Southwark”), Johns Manville, a subsidiary of Berkshire Hathaway, Inc. (“Johns Manville”), and Owens Corning Insulating Systems, LLC (“Owens Corning”), among others. 5 Table of Contents We also sell products to the commercial refrigeration market.
Diverse teams facilitate contributions from people of different backgrounds, experiences, and varied points of view. We believe that when employees feel valued, understood, and inspired, the entire Company benefits. Moreover, fostering an equal opportunity environment promotes innovative solutions and cultivates high-performing, engaged teams that collaborate to achieve our strategic goals.
Diverse teams facilitate contributions from people of different backgrounds, experiences, and varied points of view. We believe that when 7 Table of Contents employees feel valued, understood, and inspired, the entire Company benefits. Moreover, fostering an equal opportunity environment promotes innovative solutions and cultivates high-performing, engaged teams that collaborate to achieve our strategic goals.
Additionally, we use independent contractors and temporary personnel in the normal course of business to supplement our workforce. We closely monitor employee turnover, utilizing exit interviews to gather pertinent information that we use to refine our retention strategies. The voluntary turnover rate for our U.S. employees in 2024, 2023, and 2022 was approximately 18%, 19%, and 20%, respectively.
Additionally, we use independent contractors and temporary personnel in the normal course of business to supplement our workforce. We closely monitor employee turnover, utilizing exit interviews to gather pertinent information that we use to refine our retention strategies. The voluntary turnover rate for our U.S. employees in 2025, 2024, and 2023 was approximately 19%, 18%, and 19%, respectively.
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 more environmentally friendly refrigerants used in such systems, including those established by the Kigali Amendment to the Montreal Protocol concerning the phase-down of the production of HFC-based refrigerants for use in new equipment.
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 more environmentally friendly refrigerants used in such systems, including those established by the Kigali Amendment to the Montreal Protocol concerning the phase-down of the production of hydrofluorocarbon (“HFC”)-based refrigerants for use in new equipment.
To that end, several scalable technology platforms have been launched with the largest focus on customer-focused technologies, which are improving and transforming the customer experience at all of our locations.
To that end, we have launched several scalable technology platforms with the largest focus on customer-focused technologies, which are improving and transforming the customer experience at all of our locations.
We believe that our private-label branded products complement our existing product offerings at selected locations, based on customer needs and the particular market position and price of these products. 5 Table of Contents Acquisition Strategy We focus on acquiring and investing in businesses that either complement our presence in existing markets or establish a presence in new geographic markets.
We believe that our private-label branded products complement our existing product offerings at selected locations, based on customer needs and the particular market position and price of these products. Acquisition Strategy We focus on acquiring and investing in businesses that either complement our presence in existing markets or establish a presence in new geographic markets.
Since 1989, we have acquired 70 HVAC/R distribution businesses, some of which are now primary operating subsidiaries. Other smaller acquired distributors have been integrated into or are under the management of our primary operating subsidiaries.
Since 1989, we have acquired 72 HVAC/R distribution businesses, some of which are now primary operating subsidiaries. Other smaller acquired distributors have been integrated into or are under the management of our primary operating subsidiaries.
Significant relationships with HVAC/R equipment manufacturers include Carrier, Rheem, Daikin, Mitsubishi, Pentair, Gree Electric Appliances, Inc., Bosch Group, Trane, Lennox, and Midea Group. In addition, we have substantial relationships with manufacturers of non-equipment HVAC/R products, including Flexible Technologies, Southwark, DiversiTech Corp., Resideo, Mueller, Copeland, Johns Manville, Owens Corning, and Chemours.
Significant relationships with HVAC/R equipment manufacturers include Carrier, Rheem, Daikin, Mitsubishi, Pentair, Gree Electric Appliances, Inc., Lennox, and Bosch. In addition, we have substantial relationships with manufacturers of non-equipment HVAC/R products, including Flexible Technologies, Southwark, DiversiTech Corp., Resideo, Mueller, Copeland, Johns Manville, Owens Corning, and Chemours.
Oversight of investigations of known or potential violations under either code of conduct is the responsibility of the Audit Committee of the Board of Directors (the “Audit Committee”). To obtain copies of our Codes of Ethics and Conduct, please visit our investor relations website at https://investors.watsco.com under the section captioned “Governance.”
Oversight of investigations of known or potential violations under either code of conduct is the responsibility of the Audit Committee of the Board of Directors (the “Audit Committee”). To obtain copies of our Codes of Ethics and Conduct, please visit our investor relations website at https://investors.watsco.com under the section captioned “Governance.” 14 Table of Contents
According to data published in the November 2024 IBIS World Industry Report for Heating and Air Conditioning Wholesaling in the U.S., the HVAC/R distribution industry has approximately 2,100 distribution companies with an aggregate estimated annual market size of $74.0 billion.
According to data published in the November 2024 IBIS World Industry Report for Heating and Air Conditioning Wholesaling in the U.S., the HVAC/R distribution industry has more than 2,100 distribution companies with an aggregate estimated annual market size of $74.0 billion.
These products include condensing units, compressors, evaporators, valves, refrigerants, walk-in coolers, and ice machines for industrial and commercial applications. We distribute products manufactured by Copeland Corporation, LLC (“Copeland”), The Chemours Company (“Chemours”), Mueller Industries, Inc. (“Mueller”), and Pentair, Inc.
These products include condensing units, compressors, evaporators, valves, refrigerants, walk-in coolers, and ice machines for industrial and commercial applications. We distribute products manufactured by Copeland Corporation, LLC (“Copeland”), The Chemours Company (“Chemours”), Mueller Industries, Inc. (“Mueller”), and Pentair, Inc. (“Pentair”), among others.
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. Competition We operate in highly competitive environments.
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. 12 Table of Contents Competition We operate in highly competitive environments.
The advent of HVAC/R products in Latin America and the Caribbean is also well-established but has emerged in more recent years as those economies have grown and products have become more affordable and have matured from luxury to necessity.
The advent of HVAC/R products in Latin America and the Caribbean is also well-established, but has emerged at greater scale in more recent years as those economies have grown and products have become more affordable and have matured from luxury to necessity.
Certain general and administrative expenses are targeted for cost savings by leveraging the overall business volume and improving operating efficiencies. Human Capital Management Employee Population and Turnover As the largest distributor of HVAC/R equipment and related parts and supplies in North America, we have a wide variety of employees.
Certain general and administrative expenses are targeted for cost savings by leveraging the overall business volume and improving operating efficiencies. Human Capital Management Employee Population and Turnover As the largest distributor of HVAC/R equipment and related parts and supplies in North America, we employ a wide variety of employees in myriad roles.
We believe this rate is typical for a company of our size that employs a large hourly workforce such as ours. Talent Attraction, Development, and Retention Our culture celebrates talent sharing, career development, and agility across the Company.
We believe this rate is typical for a company of our size that employs a large hourly workforce. Talent Attraction, Development, and Retention Our culture celebrates talent sharing, career development, and agility across the Company.
These markets have been a strategic focus of ours given their size, the reliance by homeowners and businesses on HVAC/R products to maintain a comfortable indoor environment, and the population growth in these areas during the post-World War II era, which has led to a substantial installed base requiring replacement, a shorter useful life for equipment given the significant hours of operation, and the focus by electrical utilities on consumer incentives designed to promote replacement of HVAC/R equipment in an effort to improve energy efficiency. 8 Table of Contents Markets The table below identifies the number of our stores by location as of December 31, 2024: Florida 102 Texas 88 North Carolina 52 South Carolina 50 California 35 Georgia 34 Louisiana 33 Virginia 28 Tennessee 23 New York 20 Pennsylvania 20 Illinois 14 New Jersey 14 Alabama 10 Massachusetts 9 Mississippi 9 Missouri 9 Arizona 8 Connecticut 7 Kansas 7 Maryland 6 Indiana 5 Oklahoma 5 Utah 5 Arkansas 4 Kentucky 3 Minnesota 3 Nevada 3 Iowa 2 Maine 2 Nebraska 2 New Hampshire 2 South Dakota 2 West Virginia 2 Wisconsin 2 Colorado 1 Delaware 1 Michigan 1 New Mexico 1 North Dakota 1 Ohio 1 Rhode Island 1 Vermont 1 United States 628 Canada 36 Puerto Rico 16 Mexico 10 Total 690 9 Table of Contents Joint Ventures with Carrier Global Corporation In 2009, we formed a joint venture with Carrier, which we refer to as Carrier Enterprise I, in which Carrier contributed company-owned locations in the Sun Belt states and Puerto Rico, and its export division in Miami, Florida, and we contributed certain locations that distributed Carrier products.
These markets have been a strategic focus of ours given their size, the reliance by homeowners and businesses on HVAC/R products to maintain a comfortable indoor environment, and the population growth in these areas during the post-World War II era, which has led to a substantial installed base requiring replacement, a shorter useful life for equipment, and the focus by electrical utilities on consumer incentives designed to promote replacement of HVAC/R equipment in an effort to improve energy efficiency. 9 Table of Contents Markets The table below identifies the number of our stores by location as of December 31, 2025: Florida 102 Texas 89 North Carolina 54 South Carolina 53 California 35 Louisiana 35 Georgia 34 Virginia 28 Tennessee 23 New York 20 Pennsylvania 20 Illinois 14 New Jersey 14 Alabama 10 Missouri 10 Arizona 9 Massachusetts 9 Mississippi 8 Connecticut 7 Kansas 7 Maryland 6 Arkansas 5 Indiana 5 Oklahoma 5 Utah 5 Nevada 3 Iowa 2 Kentucky 2 Maine 2 Minnesota 2 Nebraska 2 New Hampshire 2 New Mexico 2 South Dakota 2 West Virginia 2 Wisconsin 2 Colorado 1 Delaware 1 Michigan 1 North Dakota 1 Ohio 1 Rhode Island 1 Vermont 1 United States 637 Canada 34 Puerto Rico 16 Mexico 8 Total 695 10 Table of Contents Joint Ventures with Carrier Global Corporation In 2009, we formed a joint venture with Carrier , which we refer to as Carrier Enterprise I, in which Carrier contributed company-owned locations in various Sun Belt states and Puerto Rico, and its export division in Miami, Florida, and we contributed certain locations that distributed Carrier products.
The Company’s top ten suppliers accounted for 85% of our purchases, including 62% from Carrier, and 9% from Rheem.
The Company’s top ten suppliers accounted for 85% of our purchases, including 62% from Carrier and 8% from Rheem.
Strategy in Existing Markets Our strategy for growth in existing markets focuses on customer service, product expansion, and the implementation of technology to satisfy the needs of the higher growth, higher margin replacement market, in which customers generally demand immediate, convenient, and reliable service.
Strategy in Existing Markets Our strategy for growth in existing markets focuses on adding to our existing customer base, providing exemplary customer service, product expansion, and the implementation of technology to satisfy the needs of the higher growth, higher margin replacement market, in which customers generally demand immediate, convenient, and reliable service.
We have an 80% controlling interest in Carrier Enterprise I, and Carrier has a 20% non-controlling interest. In 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 in Pennsylvania, New Jersey, and Delaware. Carrier Enterprise I has a 38.4% ownership interest in Russell Sigler, Inc.
We have an 80% controlling interest in Carrier Enterprise I, and Carrier has a 20% non-controlling interest. In 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 in Pennsylvania, New Jersey, and Delaware.
At December 31, 2024, we operated from 690 locations in 43 U.S. States, Canada, Mexico and Puerto Rico with additional market coverage on an export basis to portions 3 Table of Contents of Latin America and the Caribbean, through which we serve more than 130,000 active contractors that service the replacement and new construction markets.
At December 31, 2025, we operated from 695 locations in 43 U.S. States, Canada, Mexico and Puerto Rico with additional market coverage on an export basis to portions of Latin America and the Caribbean, through which we serve more than 130,000 active contractors that service the replacement and new construction markets.
More information, including sources and assumptions used to support our estimates, can be found at www.watsco.com/environment . Information contained on, or available through, our website is not incorporated by reference in, or made a part of, this report.
More information, including sources and assumptions used to support our estimates, can be found at www.watsco.com/environment . Information contained on, or available through, our website is not incorporated by reference in, or made a part of, this report. Federal Tax Credits The U.S.
The estimated annual market on an installed basis, which adds the contractor’s value to the market size, for residential HVAC/R products is approximately $134.0 billion according to the October 2024 IBIS World Industry Report for Heating and Air Conditioning Contractors in the U.S.
The estimated annual market on an installed basis, which adds the contractor’s value to the market size, for residential HVAC/R products is approximately $156.0 billion according to the April 2025 IBIS World Industry Report for Heating and Air Conditioning Contractors in the U.S.
We believe we compete successfully with other distributors primarily based on an experienced sales organization, strong service support, maintenance of well-stocked inventories, density of warehouse locations, high quality reputation, broad product lines, and the ability to foresee customer demand for new products. 10 Table of Contents Key Supplier Relationships Given our leadership position, Watsco represents a strategic business relationship to many of the leading manufacturers in our industry.
We believe we compete successfully with other distributors primarily based on an experienced sales organization, strong service support, maintenance of well-stocked inventories, density of warehouse locations, high quality reputation, broad product lines, and the ability to foresee customer demand for new products. 11 Table of Contents Key Supplier Relationships Given our leadership position in HVAC/R distribution, Watsco is a key customer and partner to many of the leading manufacturers in our industry.
In some geographic areas, we believe we have a competitive advantage over factory-operated distribution networks, which typically do not maintain inventories of parts and supplies that are as diversified as ours and which have fewer warehouse locations than we do, making it more difficult for these competitors to meet the time-sensitive demands of the replacement market.
In some geographic areas, we believe we have a competitive advantage over factory-operated distribution networks, which typically do not maintain inventories of parts and supplies that are as diversified as ours and which have fewer warehouse locations than we do, making it more difficult for these competitors to meet the time-sensitive demands of the replacement market. 6 Table of Contents In addition to the replacement market, we sell to the new construction market, including new homes and commercial construction.
Given the breadth of our employee base, we tailor our human capital management policies with a view to specific employee populations. As of December 31, 2024, we employed approximately 7,220 full-time and 75 part-time employees (approximately 7,295 total employees), substantially all of whom were non-union employees. Of these employees, approximately 8% were located in Canada and Mexico.
Given the breadth of our employee base, we tailor our human capital management policies with a view to specific employee populations. As of December 31, 2025, we employed approximately 6,950 full-time and 100 part-time employees (approximately 7,050 total employees), substantially all of whom were non-union employees. Of these employees, approximately 8% were located in Canada and Mexico.
Sales of commercial refrigeration products, which we currently source from approximately 150 vendors, accounted for 4% of our revenues in both 2024 and 2023. Distribution and Sales At December 31, 2024, we operated from 690 locations, a vast majority of which are located in regions that we believe have demographic trends favorable to our business.
Sales of commercial refrigeration products, which we currently source from approximately 150 vendors, accounted for 4% of our revenues in both 2025 and 2024. 8 Table of Contents Distribution and Sales At December 31, 2025, we operated from 695 locations, a vast majority of which are in regions that we believe have demographic and economic trends favorable to our business.
Based on estimates validated by independent sources, we averted an estimated 22.8 million metric tons of CO2e emissions from January 1, 2020 to December 31, 2024 through the sale of replacement residential HVAC systems at higher-efficiency standards – the equivalent of nearly 5.3 million gas powered vehicles driven over the course of one year.
Based on estimates validated by independent sources, we averted an estimated 26.2 million metric tons of CO2e emissions from January 1, 2020 to December 31, 2025 through the sale of replacement residential HVAC systems at higher-efficiency standards – the equivalent of approximately 6.1 million gas powered vehicles driven over the course of one year.
With this digital evolution in mind, our efforts have addressed how customers are served, how internal processes and practices can be improved, and how data and analytics can be created and used to enhance long-term performance. Investments include the addition of approximately 300 technology employees along with investments in our locations and infrastructure to enable these technologies.
With this digital evolution in mind, our efforts have addressed how we serve customers, how we can improve internal processes and practices, and how we compile and use data and analytics to enhance long-term performance. Investments include the addition of approximately 300 technology employees along with investments in our locations and infrastructure to enable these technologies.
Sales of HVAC equipment, which we currently source from approximately 20 vendors, accounted for 69% of our revenues in both 2024 and 2023. Sales of other HVAC products, which we currently source from more than 1,500 vendors, comprised 27% of our revenues in both 2024 and 2023.
Sales of HVAC equipment, which we currently source from approximately 20 vendors, accounted for 67% and 69% of our revenues in 2025 and 2024, respectively. Sales of other HVAC products, which we currently source from more than 1,300 vendors, comprised 29% and 27% of our revenues in 2025 and 2024, respectively.
(“Daikin”), a subsidiary of Daikin Industries, Ltd.; Rheem Manufacturing Company (“Rheem”); Trane Technologies plc (“Trane”); York International Corporation, a subsidiary of Bosch Group; Lennox International Inc. (“Lennox”); Mitsubishi Electric Trane HVAC US LLC (“Mitsubishi”); and Nortek Global HVAC, LLC, a subsidiary of Rheem.
(“Daikin”), a subsidiary of Daikin Industries, Ltd.; Rheem Manufacturing Company (“Rheem”); Trane Technologies plc (“Trane”); York Residential & Light Commercial Products, part of the Bosch Home Comfort Group (“Bosch”); Lennox International Inc. (“Lennox”); Mitsubishi Electric Trane HVAC US LLC (“Mitsubishi”); and Nortek Global HVAC, LLC, a subsidiary of Rheem.
Our revenues in HVAC/R distribution have increased from $64.1 million in 1989 to $7.6 billion in 2024, resulting from our strategic acquisition of companies with established market positions and subsequent building of revenues and profit through a combination of additional locations, introduction of new products, and other initiatives.
Our revenues in HVAC/R distribution have increased from $64.1 million in 1989 to $7.2 billion in 2025, resulting from our strategic acquisition of companies with established market positions and subsequent building of revenues and profit through a combination of additional locations, introduction of new products, expansion with industry Original Equipment Manufacturers (“OEMs”) and vendors, technology innovation, and other initiatives.
Government Regulations, Environmental, and Health and Safety Matters Our 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.
Order Backlog Order backlog is not a material aspect of our business, and no material portion of our business is subject to government contracts. Government Regulations, Environmental, and Health and Safety Matters Our 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.
Our website address is included in this report only as an inactive textual reference. Information contained on, or available through, our website is not incorporated by reference in, or made a part of, this report.
Information contained on, or available through, our website is not incorporated by reference in, or made a part of, this report.
Our principal executive office is located at 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133, and our telephone number is (305) 714-4100. Our website address on the Internet is www.watsco.com and e-mails may be sent to info@watsco.com. Our website address is included in this report only as an inactive textual reference.
Our principal executive office is located at 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133, and our telephone number is (305) 714-4100. Our website address on the Internet is www.watsco.com and e-mails may be sent to [email protected] .
In addition to salaries, commission programs, cash incentives, and stock-based equity plans, we also provide a 401(k) retirement plan with a company match, an employee stock purchase plan in which most of our employees may purchase our stock at a discount, healthcare and insurance benefits, health savings accounts, paid time off, and various services and tools to support our employees’ health and wellness. 6 Table of Contents Ownership Culture We maintain an ownership culture that helps align the long-term interests of our shareholders with a long-term wealth-building opportunity for our employees through a variety of stock-based equity plans.
In addition to salaries, commission programs, cash incentives, and stock-based equity plans, we also provide a 401(k) retirement plan with a company match, an employee stock purchase plan in which most of our employees may purchase our stock at a discount, healthcare and insurance benefits, health savings accounts, paid time off, and various services and tools to support our employees’ health and wellness.
Competitive pressures or other factors could cause our products or services to lose market acceptance or result in significant price erosion, all of which would have a material adverse effect on our results of operations, cash flows, and liquidity. 11 Table of Contents Order Backlog Order backlog is not a material aspect of our business, and no material portion of our business is subject to government contracts.
Competitive pressures or other factors could cause our products or services to lose market acceptance or result in significant price erosion, all of which would have a material adverse effect on our results of operations, cash flows, and liquidity.
The “build” component of the strategy has focused on encouraging growth at acquired companies, by adding products and locations to better serve customers, investing in scalable technologies, and exchanging ideas and business concepts amongst leadership teams.
We have employed a disciplined and conservative approach, which seeks opportunities that fit well-defined financial and strategic criteria. The “build” component of the strategy has focused on encouraging growth at acquired companies, by adding products and locations to better serve customers, investing in scalable technologies, and exchanging ideas and business concepts amongst leadership teams.
As such, replacing older, less efficient HVAC systems with higher efficiency systems is one of the most meaningful steps homeowners can take to reduce their electricity costs and carbon footprints.
According to the DOE, heating and air conditioning accounts for roughly half of household energy consumption in the United States. As such, replacing older, less efficient HVAC systems with higher efficiency systems is one of the most meaningful steps homeowners can take to reduce their electricity costs and carbon footprints.
Seasonality 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 Summer and Winter selling seasons.
See Supplier Concentration and Supply Chain Risks in “Business Risk Factors” in Item 1A of this Annual Report on Form 10-K. Seasonality 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 Summer and Winter selling seasons.
(“RSI”), an HVAC distributor operating from 36 locations in the Western U.S. RSI is Carrier’s second largest independent North American distributor and had sales of approximately $1.3 billion in 2024.
Carrier Enterprise I also has a 38.4% ownership interest in Russell Sigler, Inc. (“RSI”), an HVAC distributor operating from 36 locations in the Western U.S. RSI is Carrier’s second largest independent North American distributor and had sales of approximately $1.2 billion in 2025.
Specific initiatives include: (i) mobile applications for iOS and Android devices to help customers operate more efficiently and interact with our locations more easily; (ii) e-commerce between our customers and our subsidiaries; (iii) supply chain optimization; (iv) building and maintaining product information management, which is our leading repository of digitized HVAC/R product information used in our mobile applications and e-ecommerce platform; and (v) the development of business intelligence systems and related data sets, which provide enhanced management tools.
Specific initiatives include: (i) mobile applications for iOS and Android devices to help customers operate more efficiently and interact with our locations more easily; (ii) e-commerce between our customers and our subsidiaries; (iii) pricing optimization to manage and optimize the vast number of pricing records across the Company, which enables us to react swiftly to changing market conditions; (iv) building and maintaining product information management, which is our leading repository of digitized HVAC/R product information used in our mobile applications and e-ecommerce platform; (v) the development of business intelligence systems and related data sets, which provide enhanced management tools; (vi) vendor consolidation rationalization; and (vii) artificial intelligence tools to further enhance the customer experience, drive efficiency, and extend our competitive advantage by leveraging our industry data sets around customers, products, and vendors.
In addition to the replacement market, we sell to the new construction market, including new homes and commercial construction. We believe our reputation for reliable, high-quality service, and relationships with contractors, who may serve both the replacement and new construction markets, allows us to compete effectively in these markets.
We believe our reputation for reliable, high-quality service, and relationships with contractors, who may serve both the replacement and new construction markets, allows us to compete effectively in these markets. Product Line Expansion We actively seek new and expanded distribution territories from our key equipment and non-equipment suppliers.
In addition, regulatory mandates will likely periodically increase the required minimum Seasonal Energy Efficiency Ratio rating, referred to as SEER, thus providing a catalyst for greater sales of higher-efficiency systems. 12 Table of Contents We offer a broad variety of systems that operate above the minimum SEER standards, ranging from base-level efficiency to systems that exceed 20 SEER.
In addition, regulatory mandates will likely periodically increase the required minimum Seasonal Energy Efficiency Ratio rating, referred to as SEER, thus providing a catalyst for increased sales of higher efficiency systems.
Product Line Expansion We actively seek new and expanded territories of distribution from our key equipment suppliers. We continually evaluate new parts and supply products to support equipment sales and further enhance service to our customers. This initiative includes increasing our product offering with existing vendors and identifying new product opportunities through traditional and non-traditional supply channels.
We continually evaluate new parts and supply products to support equipment sales and further enhance service to our customers. This initiative includes increasing our product offering with existing vendors and identifying new product opportunities through traditional and non-traditional supply channels. We have also introduced private-label products to obtain market share and grow revenues.
The markets we serve are as follows: % of Revenues for the Year Ended December 31, 2024 Number of Locations as of December 31, 2024 United States 90 % 628 Canada 5 % 36 Latin America and the Caribbean 5 % 26 Total 100 % 690 7 Table of Contents The largest market we serve is the United States, in which the most significant markets for HVAC/R products are in the Sun Belt states.
The markets we serve are as follows: % of Revenues for the Year Ended December 31, 2025 Number of Locations as of December 31, 2025 United States 90 % 637 Canada 5 % 34 Latin America and the Caribbean 5 % 24 Total 100 % 695 The largest market we serve is the United States, in which the most significant markets for HVAC/R products are in the Sun Belt states where HVAC equipment tends to experience above-average usage and therefore a shorter average useful life.
In addition, through our subsidiary, Watsco Ventures, LLC (“Watsco Ventures”), we have developed (internally and through external collaboration) a variety of early-stage technologies intended to help contractor customers grow and become more profitable, and otherwise compliment the initiatives set forth above.
In addition, through our subsidiary, Watsco Ventures, LLC, we have developed (internally and through external collaboration) a variety of early-stage technologies intended to help contractor customers grow and become more profitable. These initiatives include, among others, OnCall Air® , our digital sales platform, and OnCall Air Finance+, its companion consumer financing platform.
We believe the diversity of products that we sell, along with the manufacturers’ current product offerings, quality, marketability, and brand-name recognition, allow us to operate favorably relative to our competitors. To maintain brand-name recognition, HVAC/R equipment manufacturers provide national advertising and participate with us in cooperative advertising programs and promotional incentives that are targeted to both dealers and end-users.
To maintain brand-name recognition, HVAC/R equipment manufacturers provide national advertising and participate with us in cooperative advertising programs and promotional incentives that are targeted to both dealers and end-users.
We completed the transition of our inventory to the higher SEER products during 2023. In December 2020, the American Innovation and Manufacturing Act of 2020 (the “AIM Act”) was enacted, which gave the United States Environmental Protection Agency (“EPA”) regulatory authority to address hydrofluorocarbon (“HFC”) refrigerants.
We completed the transition of our inventory to the higher SEER products during 2023. The American Innovation and Manufacturing Act of 2020 granted the U.S. Environmental Protection Agency (the “EPA”) the authority to regulate HFC refrigerants.
This legislation is intended, in part, to promote the replacement of existing systems in favor of high-efficiency heat pump systems that reduce greenhouse gas emissions, as compared to older systems, and thereby combat climate change. According to the DOE, heat pumps can reduce electricity use for heating by approximately 65% as compared to gas furnaces.
Inflation Reduction Act of 2022 (the “IRA”) was intended, in part, to promote the replacement of existing legacy systems in favor of high-efficiency heat pump systems that reduce greenhouse gas emissions, as compared to older systems, and thereby combat climate change.
Combined, our joint ventures with Carrier represented 54% of our revenues in 2024. See Supplier Concentration and Supply Chain Risks in “Business Risk Factors” in Item 1A. The business and affairs of the joint ventures are controlled, directed, and managed exclusively by their respective boards of directors (the “Boards”) pursuant to related operating agreements.
The business and affairs of the joint ventures are controlled, directed, and managed exclusively by their respective boards of directors (the “Boards”) pursuant to related operating agreements.
(“Pentair”), among others. 4 Table of Contents Culture and Business Strategy Watsco began its HVAC/R distribution strategy in 1989 and has grown by using a “buy and build” philosophy, resulting in substantial long-term growth in revenues and profits.
Culture and Business Strategy Watsco began its HVAC/R distribution strategy in 1989 and has grown by using a “buy and build” philosophy, resulting in substantial long-term growth in revenues and profits. The “buy” component of the strategy has focused on acquiring or investing in market leaders to either expand into new geographic areas or complement our presence in existing markets.
The sell-through period for existing HVAC systems using HFC refrigerants with a GWP above 700 extends through December 31, 2025. The Company expects these regulations to reduce the carbon footprint of end-users and increase average selling prices over time, subject to customary risks of quality, availability, and performance of new HVAC systems.
The Company expects these regulations to reduce the carbon footprint of end-users and increase average selling prices over time, subject to customary risks of quality, availability, and performance of new HVAC systems. We offer a broad variety of systems that operate above the minimum SEER standards, ranging from base-level efficiency to systems that exceed 20 SEER.
Although HFCs were introduced as alternatives to ozone-depleting substances like chlorofluorocarbons and hydrochlorofluorocarbons, they are now recognized as potent greenhouse gases due to their high global warming potential (“GWP”).
Although HFCs were introduced as alternatives to ozone-depleting substances like chlorofluorocarbons and hydrochlorofluorocarbons, they are now recognized greenhouse gases that impact climate change due to their high global warming potential (“GWP”). Consequently, a required 85% phasedown of HFC production and consumption over a 15-year period commenced on January 1, 2022 (40% of which was completed in 2024).
Programs under the IRA include enhanced tax credits for homeowners who install qualifying HVAC equipment and tax deductions for owners of commercial buildings that are upgraded to achieve defined energy savings. The IRA also sets aside $4.3 billion for state-administered consumer rebate programs designed to promote energy savings for low and medium-income households, including HVAC systems.
According to the DOE, heat pumps can reduce electricity use for heating by approximately 65% as compared to gas furnaces. Programs under the IRA include enhanced tax credits for homeowners who install qualifying HVAC equipment and tax deductions for owners of commercial buildings that are upgraded to achieve defined energy savings.
We also maintain distribution agreements with various other suppliers, either on an exclusive or non-exclusive basis, for various terms ranging from one to ten years. Certain distribution agreements for particular branded products contain provisions that restrict or limit the sale of competitive products in the locations that sell such branded products.
We also maintain distribution agreements with various other suppliers, either on an exclusive or non-exclusive basis, for various terms ranging from one to ten years. As it relates to distribution agreements with stated terms or renewal terms, the expiration, amendment or material change to any existing agreement could impact our financial results.
Other than where such location-level restrictions apply, we may distribute the lines of other manufacturers’ air conditioning or heating equipment in other locations in the same territories. See Supplier Concentration and Supply Chain Risks in “Business Risk Factors” in Item 1A of this Annual Report on Form 10-K.
Certain distribution agreements for particular branded products contain provisions that restrict or limit the sale of competitive products in the locations that sell such branded products. Other than where such location-level restrictions apply, we may distribute the lines of other manufacturers’ air conditioning or heating equipment in other locations in the same territories.
Removed
The “buy” component of the strategy has focused on acquiring or investing in market leaders to either expand into new geographic areas or complement our presence in existing markets. We have employed a disciplined and conservative approach, which seeks opportunities that fit well-defined financial and strategic criteria.
Added
Ownership Culture We maintain an ownership culture that helps align the long-term interests of our shareholders with a long-term wealth-building opportunity for our employees through a variety of stock-based equity plans.
Removed
These initiatives include, among others, OnCall Air ® , our digital sales platform, and OnCall Air Finance+, its companion consumer financing platform.
Added
Combined, our joint ventures with Carrier represented 53% of our revenues in 2025. See Supplier Concentration and Supply Chain Risks in “Business Risk Factors” in Item 1A of this Annual Report on Form 10-K.
Removed
We have also introduced private-label products to obtain market share and grow revenues.
Added
We believe the diversity of products that we sell, and the scale which we possess, along with the manufacturers’ current product offerings, quality, marketability, and brand-name recognition, allow us to operate favorably relative to our competitors.
Removed
If the Trump administration imposes restrictions or significant tariff increases under existing trade agreements on products imported or assembled outside the United States by our top ten suppliers, particularly from Mexico, where a significant portion of residential HVAC equipment is assembled, and China, we may incur higher inventory costs and we would, in turn, need to raise our selling prices.
Added
We continue to monitor macroeconomic conditions and recent U.S. trade policy announcements, which have implications for our supply chain. Many HVAC equipment and component manufacturers, including Carrier and Rheem, source component parts from China and Mexico or assemble significant portions of residential and light-commercial products in Mexico, exposing them to tariff and inflationary pressures.
Removed
This could adversely impact our sales and market share and negatively impact our business. Future financial results are also materially dependent upon the continued market acceptance of these manufacturers’ respective products and their ability to continue to manufacture products that comply with laws relating to environmental and efficiency standards.
Added
In response, our OEM partners and suppliers have implemented varied price actions. To mitigate these effects, we have taken pricing actions, leveraging our technology platforms to efficiently adapt to changing conditions.
Removed
However, the Company believes that alternative or substitute products would be readily available in the event of disruption of current supplier relationships given the Company’s prominence in the marketplace, including the number of locations, sales personnel, support structure, marketing and sales expertise, financial position, and established market share.
Added
While the long-term impact of tariffs remains uncertain, we believe that our focus on the HVAC replacement market remains a stabilizing factor, given the essential role of these products in providing comfort and healthy environments for homeowners and businesses.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCompetitive pressures or other factors could cause our products or services to lose market acceptance or result in significant price erosion, all of which would have a material adverse effect on our results of operations, cash flows, and liquidity. 14 Table of Contents Cybersecurity Risks In addition to the disruptions that may occur from interruptions in our information technology systems, cybersecurity threats and sophisticated and targeted cyberattacks pose a risk to our information technology systems.
Biggest changeCompetition within any given geographic market is based upon product availability, customer service, price, and quality. Competitive pressures or other factors could cause our products or services to lose market acceptance or result in significant price erosion, all of which would have a material adverse effect on our results of operations, cash flows, and liquidity.
We also maintain other distribution agreements with various other suppliers, either on an exclusive or non-exclusive basis, for various terms ranging from one to ten years. Certain distribution agreements contain provisions that restrict or limit the sale of competitive products in the locations that sell such branded products.
We also maintain distribution agreements with various other suppliers, either on an exclusive or non-exclusive basis, for various terms ranging from one to ten years. Certain distribution agreements for particular branded products contain provisions that restrict or limit the sale of competitive products in the locations that sell such branded products.
We maintain trade name and distribution agreements with Carrier and Rheem that provide us with distribution rights on an exclusive basis in specified territories. Such agreements are not subject to a stated term or expiration date.
We maintain trade name and distribution agreements with Carrier, Rheem, and Mitsubishi that provide us with distribution rights on an exclusive basis in specified territories. Such agreements are not subject to a stated term or expiration date.
Growth through acquisitions involves a number of risks, including, but not limited to, the following: • the ability to identify and consummate transactions with complementary acquisition candidates; • the successful operation and/or integration of acquired companies; • the efficiency and effectiveness of an acquired company’s internal control environment; • diversion of management’s attention from other daily functions; • issuance by us of equity securities that dilute the ownership of our existing shareholders; • incurrence and/or assumption of significant debt and contingent liabilities; and • possible loss of key employees and/or customer relationships of the acquired companies.
Growth through acquisitions involves a number of risks, including, but not limited to, the following: • the ability to identify and consummate transactions with complementary acquisition candidates; • the successful operation and/or integration of acquired companies; • the retention of existing customers purchasing from acquired companies; • the efficiency and effectiveness of an acquired company’s internal control environment; • diversion of management’s attention from other daily functions; • issuance by us of equity securities that dilute the ownership of our existing shareholders; • incurrence and/or assumption of significant debt and contingent liabilities; and • possible loss of key employees and/or customer relationships of the acquired companies.
Additionally, our operations are materially dependent upon the continued market acceptance and quality of these manufacturers’ products and their ability to continue to manufacture products that are competitive, that comply with laws relating to environmental and efficiency standards, and that keep up with shifting consumer preferences.
Additionally, our operations are materially dependent upon the continued market acceptance and quality of these manufacturers’ and suppliers’ products and their ability to continue to manufacture and supply products that are competitive, that comply with laws relating to environmental and efficiency standards, and that keep up with shifting consumer preferences.
Risks Related to our Common Stock Class B Common Stock and Insider Ownership As of December 31, 2024, our directors and executive officers and entities affiliated with them owned: (i) Common stock representing less than 1% of the outstanding shares of Common stock and (ii) Class B common stock representing 90% of the outstanding shares of Class B common stock.
Risks Related to our Common Stock Class B Common Stock and Insider Ownership As of December 31, 2025, our directors and executive officers and entities affiliated with them owned: (i) Common stock representing less than 1% of the outstanding shares of Common stock and (ii) Class B common stock representing 90% of the outstanding shares of Class B common stock.
Access to funds under our line of credit is dependent on the ability of the syndicate banks to meet their respective funding commitments. Disruptions in the credit and 15 Table of Contents capital markets could adversely affect our ability to draw on our revolving credit agreement and may also adversely affect the determination of interest rates.
Access to funds under our line of credit is dependent 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.
Goodwill, Intangibles and Long-Lived Assets At December 31, 2024, goodwill, intangibles, and long-lived assets represented approximately 31% of our total assets. The recoverability of goodwill, indefinite lived intangibles, and long-lived assets is evaluated at least annually and when events or changes in circumstances indicate that the carrying amounts may not be recoverable.
Goodwill, Intangibles and Long-Lived Assets At December 31, 2025, goodwill, intangibles, and long-lived assets represented approximately 33% of our total assets. The recoverability of goodwill, indefinite lived intangibles, and long-lived assets is evaluated at least annually and when events or changes in circumstances indicate that the carrying amounts may not be recoverable.
ITEM 1A. RISK FACTORS Business Risk Factors Supplier Concentration and Supply Chain Risks The Company’s top ten suppliers accounted for 85% of our purchases during 2024, including 62% from Carrier and 9% from Rheem.
ITEM 1A. RISK FACTORS Business Risk Factors Supplier Concentration and Supply Chain Risks The Company’s top ten suppliers accounted for 85% of our purchases during 2025, including 62% from Carrier and 8% from Rheem.
Given the significant 13 Table of Contents concentration of our supply chain, particularly with Carrier and Rheem, any significant interruption by any of the key manufacturers or a termination of a relationship could temporarily disrupt the operations of certain of our subsidiaries.
Given the significant concentration of our supply chain, particularly with Carrier and Rheem, any significant interruption by any of the key manufacturers or suppliers or a termination of a relationship could temporarily disrupt the operations of certain of our subsidiaries.
Demand related to the new construction sectors throughout most of the markets is fairly evenly distributed throughout the year and depends largely on housing completions and related weather and economic conditions. Dependence on Key Personnel Much of our success has depended on the skills and experience of senior management personnel.
Demand related to the new construction sectors throughout most of the markets is fairly evenly distributed throughout the year and depends largely on housing completions and related weather and economic conditions. 16 Table of Contents Dependence on Key Personnel Much of our success has depended on the skills and experience of senior management personnel and key operators within our regions.
These interests represent 55% of the aggregate combined voting power (including 53% beneficially owned by Albert H. Nahmad, Chairman and Chief Executive Officer (“CEO”), Aaron J.
These interests represent 56% of the aggregate combined voting power (including 54% beneficially owned by Albert H. Nahmad, Chairman and Chief Executive Officer (“CEO”), Aaron J.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
However, more frequent catastrophic weather events may impact the availability and cost of property and casualty insurance. 16 Table of Contents Risks Related to Natural Disasters, Epidemics, or Other Unexpected Events The occurrence of one or more natural disasters, including those linked to climate change, power outages, or other unexpected events, including hurricanes, fires, earthquakes, volcanic eruptions, tsunamis, floods and other forms of severe weather, health epidemics, pandemics or other contagious outbreaks, conflicts, wars or terrorist acts, in the U.S. or in other countries in which we or our suppliers or customers operate could adversely affect our operations and financial performance.
Risks Related to Natural Disasters, Epidemics, or Other Unexpected Events The occurrence of one or more natural disasters, including those linked to climate change, power outages, or other unexpected events, including hurricanes, fires, earthquakes, volcanic eruptions, tsunamis, floods and other forms of severe weather, health epidemics, pandemics or other contagious outbreaks, conflicts, wars or terrorist acts, in the U.S. or in other countries in which we or our suppliers or customers operate could adversely affect our operations and financial performance.
Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business. Failure to successfully manage the operational challenges and risks associated with, or resulting from, acquisitions could adversely affect our results of operations, cash flows, and liquidity. Competition We operate in highly competitive environments.
Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business. 15 Table of Contents Failure to successfully manage the operational challenges and risks associated with, or resulting from, acquisitions could adversely affect our results of operations, cash flows, and liquidity.
The trading price of our common stock may be adversely affected due to many factors, most of which we cannot predict or control, such as the following: • fluctuations in our operating results; • a decision by the Board of Directors to reduce or eliminate cash dividends on our common stock; • changes in recommendations or earnings estimates by securities analysts; • general market conditions in our industry or in the economy as a whole; and • political instability, natural disasters, war and/or events of terrorism. 17 Table of Contents Payment of Dividends The amount of any future dividends that we will pay, if any, will depend upon a number of factors.
The trading price of our common stock may be adversely affected due to many factors, most of which we cannot predict or control, such as the following: • fluctuations in our operating results; • a decision by the Board of Directors to reduce or eliminate cash dividends on our common stock; • changes in recommendations or earnings estimates by securities analysts; • general market conditions in our industry or in the economy as a whole; and • political instability, natural disasters, war and/or events of terrorism.
The number of shares of our common stock issued in connection with any of the foregoing may result in dilution to holders of our common stock. Volatility The market price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations.
The number of shares of our common stock issued in connection with any of the foregoing may result in dilution to holders of our common stock. 18 Table of Contents Volatility The market price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations.
Carrier provides a diverse variety of brands of HVAC systems including Carrier, Bryant, Payne, Tempstar, Heil, Comfortmaker, and Grandaire (a private label product created by the Company), along with complimentary replacement parts. Rheem provides Rheem-brand HVAC systems along with complimentary replacement parts.
Products supplied by Carrier include a diverse variety of brands of HVAC equipment including Carrier, Bryant, Payne, Tempstar, Heil, Comfortmaker, and Grandaire (a private label product created by the Company), along with complimentary replacement parts.
This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common stock despite our operating performance.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common stock despite our operating performance.
Risks Related to Loss Contingencies We carry general liability, comprehensive property damage, workers’ compensation, health benefits, cybersecurity, and other insurance coverage that management considers adequate for the protection of its assets and operations at reasonable premiums.
We cannot assure you that we will not suffer material impairments to goodwill, intangibles, or long-lived assets in the future. 17 Table of Contents Risks Related to Loss Contingencies We carry general liability, comprehensive property damage, workers’ compensation, health benefits, cybersecurity, and other insurance coverage that management considers adequate for the protection of its assets and operations at reasonable premiums.
Our international sales and operations, as well as sourcing of products from suppliers with international operations, are also sensitive to changes in foreign national priorities, including government budgets, as well as political and economic instability. In addition, post-pandemic delays and closures in China may disrupt the operations of certain of our suppliers, which could negatively impact our business.
Our international sales and operations, as well as sourcing of products from suppliers with international operations, are also sensitive to changes in foreign national priorities, including government budgets, as well as political and economic instability.
Cyberattacks may be further enhanced in frequency or effectiveness through threat actors’ use of artificial intelligence. We have established security policies, processes and defenses designed to help identify and protect against intentional and unintentional misappropriation or corruption of our information technology systems and information and disruption of our operations.
We have established security policies, processes and defenses designed to help identify and protect against intentional and unintentional misappropriation or corruption of our information technology systems and information and disruption of our operations.
We compete with other distributors and several air conditioning and heating equipment manufacturers that distribute a significant portion of their products through their own distribution organizations in certain markets. Competition within any given geographic market is based upon product availability, customer service, price, and quality.
Competition We operate in highly competitive environments and, in larger markets, often compete with both national and local distributors. We compete with other distributors and several air conditioning and heating equipment manufacturers that distribute a significant portion of their products through their own distribution organizations in certain markets.
Future cash flows can be affected by changes in the industry, a declining economic environment, or market conditions. We cannot assure you that we will not suffer material impairments to goodwill, intangibles, or long-lived assets in the future.
Future cash flows can be affected by changes in the industry, a declining economic environment, or market conditions.
Added
Rheem provides Rheem-brand HVAC systems, as well as Freidrich and AireVantage (a private label product created by Nordyne, a subsidiary of Rheem), along with complimentary replacement parts.
Added
Cybersecurity Risks In addition to the disruptions that may occur from interruptions in our information technology systems, cybersecurity threats and sophisticated and targeted cyberattacks pose a risk to our information technology systems. Cyberattacks may be further enhanced in frequency or effectiveness through threat actors’ use of artificial intelligence.
Added
However, more frequent catastrophic weather events may impact the availability and cost of property and casualty insurance.
Added
Payment of Dividends The amount of future dividends that we will pay, if any, will depend upon a number of factors.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+1 added−1 removed6 unchanged
Biggest changeGovernance A dedicated team at our corporate headquarters, which is led by our Director of Data Security (“DDS”) and composed of the Chief Technology Officer (“CTO”) and representatives from risk management, legal, internal audit, and finance departments, is responsible for assessing and managing our cybersecurity risks and data protection practices.
Biggest changeSuch processes and practices to assess, identify, and manage cybersecurity incidents are integrated into our overall enterprise risk assessment process. 19 Table of Contents Governance A dedicated team at our corporate headquarters, which is led by our Director of Data Security (“DDS”) and composed of the Chief Technology Officer (“CTO”) and representatives from risk management, legal, internal audit, and finance departments, is responsible for assessing and managing our cybersecurity risks and data protection practices.
Our DDS has more than 20 years of expertise in the information technology sector, with 11 years specifically dedicated to cybersecurity. This experience has fostered a thorough comprehension of cyber threat landscapes, defense strategies, and security technologies. 19 Table of Contents
Our DDS has more than 20 years of expertise in the information technology sector, with 12 years specifically dedicated to cybersecurity. This experience has fostered a thorough comprehension of cyber threat landscapes, defense strategies, and security technologies.
Removed
Such processes and practices to assess, identify, and manage cybersecurity incidents are integrated into our overall enterprise risk assessment process.
Added
As of the date of this Annual Report on Form 10-K, we have not encountered incidents from cybersecurity threats that have materially affected, or are reasonably likely to materially affect, our business strategy, results of operations, or financial position.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe majority of these leases are for terms of three to five years. We believe that our facilities are sufficient to meet our present operating needs. 20 Table of Contents Trucks At December 31, 2024, we operated 783 ground transport vehicles, including delivery and pick-up trucks, vans, and tractors.
Biggest changeThe majority of these leases are for terms of three to five years. We believe that our facilities are sufficient to meet our present operating needs. Trucks At December 31, 2025, we operated 873 ground transport vehicles, including delivery and pick-up trucks, vans, and tractors. Of this number, 604 trucks were leased, and the others were owned.
ITEM 2. PROPERTIES Our main properties include warehousing and distribution facilities, trucks, and administrative office space. Warehousing and Distribution Facilities At December 31, 2024, we operated 690 warehousing and distribution facilities across 43 U.S. states, Canada, Mexico, and Puerto Rico, having an aggregate of approximately 16.5 million square feet of space, of which approximately 16.4 million square feet is leased.
ITEM 2. PROPERTIES Our main properties include warehousing and distribution facilities, trucks, and administrative office space. Warehousing and Distribution Facilities At December 31, 2025, we operated 695 warehousing and distribution facilities across 43 U.S. states, Canada, Mexico, and Puerto Rico, having an aggregate of approximately 16.8 million square feet of space, of which approximately 16.6 million square feet is leased.
Of this number, 611 trucks were leased, and the others were owned. We believe that the present size of our truck fleet is adequate to support our operations. Administrative Facilities Senior management and support staff are located at various administrative offices in approximately 0.3 million square feet of space.
We believe that the present size of our truck fleet is adequate to support our operations. Administrative Facilities Senior management and support staff are located at various administrative offices in approximately 0.4 million square feet of space.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn aggregate, 6,370,913 shares of common stock have been repurchased at a cost of $114.4 million since the inception of this plan. At December 31, 2024, there were 1,129,087 shares remaining authorized for repurchase under this plan. Shares were last repurchased by the Company under this plan in 2008. ITEM 6. [RESERVED]
Biggest changeNo shares were repurchased under this plan during 2025, 2024 or 2023. In aggregate, 6,370,913 shares of common stock have been repurchased at a cost of $114.4 million since the inception of this plan. At December 31, 2025, there were 1,129,087 shares remaining authorized for repurchase under this plan.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2019 to December 31, 2024.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2020 to December 31, 2025.
Holders At February 25, 2025, there were 302 registered holders of our Common stock and 127 registered holders of our Class B common stock. 21 Table of Contents Shareholder Return Performance The following graph compares the cumulative five-year total shareholder return attained by holders of our common stock relative to the cumulative total returns of the Russell 2000 index, the S&P MidCap 400 index, the S&P 500 index, and the S&P 400 Industrials index.
Holders At February 24, 2026, there were 294 registered holders of our Common stock and 120 registered holders of our Class B common stock. 20 Table of Contents Shareholder Return Performance The following graph compares the cumulative five-year total shareholder return attained by holders of our common stock relative to the cumulative total returns of the Russell 2000 index, the S&P MidCap 400 index, the S&P 500 index, and the S&P 400 Industrials index.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference and shall not otherwise be deemed filed under such acts. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Watsco, Inc. 100.00 130.51 185.42 152.56 270.02 305.64 Watsco, Inc.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference and shall not otherwise be deemed filed under such acts. 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 Watsco, Inc. 100.00 142.06 116.89 206.89 234.18 170.85 Watsco, Inc.
Removed
Class B 100.00 133.31 180.68 153.34 264.15 343.14 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 S&P MidCap 400 Index 100.00 113.66 141.80 123.28 143.54 163.54 S&P 500 Index 100.00 118.40 152.39 124.79 157.59 197.02 S&P 400 Industrials Index 100.00 116.49 149.62 132.42 174.04 197.51 22 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs (1) October 1, 2024 to October 31, 2024 — $ — — $ — November 1, 2024 to November 30, 2024 517 535.00 — — December 1, 2024 to December 31, 2024 71,702 509.75 — — Total 72,219 $ 509.93 — $ — (1) During the quarter ended December 31, 2024, we purchased an aggregate of 72,219 shares of our common stock to satisfy the tax withholding obligations in connection with the vesting of restricted stock.
Added
Class B 100.00 135.54 115.03 198.15 257.40 167.30 Russell 2000 Index 100.00 114.82 91.35 106.82 119.14 134.40 S&P MidCap 400 Index 100.00 124.76 108.47 126.29 143.88 154.68 S&P 500 Index 100.00 128.71 105.40 133.10 166.40 196.16 S&P 400 Industrials Index 100.00 128.45 113.68 149.41 169.56 191.48 21 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers 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.
Removed
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. No shares were repurchased under this plan during 2024, 2023 or 2022.
Added
Shares were last repurchased by the Company under this plan in 2008. ITEM 6. [RESERVED] ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our 2025 Annual Report contains “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which section is incorporated herein by reference. ITEM 7A.
Added
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our 2025 Annual Report contains “Quantitative and Qualitative Disclosures about Market Risk,” which section is incorporated herein by reference.

Other WSO 10-K year-over-year comparisons