Airgas reported net earnings of $54.5m, or $0.65 per diluted share, for its second quarter ended 30th September 2009.

Excluding a $0.02 per diluted share debt extinguishment charge and a $0.01 per diluted share multi-employer pension plan withdrawal charge, adjusted earnings per diluted share were $0.68, compared to $0.86 per diluted share in the previous year quarter.

Cost reductions and operating efficiencies continued to support the company's operating margin, which posted only a modest decline year-over-year to 11.4% from 12.5%, and improved sequentially from 11.0% in the face of a challenging sales environment.

Second quarter sales were $962m, a decline of 17% from the previous year. Total same-store sales declined 19%, with hardgoods down 27% and gas and rent down 14%. Acquisitions contributed 2% sales growth in the quarter.

$quot;While sales finished stronger than they started, we are still in a very challenging economy,$quot; said Airgas Chairman and Chief Executive Officer Peter McCausland.

$quot;Difficult conditions were broad-based across our geographies and customer segments. Consistent with recent quarters, our manufacturing customers suffered the deepest declines while our medical business showed the most resilience.$quot;

As previously announced, the company fully implemented $45m of annual expense reductions between December 2008 and March 2009, the benefit of which is fully reflected in first and second quarter results.

An additional $12m of annual expense reductions were completed during the second quarter and are expected to yield full run-rate benefits starting in the third quarter.

These $57m of expense reductions were in addition to $10m of expected annual savings in fiscal 2010 from ongoing efficiency initiatives.

$quot;We have managed our cost structure effectively during this downturn,$quot; McCausland continued, “reducing expenses to mitigate the impact of declining sales on our earnings. Our efforts have yielded better operating margin and earnings than the declining sales might otherwise imply, and we are still in a good position to benefit when the economy starts to recover.$quot;

Year-to-date free cash flow through the second quarter was $223m compared to $112m last year, driven by adjusted cash from operations of $349m, up from $287m last year, and by a 29% reduction in capital expenditures to $131m this year. Return on capital was 10.8% compared to 13.6% in the previous year.

$quot;In spite of the challenging business climate, some notable highlights in the quarter included credit rating upgrades by both rating agencies, our $400 million 4.5% senior notes offering that was significantly oversubscribed and which was used to reduce revolver borrowings, and our addition to the S&P 500 index,$quot; added McCausland.

$quot;We continue to generate strong free cash flow, which we used to reduce debt this quarter. Although we believe the worst same-store sales declines are now behind us, we remain cautious in our near-term outlook and focused on forward progress for the long run.$quot;

The company expects adjusted earnings per diluted share of $0.67 to $0.70 for the third quarter, which excludes the previously announced $0.05 per diluted share loss on the early extinguishment of debt related to the October redemption of its $150m 6.25% notes. Including this charge, the company expects earnings per diluted share of $0.62 to $0.65.

For fiscal 2010, the company expects adjusted earnings of $2.70 to $2.80 per diluted share, which excludes $0.03 per diluted share of charges in the second quarter and the $0.05 per diluted share charge in the third quarter. Including these charges, the company expects earnings per diluted share of $2.62 to $2.72.