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Airgas Inc. Reports Operating Results (10-Q)

February 04, 2011 | About:
10qk

10qk

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Airgas Inc. (ARG) filed Quarterly Report for the period ended 2010-12-31.

Airgas Inc has a market cap of $5.33 billion; its shares were traded at around $63.45 with a P/E ratio of 20.1 and P/S ratio of 1.4. The dividend yield of Airgas Inc stocks is 1.6%. Airgas Inc had an annual average earning growth of 15.1% over the past 10 years. GuruFocus rated Airgas Inc the business predictability rank of 4-star.Hedge Fund Gurus that owns ARG: Daniel Loeb of Third Point, LLC, Eric Mindich of Eton Park Capital Management, L.P., Richard Perry of Perry Capital, Chris Shumway of Shumway Capital Partners LLC, John Paulson of Paulson & Co., Louis Moore Bacon of Moore Capital Management, LP, Jim Simons of Renaissance Technologies LLC, Louis Moore Bacon of Moore Capital Management, LP, George Soros of Soros Fund Management LLC. Mutual Fund and Other Gurus that owns ARG: Mario Gabelli of GAMCO Investors, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Jeremy Grantham of GMO LLC, Jean-Marie Eveillard of First Eagle Investment Management, LLC.

Highlight of Business Operations:

During the three and nine months ended December 31, 2010, the Company incurred $17.6 million ($11.1 million after tax) or $0.13 per diluted share and $26.0 million ($16.4 million after tax) or $0.19 per diluted share, respectively, of legal and professional fees and other costs related to Air Products unsolicited takeover attempt and the related litigation. The Company expects to incur additional fees and other costs in the future in connection with Air Products unsolicited takeover attempt and the related litigation.

As CBAs came up for renewal, the Company actively negotiated the withdrawal from MEPPs replacing those retirement plans for CBA employees with defined contribution plans. As part of the withdrawal from a MEPP, the Company is required to fund its portion of the MEPPs unfunded pension obligation. The ultimate amount of the withdrawal liability assessed by the MEPP is impacted by a number of factors, including investment returns, benefits levels and continued participation by other employers in the MEPP. The computation of the Companys portion of a plans unfunded obligation may take up to 24 months for the pension plan administrators to prepare. As a result, the Company has recorded estimated liabilities for these withdrawals based on the latest information available to the Company from the plans. MEPP withdrawal costs for the nine months ended December 31, 2010 were $4.6 million ($2.8 million after tax) or $0.03 per diluted share, essentially all of which were incurred prior to the current quarter, and related to the ratification of certain CBAs up for renewal as well as revised estimated withdrawal liabilities from two plan administrators. In connection with the renewal of certain labor contracts during the prior year, the Company recognized MEPP withdrawal charges of $4.9 million ($3.0 million after tax) or $0.04 per diluted share and $6.6 million ($4.1 million after tax) or $0.05 per diluted share for the three and nine months ended December 31, 2009, respectively. These charges were reflected in selling, distribution and administrative expenses.

Net earnings per diluted share rose 16% to $0.65 in the current quarter versus $0.56 in the prior year quarter. Net earnings per diluted share in the current quarter include $0.13 per diluted share in costs related to the unsolicited takeover attempt and $0.02 per diluted share for the one-time interest penalty. Net earnings per diluted share in the prior year quarter include $0.04 per diluted share in MEPP withdrawal charges and $0.05 per diluted share of losses on the early extinguishment of debt.

Looking forward, the Company expects earnings per diluted share for the fourth quarter ending March 31, 2011 in the range of $0.82 to $0.86. The earnings per diluted share range for the fourth quarter of fiscal 2011 includes an estimated $0.04 per diluted share of incremental expense associated with the Companys SAP implementation. Earnings per diluted share of $0.47 for the fourth quarter of fiscal 2010 included an aggregate of $0.22 per diluted share of costs related to the unsolicited takeover attempt, early extinguishment of debt and a non-recurring income tax benefit. For the full fiscal year 2011, the Company expects earnings per diluted share in the range of $3.01 to $3.05, which includes an estimated $0.10 per diluted share of incremental expense associated with its SAP implementation as well as the impact of the following charges recorded during the nine months ended December 31, 2010: $0.19 per diluted share in costs related to the unsolicited takeover attempt; $0.03 per diluted share in MEPP withdrawal charges; $0.03 per diluted share of losses related to the early extinguishment of debt; and $0.02 per diluted share in costs related to the one-time interest penalty. Earnings per diluted share of $2.34 for the full fiscal year 2010 included an aggregate of $0.34 per diluted share of costs related to the unsolicited takeover attempt, losses on the extinguishment of debt, MEPP withdrawal charges, and a non-recurring income tax benefit. Additional charges and costs associated with the potential future extinguishment of debt, withdrawal from the remaining MEPPs, and Air Products unsolicited takeover attempt have not been factored into the fourth quarter and full fiscal year 2011 guidance.

Depreciation expense of $56 million increased $2 million, or 5%, in the current quarter as compared to $54 million in the prior year quarter. The increase primarily reflects capital investments in revenue generating assets to support customer demand, such as cylinders and bulk tanks, and the SAP enterprise information system. Amortization expense of $6 million in the current quarter was consistent with the prior year quarter.

Net earnings were $56 million, or $0.65 per diluted share, compared to $47 million, or $0.56 per diluted share, in the prior year quarter. The current quarters net earnings include costs related to Air Products unsolicited takeover attempt of $17.6 million ($11.1 million after tax) or $0.13 per diluted share and the one-time interest penalty of $2.6 million ($1.7 million after tax) or $0.02 per diluted share. The prior year quarters net earnings include charges related to withdrawals from MEPPs of $4.9 million ($3.0 million after tax) or $0.04 per diluted share and losses related to the early extinguishment of debt of $6.7 million ($4.2 million after tax) or $0.05 per diluted share.

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