Airgas Reports Fiscal 2016 Third Quarter Earnings

OREANDA-NEWS. Airgas, Inc. (NYSE: ARG), one of the nation's leading suppliers of industrial, medical, and specialty gases, and related products, today reported earnings per diluted share of $1.01, including $0.18 per diluted share of merger costs for its third quarter ended December 31, 2015. Adjusted diluted EPS* of $1.19, is down 3% compared to prior year diluted EPS of $1.23 and is reflective of the challenging economic conditions.

Third quarter sales of $1.3 billion decreased 3% compared to the prior year. Organic sales were down 4% compared to the prior year, with gas and rent down 1% and hardgoods down 10%. In the Distribution segment, organic sales were down 5% compared to the prior year, with gas and rent down 1% and hardgoods down 10%. In the All Other Operations segment, organic sales were down 1%. Acquisitions contributed sales growth of 1% in the quarter on both a consolidated basis and in the Distribution segment and 10% 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 high single digits. However, our diversified customer base, continued strength in non-residential construction, and 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 gas business during difficult economic times. In addition, cash flow remains strong, with year-to-date free cash flow* up 12% over the prior period."

Selling, distribution, and administrative expenses increased 2% over the prior year, with operating costs associated with acquired businesses accounting for the majority of the increase.

Operating margin for the quarter was 9.7% including the impact of $21 million in merger costs. Adjusted operating margin*, excluding merger costs, was 11.3%, down 90 basis points compared to the prior year. The decrease primarily reflects challenging economic conditions in the Distribution segment which reported a 4% decline in sales, a 3% decline in gross profits, flat selling, distribution, and administrative expenses, as well as a 5% increase in depreciation and amortization expense.

Year-to-date free cash flow* was $243 million, up 12% over the prior year, and adjusted cash from operations* was $545 million, up 1% over the prior year.

During the six months ended September 30, 2015, the company repurchased 3.8 million shares on the open market for $375 million, reflecting an average price of $99.54 per share.

Return on capital* was 11.2% for the 12 months ended December 31, 2015, down 90 basis points compared to the prior year.

From the beginning of its fiscal year, the Company has acquired 17 businesses with aggregate annual sales of approximately $84 million.

"I am proud of the entire Airgas team and the strong history we have of creating shareholder value," said Airgas Executive Chairman Peter McCausland. "The announced transaction with Air Liquide is very compelling for our shareholders. Air Liquide's long-term vision and strong heritage in the U.S. make it the right fit for our valued customers, and the combination creates significant opportunities for the talented employees of both companies. Airgas customers and employees will benefit from Air Liquide's unrivaled global footprint and strength in technology, innovation and operational efficiency, while Airgas is ready to bring the entrepreneurial culture and packaged gas excellence that have driven our success to date. We are excited about the prospects of integrating these two businesses to create the largest industrial gas company in the world. We have been working closely with the Air Liquide team to plan for the successful integration of the two companies and look forward to finalizing the merger when the necessary approvals have been obtained."