Airgas Reports Fiscal 2016 Second Quarter Earnings
Second quarter sales increased 1% over the prior year to $1.4 billion. Organic sales were flat compared to the prior year, with gas and rent up 3% and hardgoods down 5%. In the Distribution segment, organic sales were down 1% compared to the prior year, with gas and rent up 2% and hardgoods down 5%. In the All Other Operations segment, organic sales were up 8%, primarily driven by increased sales in the refrigerants, CO2 and dry ice businesses. Acquisitions contributed sales growth of 1% in the quarter on both a consolidated basis and in the Distribution segment and 8% in the All Other Operations segment.
"Our results continue to reflect the challenging industrial economy with sales to customers in our energy and chemical, and manufacturing and metal fabrication end markets down year-over-year in the mid single digits. However, our diversified end customer markets and continued strength in non-residential construction, together with tight expense management, helped to mitigate the impact of the sales declines in those end markets," said Airgas President and Chief Executive Officer Michael L. Molinini. "The quarterly results demonstrated the resilience of our business during difficult economic times. In addition, despite flat sales and earnings, cash flow remains strong, with year-to-date free cash flow* up 15% over the prior period."
Selling, distribution, and administrative expenses increased 3% over the prior year, with operating costs associated with acquired businesses accounting for approximately half of the increase. The balance of the increase primarily reflects the incremental costs to support strong organic sales growth in the All Other Operations segment. Selling, distribution, and administrative expenses in the Distribution segment increased 0.6% over the prior year, excluding the impact of operating costs associated with acquired businesses.
Operating margin was 12.4%, down 50 basis points compared to the prior year, primarily reflecting the impact of the increase in selling, distribution, and administrative expenses in the current low organic sales growth environment related to our Distribution segment.
Year-to-date free cash flow* was $169 million, up 15% over the prior year, and adjusted cash from operations* was $386 million, up 8% over the prior year. During the second quarter, the Company repurchased 2.8 million shares on the open market for $271 million, reflecting an average price of $97.98 per share. During the first quarter, the Company repurchased 1.0 million shares on the open market for $104 million, reflecting an average price of $103.84 per share. At September 30, 2015, $125 million was available under the current authorized share repurchase program.
Return on capital* was 11.6% for the 12 months ended September 30, 2015, down 50 basis points compared to the prior year.
From the beginning of its fiscal year through October, the Company has acquired 12 businesses with aggregate annual sales of approximately $80 million.
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