Airgas Reports Strong Second Quarter Earnings; Raises Full Year Guidance
o Adjusted diluted EPS* of $0.83, which excludes $0.05 of special items, up 22% over prior year
o Same-store sales up 9% over prior year
o Adjusted operating margin* of 12.0%, expansion of 40 basis points over prior year
o Year-to-date free cash flow* of $179 million; year-to-date adjusted debt* reduction of $127 million
o Full-year adjusted diluted EPS* guidance raised to $3.22 to $3.32 from $3.15 to $3.30, representing a 20% to 24% increase over prior year
RADNOR, PA - October 26, 2010 -- Airgas, Inc. (NYSE: ARG), the largest U.S. distributor of industrial, medical, and specialty gases, and related supplies, today reported net earnings of $66.6 million, or $0.78 per diluted share, for its second quarter ended September 30, 2010. Excluding legal and professional fees and other costs of $0.03 per diluted share** related to an unsolicited takeover attempt, debt extinguishment charges of $0.01 per diluted share, and multi-employer pension plan withdrawal charges of $0.01 per diluted share, adjusted earnings per diluted share* were $0.83, an increase of 22% from adjusted earnings per diluted share* of $0.68 in the prior year. Prior year GAAP earnings per share of $0.65 included debt extinguishment charges of $0.02 per diluted share and multi-employer pension plan withdrawal charges of $0.01 per diluted share.
Second quarter sales were $1.06 billion, a sequential increase of 1% compared to the first quarter on the same number of selling days. Compared to the prior year, total same-store sales increased 9% in the quarter, with hardgoods up 12% and gas and rent up 7%. Acquisitions contributed 1% sales growth over the prior year.
"Our business continued to strengthen in our second quarter, reflecting broad-based improvement in most of our geographies and customer segments, and with the greatest strength in manufacturing," said Airgas Chief Executive Officer Peter McCausland. "Hardgoods same-store sales accelerated noticeably this quarter as compared to gas and rent same-store sales, which is a trend consistent with an economic recovery. While revenues have not yet recovered to pre-recession levels, we are experiencing favorable leverage on sales growth and are achieving near record results for earnings and margins."
Adjusted operating margin* for the quarter improved year-over-year to 12.0% from 11.6%, driven by operating leverage on sales growth and continued cost discipline. Sequentially, adjusted operating margin* was down slightly from 12.3% in the first quarter, reflecting 30 basis points of incremental impact from the commencement of SAP system conversions in July.
"With solid revenue growth and effective cost management, we drove second quarter adjusted EPS that exceeded our guided range, and that matched the second-best earnings quarter in Airgas history," McCausland added. "Our SAP implementation is proceeding as planned, and our robust business momentum positions us to continue delivering earnings growth and strong cash flow."
Year-to-date free cash flow* was $179 million at the end of the second fiscal quarter, driven by adjusted cash from operations* of $290 million and a 120 basis point year-over-year reduction in capital expenditures as a percent of sales, to 5.5%. Adjusted debt* at the end of the quarter was $1.7 billion, reflecting a reduction of more than $127 million year-to-date.
Guidance Update
The Company expects adjusted earnings per diluted share* for the third quarter to increase 17% to 23% from $0.65 in the prior year to $0.76 to $0.80, which includes $0.01 per diluted share of incremental expense associated with its SAP implementation. The sequential decline from the second quarter in adjusted earnings per diluted share reflects normal seasonal declines in the All Other Operations business segment as well as the impact of holidays and two fewer selling days in the third quarter, partially offset by continued business growth in the Distribution business segment.
For the full fiscal year 2011, the Company expects adjusted earnings per diluted share* to increase 20% to 24% from $2.68 in the prior year to $3.22 to $3.32, which includes $0.11 per diluted share of incremental expense associated with SAP implementation. The third quarter and fiscal 2011 guidance excludes debt extinguishment charges, multi-employer pension plan withdrawal charges, and costs and charges related to the unsolicited takeover attempt.
"Given our strong performance and expectations for steady growth, we raised our fiscal 2011 guidance, which now represents a year-over-year increase of 24% to 28% in underlying earnings before SAP costs," added McCausland. "We remain on track to beat our calendar 2012 earnings goal of at least $4.20 per share, and we strongly believe that there is tremendous value to be realized for our stockholders through the continued execution of our business strategies."
The Company will conduct an earnings teleconference at 11:00 a.m. Eastern Time on Tuesday, October 26. The teleconference will be available by calling (888) 359-3613. 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 November 26 at investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through November 3. To listen, call (888) 203-1112 and enter passcode 7505468.
* 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 and other costs 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.
Media Contact:
Jay Worley (610) 902-6206
jay.worley@airgas.com
Joele Frank / Dan Katcher / Andrew Siegel
Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449
Investor Contact:
Barry Strzelec (610) 902-6256
barry.strzelec@airgas.com
