- Record first quarter adjusted diluted EPS* of $1.13, up 13% over prior year
- First quarter same-store sales up 7% over prior year
- Return on capital* of 12.6%, up 50 basis points over prior year
- Revised fiscal year 2013 adjusted diluted EPS* guidance to $4.65 to $4.75 from $4.70 to $4.85
RADNOR, Pa.--Airgas, Inc. reported strong performance in sales, operating income, and earnings for its first quarter ended June 30, 2012, despite moderating business trends and the impact of disruption within its helium supply chain during the quarter.
First quarter adjusted earnings per diluted share* were a record $1.13, an increase of 13% from $1.00 in the prior year. Results included SAP implementation costs and depreciation expense of $0.10 and $0.08 per diluted share for the current and prior year quarters, respectively. In addition, lower helium sales volumes driven by the inability of suppliers to meet their helium supply commitments to the Company during the quarter reduced earnings by $0.04 per diluted share, some of which was anticipated.
Earnings per diluted share (GAAP)
Restructuring and other special charges
Gain on sale of businesses
Costs (benefits) related to unsolicited takeover attempt
Multi-employer pension plan withdrawal charges
Adjusted earnings per diluted share (non-GAAP)
“Our earnings were strong, notwithstanding the significant incremental challenges we faced in our helium supply chain during the quarter,” said Airgas Chief Executive Officer Peter McCausland. “The slow and steady growth we had been seeing across our customer base through May moderated in June. We are paying close attention to our business trends and tightening controls on our operating expenses. Though we are appropriately cautious about near-term conditions, we remain 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.”
First quarter sales were $1.26 billion, an increase of 8% over the prior year. Same-store sales grew 7% in the quarter, with hardgoods up 9% and gas and rent up 5%. Acquisitions, net of a divestiture, contributed sales growth of 1% in the quarter. Sequentially, sales increased 1% from the fourth quarter.
“While SAP implementation costs were higher than anticipated this quarter and are expected to be so for the remainder of the year, the number one priority in an undertaking of this magnitude is getting it right,” said Airgas Chief Operating Officer Michael L. Molinini. “In the past five months, we have successfully converted four regional companies and trained more than 2,000 users, which is a significant accomplishment for which our associates are to be commended. The implementation is on-schedule, with nearly seventy percent of the distribution business running on SAP, and 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.”
Adjusted operating margin* was 12.5% for the first quarter and included 100 basis points of impact from SAP implementation costs and depreciation expense. Prior year adjusted operating margin* was 12.4% and included 90 basis points of impact from SAP implementation costs and depreciation expense.
Return on capital* was 12.6% for the twelve months ended June 30, 2012, an increase of 50 basis points over the prior year.
The Company generated strong free cash flow* of $76 million for the quarter, compared to $71 million in the prior year, and adjusted cash from operations* was $155 million for the quarter, compared to $139 million in the prior year.
“While we expect the global helium supply chain to improve in early calendar 2013, the year-over-year headwinds will continue to be greater than we had originally anticipated for the remainder of the current fiscal year,” McCausland said. “We believe the economic recovery has indeed hit a soft patch but expect most of our customer segments to continue to post modest growth this year. Our fiscal 2013 outlook assumes mid-single-digit same-store sales in our core distribution business. Should business conditions deteriorate, however, we will have to revisit our outlook.”
The Company expects adjusted earnings per diluted share* for the second quarter of fiscal 2013 to increase 2% to 6% from $1.03 in the prior year to $1.05 to $1.09, which reflects an estimated year-over-year decline of $0.02 from the impact of lost sales due to helium supply chain constraints, as well as $0.10 of SAP implementation costs and depreciation expense compared to $0.07 of expense in the prior year. Second quarter guidance also reflects an estimated decline of $0.03 from the impact of one less selling day relative to the first quarter of fiscal 2013 and the second quarter of fiscal 2012.
For fiscal 2013, the Company expects adjusted earnings per diluted share* to increase 13% to 16% from $4.11 in fiscal 2012 to $4.65 to $4.75, which reflects the impact of two less selling days in fiscal 2013, an estimated year-over-year decline of $0.10 from the impact of lost 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 guidance excludes restructuring charges and other special charges, which were $0.05 in the first quarter and are expected to be approximately $0.03 for the second quarter and $0.11 for the full year, as well as 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 Wednesday, July 25. The teleconference will be available by calling (888) 539-3686. 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 23 at http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through August 2. To listen, call (888) 203-1112 and enter passcode 6307460.
* See attached reconciliations and calculations of the non-GAAP adjusted earnings per diluted share, adjusted operating income and adjusted operating margin, adjusted capital expenditures, adjusted cash from operations, free cash flow, and return on capital.