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Total same-store sales were up 9% compared to the same quarter a year ago, with gas and rent up 5% and hardgoods up 14%. These results reflect continued improvement in manufacturing and other industrial market segments. Net earnings for the third quarter ended Dec. 31, 2004 grew 10% to $23 million, compared to $20.9 million in the same period a year ago.
"Our EPS grew by 19%, excluding the current quarter's integration expenses and the prior period's insurance gain, reflecting continued sales momentum," said Airgas Chairman and CEO Peter McCausland. "However, earnings were a little softer than we hoped. Operating expenses, including fuel cost and cylinder maintenance, increased at a faster pace as volumes continued to grow, and we have experienced some product cost increases. We are planning comprehensive pricing actions to be implemented in the next 30 to 60 days. Given that most of the cost pressures we are experiencing directly relate to our cost to purchase and deliver product to our customers and the significant investment we have made over the last few years to enhance our customers' value experience, I am confident we will achieve appropriate revenue enhancement."
Year to date, adjusted debt increased by $181 million as a result of the July 30 closing of the BOC acquisition. After-tax cash flow for the nine months ended December 31, 2004 was $160 million compared to $137 million in the comparable prior year period. Free cash flow for the comparable periods was negative $7 million versus positive $65 million. The decline in free cash is attributed to increased inventories and accounts receivable in connection with overall sales growth and the BOC acquisition, as well as capital expenditures to support the growth in strategic products like medical gas and bulk.
McCausland continued, "Our growth platforms of bulk, medical and specialty gases as well as safety products and strategic accounts all performed well in the third quarter and our January same-store sales remain strong."
Airgas, Inc. announced that effective Feb. 28, or as contracts permit, its regional companies and operating units will increase prices on packaged and bulk gases and other products and services.
Prices will increase, on average, as follows:
The company will also raise cylinder and bulk tank rental rates and pricing for hardgoods and safety products and services.
Steadily rising costs, including higher fuel costs for the company's 3,000 delivery vehicles; operating costs in fill plants and other facilities; labor costs; costs for gas products and other raw materials, such as calcium carbide used to manufacture acetylene; and costs for new cylinders, bulk tanks and many hardgoods, due to higher steel prices, all factored into the company's decision.
"Our customers can expect Airgas to continue to provide value-added services, the broadest range of products and services, and other approaches that will help them manage their overall costs," said McCausland. "We are planning new investments in fast-fill plants, distribution centers, eBusiness capabilities and an expansion of our Radnor private-label product line as part of our commitment to reducing our customers' total cost of procurement. These pricing actions are needed so that we can maintain our profit margins, which will support these kinds of investments to add value to our customers."