Exhibit 99.1
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AIRGAS News Release Airgas, Inc.
259 N. Radnor-Chester Road
Suite 100
Radnor, PA 19087-5283
www.airgas.com
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Investor Contact: Media Contact:
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Melissa Nigro (610) 902-6206 James Ely (610) 902-6010
melissa.nigro@airgas.com jim.ely@airgas.com
For release: IMMEDIATELY
AIRGAS REPORTS FOURTH QUARTER EPS OF $0.25
RADNOR, PA - May 7, 2003 -- Airgas, Inc., (NYSE: ARG) today reported
earnings for its fourth quarter and fiscal year ended March 31, 2003.
Net earnings for the quarter were $18.2 million, or $0.25 per diluted
share, compared to $8.7 million, or $0.12 per diluted share, in the same
period a year ago. The prior-year fourth quarter included a charge
related to a litigation settlement of $8.5 million ($5.7 million after
tax) or $.08 per diluted share.
The reported net earnings before the cumulative effect of a change in
accounting principle for the year ended March 31, 2003 were $68.1
million, or $0.94 per diluted share, compared to $48.6 million, or $0.69
per diluted share for the prior year. Net earnings per diluted share
were $0.94 for year ended March 31, 2003 versus a loss of ($0.15) in
the prior year, which reflects a change in accounting for goodwill.
Fiscal 2003 earnings reflect a first quarter restructuring charge of
$2.7 million ($1.7 million after tax) or $.03 per diluted share related
to the integration of the Air Products acquisition.
"The weak industrial economy created a very tough sales environment in
fiscal 2003. However, we remained focused on executing our strategic
initiatives, pursuing growth in niches like medical and specialty gas,
and integrating acquired assets," said Airgas Chairman and Chief
Executive Officer Peter McCausland. "I am very proud of the drive and
determination displayed by all Airgas associates during the year."
While fourth quarter sales increased 6% to $443 million, total same-
store sales declined 1% compared to the same quarter a year ago,
reflecting continued weakness in manufacturing and other industrial
segments. Same-store sales in the Distribution segment were down 2%,
reflecting a 4% decline in hardgoods while gas and rent was flat. Same-
store sales for the Gas Operations segment increased 6%.
The Company continued to generate strong free cash flow during fiscal
2003, enabling it to reduce adjusted debt by $96 million. In line with
the new guidance from the Securities and Exchange Commission on the use
of non-GAAP financial measures, the Company has revised the calculation
of its liquidity measure "Free Cash Flow", making this useful measure
more transparent and traceable to the Statement of Cash Flows. The new
definition of Free Cash Flow and a reconciliation to the attached
Consolidated Statement of Cash Flows, as well as the definition of
adjusted debt and reconciliation to the balance sheet are attached.
Free Cash Flow for the year ended March 31, 2003 was $104 million versus
$133 million in the prior year. The fiscal 2003 decline in free cash
flow reflects an investment in the new liquid CO2 plant in Hopewell, VA;
a cash disbursement related to a prior year litigation settlement; and
higher cash interest payments on the prior year's subordinated debt
issuance resulting from a long first coupon period.
McCausland continued, "The year ahead looks like it may not be an easy
one as we could face as many challenges as opportunities, but I believe
we are a strong organization with the ability to execute in any
environment. We expect to continue growing our earnings and project to
earn between $1.05 and $1.12 per diluted share in fiscal 2004. The low
end of the range reflects a continuation of the current environment and
the high end assumes improvement."
The Company will conduct an earnings teleconference on Thursday, May 8,
2003, beginning at 8:30 a.m. Eastern Time. Access the teleconference by
calling (800) 946-0270. 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 Info'
section on the Company's Internet site www.airgas.com. The telephone
replay will be accessible for one week starting May 8th at approximately
11:00 a.m. Eastern Time by calling (888) 203-1112 and entering passcode
495366.
ABOUT AIRGAS, INC.
Airgas, Inc. is the largest U.S. distributor of industrial, medical and
specialty gases, welding, safety and related products. Its integrated
network of nearly 800 locations includes 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.
FORWARD-LOOKING STATEMENTS
This press release may contain statements that are forward-looking,
as that term is defined by the Private Securities Litigation Reform
Act of 1995 or by the Securities and Exchange Commission in its
rules, regulations and releases. These statements include, but are
not limited to, statements regarding: the challenges that the Company
may face in fiscal 2004; the Company's ability to execute in any
environment; the future growth of the Company's earnings; and, the
range of expected earnings per share for fiscal 2004. Airgas
intends 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 the Company or any other person
that the results expressed therein will be achieved. Important
factors that could cause actual results to differ materially from
those contained in any forward-looking statement include; the success
of the Company's ability to execute on its strategic initiatives of
improving operational efficiency and growing sales and market share;
an economic downturn; increased industry competition; adverse changes
in customer buying patterns; significant fluctuations in interest
rates; adverse changes in general economic conditions; political and
economic uncertainties associated with current world events; and
other factors described in the Company's reports, including Form 10-K
dated March 31, 2002 and Form 10-Q reports dated June 30, 2002,
September 30, 2002 and December 31, 2002, filed by the Company with
the Securities and Exchange Commission.
Consolidated statements of earnings, consolidated condensed balance
sheets and consolidated statements of cash flow follow.
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,
2003 2002 2003 2002
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Net sales $442,904 $415,957 $1,786,964 $1,636,047
Costs and expenses:
Cost of products sold (excl. deprec.) 209,756 204,680 850,316 818,753
Selling, distribution and
administrative expenses (a) 174,789 165,833 698,228 619,316
Depreciation 17,774 17,288 73,482 64,785
Amortization 1,427 1,940 6,362 8,160
Special charges (b) -- -- 2,694 --
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Total costs and expenses 403,746 389,741 1,631,082 1,511,014
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Operating income 39,158 26,216 155,882 125,033
Interest expense, net (10,249) (11,802) (46,375) (47,013)
Discount on securitization of
trade receivables (772) (799) (3,326) (4,846)
Other income (expense), net (54) (411) (645) 1,382
Equity in earnings of unconsolidated
affiliates 741 960 3,768 3,835
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Earnings before income taxes and the
cumulative effect of a change in
accounting principle 28,824 14,164 109,304 78,391
Income tax expense 10,659 5,428 41,199 29,806
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Earnings before the cumulative
effect of a change in accounting
principle 18,165 8,736 68,105 48,585
Cumulative effect of a change in
accounting principle (c) -- -- -- (59,000)
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Net earnings (loss) $18,165 $8,736 $68,105 $(10,415)
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Basic earnings (loss) per share:
Earnings per share before the
cumulative effect of a change in
accounting principle $ .26 $ .13 $ .97 $ .71
Cumulative effect per share of a
change in accounting principle -- -- -- (.86)
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Net earnings (loss) per share $ .26 $ .13 $ .97 $ (.15)
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Diluted earnings (loss) per share:
Earnings per share before the
cumulative effect of a change in
accounting principle $ .25 $ .12 $ .94 $ .69
Cumulative effect per share of a
change in accounting principle -- -- -- (.84)
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Net earnings (loss) per share $ .25 $ .12 $ .94 $ (.15)
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Weighted average shares
outstanding:
Basic 71,100 68,900 70,500 68,100
Diluted 73,000 71,400 72,300 69,900
See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
March 31, March 31,
2003 2002
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ASSETS
Trade accounts receivable, net (d) $ 71,346 $ 88,634
Inventories, net 151,405 154,045
Deferred income tax asset, net 17,688 13,210
Prepaids and other current assets 30,143 47,654
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TOTAL CURRENT ASSETS 270,582 303,543
Property, plant and equipment, net 869,492 893,015
Goodwill 437,709 406,548
Other intangible assets, net 19,832 25,718
Other non-current assets 102,628 88,233
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TOTAL ASSETS $1,700,243 $1,717,057
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, trade $ 85,375 $ 82,485
Accrued expenses and other current
liabilities 121,292 136,390
Current portion of long-term debt 2,229 2,456
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TOTAL CURRENT LIABILITIES 208,896 221,331
Long-term debt (d) 658,031 764,124
Deferred income taxes 209,140 198,173
Other non-current liabilities 27,243 30,343
Stockholders' equity 596,933 503,086
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,700,243 $1,717,057
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See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended Year Ended
March 31, March 31,
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 68,105 $(10,415)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation 73,482 64,785
Amortization 6,362 8,160
Deferred income taxes 8,655 34,578
Equity in earnings of unconsolidated affiliates (3,768) (3,835)
(Gains) losses on divestitures 241 (1,916)
(Gains) losses on sales of plant and equipment (257) 405
Stock issued for employee stock purchase plan 8,951 7,369
Cumulative effect of a change in accounting principle -- 59,000
Other non-cash charges -- 1,068
Changes in assets and liabilities, excluding effects of
business acquisitions and divestitures:
Securitization of trade receivables 24,900 60,800
Trade receivables, net (8,316) 9,111
Inventories, net 4,675 12,614
Prepaid expenses and other current assets 17,718 (24,743)
Accounts payable, trade 2,884 6,148
Accrued expenses and other current liabilities (8,021) 18,300
Other assets 2,068 5,081
Other liabilities (3,280) 2,871
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Net cash provided by operating activities 194,399 249,381
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (67,969) (58,297)
Proceeds from sales of plant and equipment 4,260 3,216
Proceeds from divestitures 3,167 10,200
Business acquisitions, holdbacks and other
settlements of acquisition related liabilities (27,216) (257,556)
Dividends and fees from unconsolidated affiliates 2,507 2,583
Other, net (1,719) 5,153
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Net cash used in investing activities (86,970) (294,701)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 248,961 680,144
Repayment of debt (367,356) (612,779)
Financing costs -- (12,461)
Exercise of stock options 9,847 7,442
Cash overdraft 1,119 (17,026)
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Net cash (used in) provided by financing activities (107,429) 45,320
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Change in cash
Cash - Beginning of period $ -- $ --
Cash - End of period -- --
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$ -- $ --
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See attached notes
Notes:
(a) Selling, distribution, and administrative expenses for the three months
and year ended March 31, 2002 reflect the settlement of litigation, net of
previously established reserves, of $8.5 million ($5.7 million after-tax)
related to litigation brought about by Praxair, Inc. against the Company in
July 1996.
(b) Special charges of $2.7 million ($1.7 million after-tax) for the year
ended March 31, 2003 consist of a first quarter restructuring charge
related to the integration of the business acquired from Air Products and
costs related to the consolidation of certain of the Company's procurement
functions. The special charges include facility exit costs associated with
the closure of certain Airgas facilities and severance for approximately
130 employees.
On February 28, 2002, the Company completed its acquisition of the
majority of
the U.S. packaged gas business of Air Products and Chemicals, Inc.
(c) In connection with the adoption of SFAS 142, the year ended March 31,
2002 includes a $59 million non-cash charge recorded as the cumulative
effect of a change in accounting principle for the write-down of goodwill
to its fair value. The impaired goodwill was not deductible for taxes, and
consequently, no tax benefit was recorded in relation to the charge.
(d) The Company participates in a securitization agreement with two
commercial banks to sell up to $175 million of qualified trade receivables.
Net proceeds from the securitization were used to reduce borrowings under
the Company's revolving credit facilities. The amount of outstanding
receivables under the agreement was $158.9 million and $134 million at
March 31, 2003 and March 31, 2002, respectively.
(e) Business segment information for the Company's Distribution and Gas
Operations segments is shown below:
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
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(In thousands) Dist. Gas Ops. Elim Combined Dist. Gas Ops. Elim Combined
---- ------- ---- -------- ---- ------- ---- --------
Gas and rent $216,798 $40,990 $(9,619) $248,169 $189,947 $37,049 $(7,338) $219,658
Hardgoods 193,235 1,500 -- 194,735 195,892 595 (188) 196,299
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Total net sales 410,033 42,490 (9,619) 442,904 385,839 37,644 (7,526) 415,957
Cost of Products
sold, excl.
deprec. expense 198,973 20,402 (9,619) 209,756 195,517 16,689 (7,526) 204,680
Selling, distribution
and administrative
expenses 159,197 15,592 174,789 150,688 15,145 165,833
Depreciation expense 14,901 2,873 17,774 14,468 2,820 17,288
Amortization expense 1,315 112 1,427 1,805 135 1,940
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Operating income 35,647 3,511 39,158 23,361 2,855 26,216
Year Ended Year Ended
March 31, 2003 March 31, 2002
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(In thousands) Dist. Gas Ops. Elim Combined Dist. Gas Ops. Elim Combined
---- ------- ---- -------- ---- ------- ---- --------
Gas and rent $ 863,975 $178,622 $(37,067) $1,005,530 $ 707,435 $170,687 $(31,163) $ 846,959
Hardgoods 778,101 5,227 (1,894) 781,434 786,832 2,907 (651) 789,088
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Total net sales 1,642,076 183,849 (38,961) 1,786,964 1,494,267 173,594 (31,814) 1,636,047
Cost of Products
sold, excl.
deprec. expense 806,320 82,957 (38,961) 850,316 770,094 80,473 (31,814) 818,753
Selling, distribution
and administrative
expenses 634,580 63,648 698,228 559,468 59,848 619,316
Depreciation expense 62,071 11,411 73,482 53,701 11,084 64,785
Amortization expense 5,877 485 6,362 7,574 586 8,160
Special charges 2,694 -- 2,694 -- -- --
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Operating income 130,534 25,348 155,882 103,430 21,603 125,033
The elimination entries represent inter-company sales from the Company's Gas
Operations segment to its Distribution segment. The Company previously
reflected these elimination entries within the Gas Operations segment.
Reconciliation of Non-GAAP Financial Measures
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Adjusted Debt Reduction:
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Reconciliation of the change in debt per the Balance Sheet to debt
reduction adjusted for off-balance sheet and non-cash items ("adjusted
debt"):
Year Ended
Amounts in thousands March 31, 2003
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Reduction in debt per the Balance Sheet $(106,320)
Increase in funding under the trade
receivables securitization program 24,900
Change in fair value of debt related to
interest rate swap agreements (non-cash) (13,541)
Other (1,066)
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Adjusted debt reduction $ (96,027)
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Free Cash Flow:
Reconciliation of net cash provided by operating activities per the
Consolidated Statement of Cash Flows to Free Cash Flow:
Year Ended Year Ended
Amounts in thousands March 31, 2003 March 31, 2002
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Net cash provided by operating activities $194,399 $249,381
Plus:
Dividends and fees from equity affiliates 2,507 2,583
Less:
Cash provided by the securitization of
trade receivables (24,900) (60,800)
Capital expenditures (67,969) (58,297)
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Free Cash Flow $104,037 $132,867
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Free Cash Flow is a measure of the Company's ability to generate cash
from continuing operations, which can be used at management's discretion
for acquisitions, the repayment of debt or to support other investing and
financing activities.