Exhibit 99.1
- ------------
Airgas, Inc.
259 N. Radnor Chester Road
Suite 100
Radnor, PA 19087-5283
www.airgas.com
AIRGAS News Release
- --------------------------------------------------------------------------
Investor Contact: Media Contact:
- ----------------- --------------
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 GROWTH OF 16%
RADNOR, PA - May 5, 2004 -- Airgas, Inc., (NYSE: ARG) today reported
strong sales, operating profit and earnings growth for its fourth quarter
ended March 31, 2004. Net earnings for the quarter were $21.7 million,
or $0.29 per diluted share, compared to $18.2 million, or $0.25 per
diluted share, in the same period a year ago.
Fourth quarter sales increased 18% to $522.1 million reflecting the
consolidation of National Welders Supply Company - the Airgas joint
venture affiliate - as well as acquisitions and same-store sales growth.
Excluding National Welders, sales grew 9%. Total same-store sales were
up 6% compared to the same quarter a year ago, reflecting significant
improvement in manufacturing and other industrial segments. Same-store
sales in the Distribution segment were up 6%, driven by gains of 9% in
hardgoods and 2% in gas and rent.
"Our sales momentum accelerated in the fourth quarter, including a
very strong March for both gases and hardgoods," said Airgas Chairman
and Chief Executive Officer Peter McCausland. "Although sales growth
was led by our lower-margin hardgoods products, the recovery in our
business is unfolding as expected and the gases strength in March is
very encouraging."
Net earnings for the year ended March 31, 2004 were $1.07 per diluted
share compared to prior year results of $0.94 per diluted share. The
results for the year ended March 31, 2004 include a non-recurring after-
tax gain of $1.7 million, or $0.02 per diluted share, at National Welders
Supply Company, and an after-tax $480 thousand special charge recovery
related to a revised estimate on prior years' restructuring charges. Also
included in the year ended March 31, 2004 are insurance-related losses of
$2.8 million ($1.7 million after tax), or $0.02 per diluted share, for
previously announced incidents at two of the Company's facilities. The
year ended March 31, 2003 included charges of $2.9 million ($2.2 million
after tax), or $0.03 per diluted share, primarily related to a special
charge for the integration of the Air Products U.S. packaged gas
acquisition ($2.7 million).
"We grew fiscal 2004 earnings per share by 10%, excluding the impact
of special charges and recoveries, even though our markets didn't
recover until late in the year," added McCausland. "I'm delighted to
see the momentum, but most importantly, our results validate a strong
and stable business model that can weather a tough economy."
McCausland continued, "I'm excited about our growth opportunities
ahead. During the last several years, we have built a tremendous
infrastructure and product offering. With that behind us, we are now
focused on growing our business, branch by branch, with those core
customers who use gases, welding and safety products. We also plan
to continue growing our medical business through Airgas Puritan
Medical divisions in every regional company. Finally, we look
forward to successfully completing our largest acquisition ever as we
welcome the customers and associates from BOC's U.S. packaged gas
business at the end of July. We expect to earn $1.21 to $1.27 per
share in fiscal 2005, including up to $0.02 per share accretion from
the BOC acquisition."
Free Cash Flow for the year ended March 31, 2004 was $106 million
compared to $104 million in the prior year. The Company reduced adjusted
debt by $60 million during the fiscal year. The definition of free cash
flow, a reconciliation to the attached Consolidated Statement of Cash
Flows, the definition of adjusted debt and a reconciliation to the
balance sheet are attached.
The Company will conduct an earnings teleconference on Thursday, May 6,
2004, beginning at 11:00 a.m. Eastern Time. Access the teleconference by
calling (800) 810-0924. 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 May 6th at
1 p.m. Eastern Time by calling (888) 203-1112 and entering passcode
293214.
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 gases strength in March being encouraging;
a focus on growing the business branch by branch; growing the medical
business through Airgas Puritan Medical divisions; successfully
completing the acquisition of BOC's U.S. packaged gas business and
welcoming the customers and associates; the range of expected earnings
per share for fiscal year 2005; and the expected accretion from the BOC
acquisition. 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 grow sales and market share; the
closing of the Company's acquisition of the majority of BOC's U.S.
packaged gas business; the successful integration of the BOC acquisition;
the cost of integrating the BOC business into the Company's operations;
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 reports dated June 30, 2003,
September 30, 2003 and December 31, 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 Year Ended
March 31, March 31,
2004 2003 2004 2003
---- ---- ---- ----
Net sales $522,091 $442,904 $1,895,468 $1,786,964
-------- -------- ---------- ----------
Costs and expenses:
Cost of products sold (excl.deprec.) 253,587 209,756 908,681 850,316
Selling, distribution and
administrative expenses 198,736 174,789 731,827 698,228
Depreciation 23,318 17,774 82,567 73,482
Amortization 1,154 1,427 5,389 6,362
Special charges (recoveries) (a) (776) -- (776) 2,694
-------- -------- ---------- ----------
Total costs and expenses 476,019 403,746 1,727,688 1,631,082
-------- -------- ---------- ----------
Operating income 46,072 39,158 167,780 155,882
Interest expense, net (11,367) (10,249) (42,357) (46,375)
Discount on securitization of
trade receivables (c) (797) (772) (3,264) (3,326)
Other income (expense), net 824 (54) 625 (645)
Equity in earnings of
unconsolidated affiliates (b) 232 741 5,213 3,768
Minority interest (291) -- (291) --
-------- -------- ---------- ----------
Earnings before income tax expense 34,673 28,824 127,706 109,304
Income tax expense 13,013 10,659 47,514 41,199
-------- -------- ---------- ----------
Net earnings $ 21,660 $ 18,165 $ 80,192 $ 68,105
======== ======== ========== ==========
Basic earnings per share $ .29 $ .26 $ 1.10 $ .97
Diluted earnings per share $ .29 $ .25 $ 1.07 $ .94
Weighted average shares outstanding:
Basic 73,600 71,100 72,800 70,500
Diluted 75,700 73,000 74,700 72,300
See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
March 31, March 31,
2004 2003
---- ----
ASSETS
Trade accounts receivable, net (c) $ 107,013 $ 71,346
Inventories, net 170,300 151,405
Deferred income tax asset, net 21,054 17,688
Prepaids and other current assets 28,463 30,143
---------- ----------
TOTAL CURRENT ASSETS 326,830 270,582
Property, plant and equipment, net (d) 1,033,926 869,492
Goodwill 504,207 437,709
Other intangible assets, net 19,733 19,832
Investments in unconsolidated affiliates (e) 6,292 65,957
Other non-current assets 40,091 36,671
---------- ----------
TOTAL ASSETS $1,931,079 $1,700,243
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, trade $ 114,303 $ 85,375
Accrued expenses and
other current liabilities 122,026 121,292
Current portion of long-term debt 6,140 2,229
---------- ----------
TOTAL CURRENT LIABILITIES 242,469 208,896
---------- ----------
Long-term debt (c)(d) 682,698 658,031
Deferred income taxes 257,031 209,140
Other non-current liabilities (d) 20,789 27,243
Minority interest in subsidiary (e) 36,191 --
Stockholders' equity 691,901 596,933
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,931,079 $1,700,243
========== ==========
See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended Year Ended
March 31, 2004 March 31, 2003
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 80,192 $ 68,105
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 82,567 73,482
Amortization 5,389 6,362
Deferred income taxes 23,172 8,655
Equity in earnings of unconsolidated affiliates (5,213) (3,768)
Loss on divestitures -- 241
Gain on sales of plant and equipment (837) (257)
Minority interest in earnings 291 --
Stock issued for employee stock purchase plan 6,889 8,951
Changes in assets and liabilities, excluding
effects of business acquisitions, divestitures
and the consolidation of the National Welders
joint venture:
Securitization of trade receivables 3,700 24,900
Trade receivables, net (15,901) (8,316)
Inventories, net (5,586) 4,675
Prepaid expenses and other current assets 10,146 17,718
Accounts payable, trade 20,845 2,884
Accrued expenses and other current liabilities 4,687 (8,021)
Other assets 1,179 2,068
Other liabilities (2,425) (3,280)
-------- --------
Net cash provided by operating activities 209,095 194,399
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (93,749) (67,969)
Proceeds from sales of plant and equipment 5,347 4,260
Proceeds from divestitures -- 3,167
Business acquisitions, holdbacks and other
settlements of acquisition related liabilities (34,907) (27,216)
Dividends and fees from unconsolidated affiliates 2,147 2,507
Other, net (1,369) (1,719)
-------- --------
Net cash used in investing activities (122,531) (86,970)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 414,297 248,961
Repayment of debt (485,004) (367,356)
Financing costs (2,737) --
Minority interest (291) --
Exercise of stock options 13,130 9,847
Dividends paid to stockholders (11,801) --
Cash overdraft (14,158) 1,119
-------- --------
Net cash used in financing activities (86,564) (107,429)
-------- --------
Change in cash
Cash - Beginning of period $ -- $ --
Cash - End of period -- --
-------- --------
$ -- $ --
======== ========
See attached notes.
Notes:
(a) 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
in the fourth quarter of fiscal 2002 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 (the "Company") facilities and severance.
Special charge recoveries of $776 thousand ($480 thousand after
tax) for the quarter and year ended March 31, 2004 consist of the
reversal of the excess portion of prior years' restructuring
charges. The special charge recoveries represent a change in
estimate related to facility exit costs.
(b) Equity in the earnings of unconsolidated affiliates for the year ended
March 31, 2004 reflects a $1.7 million non-recurring after-tax
gain.
(c) 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
$162.6 million and $158.9 million at March 31, 2004 and March 31,
2003, respectively.
(d) Since October 1999, the Company has leased certain real estate and
equipment from a grantor trust (the "Trust") under a sale-
leaseback arrangement. The Trust was not consolidated for
financial reporting purposes. Effective July 1, 2003, the Company
elected to early adopt Financial Accounting Standards Board
Interpretation No. 46 ("FIN 46") with respect to the Trust, which
required 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.
(e) Since June 1996, the Company has participated in a joint venture with
National Welders Supply Company, Inc. ("NWS"), a producer and dis-
tributor of industrial gases based in Charlotte, North Carolina.
Ownership interests in the joint venture consist of voting common
stock and voting, redeemable preferred stock. The Company owns 100% of
the joint venture's common stock, which represents a 50% voting
interest. The Company does not hold a majority voting interest in the
joint venture and, therefore, historically has used the equity method
to account for its interest in the joint venture.
The Company has determined that NWS meets the definition of a
"Variable Interest Entity" under FIN 46R (FIN 46 as revised in
December 2003) and that the Company is the primary beneficiary of
the joint venture. Therefore, effective December 31, 2003, the
Company elected to adopt FIN 46R, as it applies to the joint
venture, and consolidated NWS. The consolidation had the effect of
eliminating the Company's $62 million investment in NWS and
recording the joint venture's assets, liabilities and a
corresponding minority interest liability. The summarized balance
sheet impact of the consolidation of NWS at March 31, 2004 is
reflected in the table below. Beginning January 1, 2004, NWS'
operating results were no longer reflected as "Equity in Earnings
of Unconsolidated Affiliates." Rather, the operating results were
reflected broadly across the income statement with minority
interest expense representing the after-tax portion of the
operating results applicable to the preferred stockholders.
(e) Continued.
Summarized Impact of the Consolidation of NWS at
March 31, 2004
Current Assets $ 29,922
Non-Current Assets 109,750
-------
Total Assets 139,672
=======
Current Liabilities 21,217
Non-Current Liabilities 82,929
Minority Interest 36,191
Common Stockholder's Equity (665)
-------
Total Liabilities and
Stockholder's Equity $139,672
=======
(f) Business segment information
Beginning with the Company's fiscal fourth quarter, the operating
results of NWS were reported broadly across the income statement
contributing $39.2 million to sales and $3.4 million to operating
income. For the purpose of disclosing operating results by
business segment, the Company renamed its Gas Operations segment as
"All Other Operations" and disclosed the operating results of NWS
with the results of the companies previously reported under that
segment. Prior to the adoption of FIN 46R, the operating results of
NWS were reported as a single line item, below operating income,
entitled "equity in earnings of unconsolidated affiliates."
The companies reporting their results under the All Other Operations
segment consist of producers and distributors, principally of dry ice,
carbon dioxide, nitrous oxide and specialty gases. The operating
results of the Company's two air separation plants and its five
most significant specialty gas labs are also reported under this
segment. The operating results of these businesses are not material
enough to meet the thresholds to be reported as individual business
segments. NWS also has significant production capabilities with three
air separation plants, two acetylene plants and a specialty gas lab.
Although Airgas is the primary beneficiary of the NWS joint venture,
the absence of a controlling voting interest, the significant production
capabilities of NWS, the fact that the obligations of NWS are non-
recourse to the Company and that the cash flows of NWS are not available
to the Company, lead to the conclusion that NWS does not meet the
criteria to be aggregated with the companies in the Distribution
segment. Furthermore, NWS is not material enough to meet the thresholds
to be reported as an individual business segment. Therefore, the
results of NWS have been reflected in the All Other Operations segment
as disclosed below:
(f) Business segment information (continued)
(Unaudited) (Unaudited)
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
-------------- --------------
(In thousands) Dist. All Elim Combined Dist. All Elim Combined
---- --- ---- -------- ----- --- ---- --------
Other Other
----- -----
Ops. Ops.
---- ----
Gas and rent $226,515 $70,094 $(10,526) $286,083 $216,798 $40,990 $(9,619) $248,169
Hardgoods 221,266 15,703 (961) 236,008 193,235 1,500 -- 194,735
-------- ------- --------- -------- -------- ------- -------- --------
Total net sales 447,781 85,797 (11,487) 522,091 410,033 42,490 (9,619) 442,904
Cost of products
sold, excl.
deprec.expense 225,960 39,114 (11,487) 253,587 198,973 20,402 (9,619) 209,756
Selling, distribution
and administrative
expenses 165,602 33,134 198,736 159,197 15,592 174,789
Deprec. & amort.
expense 18,856 5,616 24,472 16,216 2,985 19,201
Special charges
(recoveries) (776) -- (776) -- -- --
-------- ------- -------- -------- ------- --------
Operating income 38,139 7,933 46,072 35,647 3,511 39,158
-------- ------- -------- -------- ------- --------
Year Ended Year Ended
March 31, 2004 March 31, 2003
-------------- --------------
(In thousands) Dist. All Elim Combined Dist. All Elim Combined
----- --- ---- -------- ----- --- ---- --------
Other Other
----- -----
Ops. Ops.
---- ----
Gas and rent $882,585 $216,166 $(39,944) $1,058,807 $ 863,975 $178,622 $(37,067) $1,005,530
Hardgoods 819,886 19,760 (2,985) 836,661 778,101 5,227 (1,894) 781,434
--------- -------- --------- ---------- --------- -------- --------- ----------
Total net sales 1,702,471 235,926 (42,929) 1,895,468 1,642,076 183,849 (38,961) 1,786,964
Cost of products
sold, excl.
deprec.expense 845,440 106,170 (42,929) 908,681 806,320 82,957 (38,961) 850,316
Selling, distribution
and administrative
expenses 648,919 82,908 731,827 634,580 63,648 698,228
Deprec. & amort.
expense 72,439 15,517 87,956 67,948 11,896 79,844
Special charges
(recoveries) (776) -- (776) 2,694 -- 2,694
--------- -------- ---------- --------- -------- ----------
Operating income 136,449 31,331 167,780 130,534 25,348 155,882
--------- -------- ---------- --------- -------- ----------
Reconciliation of Non-GAAP Financial Measures (Unaudited)
- ---------------------------------------------------------
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, 2004 March 31, 2003
-------------- --------------
Net cash provided by operating activities $209,095 $194,399
Less net cash provided by operating activities of NWS (1) (9,831) --
Plus:
Dividends and fees paid by unconsolidated affiliates 2,147 2,507
Management fees paid by NWS (1) 249 --
Less:
Cash provided by the securitization of trade receivables (3,700) (24,900)
Capital expenditures (93,749) (67,969)
Add back capital expenditures of NWS (1) 2,265 --
-------- --------
Free Cash Flow $106,476 $104,037
======== ========
(1) National Welders Supply Co. ("NWS") is a corporate joint venture
meeting the definition of a variable interest entity and for which
the Company is the primary beneficiary as described under FIN 46R.
NWS was consolidated effective December 31, 2003 when the Company
prospectively adopted FIN 46R as required by the interpretation.
Prior to January 1, 2004, the Company reported the results of NWS
below operating income in "Equity in Earnings of Unconsolidated
Affiliates." The liabilities of NWS are non-recourse to the Company.
Likewise, the cash flows in excess of the management fee paid by NWS
are not available to the Company. Accordingly, the cash flows of NWS
have been excluded from the Company's non-GAAP liquidity measures.
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 the non-recourse debt of NWS, off-
balance sheet financing and non-cash interest rate hedging
("adjusted debt"):
(Amounts in thousands) Change in Adjusted
March 31, 2004 March 31, 2003 Debt
-------------- -------------- ------------------
Debt $688,838 $660,260 $ 28,578
Adjustments to Debt:
Securitization of trade receivables 162,600 158,900 3,700
Lease obligation with a Trust(1) -- 42,097 (42,097)
Consolidation of National Welders(2) (53,823) -- (53,823)
Interest rate swap agreements (13,832) (17,681) 3,849
--------- --------- ---------
Adjusted Debt $783,783 $843,576 $(59,793)
========= ========= =========
(1) As a result of the consolidation of the Trust as disclosed in
note (d), the lease obligation with the Trust has been classified as
debt at March 31, 2004.
(2) As a result of the December 31, 2003 consolidation of National
Welders as disclosed in notes (e) and (f), debt associated with National
Welders, which is non-recourse to Airgas, has been excluded from adjusted
debt.
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 the non-recourse debt of NWS, non-cash interest
rate hedging and funds received (or repaid) under the trade receivables
securitization program.