Airgas Reports First Quarter Earnings, Raises Full Year Guidance


o Adjusted diluted EPS* of $0.83, which excludes $0.07 of special items, up 26% over prior year and up 20% sequentially
o Full-year adjusted diluted EPS* guidance raised to $3.15 to $3.30 from $2.95 to $3.05, representing a 18% to 23% increase over prior year; second quarter guidance of $0.78 to $0.82
o Same-store sales up 6% over prior year; sales per day up 5% sequentially over fourth quarter
o Adjusted operating margin* of 12.3%, expansion of 130 basis points over prior year and 160 basis points sequentially over fourth quarter
o Free cash flow* of $113 million; $83 million of debt reduction in first quarter
o Second quarter dividend raised to $0.25

RADNOR, PA - July 21, 2010 -- Airgas, Inc. (NYSE: ARG), the largest U.S. distributor of industrial, medical, and specialty gases, and related supplies, today reported net earnings of $64.8 million, or $0.76 per diluted share, for its first quarter ended June 30, 2010. Excluding legal and professional fees of $0.03 per diluted share** related to an unsolicited takeover attempt, debt extinguishment charges of $0.02 per diluted share, and multi-employer pension plan withdrawal charges of $0.02 per diluted share, adjusted earnings per diluted share* were $0.83, up 26% from $0.66 in the prior year and up 20% sequentially.

First quarter sales were $1.05 billion, a sequential increase of 5% in sales per day and 7% in total sales compared to the fourth quarter. Compared to the prior year, total same-store sales increased 6% in the quarter, with hardgoods up 8% and gas and rent up 5%. Acquisitions contributed 1% sales growth over prior year.

"We delivered the second best earnings quarter in company history, which is particularly encouraging given that, at this early stage of the economic recovery, revenues have not yet recovered to pre-recession levels," said Airgas Chairman and Chief Executive Officer Peter McCausland. "Our strategy through the downturn was to position Airgas to emerge from the recession as an even stronger company, and our results demonstrate our success, as we are running very close to record earnings and margins.

"Conditions continued to improve in most of our customer segments and geographies this quarter, led by manufacturing, and with the greatest strength in our Great Lakes region," McCausland added. "The strengthening in our business and our robust results give us the confidence to raise our fiscal 2011 guidance. Further, the increasing momentum we are seeing reinforces our confidence in our calendar 2012 earnings goal of at least $4.20 per share, and with continued modest improvement in the economy, we could very well outperform that objective."

Adjusted operating margin* for the quarter improved year-over-year to 12.3% from 11.0% and sequentially from 10.7%, driven by operating leverage on sales growth and continued cost discipline. Adjusted operating margin* in the Distribution business segment improved sequentially for a fourth consecutive quarter to 11.5%.

Free cash flow* for the quarter was strong at $113 million, driven by adjusted cash from operations* of $171 million and disciplined capital expenditures. Net debt at the end of the quarter was $1.7 billion, reflecting more than $83 million in debt reduction during the quarter.

Guidance Update

The Company expects adjusted earnings per diluted share* for the second quarter to increase 15% to 21% from $0.68 in the prior year to $0.78 to $0.82, which includes $0.03 per diluted share of incremental expense associated with its SAP implementation. For the full fiscal year 2011, the Company expects adjusted earnings per diluted share* to increase 18% to 23% from $2.68 in the prior year to $3.15 to $3.30, which includes $0.10 per diluted share of incremental expense associated with its SAP implementation. The second quarter and fiscal 2011 guidance does not incorporate the impact of debt extinguishment or multi-employer pension plan withdrawal charges, or costs related to the unsolicited takeover attempt.

"Our updated fiscal 2011 guidance represents a year-over-year increase of 21% to 27% in underlying earnings before SAP costs," added McCausland. "We successfully began the roll out of our SAP system on schedule July 5, with the conversion of our Safety telesales and hardgoods infrastructure businesses. We are very pleased that all converted operations are running as planned and without interruption. There is tremendous value to be realized for our stockholders through the continued execution of our business strategies, including leveraging our substantial recent investments, enhancing our customer service culture and operating efficiency, and extending our business platform. We remain confident in our ability to build on our track record of delivering solid returns for all Airgas stockholders and are very pleased to announce a significant quarterly dividend increase to $0.25 per share, reflecting our strong performance and future prospects."

The Company will conduct an earnings teleconference at 10:00 a.m. Eastern Time on

Wednesday, July 21. The teleconference will be available by calling (888) 516-2445. 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 of the Company's website at www.airgas.com. A webcast of the teleconference will be available live and on demand through August 20 at investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through July 29. To listen, call (888) 203-1112 and enter passcode 2140121.

* See attached reconciliations and calculations of the non-GAAP adjusted earnings per diluted share, adjusted operating margin, adjusted cash from operations, free cash flow, and adjusted debt.

** The legal and professional fees incurred are in response to Air Products' unsolicited takeover attempt.

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 approximately 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.

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