Results for the fourth quarter for Airgas reflect challenges associated with the significant and rapid decline in oil prices, the impact of the strong dollar and poor weather conditions throughout much of the U.S.
“For the year, we delivered strong free cash flow of $309m on adjusted cash from operations of $752m while continuing to grow earnings in a challenging environment,” said Airgas President and Chief Executive Officer Michael L. Molinini.
“During the quarter, we experienced greater than anticipated declines in year-over-year sales growth rates in our Energy & Chemicals and Manufacturing customer segments reflecting the impact of the significant and rapid decline in oil prices and the impact of the strong dollar on manufacturers that export, as well as challenging weather conditions throughout much of the country.”
“As we announced on March 20, we expected these sales challenges to slow year-over-year organic growth for our fourth quarter to a range of 1% to 2% resulting in diluted EPS in a range of $1.13 to $1.16, and that is where we landed,” Molinini added. “We remain committed to delivering long-term growth and value through leveraging our industry leading platform as well as our broad product and service offering. In addition, we will continue to look hard at our operating costs and more tightly manage capital expenditures until sustained growth levels return.”
Fourth quarter earnings per diluted share were $1.15, down 2% compared to prior year earnings per diluted share of $1.17 and flat compared to prior year adjusted earnings per diluted share* of $1.15.
Fourth quarter sales were $1.3bn, an increase of 3% over the prior year. Organic sales in the quarter were up 2% over the prior year, with gas and rent up 2% and hardgoods up 2%. Distribution segment organic sales in the quarter were up 1% compared to prior year, with gas and rent flat and hardgoods up 2%. Acquisitions contributed sales growth of 1% in the quarter on a consolidated basis and in the Distribution segment.
Selling, distribution, and administrative expenses increased 4% over the prior year with operating costs associated with acquired businesses representing approximately 1% of the increase.
The balance of the increase reflects normal expense inflation, as well as expenses associated with the company’s investments in long-term strategic growth initiatives, including its e-Business platform and continued expansion of its telesales business through Airgas Total Access.
Full year sales were $5.3bn, an increase of 5% over the prior year. Organic sales increased 3% over the prior year, with gas and rent up 3% and hardgoods up 4%, while acquisitions contributed sales growth of 2% for the year.
Full year free cash flow was $309m, compared to $441m in the prior year, and adjusted cash from operations was $752m, compared to $776m in the prior year.
“Like many others, we had expected the U.S. industrial economy to be much stronger by now. We are seeing an economy that is clearly weaker than it was in the December quarter, and the level of uncertainty in the marketplace makes it difficult for us to predict our near-term sales outlook. While we are encouraged by some bright spots, such as the increased activity of many of our construction customers, the overall sluggishness in the industrial economy tempers our near-term optimism,” said Airgas Executive Chairman Peter McCausland.
“The low end of our fiscal 2016 guidance assumes a very modest uptick in growth rates as the year progresses, with average organic sales growth in the low single digits for the full year. The high end assumes a healthier acceleration in growth rates over the course of the year, with average organic sales growth in the mid single digits for the full year.”
McCausland added, “We continue to believe the long-term growth prospects for the U.S. economy are strong and, with the recent investments we’ve made to improve our platform, systems and product and service offering, we have positioned Airgas for growth when the economy improves. Consistent with our demonstrated track record, we remain committed to delivering sustainable long-term value to our customers and shareholders.”