The CEO of Airgas has said the company is positioned for profitable growth as the economy recovers.
The company has reported net earnings of $46.9m, or $0.56 per diluted share, for its third quarter ended 31st December 2009.
Third quarter sales were $942m - a decline of 13% from the previous year.
Total same-store sales declined 14%, with hardgoods down 19% and gas and rent down 11%.
Acquisitions contributed 1% sales growth in the quarter. On a sequential basis, total sales declined by 2% from the second quarter, reflecting the impact of fewer selling days and a normal seasonal decline of certain businesses in the All Other Operations segment. Sales per selling day increased sequentially by 1%.
$quot;Although more modest than anticipated, a recovery seems to be underway across most of our geographies and customer segments,$quot; said Airgas Chairman and Chief Executive Officer Peter McCausland.
$quot;However, a slow finish left third quarter sales short of our expectations. Conditions were particularly challenging in our Distribution segment's highly-profitable rental welder business, as activity related to major plant turnarounds and contractor maintenance was unexpectedly slow.”
“This quarter's results were up against some tough comparisons, as our earnings remained strong late into last year's third quarter.$quot;
Cost reductions and operating efficiencies helped support the company's adjusted operating margin, which declined modestly year-over-year to 11.1% from 12.2% and sequentially from 11.6%, when adjusted for multi-employer pension plan withdrawal charges.
The sequential decline is attributable to seasonality of certain businesses in the All Other Operations segment, as adjusted operating margin in the Distribution segment expanded modestly on a sequential basis.
Operating margin in the current quarter, including multi-employer pension plan withdrawal charges, was 10.6%.
$quot;We have aggressively managed costs and continue to gain production and distribution operating efficiencies, positioning us for profitable growth as the economy recovers,$quot; added McCausland.
$quot;We have also reduced future exposure to defined benefit retirement obligations by withdrawing from half of our remaining multi-employer pension plans this year.$quot;
Year-to-date free cash flow through the third quarter was a record $289m, compared to $171m last year, driven by adjusted cash from operations of $470m, up from $436m last year, and by a 32% reduction in capital expenditures to $192m this year.
Return on capital was 10.1% compared to 13.5% in the previous year, driven by the decline in operating income reflecting the difficult economic environment over the past year.
$quot;Year-to-date we have reduced adjusted debt by $191million, and have acquired five companies with annual revenues of $47 million,$quot; McCausland continued.
$quot;We expect cash flow to remain strong and our markets to continue gaining momentum in the coming quarters. We are strengthening our sales and marketing organization, expanding product lines, and streamlining our supply chain. Airgas becomes more customer-focused every day, and we are ready to capitalize on an improving economy.$quot;
The company expects earnings per diluted share of $0.67 to $0.71 for the fourth quarter, assuming modest sequential improvement in its core packaged gas business partially offset by seasonal declines in its All Other Operations segment and continued pressure in its rental welding business.
For fiscal 2010, the company expects adjusted earnings of $2.66 to $2.70 per diluted share, which excludes year-to-date charges of $0.05 per diluted share for withdrawal from multi-employer pension plans and $0.07 per diluted share for debt extinguishment.