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| 8-K - AIRGAS, INC. 8-K - AIRGAS INC | a6710056.htm |
Exhibit 99.1
Airgas Reports Fiscal Fourth Quarter and Full Year 2011 Earnings
- Record fourth quarter adjusted diluted EPS* of $0.88, which includes $0.04 of SAP costs and excludes $0.14 of special items, up 28% over prior year
- Fourth quarter same-store sales up 11% over prior year
- Record full-year adjusted diluted EPS* of $3.34, which includes $0.14 of SAP costs and excludes $0.41 of special items, up 25% over prior year
- Full-year free cash flow* of $387 million; adjusted cash from operations* of $617 million
- Fiscal year 2012 adjusted diluted EPS* guidance of $3.75 to $3.90, which includes $0.32 of SAP costs
RADNOR, Pa.--(BUSINESS WIRE)--May 5, 2011--Airgas, Inc. (NYSE: ARG), the largest U.S. distributor of industrial, medical, and specialty gases, and related supplies, today reported net earnings of $63 million, or $0.74 per diluted share, for its fourth quarter ended March 31, 2011. Excluding legal and professional fees and other costs of $0.14 per diluted share** related to an unsolicited takeover attempt, adjusted earnings per diluted share* were $0.88, an increase of 28% from adjusted earnings per diluted share* of $0.69 in the prior year. Prior year GAAP earnings per diluted share of $0.47 included legal and professional fees of $0.18 related to an unsolicited takeover attempt, debt extinguishment charges of $0.07 and a $0.03 income tax benefit. Adjusted earnings per diluted share include SAP implementation costs and depreciation expense of $0.04 and $0.01 for the current and prior year quarters, respectively.
Fourth quarter sales were $1.1 billion, an increase of 12% over the prior year. Total same-store sales increased 11% in the quarter, with hardgoods up 14% and gas and rent up 9%. Sequentially, total sales increased 7% from the third quarter, and sales per day increased 3%.
“The manufacturing recovery that began in the central regions of the U.S. among larger customers is now evident more broadly throughout the country and in smaller manufacturers. Our medical business began to accelerate this quarter, and utilities and petrochemical customers, as well as customers using our products and services for repair and maintenance operations, continued to show strength,” said Airgas Chief Executive Officer Peter McCausland. “We continue to leverage our national footprint and industry-leading platform as sales volumes recover, improving our adjusted operating margin* for the quarter by 140 basis points year-over-year to 12.1% and posting record earnings on sales that are still below pre-recession levels.”
For the full year, sales increased 10% from the prior year to $4.3 billion. Total same-store sales increased 8%, with hardgoods up 11% and gas and rent up 7%, while acquisitions contributed 2% sales growth for the year.
Net earnings for the year were $250 million, or $2.93 per diluted share. Excluding $0.41 of special items primarily related to an unsolicited takeover attempt, adjusted earnings per diluted share* were a record $3.34, up 25% over prior year, and the related adjusted operating margin* was 12.2%. Adjusted earnings per diluted share include SAP implementation costs and depreciation expense of $0.14 and $0.06 for the current and prior years, respectively. Return on capital* improved by 190 basis points over the prior year to 11.9%, driven by stronger operating performance and leveraging the significant capital investments made in recent years.
Free cash flow* for the year was $387 million, compared to $412 million in the prior year, driven by adjusted cash from operations* of $617 million. The modest decrease in free cash flow from the prior year primarily reflects an increase in working capital to support sales growth. As of March 31, 2011, the Company had completed the $300 million share repurchase authorization announced on February 16, 2011, repurchasing 4.78 million shares on the open market at an average price of $62.76. The Company increased its dividend payout by 33% in fiscal 2011.
Guidance
The Company expects adjusted earnings per diluted share* for the first quarter of fiscal 2012 to increase 11% to 17% from $0.83 in the prior year to $0.92 to $0.97, which includes $0.08 of SAP implementation costs and depreciation expense, compared to $0.03 in the prior year.
For fiscal 2012, the Company expects adjusted earnings per diluted share* to increase 12% to 17% from $3.34 in fiscal 2011 to $3.75 to $3.90, which includes $0.32 of SAP implementation costs and depreciation expense, compared to $0.14 in fiscal 2011.
All fiscal 2012 adjusted diluted EPS* guidance excludes the impact of restructuring charges, expected to be $0.10 in the first quarter and $0.17 for the full year. The charges arise from the consolidation of the accounting and certain administrative functions of twelve regional distribution companies into four Business Support Centers.
“The rollout of SAP at our first regional distribution company, Airgas South, which went live at the beginning of April, has been very successful and reinforces our confidence in the benefits we expect to achieve. SAP implementation costs will be heaviest in fiscal 2012, and we expect to complete the implementation in fiscal 2013 as the benefits begin to ramp up,” said McCausland. “Even with considerable SAP implementation costs still to be incurred, we remain on track to beat our calendar 2012 earnings goal of at least $4.20 per diluted share.”
The Company will conduct an earnings teleconference at 10:00 a.m. Eastern Time on Thursday, May 5. The teleconference will be available by calling (800) 616-9004. 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 3 at http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through May 13. To listen, call (888) 203-1112 and enter passcode 9682617.
* 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 return on capital.
** 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.
This press release contains statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and releases. These statements include, but are not limited to: expectations for adjusted earnings per diluted share (excluding restructuring charges) to be in the range of $0.92 to $0.97 (which includes $0.08 of SAP implementation costs and depreciation expense, compared to $0.03 in the prior year) for the first quarter of fiscal 2012, and in the range of $3.75 to $3.90 (which includes $0.32 of SAP implementation costs and depreciation expense, compared to $0.14 in fiscal 2011) for fiscal year 2012; expectations for the impact of restructuring charges to be $0.10 per diluted share in the first quarter of fiscal 2012 and $0.17 per diluted share for fiscal year 2012; expectations regarding the timing and magnitude of SAP implementation costs to be incurred and benefits to be achieved; and our ability to outperform our calendar 2012 earnings goal of at least $4.20 per diluted share. Forward-looking statements also include any statement that is not based on historical fact, including statements containing the words "believes," "may," "plans," "will," "could," "should," "estimates," "continues," "anticipates," "intends," "expects," and similar expressions. We intend that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors and should not be regarded as a representation by us or any other person that the results expressed therein will be achieved. Airgas assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include: adverse changes in customer buying patterns resulting from deterioration in current economic conditions; weakening in the operating and financial performance of our customers, which can negatively impact our sales and our ability to collect our accounts receivable; postponement of projects due to economic developments; customer acceptance of price increases; the success of implementing and continuing our cost reduction programs; our ability to achieve anticipated acquisition synergies; supply cost pressures; increased industry competition; our ability to successfully identify, consummate, and integrate acquisitions; our continued ability to access credit markets on satisfactory terms; significant fluctuations in interest rates; increases in energy costs and other operating expenses eroding planned cost savings; higher than expected implementation costs of the SAP system; conversion problems related to the SAP system that disrupt our business and negatively impact customer relationships; the impact of tightened credit markets on our customers; the impact of changes in tax and fiscal policies and laws; the potential for increased expenditures relating to compliance with environmental regulatory initiatives; the impact of new environmental, healthcare, tax, accounting, and other regulation; continued potential liability under the Multiemployer Pension Plan Amendments Act of 1980 with respect to our participation in or withdrawal from multi-employer pension plans for our union employees; the timing of economic recovery in the U.S. economy; the effect of catastrophic events; political and economic uncertainties associated with current world events; and other factors described in the Company's reports, including its March 31, 2010 Form 10-K, subsequent Forms 10-Q, and other forms filed by the Company with the SEC.
Consolidated statements of earnings, condensed consolidated balance sheets, consolidated statements of cash flows, and reconciliations of non-GAAP financial measures follow below.
| AIRGAS, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2011 | 2010 (g) | 2011 | 2010 (g) | |||||||||||||
| Net sales | $ | 1,102,684 | $ | 983,308 | $ | 4,251,467 | $ | 3,875,153 | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of products sold | ||||||||||||||||
| (excluding depreciation) | 504,599 | 448,667 | 1,914,090 | 1,727,866 | ||||||||||||
| Selling, distribution and | ||||||||||||||||
| administrative expenses (d) | 398,947 | 368,350 | 1,574,072 | 1,489,305 | ||||||||||||
| Costs related to unsolicited | ||||||||||||||||
| takeover attempt (e) | 18,374 | 23,435 | 44,406 | 23,435 | ||||||||||||
| Depreciation | 58,773 | 54,846 | 225,383 | 212,718 | ||||||||||||
| Amortization | 6,492 | 6,127 | 25,135 | 22,231 | ||||||||||||
| Total costs and expenses | 987,185 | 901,425 | 3,783,086 | 3,475,555 | ||||||||||||
| Operating income | 115,499 | 81,883 | 468,381 | 399,598 | ||||||||||||
| Interest expense, net (f) | (14,239 | ) | (13,566 | ) | (60,054 | ) | (63,310 | ) | ||||||||
| Discount on securitization | ||||||||||||||||
| of trade receivables (a) | - | (1,148 | ) |
- |
(5,651 | ) | ||||||||||
| Losses on the extinguishment |
|
|||||||||||||||
| of debt (c) | - | (9,191 | ) | (4,162 | ) | (17,869 | ) | |||||||||
| Other income, net | 680 | 442 | 1,958 | 1,332 | ||||||||||||
| Earnings before income tax expense | 101,940 | 58,420 | 406,123 |
314,100 |
||||||||||||
| Income tax expense | (39,369 | ) | (18,342 | ) | (156,357 | ) | (117,800 | ) | ||||||||
| Net earnings | $ | 62,571 | $ | 40,078 | $ | 249,766 | $ | 196,300 | ||||||||
| Net earnings per common share: | ||||||||||||||||
| Basic earnings per share | $ | 0.76 | $ | 0.48 | $ | 2.99 | $ | 2.39 | ||||||||
| Diluted earnings per share | $ | 0.74 | $ | 0.47 | $ | 2.93 | $ | 2.34 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 82,714 | 82,928 | 83,487 | 82,129 | ||||||||||||
| Diluted | 84,395 | 84,669 | 85,252 | 83,787 | ||||||||||||
| See attached Notes. | ||||||||||||||||
| AIRGAS, INC. AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (Amounts in thousands) | ||||||
| (Unaudited) | ||||||
| March 31, | ||||||
| 2011 | 2010 | |||||
| ASSETS | ||||||
| Cash | $ | 57,218 | $ | 47,001 | ||
| Trade receivables, net (a) | 550,262 | 186,804 | ||||
| Inventories, net | 362,502 | 333,961 | ||||
| Deferred income tax asset, net | 50,132 | 48,591 | ||||
| Prepaid expenses and other current assets | 100,531 | 94,978 | ||||
| TOTAL CURRENT ASSETS | 1,120,645 | 711,335 | ||||
| Plant and equipment, net | 2,455,758 | 2,427,996 | ||||
| Goodwill | 1,117,336 | 1,109,276 | ||||
| Other intangible assets, net | 197,168 | 212,752 | ||||
| Other non-current assets | 44,974 | 34,573 | ||||
| TOTAL ASSETS | $ | 4,935,881 | $ | 4,495,932 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Accounts payable, trade | $ | 163,091 | $ | 157,566 | ||
| Accrued expenses and other current liabilities | 391,544 | 307,822 | ||||
| Current portion of long-term debt | 9,868 | 10,255 | ||||
| TOTAL CURRENT LIABILITIES | 564,503 | 475,643 | ||||
| Long-term debt, excluding current portion (a)(b) | 1,842,994 | 1,499,384 | ||||
| Deferred income tax liability, net | 722,954 | 652,389 | ||||
| Other non-current liabilities | 70,548 | 72,972 | ||||
| Stockholders’ equity | 1,734,882 | 1,795,544 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 4,935,881 | $ | 4,495,932 | ||
| See attached Notes. | ||||||
| AIRGAS, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Amounts in thousands) | ||||||||
| (Unaudited) | ||||||||
| Year Ended | ||||||||
| March 31, | ||||||||
| 2011 | 2010 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net earnings | $ | 249,766 | $ | 196,300 | ||||
|
Adjustments to reconcile net earnings to net cash
provided by operating activities: |
||||||||
| Depreciation | 225,383 | 212,718 | ||||||
| Amortization | 25,135 | 22,231 | ||||||
| Deferred income taxes | 69,328 | 66,166 | ||||||
| Loss on sales of plant and equipment | 976 | 3,014 | ||||||
| Stock-based compensation expense | 23,669 | 22,868 | ||||||
| Losses on the extinguishment of debt (c) | 4,162 | 17,869 | ||||||
| Changes in assets and liabilities, excluding effects of business acquisitions and divestitures: | ||||||||
| Securitization of trade receivables (a) | (295,000 | ) | (16,400 | ) | ||||
| Trade receivables, net | (66,216 | ) | 18,287 | |||||
| Inventories, net | (28,636 | ) | 58,785 | |||||
| Prepaid expenses and other current assets | (3,586 | ) | (18,028 | ) | ||||
| Accounts payable, trade | 6,043 | (3,863 | ) | |||||
| Accrued expenses and other current liabilities | 65,504 | 24,085 | ||||||
| Other non-current assets | 1,427 | 4,012 | ||||||
| Other non-current liabilities | (2,654 | ) | (7,997 | ) | ||||
| Net cash provided by operating activities | 275,301 | 600,047 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (256,030 | ) | (252,828 | ) | ||||
| Proceeds from sales of plant and equipment | 15,844 | 14,466 | ||||||
| Business acquisitions and holdback settlements | (21,186 | ) | (80,777 | ) | ||||
| Other, net | (395 | ) | (3,142 | ) | ||||
| Net cash used in investing activities | (261,767 | ) | (322,281 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from borrowings | 1,403,010 | 1,446,500 | ||||||
| Repayment of debt | (1,072,417 | ) | (1,700,368 | ) | ||||
| Financing costs | (8,598 | ) | (5,161 | ) | ||||
| Premium paid on call of senior subordinated notes (c) | (3,175 | ) | (14,624 | ) | ||||
| Purchase of treasury stock | (300,000 | ) | - | |||||
| Proceeds from the exercise of stock options | 22,092 | 21,863 | ||||||
| Stock issued for the Employee Stock Purchase Plan | 14,997 | 15,428 | ||||||
| Tax benefit realized from the exercise of stock options | 8,444 | 15,444 | ||||||
| Dividends paid to stockholders | (83,797 | ) | (62,526 | ) | ||||
| Change in cash overdraft and other | 16,127 | 5,491 | ||||||
| Net cash used in financing activities | (3,317 | ) | (277,953 | ) | ||||
| Change in cash | $ | 10,217 | $ | (187 | ) | |||
| Cash – Beginning of period | 47,001 | 47,188 | ||||||
| Cash – End of period | $ | 57,218 | $ | 47,001 | ||||
| See attached Notes. | ||||||||
| Notes: | ||
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a) |
On April 1, 2010, the Company adopted new accounting guidance which affected the presentation of its trade receivables securitization program. Under the new guidance, proceeds received under the securitization are treated as secured borrowings. Previously, they were treated as proceeds from the sale of trade receivables. The Company participates in a trade receivables securitization agreement with three commercial banks. Funding under the agreement was $295 million at both March 31, 2011 and March 31, 2010. Beginning on April 1, 2010, the Company recognized the trade receivables and the borrowings they collateralize on its consolidated balance sheet. Additionally, new borrowings under the trade receivables securitization agreement are classified as financing activities on the Company’s consolidated statement of cash flows. Prior to April 1, 2010, they were treated as proceeds from the sale of trade receivables and reflected net of collections on the consolidated statement of cash flows as operating activities. With respect to the Company’s consolidated statement of earnings, the amounts previously recorded within the line item “Discount on securitization of trade receivables,” which represented the difference between the proceeds from the sale and the carrying value of the receivables under the securitization agreement, are now reflected within “Interest expense, net” consistent with the new accounting treatment. |
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b) |
The Company maintains a senior credit facility (the “Credit Facility”) with a syndicate of lenders, which replaced the Company’s prior credit facility in September 2010. Approximately $335 million was available to the Company under the Credit Facility at March 31, 2011. |
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c) |
During the fiscal years ended March 31, 2011 and 2010, the Company repurchased $30 million and $154 million, respectively, of its 7.125% senior subordinated notes that are due on October 1, 2018 (the “2018 Notes”). In fiscal 2011, the Company recognized $4.2 million ($2.6 million after tax) of losses on the extinguishment of debt related to redemption premiums and the write-off of deferred financing costs associated with the repurchases of the 2018 Notes and the early termination of the prior credit facility. Losses on the extinguishment of debt of approximately $9.2 million and $17.9 million ($5.8 million and $11.3 million after tax) were recognized in fiscal 2010 related to the redemption premium and the write-off of deferred financing costs associated with the repurchase of notes during the fourth fiscal quarter and fiscal year ended March 31, 2010, respectively. |
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d) |
As collective bargaining agreements (“CBAs”) came up for renewal, the Company actively negotiated the withdrawal from multi-employer defined benefit pension plans (“MEPP”) replacing those retirement plans for CBA employees with defined contribution plans. As part of the withdrawal from a MEPP, the Company is required to fund its portion of the MEPP’s unfunded pension obligation. The ultimate amount of the withdrawal liability assessed by the MEPP is impacted by a number of factors, including investment returns, benefit levels, and continued participation by other employers in the MEPP. The computation of the Company’s portion of a plan’s unfunded obligation may take up to 24 months for the pension plan administrators to prepare. As a result, the Company has recorded estimated liabilities for these withdrawals based on the latest information available to it from the plans. MEPP withdrawal charges for the years ended March 31, 2011 and 2010 were $4.6 million ($2.8 million after tax) and $6.7 million ($4.1 million after tax) respectively. There were no MEPP withdrawal charges in the fourth quarter of either fiscal year. These charges are reflected in selling, distribution and administrative expenses. In fiscal 2012, three remaining CBAs, covering approximately 30 employees who participate in MEPPs, will come up for renewal. Also included within selling, distribution and administrative expenses are costs related to the Company’s SAP implementation. During the fiscal fourth quarter and fiscal year ended March 31, 2011, costs related to the Company’s SAP implementation of $5.0 million and $16.4 million, respectively, were also reflected in selling, distribution and administrative expenses. During the fourth fiscal quarter and fiscal year ended March 31, 2010, SAP implementation costs of $1.7 million and $7.5 million, respectively, were reflected in selling, distribution and administrative expenses. |
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e) |
On February 11, 2010, Air Products & Chemicals, Inc. (“Air Products”) initiated an unsolicited tender offer for all of the Company’s outstanding shares of common stock. In connection with this unsolicited tender offer, Air Products filed an action against the Company and members of its Board in the Delaware Court of Chancery. In the suit, Air Products sought, among other things, an order declaring that members of the Company’s Board breached their fiduciary duties by refusing to negotiate with Air Products. Additionally, a number of purported stockholder class action lawsuits were commenced against the Company and/or the members of the Airgas Board in the Delaware Court of Chancery. These suits, which were later consolidated, alleged, among other things, that the members of the Airgas Board breached their fiduciary duties by refusing to negotiate with Air Products, failing to seek more valuable alternatives and failing to redeem the Company’s shareholder rights plan. On February 15, 2011, the Delaware Court of Chancery denied in their entirety all requests for relief by Air Products and by the plaintiffs in the stockholder class action lawsuits, and dismissed with prejudice all claims asserted against the Company and its directors. Air Products promptly terminated its unsolicited tender offer and no appeal of the Court’s decision was filed. In connection with the unsolicited tender offer and related litigation, the Company incurred $67.8 million of legal and professional fees and other costs, of which $18.4 million and $44.4 million were incurred during the three- and twelve-month periods ended March 31, 2011, respectively, and $23.4 million was incurred during the three- and twelve-month periods ended March 31, 2010. |
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f) |
During the third quarter of fiscal 2011, the Company incurred a one-time interest penalty to holders of the 2018 Notes in the amount of $2.6 million ($1.7 million after tax), relating to the late removal of a restrictive legend on these notes. The Company has classified these charges as interest expense. |
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g) |
Certain reclassifications were made to the consolidated statements of earnings for the prior period to conform to the current period presentation. These reclassifications resulted in increasing revenue and selling, distribution and administrative expenses and reducing cost of products sold (excluding depreciation). These reclassifications were the result of conforming the Company’s accounting policies in conjunction with its SAP implementation and were not material. Consolidated operating income and net earnings for the prior period were not impacted by the reclassifications. |
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h) |
Business segment information for the Company’s Distribution and All Other Operations business segments is presented below. Certain reclassifications were made to the presentation of business segment operating results for the prior periods to conform to the current period presentation. These reclassifications were the result of changes made to the allocation of corporate operating expenses. Although corporate operating expenses are generally allocated to each business segment based on sales dollars, the Company currently reports expenses (excluding depreciation) related to the implementation of its SAP system and costs associated with the Company’s withdrawal from various MEPPs under selling, distribution and administrative expenses in the eliminations and other column below. Previously these costs were allocated to each business segment based on sales dollars. Consolidated operating income and net earnings for the prior periods were not impacted by these reclassifications. Additionally, the legal and professional fees incurred as a result of Air Products’ unsolicited tender offer are not allocated to the Company’s business segments. These costs are also reflected in the eliminations and other column below. |
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| (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||
| March 31, 2011 | March 31, 2010 | |||||||||||||||||||||||||
| (In thousands) | Distribution |
All Other Ops. |
Elimination and Other |
Total | Distribution |
All Other Ops. |
Elimination and Other |
Total | ||||||||||||||||||
| Gas and rent | $ | 588,664 | $ | 110,834 | $ | (7,266 | ) | $ | 692,232 | $ | 534,298 | $ | 98,740 | $ | (6,009 | ) | $ | 627,029 | ||||||||
| Hardgoods | 408,643 | 1,812 | (3 | ) | 410,452 | 354,841 | 1,444 | (6 | ) | 356,279 | ||||||||||||||||
| Total net sales | 997,307 | 112,646 | (7,269 | ) | 1,102,684 | 889,139 | 100,184 | (6,015 | ) | 983,308 | ||||||||||||||||
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Cost of products sold (excluding depreciation) |
447,447 | 64,421 | (7,269 | ) | 504,599 | 397,888 | 56,794 | (6,015 | ) | 448,667 | ||||||||||||||||
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Selling, distribution and administrative expenses |
359,455 | 34,508 | 4,984 | 398,947 | 333,755 | 32,963 | 1,632 | 368,350 | ||||||||||||||||||
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Costs related to unsolicited takeover attempt |
- | - | 18,374 | 18,374 | - | - | 23,435 | 23,435 | ||||||||||||||||||
| Depreciation | 54,830 | 3,943 | - | 58,773 | 51,185 | 3,661 | - | 54,846 | ||||||||||||||||||
| Amortization | 5,327 | 1,165 | - | 6,492 | 4,966 | 1,161 | - | 6,127 | ||||||||||||||||||
| Operating income | $ | 130,248 | $ | 8,609 | $ | (23,358 | ) | $ | 115,499 | $ | 101,345 | $ | 5,605 | $ | (25,067 | ) | $ | 81,883 | ||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
| Year Ended | Year Ended | |||||||||||||||||||||||||
| March 31, 2011 | March 31, 2010 | |||||||||||||||||||||||||
| (In thousands) | Distribution |
All Other Ops. |
Elimination and Other |
Total | Distribution |
All Other Ops. |
Elimination and Other |
Total | ||||||||||||||||||
| Gas and rent | $ | 2,272,215 | $ | 465,803 | $ | (30,702 | ) | $ | 2,707,316 | $ | 2,113,223 | $ | 414,903 | $ | (24,240 | ) | $ | 2,503,886 | ||||||||
| Hardgoods | 1,537,921 | 6,251 | (21 | ) | 1,544,151 | 1,365,252 | 6,038 | (23 | ) | 1,371,267 | ||||||||||||||||
| Total net sales | 3,810,136 | 472,054 | (30,723 | ) | 4,251,467 | 3,478,475 | 420,941 | (24,263 | ) | 3,875,153 | ||||||||||||||||
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Cost of products sold (excluding depreciation) |
1,692,866 | 251,947 | (30,723 | ) | 1,914,090 | 1,529,607 | 222,522 | (24,263 | ) | 1,727,866 | ||||||||||||||||
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Selling, distribution and administrative expenses |
1,418,491 | 134,578 | 21,003 | 1,574,072 | 1,348,022 | 127,250 | 14,033 | 1,489,305 | ||||||||||||||||||
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Costs related to unsolicited takeover attempt |
- | - | 44,406 | 44,406 | - | - | 23,435 | 23,435 | ||||||||||||||||||
| Depreciation | 209,999 | 15,384 | - | 225,383 | 198,066 | 14,652 | - | 212,718 | ||||||||||||||||||
| Amortization | 20,485 | 4,650 | - | 25,135 | 18,196 | 4,035 | - | 22,231 | ||||||||||||||||||
| Operating income | $ | 468,295 | $ | 65,495 | $ | (65,409 | ) | $ | 468,381 | $ | 384,584 | $ | 52,482 | $ | (37,468 | ) | $ | 399,598 | ||||||||
Reconciliations of Non-GAAP Financial Measures (Unaudited)
Adjusted Earnings Per Diluted Share and Earnings Guidance
Reconciliations and computations of adjusted earnings per diluted share and earnings guidance:
| Three Months Ended | Year Ended | |||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||
| Earnings per diluted share | $ | 0.74 | $ | 0.47 | $ | 2.93 | $ | 2.34 | ||||||||||||||||
| Adjustments to earnings per diluted share: | ||||||||||||||||||||||||
| Costs related to unsolicited takeover attempt | 0.14 | 0.18 | 0.33 | 0.18 | ||||||||||||||||||||
| Losses on the extinguishment of debt | - | 0.07 | 0.03 | 0.14 | ||||||||||||||||||||
| Multi-employer pension withdrawal charges | - | - | 0.03 | 0.05 | ||||||||||||||||||||
| Non-recurring tax benefit | - | (0.03 | ) | - | (0.03 | ) | ||||||||||||||||||
| One-time interest penalty | - | - | 0.02 | - | ||||||||||||||||||||
| Adjusted earnings per diluted share | $ | 0.88 | $ | 0.69 | $ | 3.34 | $ | 2.68 | ||||||||||||||||
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| Three | (Guidance Range) | (Guidance Range) | ||||||||||||||||||||||
| Months | Three Months Ending | Year | Year Ending | |||||||||||||||||||||
| Ended | June 30, 2011 | Ended | March 31, 2012 | |||||||||||||||||||||
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June 30, |
March 31, |
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| 2010 | Low | High | 2011 | Low | High | |||||||||||||||||||
| Earnings per diluted share | $ | 0.76 | $ | 0.82 | $ | 0.87 | $ | 2.93 | $ | 3.58 | $ | 3.73 | ||||||||||||
| Adjustments to earnings per diluted share: | ||||||||||||||||||||||||
| Costs related to unsolicited takeover attempt | 0.03 | - | - | 0.33 | - | - | ||||||||||||||||||
| Losses on the extinguishment of debt | 0.02 | - | - | 0.03 | - | - | ||||||||||||||||||
| Multi-employer pension withdrawal charges | 0.02 | - | - | 0.03 | - | - | ||||||||||||||||||
| One-time interest penalty | - | - | - | 0.02 | - | - | ||||||||||||||||||
| Business Support Center restructuring charges | - | 0.10 | 0.10 | - | 0.17 | 0.17 | ||||||||||||||||||
| Adjusted earnings per diluted share | $ | 0.83 | $ | 0.92 | $ | 0.97 | $ | 3.34 | $ | 3.75 | $ | 3.90 | ||||||||||||
| Year-over-year change | 11 | % | 17 | % | 12 | % | 17 | % | ||||||||||||||||
Guidance for adjusted earnings per diluted share excludes Business Support Center restructuring charges and any potential multi-employer pension plan withdrawal charges that may arise from the three remaining CBAs, covering approximately 30 employees who participate in MEPPs, that come up for renewal in fiscal 2012.
The Company believes that adjusted earnings per diluted share provides investors meaningful insight into the Company's earnings performance without the impact of debt extinguishment charges, multi-employer pension plan withdrawal charges, costs related to Air Products’ unsolicited takeover attempt, the non-recurring tax benefit, the one-time interest penalty, and Business Support Center restructuring charges. Non-GAAP numbers should be read in conjunction with GAAP financial measures, as non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial measures. It should be noted as well that our adjusted earnings per diluted share metric may be different from adjusted earnings per diluted share metrics provided by other companies.
Adjusted Operating Margin
Reconciliations and computations of adjusted operating margin:
| Three Months Ended | Year Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| (Dollars in thousands) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Net sales | $ | 1,102,684 | $ | 983,308 | $ | 4,251,467 | $ | 3,875,153 | ||||||||
| Operating income | $ | 115,499 | $ | 81,883 | $ | 468,381 | $ | 399,598 | ||||||||
| Operating margin | 10.5 | % | 8.3 | % | 11.0 | % | 10.3 | % | ||||||||
| Adjustments: | ||||||||||||||||
| Costs related to unsolicited takeover attempt | 18,374 | 23,435 | 44,406 | 23,435 | ||||||||||||
| Multi-employer pension plan withdrawal charges | - | - | 4,628 | 6,650 | ||||||||||||
| Adjusted operating income | $ | 133,873 | $ | 105,318 | $ | 517,415 | $ | 429,683 | ||||||||
| Adjusted operating margin | 12.1 | % | 10.7 | % | 12.2 | % | 11.1 | % | ||||||||
The Company believes the above adjusted operating margin computations help investors assess the Company’s operating performance without the impact of charges associated with the Company’s withdrawal from multi-employer pension plans and costs related to Air Products’ unsolicited takeover attempt. Non-GAAP numbers should be read in conjunction with GAAP financial measures, as non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial measures. It should be noted as well that our adjusted operating margin computations may be different from the adjusted operating margin computations provided by other companies.
Free Cash Flow and Adjusted Cash from Operations
Reconciliations and computations of free cash flow and adjusted cash from operations:
| Year Ended | ||||||||
| March 31, | ||||||||
| (Dollars in thousands) | 2011 | 2010 | ||||||
| Net cash provided by operating activities | $ | 275,301 | $ | 600,047 | ||||
| Adjustments to cash provided by operating activities: | ||||||||
| Cash used by the securitization of trade receivables | 295,000 | 16,400 | ||||||
| Stock issued for employee stock purchase plan | 14,997 | 15,428 | ||||||
| Tax benefit realized from the exercise of stock options | 8,444 | 15,444 | ||||||
| Cash expenditures related to unsolicited takeover attempt | 23,427 | 963 | ||||||
| Adjusted cash from operations | 617,169 | 648,282 | ||||||
| Capital expenditures | (256,030 | ) | (252,828 | ) | ||||
| Adjustments to capital expenditures: | ||||||||
| Proceeds from sales of plant and equipment | 15,844 | 14,466 | ||||||
| Operating lease buyouts | 9,893 | 1,687 | ||||||
| Adjusted capital expenditures | (230,293 | ) | (236,675 | ) | ||||
| Free Cash Flow | $ | 386,876 | $ | 411,607 | ||||
The Company believes that free cash flow and adjusted cash from operations provide investors meaningful insight into the Company's ability to generate cash from operations, which is available for servicing debt obligations and for the execution of its business strategies, including acquisitions, the prepayment of debt, the payment of dividends, or to support other investing and financing activities. Non-GAAP numbers should be read in conjunction with GAAP financial measures, as non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial measures. It should be noted as well that our free cash flow and adjusted cash from operations metrics may be different from free cash flow and adjusted cash from operations metrics provided by other companies.
Return on Capital
Reconciliations and computations of return on capital:
| March 31, | ||||||||
| (Dollars in thousands) | 2011 | 2010 | ||||||
| Adjusted Operating Income - Trailing Four Quarters |
$ |
517,415 |
$ | 429,683 | ||||
| Five Quarter Average of Total Assets | $ | 4,788,267 | $ | 4,428,239 | ||||
| Five Quarter Average of Securitized Trade Receivables | 59,000 | 288,500 | ||||||
| Five Quarter Average of Current Liabilities (exclusive of debt) | (498,618 | ) | (419,959 | ) | ||||
| Five Quarter Average Capital Employed |
$ |
4,348,649 |
$ | 4,296,780 | ||||
| Return on Capital | 11.9 | % | 10.0 | % | ||||
The Company believes this return on capital computation helps investors assess how effectively the Company uses the capital invested in its operations. Non-GAAP numbers should be read in conjunction with GAAP financial measures, as non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial measures. It should be noted as well that our return on capital computation may be different from the return on capital computations provided by other companies.
CONTACT:
Airgas, Inc.
Media Contact:
Jay Worley (610)
902-6206
jay.worley@airgas.com
or
Investor Contact:
Barry
Strzelec (610) 902-6256
barry.strzelec@airgas.com