(Source: Business Wire)
Airgas, Inc. (NYSE:ARG), the largest U.S. distributor of industrial,
medical, and specialty gases, and related supplies, today reported net
earnings of $54.5 million, or $0.65 per diluted share, for its second
quarter ended September 30, 2009. Excluding a $0.02 per diluted share
debt extinguishment charge and a $0.01 per diluted share multi-employer
pension plan withdrawal charge, adjusted earnings per diluted share*
were $0.68, compared to $0.86 per diluted share in the prior-year
quarter. Cost reductions and operating efficiencies continued to support
the Company's operating margin, which posted only a modest decline
year-over-year to 11.4% from 12.5% and improved sequentially from 11.0%
in the face of a challenging sales environment.
Second quarter sales were $962 million, a decline of 17% from the prior
year. Total same-store sales declined 19%, with hardgoods down 27% and
gas and rent down 14%. Acquisitions contributed 2% sales growth in the
quarter.
"While sales finished stronger than they started, we are still in a very
challenging economy," said Airgas Chairman and Chief Executive Officer
Peter McCausland. "Difficult conditions were broad-based across our
geographies and customer segments. Consistent with recent quarters, our
manufacturing customers suffered the deepest declines while our medical
business showed the most resilience."
As previously announced, the Company fully implemented $45 million of
annual expense reductions between December 2008 and March 2009, the
benefit of which is fully reflected in first and second quarter results.
An additional $12 million of annual expense reductions were completed
during the second quarter and are expected to yield full run-rate
benefits starting in the third quarter. These $57 million of expense
reductions were in addition to $10 million of expected annual savings in
fiscal 2010 from ongoing efficiency initiatives.
"We have managed our cost structure effectively during this downturn,"
McCausland continued, "reducing expenses to mitigate the impact of
declining sales on our earnings. Our efforts have yielded better
operating margin and earnings than the declining sales might otherwise
imply, and we are still in a good position to benefit when the economy
starts to recover."
Year-to-date free cash flow* through the second quarter was $223 million
compared to $112 million last year, driven by adjusted cash from
operations* of $349 million, up from $287 million last year, and by a
29% reduction in capital expenditures to $131 million this year. Return
on capital* was 10.8% compared to 13.6% in the prior year.
"In spite of the challenging business climate, some notable highlights
in the quarter included credit rating upgrades by both rating agencies,
our $400 million 4.5% senior notes offering that was significantly
oversubscribed and which was used to reduce revolver borrowings, and our
addition to the S&P 500 index," added McCausland. "We continue to
generate strong free cash flow, which we used to reduce debt this
quarter. Although we believe the worst same-store sales declines are now
behind us, we remain cautious in our near-term outlook and focused on
forward progress for the long run."
The Company expects adjusted earnings per diluted share of $0.67 to
$0.70 for the third quarter, which excludes the previously announced
$0.05 per diluted share loss on the early extinguishment of debt related
to the October redemption of its $150 million 6.25% notes. Including
this charge, the Company expects earnings per diluted share of $0.62 to
$0.65. For fiscal 2010, the Company expects adjusted earnings of $2.70
to $2.80 per diluted share, which excludes $0.03 per diluted share of
charges in the second quarter and the $0.05 per diluted share charge in
the third quarter. Including these charges, the Company expects earnings
per diluted share of $2.62 to $2.72. The previously announced range of
$2.65 to $2.85 per diluted share also excluded the aforementioned second
and third quarter charges. The third quarter and fiscal 2010 guidance
above does not incorporate the impact of future multi-employer pension
plan withdrawal charges. The Company will continue its efforts to
withdraw from such plans. Charges for withdrawal from plans under
contracts that expire during the remainder of fiscal 2010 could be up to
$0.04 per diluted share.
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 today at 2:00 p.m.
Eastern Time. The teleconference will be available by calling (877)
718-5092. 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 in the "Investor Information" section on the Company's
Internet site at www.airgas.com.
A webcast of the teleconference will be available live and on-demand
through November 25 at http://investor.shareholder.com/arg/events.cfm.
A replay of the teleconference will be available through November 6. To
listen, call (888) 203-1112 and enter passcode 8939514.
* See attached reconciliations and calculations of the non-GAAP adjusted
earnings per diluted share and earnings guidance, adjusted cash from
operations, 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 third quarter diluted earnings per share to be in
the range of $0.62 to $0.65, which includes the previously announced
$0.05 per diluted share loss on the early extinguishment of its 6.25%
notes; expectations for full year diluted earnings per share for fiscal
2010 to be in the range of $2.62 to $2.72, which includes $0.03 per
diluted share of charges in the second quarter and the $0.05 per diluted
share charge in the third quarter; our expectations to yield full
run-rate benefits from announced expense reductions and efficiency
initiatives; our expectation regarding our ability to benefit when the
economy starts to recover; our continuing efforts to withdraw from
multi-employer pension plans, and our expectation that withdrawal from
plans under contracts that expire during the remainder of fiscal 2010
could be up to $0.04 per diluted share; our belief that our worst
same-store sales declines are now behind us; and our cautious outlook
for the near-term. 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 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 the Company's 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; 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.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2009 2008(d) 2009 2008(d)
Net sales $ 962,266 $ 1,161,908 $ 1,941,523 $ 2,278,622
Costs and expenses:
Cost of products sold (excluding depreciation) 426,433 558,020 866,269 1,096,485
Selling, distribution and administrative expenses 367,892 403,890 743,005 793,783
Depreciation 52,647 48,930 104,230 97,028
Amortization 5,477 6,080 10,293 11,486
Total costs and expenses 852,449 1,016,920 1,723,797 1,998,782
Operating income 109,817 144,988 217,726 279,840
Interest expense, net (16,343 ) (22,047 ) (34,710 ) (41,127 )
Discount on securitization of trade receivables (a) (1,485 ) (2,866 ) (3,100 ) (5,850 )
Loss on debt extinguishment (c) (2,011 ) - (2,011 ) -
Other income (expense), net (257 ) (185 ) 948 135
Earnings before income tax expense 89,721 119,890 178,853 232,998
Income tax expense (35,181 ) (47,069 ) (69,497 ) (91,294 )
Net earnings $ 54,540 $ 72,821 $ 109,356 $ 141,704
Net earnings per common share:
Basic earnings per share $ 0.67 $ 0.88 $ 1.34 $ 1.72
Diluted earnings per share $ 0.65 $ 0.86 $ 1.31 $ 1.67
Weighted average shares outstanding:
Basic 81,764 82,471 81,646 82,581
Diluted 83,476 84,706 83,258 84,848
See attached Notes.
-------------------------------------------------------------------------------
AIRGAS, INC.