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Airgas Reports Fiscal 2010 Third Quarter Earnings |
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Airgas Reports Fiscal 2010 Third Quarter Earnings
- Adjusted diluted EPS* down 14% versus prior year, to $0.65, which excludes $0.09 of previously announced charges; diluted EPS down 26% to $0.56
- Sales down 13%, same-store sales down 14% versus prior year; sales per day up 1% sequentially
- Record year-to-date free cash flow* of $289 million, up 69% from prior year
RADNOR, PA – January 28, 2010 -- Airgas, Inc. (NYSE: ARG), the largest U.S. distributor of industrial, medical, and specialty gases, and related supplies, today reported net earnings of $46.9 million, or $0.56 per diluted share, for its third quarter ended December 31, 2009. Excluding previously announced charges of $0.05 per diluted share for debt extinguishment and $0.04 per diluted share for withdrawal from multi-employer pension plans, adjusted earnings per diluted share* were $0.65, compared to $0.76 per diluted share in the prior-year quarter.
Third quarter sales were $942 million, a decline of 13% from the prior year. Total same-store sales declined 14%, with hardgoods down 19% and gas and rent down 11%. Acquisitions contributed 1% sales growth in the quarter. On a sequential basis, total sales declined by 2% from the second quarter, reflecting the impact of fewer selling days and a normal seasonal decline of certain businesses in the All Other Operations segment. Sales per selling day increased sequentially by 1%.
“Although more modest than anticipated, a recovery seems to be underway across most of our geographies and customer segments,” said Airgas Chairman and Chief Executive Officer Peter McCausland. “However, a slow finish left third quarter sales short of our expectations. Conditions were particularly challenging in our Distribution segment’s highly-profitable rental welder business, as activity related to major plant turnarounds and contractor maintenance was unexpectedly slow. This quarter’s results were up against some tough comparisons, as our earnings remained strong late into last year’s third quarter.”
Cost reductions and operating efficiencies helped support the Company’s adjusted operating margin*, which declined modestly year-over-year to 11.1% from 12.2% and sequentially from 11.6%, when adjusted for multi-employer pension plan withdrawal charges. The sequential decline is attributable to seasonality of certain businesses in the All Other Operations segment, as adjusted operating margin* in the Distribution segment expanded modestly on a sequential basis. Operating margin in the current quarter, including multi-employer pension plan withdrawal charges, was 10.6%.
“We have aggressively managed costs and continue to gain production and distribution operating efficiencies, positioning us for profitable growth as the economy recovers,” added McCausland. “We have also reduced future exposure to defined benefit retirement obligations by withdrawing from half of our remaining multi-employer pension plans this year.”
Year-to-date free cash flow* through the third quarter was a record $289 million compared to $171 million last year, driven by adjusted cash from operations* of $470 million, up from $436 million last year, and by a 32% reduction in capital expenditures to $192 million this year. Return on capital* was 10.1% compared to 13.5% in the prior year, driven by the decline in operating income reflecting the difficult economic environment over the past year.
“Year-to-date we have reduced adjusted debt* by $191 million, and have acquired five companies with annual revenues of $47 million,” added McCausland. “We expect cash flow to remain strong and our markets to continue gaining momentum in the coming quarters. We are strengthening our sales and marketing organization, expanding product lines, and streamlining our supply chain. Airgas becomes more customer-focused every day, and we are ready to capitalize on an improving economy.”
The Company expects earnings per diluted share of $0.67 to $0.71 for the fourth quarter, assuming modest sequential improvement in its core packaged gas business partially offset by seasonal declines in its All Other Operations segment and continued pressure in its rental welding business. For fiscal 2010, the Company expects adjusted earnings of $2.66 to $2.70 per diluted share*, which excludes year-to-date charges of $0.05 per diluted share for withdrawal from multi-employer pension plans and $0.07 per diluted share for debt extinguishment. The previously announced range of $2.70 to $2.80 per diluted share also excluded the aforementioned charges. Including these charges, the Company expects earnings per diluted share of $2.54 to $2.58.
Prevailing economic conditions offer limited visibility into future sales and earnings, which should be taken into consideration when evaluating the Company’s guidance.
The Company will conduct an earnings teleconference at 9:00 a.m. Eastern Time on Friday, January 29. The teleconference will be available by calling (888) 576-4394. The presentation materials (this press release, slides to be presented during the Company’s teleconference and information about how to access a live and on-demand webcast of the teleconference) are available on the Internet in the “Investor Information” section of the Company’s website at www.airgas.com. A webcast of the teleconference will be available live and on-demand through February 26 at http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through February 5. To listen, call (888) 203-1112 and enter passcode 8695946.
* See attached reconciliations and calculations of the non-GAAP adjusted earnings per diluted share and earnings guidance, adjusted operating margin, adjusted cash from operations, adjusted debt, free cash flow, and return on capital financial measures.
About Airgas, Inc.
Airgas, Inc. (NYSE: ARG), through its subsidiaries, is the largest U.S. distributor of industrial, medical, and specialty gases, and hardgoods, such as welding equipment and supplies. Airgas is also one of the largest U.S. distributors of safety products, the largest U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast, and a leading distributor of process chemicals, refrigerants, and ammonia products. More than 14,000 employees work in over 1,100 locations, including branches, retail stores, gas fill plants, specialty gas labs, production facilities, and distribution centers. Airgas also distributes its products and services through eBusiness, catalog, and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base. For more information, please visit www.airgas.com.
Forward-Looking Statements
This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. These statements include, but are not limited to: expectations for fourth quarter earnings per diluted share to be in the range of $0.67 to $0.71; expectations for earnings per diluted share for fiscal 2010 to be in the range of $2.54 to $2.58, which includes year-to-date charges of $0.05 per diluted share for withdrawal from multi-employer pension plans and $0.07 per diluted share for debt extinguishment; expectations for adjusted earnings per diluted share for fiscal 2010 of $2.66 to $2.70, excluding year-to-date charges of $0.05 per diluted share for withdrawal from multi-employer pension plans and $0.07 per diluted share for debt extinguishment; a recovery underway across most of our geographies and customer segments; our being positioned for growth as the economy recovers; our operating efficiencies; our reduced future exposure to defined benefit retirement obligations; our expectation that cash flow will remain strong; and our expectation that our markets will continue gaining momentum in the coming quarters; our strengthening our sales and marketing organization, expanding product lines, and streamlining our supply chain; our becoming more customer-focused every day, and our readiness to capitalize on an improving economy. We intend that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors and should not be regarded as a representation by us or any other person that the results expressed therein will be achieved. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include: adverse changes in customer buying patterns resulting from further deterioration in current economic conditions; continued weakening in the operating and financial performance of our customers, which can negatively impact our sales and our ability to collect our accounts receivable; postponement of projects due to the recession; customer acceptance of price increases; the success of implementing and continuing our cost reduction programs; our ability to achieve anticipated acquisition synergies; supply cost pressures; increased industry competition; our ability to successfully identify, consummate, and integrate acquisitions; our continued ability to access credit markets on satisfactory terms; significant fluctuations in interest rates; increases in energy costs and other operating expenses eroding the planned cost savings; higher than expected implementation costs of the SAP system; conversion problems related to the SAP system that disrupt our business and negatively impact customer relationships; the impact of tightened credit markets on our customers; the impact of changes in tax and fiscal policies and laws; the potential for increased expenditures relating to compliance with environmental regulatory initiatives; the impact of new environmental, healthcare, tax, accounting, and other regulation; continued potential liability under the Multiemployer Pension Plan Amendments Act of 1980 with respect to our participation in or withdrawal from multi-employer pension plans for our union employees; the extent and duration of current recessionary trends in the U.S. economy; the effect of catastrophic events; political and economic uncertainties associated with current world events; and other factors described in the Company’s reports, including its March 31, 2009 Form 10-K, subsequent Forms 10-Q, and other forms filed by the Company with the Securities and Exchange Commission.
Consolidated statements of earnings, condensed consolidated balance sheets, consolidated statements of cash flows, and reconciliations of non-GAAP financial measures follow.
Please click here for the complete release including financials.
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