Airgas Reports Record Fiscal Fourth Quarter and Full Year Earnings
* Record fourth quarter adjusted diluted EPS* of $1.11, up 26% over prior year
* Fourth quarter same-store sales up 11% over prior year
* Return on capital* of 12.5%, up 60 basis points over prior year
* Record full-year adjusted diluted EPS* of $4.11, up 23% over prior year
* Fiscal year 2013 adjusted diluted EPS* guidance of $4.70 to $4.85
Radnor, PA - Airgas, Inc. (NYSE: ARG), the largest U.S. distributor of industrial, medical, and specialty gases, and related supplies, today reported strong performance in sales, operating income, and earnings for its fourth quarter ended March 31, 2012. Business trends reflect growth across the Company's diverse customer base with particular strength in large manufacturing, petrochemical, and energy customers.
Fourth quarter adjusted earnings per diluted share* were a record $1.11, an increase of 26% from $0.88 in the prior year. Results included SAP implementation costs and depreciation expense of $0.09 and $0.04 per diluted share for the current and prior year quarters, respectively, and the current quarter reflected the benefit of share repurchases which offset the incremental SAP costs.
"Our performance was very strong this quarter across most of our core business, with particular strength in manufacturing, petrochemical and energy customers, and noticeable improvement in our construction customer base, despite a weak new project market," said Airgas Chief Executive Officer Peter McCausland. "Our product line adjacency businesses also performed well relative to our expectations, highlighted by strong pre-season demand in our refrigerants business that contributed nicely to our earnings this quarter."
Fourth quarter sales were $1.24 billion, an increase of 13% over the prior year. Same-store sales grew 11% in the quarter, with hardgoods up 15% and gas and rent up 9%. Acquisitions contributed sales growth of 2% in the quarter. Sequentially, total sales increased 8% from the third quarter, reflecting the impact of two additional selling days, the falloff of the holiday impact, and continued business growth. Sequentially, sales per day increased 4% from the third quarter on a consolidated basis and increased 3% in the Distribution business segment.
Adjusted operating margin* of 12.2% for the fourth quarter included 90 basis points of impact from SAP implementation costs and depreciation expense. Prior year adjusted operating margin* of 12.2% included only 50 basis points of impact from SAP implementation costs and depreciation expense.
"The strength of our hardgoods same-store sales growth relative to gas and rent, and the sales mix shift within hardgoods to welding and automation equipment, reflect the continued modest expansion and reinvestment we're seeing by larger customers in the manufacturing-intensive regions of the U.S.," said Airgas Chief Operating Officer Michael L. Molinini. "While the mix shift has a dilutive effect on our gross margin, we have continued to leverage our national footprint and industry-leading platform to increase our underlying operating margin and expand our return on capital* to 12.5% this quarter, 60 basis points over the prior year. A continuation of current business trends, coupled with the future benefits of our SAP implementation, indicates very attractive prospects for Airgas."
For the full year, sales increased 12% from the prior year to $4.7 billion. Total same-store sales increased 10%, with hardgoods up 14% and gas and rent up 7%, while acquisitions contributed 2% sales growth for the year.
Full year adjusted earnings per diluted share* were a record $4.11, an increase of 23% from $3.35 in the prior year. Results included SAP implementation costs and depreciation expense of $0.34 and $0.14 per diluted share for the current and prior year, respectively, and the current year reflected the benefit of share repurchases, which offset the incremental SAP costs.
"Our record sales and earnings performance this year is a testament to the value of our investment in organic growth initiatives such as our Strategic Accounts program, as well as our strong operating culture and customer-centric approach to doing business," said McCausland. "Our acquisition pipeline continues to improve, and in fiscal 2012 we acquired eight businesses with aggregate annual revenues of more than $106 million, including our recent purchase of Nordan Smith with 17 locations across Mississippi, Arkansas, and Alabama."
Free cash flow for the year was $262 million, compared to $387 million in the prior year, and adjusted cash from operations* was $593 million for the year, compared to $617 million in the prior year. The decrease in free cash flow from the prior year reflects an increase in capital expenditures and working capital to support strong sales growth.
During the fiscal 2011 fourth quarter, the Company completed a $300 million share repurchase program, repurchasing 4.78 million shares at an average price of $62.76. During the first quarter of fiscal 2012, the Company completed an additional $300 million share repurchase program, repurchasing 4.46 million shares at an average price of $67.19.
Guidance
The Company expects adjusted earnings per diluted share* for the first quarter of fiscal 2013 to increase 12% to 16% from $1.00 in the prior year to $1.12 to $1.16, which includes $0.08 of SAP implementation costs and depreciation expense in both periods.
For fiscal 2013, the Company expects adjusted earnings per diluted share* to increase 14% to 18% from $4.11 in fiscal 2012 to $4.70 to $4.85, which includes approximately $0.12 to $0.16 of SAP implementation costs and depreciation expense, net of expected benefits. Fiscal 2012 adjusted earnings per diluted share* included $0.34 of SAP implementation costs and depreciation expense.
Fiscal 2013 guidance excludes restructuring charges related to the consolidation of our regional accounting and administrative functions into four Business Support Centers, which are expected to approximate a net charge of $0.02 in the first quarter and $0.06 for the full year. Special gains and charges in fiscal 2012 were a net total charge of $0.11.
The Company will conduct an earnings teleconference at 10:00 a.m. Eastern Time on Thursday, May 3. The teleconference will be available by calling (888) 587-0615. 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 June 1 at http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through May 11. To listen, call (888) 203-1112 and enter passcode 9254540.
Airgas Increases First Quarter Dividend by 25%
Radnor, PA - Airgas, Inc. (NYSE: ARG) today announced that the Board of Directors increased the quarterly cash dividend on the company's common stock by 25%, from $0.32 per share to $0.40 per share. The dividend will be payable on June 29, 2012 to shareholders of record as of June 15, 2012.
"Fiscal 2012 was another tremendous year for Airgas and its shareholders, highlighted by record earnings and very strong cash flow," said Airgas Chairman and Chief Executive Officer Peter McCausland. "The financial strength of our business and our outstanding future prospects enable us to increase our dividend while continuing to fund our long-term growth strategies."
Airgas Announces Leadership Transition
Michael L. Molinini to be Named President and Chief Executive Officer Following 2012 Annual Meeting of Stockholders; Joins Board of Directors
Airgas Founder Peter McCausland to Serve as Executive Chairman of the Board
Radnor, PA - Airgas, Inc. (NYSE: ARG) today announced that effective immediately following the Company's 2012 Annual Meeting of Stockholders scheduled to be held in mid-August, Airgas Founder Peter McCausland will assume the role of Executive Chairman of the Board of Directors, and current Executive Vice President and Chief Operating Officer Michael L. Molinini will succeed him as President and Chief Executive Officer.
In connection with this leadership transition, the Airgas Board of Directors has unanimously elected Molinini to serve as a director of the Company, effective immediately, expanding the Board to eleven directors. Molinini will stand for re-election to the Board at the Company's 2012 Annual Meeting. In his expanded role, Molinini will continue to lead the Company's operations and information technology initiatives, while also assuming responsibility for finance and human resources. McCausland will continue to lead the development of Airgas' growth strategies. In addition, McCausland will continue to serve as Chairman of the Company's Management Committee and will retain responsibility for corporate development, risk management and governance.
"Mike and I have worked together for 15 years; he is a proven leader with an outstanding record of accomplishment both here at Airgas and in his previous roles," said McCausland. "I am confident that Mike is the right person to serve as Airgas' next CEO and that he will continue to build on our 30-year track record of operational excellence and shareholder value creation. Mike and I, together with our CFO Bob McLaughlin, will continue to be actively engaged with our shareholders and the rest of the investment community. As Airgas' founder and largest shareholder, I am committed to making sure that this plan is successful, and I am looking forward to working with Mike and the entire management team in the years ahead. As I always say, the best time at Airgas is now."
"This leadership transition is a natural result of the Board's long-time focus on developing a deep management team and represents the next step in the evolution of Airgas," said Lee Thomas, Chairman of the Airgas Board's Governance and Compensation Committee. "The company's current momentum provides an opportune time for Mike to take on increased responsibility, allowing Peter to focus his expertise, industry experience, and considerable energy on the areas of the business about which he is most passionate - strategic planning, mergers and acquisitions, and corporate governance."
"I am honored and energized by the confidence that Peter and the rest of the Board have in me, and I look forward to enhancing Airgas' position as one of the premier industrial gas companies in the world," said Molinini. "Peter and I have worked successfully together for many years and I am pleased that he will stay actively involved in Airgas, continuing to contribute the vision and leadership that have helped make the company what it is today. I plan to continue his tradition of strong, active leadership and nurturing Airgas' entrepreneurial culture in pursuit of the tremendous opportunities ahead for Airgas. Our more than 15,000 associates are the best in the business, and together we will continue to focus on serving our one million loyal customers, operating safely, and growing the business for years to come."
Peter McCausland is Chairman and Chief Executive Officer of Airgas. McCausland founded Airgas in 1982, has been President and Chief Executive Officer since 1987, previously served as Chairman of the Board from 1987 to September 2010, and was elected Chairman again in August 2011. Before founding Airgas, McCausland served as General Counsel for MG Industries, Inc., an industrial gas producer. He also was a founding partner in the law firm of McCausland Keen & Buckman, where he focused on mergers, acquisitions, and financings. McCausland serves as a director of the Fox Chase Cancer Center, the Independence Seaport Museum, and the Philadelphia Orchestra Association. He also serves on the Board of Visitors of the College of Arts and Sciences, University of South Carolina, and on the Board of Visitors at the Boston University School of Law.
Michael L. Molinini is Executive Vice President and Chief Operating Officer of Airgas and is a member of the Management Committee. Prior to assuming this position in January 2005, he was Senior Vice President - Hardgoods, with company-wide responsibility for directing sales and marketing, procurement, and distribution center logistics. Molinini joined Airgas in April 1997 as Group Vice President of Airgas Direct Industrial and led the build out of Airgas' hardgoods supply chain, including development of the Radnor private label program. Prior to joining Airgas, Molinini served as Vice President - Marketing at National Welders Supply Company, an Airgas joint venture, where he managed all gases and hardgoods sales and marketing programs. Molinini joined National Welders after spending 19 years with the Linde Division of Union Carbide Corporation in a variety of operations, sales and management positions.
