Industrial and medical gases distributor Airgas, Inc. (ARG) reported Thursday a decline in second-quarter profit, reflecting a 17% decrease in sales. On an adjusted basis, earnings per share came in above analysts' estimate by a penny. The company also provided earnings guidance for the third quarter and revised its full year outlook.
For the second quarter, net earnings dropped to $54.54 million or $0.65 per share from $72.82 million or $0.86 per share in the previous year. The results of the latest quarter included loss on debt extinguishment of $2.01 million or $0.02 a share and multi-employer pension plan withdrawal charge of $0.01 a share.
Excluding items, earnings were $0.68 per share. On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $0.67 per share for the second quarter. Analysts' estimates typically exclude special items.
Airgas noted that cost reductions and operating efficiencies helped reduce the year-over-year decline in operating margin to 11.4% from 12.5% a year ago. Operating income dropped year-over-year to $109.82 million from $144.98 million.
Net sales for the period decreased 17% to $962.27 million from $1.16 billion in the second quarter of the prior fiscal year. Ten analysts were expecting revenue of $999.17 million in the second quarter.
Revenue from gas and rent reduced to $625.39 million from $704.35 million, and Hardgoods sales dipped to $336.87 million from $457.56 million in the corresponding period of fiscal 2008.
Total same-store sales declined 19%, with hardgoods down 27% and gas and rent down 14%. Acquisitions contributed 2% sales growth in the quarter, Airgas revealed.
Commenting on the results, Peter McCausland, Airgas' Chief Executive, said, "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."
Airgas implemented $45 million of annual expense reductions between December 2008 and March 2009, which resulted in benefits for the first and second quarter. Further, the company implemented $12 million of annual expense reductions in the second quarter and expects full run-rate benefits show up in beginning of the third quarter. Airgas also sees $10 million of annual savings in fiscal 2010 from ongoing efficiency initiatives.
For the first half of fiscal 2009, net earnings slid to $109.36 million or $1.31 per share from $141.70 million or $1.67 per share in fiscal 2008. Sales decreased to $1.94 billion from $2.28 billion in the same period last year.
Looking ahead, for the third quarter, the company expects adjusted earnings in the range of $0.67 - $0.70 per share, excluding the earlier announced $0.05 per share loss on the early extinguishment of debt related to the October redemption of its $150 million 6.25% notes. Analysts curerntly expect the company to earn $0.71 per share for the third quarter. Including charges, the company expects earnings per share of $0.62 to $0.65.
For fiscal 2010, the company now expects adjusted earnings to range between $2.70 and $2.80 per share, which excludes $0.03 per share of charges in the second quarter and the $0.05 per share charge in the third quarter. Analysts expect the company to earn $2.78 per share. Previously, Airgas had projected adjusted earnings of $2.65 to $2.85 per share. Including these charges, the company expects fiscal 2010 earnings per share of $2.62 to $2.72.
ARG closed Thursday's regular trading hours at $45.95 on the NYSE.
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