Airgas, Inc.
259 N. Radnor-Chester Road
Suite 100
Radnor, PA 19087-5283
www.airgas.com
AIRGAS
NEWS RELEASE
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Exhibit 99.1
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 SECOND QUARTER EPS OF $0.26
RADNOR, PA - October 29, 2003 -- Airgas, Inc., (NYSE: ARG) today reported
earnings for its second quarter ended September 30, 2003. Net earnings
for the quarter were $19.1 million, or $0.26 per diluted share, compared
to $19.2 million, or $0.27 per diluted share, in the same period a year
ago. Second quarter results include insurance-related losses of $2.8
million, or $0.02 per diluted share, for previously announced incidents
at two of the Company's facilities.
Second quarter sales increased 2% to $460 million, while total same-store
sales were essentially flat 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 1%,
driven by a 2% decline in hardgoods. Same-store sales for the Gas
Operations segment increased 4%, attributed to sales from the Hopewell,
Virginia CO2 plant, which began operations in January 2003.
Net earnings for the six months ended September 30, 2003 were $0.51 per
diluted share compared to prior year results of $0.46 per diluted share.
The six months ended September 30, 2002 included charges of $2.9 million
($2.2 million after tax), or $0.03 per diluted share, related to a
special charge for the integration of the Air Products acquisition ($2.7
million) and a net divestiture loss.
"I am pleased with our operational and financial performance in the
second quarter," said Airgas Chairman and Chief Executive Officer Peter
McCausland. "Airgas associates are managing well in a tough environment.
We will continue to manage our costs conservatively until it becomes
clearer that the industrial economy is on the mend."
Free Cash Flow for the six months ended September 30, 2003 was $33
million compared to $29 million in the prior year, driving a $22 million
reduction in adjusted debt. The 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 a reconciliation to the
balance sheet are attached.
McCausland continued, "Daily sales rates improved sequentially throughout
the quarter, with September posting the highest level we've seen since
December. October trends are running slightly behind September. We are
cautiously optimistic, although it is important to remember that the
industrial economy still has a long road to recovery. We have adjusted
the range for our full year earnings per share guidance to $1.03 to
$1.10, specifically reflecting the insurance related losses of $0.02 per
share in the second quarter."
The Company will conduct an earnings teleconference on Thursday, October
30, 2003, beginning at 11:00 a.m. Eastern Time. Access the
teleconference by calling (800) 811-8824. 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 Info' section on the Company's Internet site www.airgas.com.
The telephone replay will be accessible for one week starting October
30th at approximately 1 p.m. Eastern Time by calling (888) 203-1112 and
entering passcode 256959.
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: continuing efforts to manage costs conservatively
until the industrial economy strengthens; being cautiously optimistic about
sales and the economy; and the range of expected earnings per share for
fiscal 2004. The Company 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;
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, 2003 and Form 10-Q dated June 30, 2003, filed
by the Company with the Securities and Exchange Commission.
Consolidated statements of earnings, consolidated condensed balance
sheets, consolidated statements of cash flows, and a reconciliation
of non-GAAP financial measures follow.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2003 2002 2003 2002
------ ------ ------ ------
Net sales $460,452 $451,053 $921,508 $908,721
------- ------- ------- -------
Costs and expenses:
Cost of products sold
(excl. deprec.) 220,361 214,087 441,494 436,353
Selling, distribution and
administrative expenses 178,175 174,737 356,636 351,036
Depreciation 19,824 18,169 39,115 36,628
Amortization 1,331 1,636 2,842 3,376
Special charges (a) -- -- -- 2,694
------- ------- ------- -------
Total costs and expenses 419,691 408,629 840,087 830,087
------- ------- ------- -------
Operating income 40,761 42,424 81,421 78,634
Interest expense, net (10,295) (12,040) (20,730) (25,161)
Discount on securitization of
trade receivables (801) (899) (1,669) (1,750)
Other income (expense), net (185) (129) (358) (252)
Equity in earnings
unconsolidated affiliates 1,347 1,364 2,047 2,296
------- ------- ------- -------
Earnings before income
tax expense 30,827 30,720 60,711 53,767
Income tax expense 11,714 11,520 23,070 20,523
------- ------- ------- -------
Net earnings $ 19,113 $ 19,200 $ 37,641 $ 33,244
======= ======= ======= =======
Basic earnings per share $ .26 $ .27 $ .52 $ .47
Diluted earnings per share $ .26 $ .27 $ .51 $ .46
Weighted average shares
outstanding:
Basic 72,600 70,400 72,200 70,100
Diluted 74,400 71,900 74,100 72,000
See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
September 30, March 31,
2003 2003
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ASSETS
Trade accounts receivable, net (b) $ 82,009 $ 71,346
Inventories, net 158,663 151,405
Deferred income tax asset, net 18,058 17,688
Prepaids and other current assets 29,198 30,143
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TOTAL CURRENT ASSETS 287,928 270,582
Property, plant and equipment, net (c) 901,265 869,492
Goodwill 439,886 437,709
Other intangible assets, net 18,214 19,832
Other non-current assets 102,862 102,628
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TOTAL ASSETS $ 1,750,155 $ 1,700,243
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, trade $ 78,008 $ 85,375
Accrued expenses and
other current liabilities 104,721 121,292
Current portion of long-term debt 580 2,229
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TOTAL CURRENT LIABILITIES 183,309 208,896
Long-term debt (b)(c) 684,017 658,031
Deferred income taxes 221,359 209,140
Other non-current liabilities (c) 15,798 27,243
Stockholders' equity 645,672 596,933
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TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 1,750,155 $ 1,700,243
=========== ===========
See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended Six Months Ended
September 30, 2003 September 30, 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 37,641 $ 33,244
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 39,115 36,628
Amortization 2,842 3,376
Deferred income taxes 10,600 (3,006)
Equity in earnings of unconsolidated affiliates (2,047) (2,296)
Loss on divestitures -- 241
(Gain) loss on sales of plant and equipment 217 (85)
Stock issued for employee stock purchase plan 4,384 4,502
Changes in assets and liabilities, excluding
effects of business acquisitions and divestitures:
Securitization of trade receivables (6,200) 20,500
Trade receivables, net (3,404) (20,589)
Inventories, net (6,569) 6,264
Prepaid expenses and other current assets 575 18,533
Accounts payable, trade (7,384) 1,437
Accrued expenses and other current liabilities (4,241) (12,131)
Other assets 76 (1,755)
Other liabilities 2,340 (2,989)
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Net cash provided by operating activities 67,945 81,874
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (42,151) (34,271)
Proceeds from sales of plant and equipment 3,133 2,748
Proceeds from divestitures -- 3,167
Business acquisitions, holdbacks and other
settlements of acquisition related liabilities (5,852) (4,816)
Dividends and fees from unconsolidated affiliates 1,098 1,402
Other, net (1,728) (686)
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Net cash used in investing activities (45,500) (32,456)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 136,461 167,229
Repayment of debt (151,871) (224,157)
Dividends paid to stockholders (5,866) --
Exercise of stock options 7,353 4,998
Cash overdraft (8,522) 2,512
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Net cash used in financing activities (22,445) (49,418)
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Change in cash
Cash - Beginning of period $ -- $ --
Cash - End of period -- --
------- -------
$ -- $ --
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See attached notes
Notes:
(a) Special charges of $2.7 million ($1.7 million after tax) for the six
months ended September 30, 2002 consist of a restructuring charge
related to the integration of the business acquired from Air Products
in the fourth quarter of fiscal 2002 and costs related to the
consolidation 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.
(b) 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
$152.7 million and $158.9 million at September 30, 2003 and March 31,
2003, respectively.
(c) Since October 1999, the Company has leased certain real estate and
equipment from a grantor trust (the "Trust") established by a
commercial bank under a sale-leaseback arrangement. The Trust was
not consolidated for financial reporting purposes. Effective July 1,
2003, the Company has elected to early adopt Financial
Accounting Standards Board Interpretation No. 46, which requires
the consolidation of the Trust. The consolidation of the Trust
resulted in the Company recording assets of $29 million and debt
of $42 million, while eliminating a deferred gain of $13 million
that was previously carried on the balance sheet as a long-term
liability. Consolidation of the Trust was a non-cash transaction.
(d) Business segment information for the Company's Distribution and Gas
Operations segments is shown below:
Three Months Ended Three Months Ended
September 30, 2003 September 30, 2002
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(In thousands) Dist. Gas Ops. Elim Combined Dist. Gas Ops. Elim Combined
------ --------- ----- --------- ------ -------- ----- ---------
Gas and rent $217,481 $52,154 $(10,026) $259,609 $214,905 $49,700 $(9,817) $254,788
Hardgoods 200,215 1,318 (690) 200,843 195,424 1,342 (501) 196,265
-------- ------- --------- -------- -------- ------- -------- --------
Total net sales 417,696 53,472 (10,716) 460,452 410,329 51,042 (10,318) 451,053
Cost of products
sold, excl.
deprec. expense 207,195 23,882 (10,716) 220,361 201,549 22,856 (10,318) 214,087
Selling, distribution
and administrative
expenses 161,289 16,886 178,175 158,858 15,879 174,737
Depreciation
expense 16,645 3,179 19,824 15,325 2,844 18,169
Amortization
expense 1,189 142 1,331 1,518 118 1,636
-------- ------- -------- -------- ------- --------
Operating income 31,378 9,383 40,761 33,079 9,345 42,424
-------- ------- -------- -------- ------- --------
Six Months Ended Six Months Ended
September 30, 2003 September 30, 2002
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(In thousands) Dist. Gas Ops. Elim Combined Dist. Gas Ops. Elim Combined
------ --------- ----- --------- ------ --------- ----- --------
Gas and rent $437,888 $100,226 $(19,624) $518,490 $431,862 $93,367 $(18,657) $506,572
Hardgoods 401,663 2,667 (1,312) 403,018 400,522 2,641 (1,014) 402,149
-------- -------- --------- -------- -------- ------- --------- --------
Total net sales 839,551 102,893 (20,936) 921,508 832,384 96,008 (19,671) 908,721
Cost of products
sold, excl.
deprec. expense 416,344 46,086 (20,936) 441,494 412,998 43,026 (19,671) 436,353
Selling, distribution
and administrative
expenses 323,239 33,397 356,636 319,471 31,565 351,036
Depreciation
expense 32,815 6,300 39,115 31,001 5,627 36,628
Amortization
expense 2,546 296 2,842 3,135 241 3,376
Special charges -- -- -- 2,694 -- 2,694
-------- -------- -------- -------- ------- --------
Operating income 64,607 16,814 81,421 63,085 15,549 78,634
-------- -------- -------- -------- ------- --------
Reconciliation of Non-GAAP Financial Measures (Unaudited)
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Free Cash Flow:
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Reconciliation of net cash provided by operating activities per the
Consolidated Statement of Cash Flows to Free Cash Flow:
Six Months Ended Six Months Ended
(Amounts in thousands) September 30, 2003 September 30, 2002
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Net cash provided by operating activities $67,945 $81,874
PLUS:
Dividends and fees from equity affiliates 1,098 1,402
LESS:
Cash (provided) used by the securitization of
trade receivables 6,200 (20,500)
Capital expenditures (42,151) (34,271)
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Free Cash Flow $33,092 $28,505
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The Company believes Free Cash Flow provides investors meaningful insight
into 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.
Reduction of Adjusted Debt:
----------------------------
Reconciliation of the change in debt per the Balance Sheet to the
decrease in debt adjusted for off-balance sheet and non-cash items
("adjusted debt"):
Change in Adjusted
(Amounts in thousands) September 30, 2003 March 31, 2003 Debt
------------------ -------------- -------------------
Debt $684,597 $660,260 $24,337
Adjustments to Debt:
Securitization of Trade Receivables 152,700 158,900 (6,200)
Lease Obligation with a Trust(1) -- 42,097 (42,097)
Interest Rate Swap Agreements (15,864) (17,681) 1,817
-------- -------- --------
Adjusted Debt $821,433 $843,576 $(22,143)
======== ======== ========
(1) As a result of the consolidation of the Trust as disclosed in note (c),
the lease obligation with the Trust has been classified as debt at
September 30, 2003.
The Company uses Adjusted Debt to provide investors with a more accurate and
meaningful measure of the change in the Company's obligation to repay debt
by adjusting for non-cash items and funds received (or repaid) under the
trade receivables securitization program.