In a refreshing set of financial results given the current climate, Airgas reports growth in sales, operating income and earnings, as well as strong free cash flow for its third quarter.

It seems the largest distributor of industrial, medical and specialty gases, and welding, safety and related products, has escaped a battering from the economic downturn by reacting quickly.

Quarterly net earnings grew to $62.9 million, or $0.76 per diluted share, compared to $56.8 million, or $0.67 per diluted share, in the previous year, representing a 13% increase in earnings per share.

The previous year quarter included $0.01 per diluted share of integration expense primarily associated with the acquisition of Linde's U.S. packaged gas business, and a one-time $0.01 per diluted share tax benefit related to a change in state tax law.

Third quarter sales increased 7% from the previous year to $1.1 billion - acquisitions contributed 6% to the increase, and total same-store sales grew 1% in the quarter, with gas and rent up 6% and hardgoods down 5%.

Airgas Chairman and Chief Executive Officer Peter McCausland commented on the results, “Our strategic products, which have favourable long-term growth profiles and represent about 40% of sales, posted 4% organic growth in the quarter.”

“The second half of the quarter was characterised by widespread slowing across most of our customer segments, with relative strength in the medical, analytical, and food and beverage segments.”

Referring to the Company’s 12.1% operating margin in the quarter, McCausland said, “Our operating margins held up relatively well, demonstrating our ability to react quickly in a downturn.”

“We generated $59m of free cash flow this quarter, marking our sixth straight quarter of free cash flow in excess of $50m. Looking forward, we are targeting curtailment of capital expenditures as we complete significant plant projects in the next two quarters.”

Assuming a modest decline from third quarter sales and the realisation of expected benefits from its previously announced expense reduction efforts, Airgas expects earnings per diluted share of $0.73 to $0.76 in the fourth quarter, a range similar to third quarter earnings.

The Company expects full-year earnings per diluted share of $3.16 to $3.19 in fiscal 2009, representing 19% to 20% growth over fiscal 2008.