Original Source: FD (FAIR DISCLOSURE) WIRE
. Melissa Nigro, Airgas, Investor Relations . Peter McCausland, Airgas, Chairman, CEO . Roger Millay, Airgas, SVP, CFO
ARG reported 2Q04 sales grew 30% to $600m, while EBITDA grew 24% to $78m, and EPS grew 15% to $0.30 per share. Highlights included the acquisition of the US packaged gas assets from BOC Group and continuing strength in same store sales. For the second quarter in a row, each of regional companies posted growth in same store sales. Q&A Focus: medical gas pricing pressure, sales growth cycle, integration metrics, centralized business.
A. Key Data From Call 1. Sales =$600m. 2. EBITDA = $78m. 3. EPS = $0.30. 4. YTD Free Cash Flow = negative $8m. 5. ROC = 9%. 6. Net sales increase = 30%. 7. Operating Margin = 8.5%. 8. YTD spending = $66m.
S1. Highlights (P.M.) 1. Financial Highlights: 1. Sales grew 30% to $600m. 2. EBITDA grew 24% to $78m. 3. EPS grew 15% to $0.30 per share, including a couple of cents BOC integrations costs. 2. Highlights: 1. Acquisition of the US packaged gas assets from BOC Group on July 30. 2. Continuing strength in same store sales. 3. Outlook for organic growth is very good, and feel business conditions are the best in this industry in a very long time. 4. A continued weak dollar, strong manufacturing, much better pricing environment, and higher oil prices all bode well for the future. 5. Total same stores growth: 10% vs. last year. 6. Gas and rent up 6% and hardgoods up 16%. 7. These results reflect the continuing economic strength in industrial America and solid execution of growth initiatives. 8. Pricing environment for gas is strengthening and volumes continue to grow in line with expectations. 1. Over the next three months will be much more active in the pricing area. 2. Have passed through cost increases on welding, hardgoods and safety products over the last several months. 3. Pricing actions contributed about 2% of the total 10% same store sales growth. 9. Gaining momentum in all markets. 1. For the second quarter in a row, each of regional companies posted growth in same store sales, and over half posted
double-digit growth. 10. At the GAWDA meeting, the tone was very positive about the improving business climate. 11. ARG acquisition pipeline remains full and expect an extended period of good opportunities. 3. Gas and rent growth increases: 1. 15% in bulk.
2. 13% in medical. 3. 23% in specialty gas. 4. Excluding the gas and rent sales from acquired BOC business, growth was still very good at: 1. 10% in bulk. 2. 5% in medical. 3. 10% in specialty. 5. Gas Highlights: 1. Medical gas strategy involving the integration of the Puritan medical gas business and the regional gas businesses into the Airgas Puritan division is going extremely well. 2. Spec gas program is also gaining momentum.
1. ARG feels this sector is rebounding and that spec gas strategies are beginning to take hold. 3. Continue making good progress with core business strategy. 6. Equipment Business: 1. Retail equipment sales: up 34% vs. last year and 6% sequentially. 2. Core stocking program: average daily sales up 57% since launching the program last Nov. 1. Core strategy is reinvigorating the organization. 7. Radnor: 1. Radnor sales: $23m, up 37% vs. last year and 15% sequentially. 2. All Radnor catalog was distributed in Aug. 1. This catalog provides full description of items, technical
support information and includes an industrial gasses section.
2. Expect it to contribute to maintaining the strong Radnor sales momentum. 8. Hardgoods Highlights: 1. The hardgoods strategy is clicking on all cylinders. 2. Distribution Center fulfillment and error rates are at all-time record performance. 3. Brand strategy is working very well. 4. Inventory management with the Manugistics software is working extremely well. 9. Safety Sales: 1. Had another great quarter for safety sales due to
strengthening economy and acquisitions. 2. Total safety sales grew 21% to $84m. 1. Adjusting for acquisitions, sales were up 16%. 2. Proves ARG can successfully leverage its infrastructure and customer base to sell additional products and services. 3. Vendor workshops, training and promotional programs are having
a positive impact in increasing penetration. 4. Sales through strategic accounts grew 20% to 75m vs. 2Q03. 1. Excluded the BOC sales it was 12%. 5. Signed 35 new agreements in 2Q04, a record for this group. 10. Dry Ice: 1. The dry ice market remains competitive, but sales volumes were up 4% on a same store basis. 2. Same store sales for CO2 were up 9% in the quarter. 3. Overall had good sales momentum across product portfolio and hope to see it continue.
4. Did well with strategic growth platforms. 5. The BOC deal will enhance sales in several areas, including bulk gasses, medical gasses, and specialty gasses. 11. BOC Integration Process:
1. Delivered a smooth integration. 2. From day one have made deliveries accurately and on time. 3. Customers and distributors have commented on how pleased they are with the service. 4. Have a lot of work to do to capture synergies, but have established a solid foundation.
S2. Financial Results (R.M.) 1. BOC Integration: 1. Focused on maintaining uninterrupted high quality service to customers, integrating systems, and assimilating new employees. 1. These costs impacted EPS $0.02, in line with expectations. 2. The BOC business model was very different leading to this unusual high level of initial integration costs, with more centralized management organizational structure, centralized customer service and logistics, consolidated use of SAP. 1. ARG is reshaping the …