Airgas, one of the nation’s leading suppliers of industrial, medical, and specialty gases, and related products, today reported sales and earnings growth for its third quarter ended December 31, 2012, which reflected the impact of continued economic uncertainty and moderation in business conditions on its diversified customer base.
Results for the quarter also reflected the realisation of SAP-related benefits as planned, tempered by slightly higher than anticipated implementation costs.
Third quarter earnings per diluted share were $1.05, an increase of 13% over prior year earnings per diluted share of $0.93. Excluding a net $0.01 benefit from certain lower-than-expected restructuring costs, adjusted earnings per diluted share* were $1.04, an increase of seven percent over prior year adjusted earnings per diluted share* of $0.97. Results included SAP implementation costs and depreciation expense, net of benefits realised, of $0.03 per diluted share in the current year quarter compared to $0.10 of expense in the prior year quarter.
“Moderating activity levels in our industrial customer base throughout the quarter were further exacerbated in late December by uncertainty around the fiscal cliff and by the timing of the holidays during the work week,” said Airgas Executive Chairman Peter McCausland.
“We’re pleased to be on target for our SAP benefits, which contributed to the Distribution segment’s 200 basis point year-over-year expansion in gross margin and 30 basis point year-over-year expansion in operating margin on very modest sales growth. Although implementation costs were slightly higher than anticipated during the quarter, we demonstrated the ability to achieve the SAP benefits, and that reinforces that this program will create substantial shareholder value. Acquisition activity was another bright spot in the quarter, as we added seven businesses with aggregate annual revenues of $75m. Though we remain appropriately cautious about near-term business conditions, we’re very optimistic about the long-term prospects for the US manufacturing and energy industries, as well as non-residential construction, and our ability to leverage our unique value proposition and unrivaled platform to drive growth. Some of the most challenging aspects of the SAP implementation are behind us, we’re building momentum, and we’re ready to capitalise on any improvement in the US economy.”
“The SAP implementation is on-schedule, with only one region remaining to convert to the new system,” said Airgas Chief Executive Officer Michael L. Molinini.
“To ensure the long-term success of this initiative, we expect to incur slightly higher than anticipated SAP-related expenses in our fourth quarter and to continue to incur some SAP-related costs during the first half of fiscal 2014 for post-conversion support and training. Our expectation that we will achieve our projected $75 to $125m in run-rate operating income benefits by the end of calendar 2013, however, remains unchanged. These SAP milestones and the growth initiatives we presented at our analyst meeting in December, which support our fiscal 2016 financial goals, all make for a bright future for this company.”
Third quarter sales were $1.21bn, an increase of five percent over the prior year. Organic sales in the quarter were up four percent over the prior year, with gas and rent up six percent and hardgoods down one percent. Organic sales in the Distribution business segment were up two percent over the prior year, with gas and rent up five percent and hardgoods down one percent.