Airgas Reports Fiscal Second Quarter Earnings
- Second quarter diluted EPS of $1.03 and adjusted diluted EPS* of $1.05, each up 2% over prior year
- Second quarter same-store sales up 3% over prior year
- Year-to-date free cash flow* of $121 million, up 15% over prior year
- Return on capital* of 12.5%, up 20 basis points over prior year
- Revised fiscal year 2013 diluted EPS guidance to $4.42 to $4.57 from $4.61 to $4.71; revised fiscal year 2013 adjusted diluted EPS* guidance to $4.45 to $4.60 from $4.65 to $4.75
RADNOR, PA - Airgas, Inc., a large U.S. supplier of industrial, medical, and specialty gases, and related products, today reported solid financial results for its second quarter ended September 30, 2012, in moderating macroeconomic conditions across its diversified customer base during the quarter and in light of the year-over-year impacts of incrementally higher SAP implementation costs, one less selling day, and helium supply constraints.
Second quarter earnings per diluted share were $1.03, an increase of 2% over prior year earnings per diluted share of $1.01. Excluding a $0.02 restructuring charge, adjusted earnings per diluted share* were $1.05, an increase of 2% over prior year adjusted earnings per diluted share* of $1.03. Results included SAP implementation costs and depreciation expense of $0.09 per diluted share in the current year quarter compared to $0.07 in the prior year quarter, a year-over-year negative impact of approximately $0.03 due to one less selling day in the current year quarter, and a year-over-year decline of $0.02 from the impact of lower sales due to helium supply constraints.
"Our second quarter earnings reflect the resilience of our business and our 15,000 dedicated associates in a sluggish economic environment," said Airgas Executive Chairman Peter McCausland. "Though the relative strength of the U.S. metal fabrication and energy sectors overall has softened of late, we continue to win new business in these sectors on the strength of our strategic accounts program, technical support, breadth of our product and service offering, and outstanding customer service. The year-over-year earnings headwinds we faced this quarter from one less selling day, helium supply constraints, and incremental SAP costs reduced our year-over-year earnings growth by $0.07, further highlighting the solid performance in our underlying business."
Second quarter sales were $1.23 billion, an increase of 4% over the prior year. Same-store sales grew 3% in the quarter, with gas and rent up 4% and hardgoods up 1%.
"Current business conditions present some near-term challenges, but we will continue to invest in our growth strategies," said Airgas Chief Executive Officer Michael L. Molinini. "Our SAP implementation is on-schedule, with ten of our twelve regional distribution businesses now running successfully on the new system. We remain confident that we will realize the economic benefits as planned and that this investment will further enhance the value of our full-service offering to customers and help our business operate more efficiently over the long-term."
Operating margin was 11.8% for the second quarter and included 90 basis points of impact from SAP implementation costs and depreciation expense. Prior year operating margin was 12.0% and included 70 basis points of impact from SAP implementation costs and depreciation expense. Adjusted operating margin* was 12.0% and 12.2% in the current and prior year quarters, respectively.
Return on capital* was 12.5% for the twelve months ended September 30, 2012, an increase of 20 basis points over the prior year.
Year-to-date free cash flow* through the second quarter was $121 million, an increase of 15% over the prior year, and adjusted cash from operations* was $277 million, an increase of 8% over the prior year.
Since the beginning of its fiscal year, the Company has acquired eight businesses with aggregate annual revenues of more than $19 million.
"The broad-based moderation in business conditions that persisted during the second quarter has continued during October," McCausland said. "Accordingly, we're reducing our outlook for earnings growth for the balance of our fiscal year. Though we're appropriately cautious about the near-term business environment, we're very optimistic about the long-term prospects for the U.S. manufacturing and energy industries and our ability to leverage our unique value proposition and unrivaled platform to drive growth in these and other key customer segments."
The Company expects earnings per diluted share for the third quarter of fiscal 2013 to increase 11% to 17% from $0.93 in the prior year to $1.03 to $1.09. The Company expects adjusted earnings per diluted share* for the third quarter of fiscal 2013 to increase 8% to 14% from $0.97 in the prior year to $1.05 to $1.11. Guidance for both earnings per diluted share and adjusted earnings per diluted share* reflects an estimated year-over-year decline of $0.03 from the impact of lower sales due to helium supply constraints, as well as $0.01 to $0.02 of SAP implementation costs and depreciation expense, net of expected benefits, compared to $0.10 of expense in the prior year.
For fiscal 2013, the Company expects earnings per diluted share to increase 11% to 14% from $4.00 in the prior year to $4.42 to $4.57. The Company expects adjusted earnings per diluted share* to increase 8% to 12% from $4.11 in the prior year to $4.45 to $4.60. Guidance for both earnings per diluted share and adjusted earnings per diluted share* reflects an estimated year-over-year decline of $0.06 from the impact of two less selling days in fiscal 2013, an estimated year-over-year decline of $0.10 from the impact of lower sales due to helium supply constraints, as well as 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 adjusted earnings per diluted share* guidance excludes restructuring and other special charges, which were $0.05 in the first quarter and $0.02 in the second quarter, and are expected to be $0.02 in the third quarter and $0.10 for the full year, and also excludes a $0.07 gain on the sale of businesses in the first quarter. 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 Tuesday, October 23. The teleconference will be available by calling (888) 204-4368 (U.S./Canada) or (913) 312-0968 (International). 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 23 at http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through October 31. To listen, call (888) 203-1112 (U.S./Canada) or (719) 457-0820 (International) and enter passcode 8448259.
* See attached reconciliations and computations of non-GAAP adjusted earnings per diluted share, adjusted operating margin, adjusted cash from operations, free cash flow, and return on capital.
RADNOR, PA - Airgas, Inc. announced a program to repurchase up to $600 million of its outstanding shares of common stock. As of October 22, 2012, Airgas had approximately 77.3 million common shares outstanding.
"Airgas is well-positioned for sustained long-term growth, and this share repurchase program reflects our confidence in the future," said Airgas Executive Chairman Peter McCausland. "Our balance sheet is solid, and we continue to generate strong cash flow, which affords us the opportunity to repurchase shares and realize attractive earnings accretion while continuing to fund our growth strategies."
Airgas may repurchase shares from time to time for cash in open market transactions or in privately-negotiated transactions in accordance with applicable federal securities laws. The company will determine the timing and the amount of any repurchases based on its evaluation of market conditions, share price, and other factors. The stock repurchase program has no pre-established closing date and may be suspended or discontinued at any time.
About Airgas, Inc.
Airgas, Inc. (NYSE: ARG), through its subsidiaries, is one of the nation's leading suppliers of industrial, medical and specialty gases, and hardgoods, such as welding equipment and related products. Airgas is a leading U.S. producer of atmospheric gases with 16 air separation plants, a leading producer of carbon dioxide, dry ice, and nitrous oxide, one of the largest U.S. suppliers of safety products, and a leading U.S. supplier of refrigerants, ammonia products, and process chemicals. More than 15,000 employees work in approximately 1,100 locations, including branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also markets 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.