The prevailing economic conditions have ‘put a damper’ on Airgas’ record year in terms of earnings and cash flow, but the company is using this time to strengthen its operations, so that it is well positioned for growth when the economy begins to recover.
Quarterly earnings declined 11% to $0.68 per diluted share, compared to $0.76 per diluted share in the previous year.
Fourth quarter sales were $1.0bn compared to $1.1bn in the previous year, a decline of 9%.
Total same-store sales declined 13% in the quarter, with hardgoods down 20% and gas and rent down 8%; acquisitions contributed 4% sales growth in the quarter.
“Most of our customer segments were under significant pressure this quarter, with manufacturing suffering the deepest declines,” said Airgas Chairman and CEO Peter McCausland.
“Given the difficult sales environment, we moved quickly to curtail costs and capital spending. As a result, our operating margin in the quarter held up relatively well, declining modestly to 11.5% from 12.1% last year.”
Free cash flow in the fourth quarter was a strong $157m compared to $63m last year, with a large part of the improvement driven by reductions in working capital.
Return on capital was 12.7% compared to 13.2% in the previous year.
For the full year, sales increased 8% to $4.3bn; acquisitions contributed 7% sales growth in the year, while total same-store sales grew 1%, with hardgoods down 4% and gas and rent up 4%.
The Company completed 14 acquisitions in fiscal 2009, adding more than $205m in historic annual revenue.
Earnings for the year grew 17% from $2.66 per diluted share in the previous year to $3.12, marking another record year of earnings.
The strong performance was driven by good sales growth in the first half of the year and effective management of costs in response to the slowing economy in the second half of the year.
The previous year included $0.06 of integration expense primarily associated with the June 30 2007 acquisition of Linde’s US packaged gas business, a one-time non-cash charge of $0.03 related to the conversion of National Welders Supply Company from a joint venture to a wholly owned subsidiary, and a $0.01 tax benefit related to a change in state tax law.
Adjusted cash from operations was a record $660m, up from $482m the previous year, helping to drive strong free cash flow of $328m for the year, up from $225m the previous year.
“The current environment puts a damper on what was a record year for Airgas in earnings and cash flow, but we’re using this time to strengthen our operations so that we are well-positioned for growth when the economy begins to recover,” McCausland added.
“The fourth quarter trend of low sales volumes continued in April, and with few signs of recovery in the near term, we are cautious in our outlook for fiscal 2010.”
“The resilient nature of our business model, including our flexible cost structure and ability to generate strong free cash flow, should prove beneficial even if conditions deteriorate further.”