AIQUY L Air Liquide (PK)

Airgas Inc. (ARG) reported an EPS of 74 cents in the fourth quarter of fiscal 2011 versus 47 cents in the year-earlier quarter.

The quarter noted some special items, which included legal and professional fees of 14 cents per share. Excluding these items, adjusted EPS was 88 cents versus 69 cents in the year-earlier quarter, surpassing the Zacks Consensus Estimate of 85 cents.

For fiscal 2011 the company reported an EPS of $2.93 versus $2.34 in the prior year. The results included some special items such as cost of 33 cents per share related to unsolicited takeover; 3 cents per share pertaining to the losses on the extinguishment of debt; another 3 cents per share related to the multi-employer pension withdrawal charges and 2 cents per share pertaining to one-time interest penalty.

Excluding these charges, adjusted EPS amounted to $3.34 versus $2.68 in the prior year, exceeding the Zacks Consensus Estimate of $3.32.

Net sales stood at $1.10 billion, up from $983.3 million in the year-earlier quarter, outperforming the Zacks Consensus Estimate of $1.07 billion. Total same-store sales increased 11% in the quarter, with hardgoods up 14% and gas and rent up 9%.

For the full year, the company reported net sales of $4.25 billion, up from $3.9 billion during the prior year, above the Zacks Consensus Estimate of $4.22 billion. Total same-store sales increased 8%, with hardgoods up 11% and gas and rent up 7%, while contribution from acquisition was 2%.

Cost and Margins

Cost of goods sold (COGS) increased to $504.6 million from $448.7 million in the year-earlier quarter. Selling, distribution and administrative (SD&A) expenses amounted to $398.9 million, up from $368.3 million in the fourth quarter 2010.

Operating income increased to $115.5 million from $81.9 million in the year-ago quarter. Consequently, operating margin expanded 220 basis points year over year to 10.5% in the quarter.

For fiscal 2011, COGS increased to $1.9 billion from $1.7 billion in the prior year. Selling, distribution and administrative expenses rose slightly to $1.6 billion from $1.5 billion in the prior year.

Operating income was $468.4 million, up from $399.6 million during the prior year. Consequently, operating margin increased 70 basis points year over year to 11% in fiscal 2011.

Financial Position

Cash and cash equivalents increased to $57.2 million as of March 31, 2011 from $47 million as of March 31, 2010. Long-term debt of the company increased substantially to $1.8 billion as of March 31, 2011 from $1.5 billion as of March 31, 2010.

Net cash from operating activity slipped to $275.3 million in fiscal 2011 from $600 million in the preceding fiscal year. Free cash flow also decreased to $386.9 million in the year from $411.6 million a year ago.

Airgas announced a program to repurchase up to $300 million of its outstanding shares of common stock. As of May 4, 2011, Airgas had approximately 79.8 million common shares outstanding. Airgas completed its previous $300 million share repurchase authorization as of the end of March 2011.

Guidance

The company now expects fiscal 2012 first quarter adjusted earnings to increase in the range of 11%–17% from 83 cents in the prior year to come in between 92 cents and 97 cents. The guided figures include 8 cents of SAP implementation costs and depreciation expense, compared with a 3 cents charge in the prior year.

For the full year the company expects adjusted earnings growth in the range of 12%–17% from $3.34 in fiscal 2011 to $3.75–$3.90. The forecast includes 32 cents of SAP implementation costs and depreciation expense, compared with 14 cents incurred in fiscal 2011.

The guidance above excludes restructuring charges, which are expected to be 10 cents in the first quarter and 17 cents for the full year.

Based in Randor, Pennsylvania, Airgas, through its subsidiaries, distributes industrial, medical, and specialty gases, as well as hard goods in the United States. Airgas competes with Air Products (APD) and L'Air Liquide SA (AIQUY). Currently, the company has a Zacks #3 Rank (Hold) for the short term.

 
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