Airgas Reports Strong Third Quarter Earnings
o Adjusted diluted EPS* of $0.80, which excludes $0.15 of special items, up 23% over prior year
o Same-store sales up 9% over prior year
o Adjusted operating margin* of 12.2%, expansion of 110 basis points over prior year
o Year-to-date free cash flow* of $255 million; year-to-date adjusted debt* reduction of $178 million
o Full-year adjusted diluted EPS* guidance of $3.28 to $3.32, representing a 22% to 24% increase over prior year
RADNOR, PA - January 21, 2011 - Airgas, Inc. (NYSE: ARG), the largest U.S. distributor of industrial, medical, and specialty gases, and related supplies, today reported net earnings of $55.8 million, or $0.65 per diluted share, for its third quarter ended December 31, 2010. Excluding legal and professional fees and other costs of $0.13 per diluted share** related to an unsolicited takeover attempt, and a one-time interest penalty of $0.02 per diluted share related to the late removal of a restrictive legend on the Company's 7.125% senior subordinated notes, adjusted earnings per diluted share* were $0.80, an increase of 23% from adjusted earnings per diluted share* of $0.65 in the prior year. Prior year GAAP earnings per diluted share of $0.56 included debt extinguishment charges of $0.05 per diluted share and multi-employer pension plan withdrawal charges of $0.04 per diluted share.
Third quarter sales were $1.03 billion, an increase of 9.5% over the prior year. Total same-store sales increased 9% in the quarter, with hardgoods up 11% and gas and rent up 7%. Sequentially, total sales declined 3% from the second quarter, driven by normal seasonality in the All Other Operations business segment and two fewer selling days in the third quarter. Sales per day increased 1% sequentially on a consolidated basis and 2% sequentially in the Distribution business segment.
"We are seeing improvement across the country, with robust results in our Great Lakes, Mid South, and Southwest regions," said Airgas Chief Executive Officer Peter McCausland. "Growth is now accelerating in our core business on strength in our manufacturing, utilities and petrochemical customer segments, as well as in repair and maintenance activity, particularly at our larger customers. Although we have yet to see meaningful recovery in energy and infrastructure construction, the outlook is improving and our rental welder business is poised to return to positive same-store sales growth in our fourth quarter."
Adjusted operating margin* for the quarter improved by 110 basis points year-over-year to 12.2% from 11.1%.
"We continue to manage costs while gaining production and distribution efficiencies as volumes recover," McCausland added. "Our national footprint and industry-leading platform also help boost operating leverage on sales growth."
Year-to-date free cash flow* was $255 million at the end of the third fiscal quarter, driven by adjusted cash from operations* of $419 million. Adjusted debt* at the end of the quarter was $1.6 billion, reflecting a reduction of $178 million year-to-date.
"Our acquisition pipeline is improving as the economy recovers. We recently acquired three businesses with annual revenues of $14 million, including Conley Gas, a supplier of pure gases to the specialty gas industry," McCausland said. "Since the beginning of our fiscal year in April, we have acquired seven businesses with $20 million in annual revenues, and we anticipate a more robust acquisition environment in the coming quarters."
Guidance Update
The Company expects adjusted earnings per diluted share* for the fourth quarter to increase 19% to 25% from $0.69 in the prior year to $0.82 to $0.86, which includes $0.04 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 22% to 24% from $2.68 in the prior year to $3.28 to $3.32, which includes $0.10 per diluted share of incremental expense associated with its SAP implementation. The fourth quarter and fiscal 2011 guidance excludes debt extinguishment charges, multi-employer pension plan withdrawal charges, costs and charges related to the unsolicited takeover attempt, and the one-time interest penalty.
"Our updated fiscal 2011 adjusted EPS guidance now represents a year-over-year increase of 26% to 28% in underlying earnings before SAP costs," added McCausland. "Given our strong performance and expectations for steady growth, we are on track to outperform our calendar 2012 earnings goal of at least $4.20 per share."
The Company will conduct an earnings teleconference at 11:30 a.m. Eastern Time on Friday, January 21. The teleconference will be available by calling (888) 334-3034. 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 February 22 at investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through January 31. To listen, call (888) 203-1112 and enter passcode 8406321.
* 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
