As Airgas releases its first quarter 2009 earnings, Chairman Peter McCausland says the company’s quick reaction has resulted in only a modest decline in operating margin, helping it to keep focused on forward progress for the long run.
The company reported earnings of $0.66 per diluted share for its first quarter ended 30th June 2009, consistent with the company’s guidance. Quarterly EPS results represent a 19% decline from previous year earnings of $0.81 per diluted share.
First quarter sales were $1.0 bn, a decline of 12% from the previous year. Total same-store sales declined 17%, with hardgoods down 27% and gas and rent down 10%. Acquisitions contributed 5% sales growth in the quarter.
“Sales were consistently at the low end of our expectations throughout the quarter, and demand continues to be weak across most customer segments,” said Airgas Chairman and Chief Executive Officer Peter McCausland.
“Manufacturing has shown the deepest declines, analytical and utilities have shown some resilience, and our medical sales posted positive growth.”
Between December and March, as previously announced, the Company fully implemented $45m of annual expense reductions, which were in addition to $10m of expected annual savings in fiscal 2010 from ongoing efficiency initiatives.
McCausland continued, “We have reacted quickly and effectively reducing expenses to mitigate the impact of declining sales. As a result, we have only experienced a modest decline in operating margin, to 11.0% from 11.5% last quarter and 12.1% in the first quarter last year.”
In light of the continued weak business climate and few signs of near-term recovery, the company has identified an additional $12m of annual expense reductions that will be fully implemented by the end of the second quarter.
“In addition to our focus on cost management, we continue to enhance and expand our offerings and capabilities to best serve our customers,” added McCausland.
“I am pleased with our ability to win new business, such as the supply contract we recently announced with NIST, the National Institute of Standards and Technology, which is the standard-setting body for EPA protocol gases.”
Free cash flow in the first quarter was $119m compared to $58m last year, driven by adjusted cash from operations of $183m, up from $140m last year, and by a 21% reduction in capital expenditures to $67m this year. Return on capital was 11.8% compared to 13.3% in the previous year.
“We continue to generate strong free cash flow, which we used to reduce debt and increase our dividend this quarter,” added McCausland.
“We remain cautious in our near-term outlook and focused on forward progress for the long run.”
The Company expects earnings per diluted share of $0.64 to $0.69 for the second quarter. For fiscal 2010, the company is updating its expectations to $2.65 to $2.85 per diluted share. The previously announced range was $2.60 to $2.90.