EX-99.1 2 w34463exv99w1.htm PRESS RELEASE DATED MAY 2, 2007 exv99w1
 

Exhibit 99.1
         
(AIRGAS LOGO)
  News Release   Airgas, Inc.
259 N. Radnor-Chester Road
Suite 100
Radnor, PA 19087-5283
www.airgas.com
     
Investor Contact:   Media Contact:
Jay Worley (610) 902-6206   James Ely (610) 902-6010
jay.worley@airgas.com   jim.ely@airgas.com
For release:  Immediately
Airgas Reports Record Fourth Quarter EPS from Continuing Operations of $0.54
RADNOR, PA – May 2, 2007 — Airgas, Inc., (NYSE: ARG), the largest U.S. distributor of industrial, medical, and specialty gases, welding, safety, and related products, today reported strong growth in sales, operating income, and earnings for its fourth quarter ended March 31, 2007.
Quarterly income from continuing operations was $43.7 million, or $0.54 per diluted share, compared to $36.0 million, or $0.45 per diluted share in the prior year. In April 2006, the Company adopted, on a modified prospective basis, SFAS 123R, Share-Based Payment. SFAS 123R requires the Company to recognize the estimated value of stock options issued to employees and shares purchased under its Employee Stock Purchase Plan as compensation expense. Had the Company applied SFAS 123 to the prior year quarter, the Company would have recognized income from continuing operations of $34.5 million, or $0.43 per diluted share. Quarterly income from continuing operations per diluted share increased 26% over the prior year quarter adjusted for the impact of stock-based compensation.*
Fourth quarter sales grew 14% to $854 million from the prior year. Acquisitions accounted for 9% of the growth, and total same-store sales increased 5% over robust growth levels in the prior year, with hardgoods up 6% and gas and rent up 5%.
“We capped the most successful year for acquisitions in our 25-year history. The quarter included the acquisition of CFC Refimax in January and the March 9 acquisition of Linde’s divested bulk gas business, bringing our year-end total to 13 acquisitions with more than $335 million in acquired revenue,” said Airgas Chairman and Chief Executive Officer Peter McCausland.
“Our non-residential construction and energy markets remain healthy. Along with our strategic products, they are helping to provide good growth in today’s economic climate,” said McCausland. “Most importantly, our growth is profitable, as operating margin in the quarter expanded to 10.9%, an

 

 

4Q07 Earnings Final NR/Page 2 of 12
improvement of 130 basis points over last year’s operating margin adjusted for stock-based compensation. Return on Capital was 13.3%, an increase of 150 basis points over the prior year.” *
Sales in fiscal 2007 increased 13% to $3.2 billion, with same-store sales growth of 8%. Earnings from continuing operations for the year were $1.92 per diluted share compared to prior year results of $1.62 per diluted share. The current year includes a charge of $0.10 per share for the early extinguishment of debt and a $0.02 per share tax benefit related to a change in state tax law, while the prior year includes a $0.02 per share loss related to hurricanes. Excluding these items, and adjusting the prior year for the pro-forma impact of $0.10 per share of stock-based compensation expense, diluted earnings per share from continuing operations increased 30% to $2.00 in fiscal 2007.*
McCausland continued, “We expect earnings per diluted share of $2.33 to $2.41 in fiscal 2008, including the impact of the Linde bulk business that we just acquired. First-quarter expectations are $0.52 to $0.54 per diluted share. We hope to outperform the economy again this year, as we benefit from our growth strategies and operating infrastructure.”
The Company will conduct an earnings teleconference at 11:00 a.m. Eastern Time on Thursday, May 3. The teleconference will be available by calling (800) 819-9193. The presentation materials (this press release, slides to be presented during the Company’s teleconference, and information about how to access a live and on-demand webcast of the teleconference) are available in the “Investor Information” section under the “Company Information” heading on the Company’s Internet site at www.airgas.com. A webcast of the teleconference will be available live and on demand through June 1 at http://www.shareholder.com/arg/medialist.cfm. A replay of the teleconference will be available through May 11. To listen, call (888) 203-1112 and enter passcode 4634965.
 
*   See attached reconciliations of non-GAAP financial measures associated with Adjusted Income from Continuing Operations, Adjusted Operating Margin, and Return on Capital calculations.
About Airgas, Inc.
Airgas, Inc. (NYSE: ARG), through its subsidiaries, is the largest U.S. distributor of industrial, medical, and specialty gases, and hardgoods, such as welding equipment and supplies. Airgas is also the third-largest U.S. distributor of safety products, the largest U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast, and a leading distributor of process chemicals, refrigerants, and ammonia products. More than 11,000 employees work in about 900 locations including branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also distributes its products and services through eBusiness, catalog and telesales

 

 

4Q07 Earnings Final NR/Page 3 of 12
channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base. For more information, please visit www.airgas.com.
# # #
Forward-Looking Statements
This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. These statements include, but are not limited to, statements regarding: our non-residential and energy markets and strategic products providing for good growth; expectations for fiscal 2008 earnings per diluted share of $2.33 to $2.41 and first quarter earnings per diluted share of $0.52 to $0.54; and expectations to outperform the economy, as we benefit from our growth strategies and operating infrastructure. We intend that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors and should not be regarded as a representation by us or any other person that the results expressed therein will be achieved. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include: customer acceptance of price increases; supply cost pressures; increased industry competition; our ability to successfully consummate and integrate acquisitions, including the Linde transaction; a disruption to our business from integration problems associated with acquisitions; an economic downturn; adverse changes in customer buying patterns; significant fluctuations in interest rates; increases in energy costs and other operating expenses; the effect of hurricanes and other catastrophic events; political and economic uncertainties associated with current world events; and other factors described in the Company’s reports, including Form 10-K dated March 31, 2006, subsequent Forms 10-Q, and other forms filed by the Company with the Securities and Exchange Commission.
Consolidated statements of earnings, consolidated condensed balance sheets, consolidated statements of cash flows, and reconciliations of non-GAAP financial measures follow.

 

 

4Q07 Earnings Final NR/Page 4 of 12
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
                                 
    Three Months Ended     Year Ended  
    March 31,     March 31,  
    (Unaudited)     (Unaudited)        
    2007     2006     2007     2006  
Net sales
   $ 853,861     $ 746,896     $ 3,205,051     $ 2,829,610  
 
                        
 
                                
Costs and expenses:
                                
Cost of products sold (excl. deprec.)
     419,342       373,915       1,567,090       1,401,978  
Selling, distribution and administrative expenses (b),(d)
     303,163       266,159       1,149,166       1,031,332  
Depreciation
     36,595       31,881       138,818       122,396  
Amortization
     1,808       1,199       8,525       5,146  
 
                        
Total costs and expenses
     760,908       673,154       2,863,599       2,560,852  
 
                        
 
                                
Operating income
     92,953       73,742       341,452       268,758  
 
                                
Interest expense, net
     (17,107 )     (13,281 )     (60,180 )     (53,812 )
Discount on securitization of trade receivables (e)
     (3,137 )     (2,706 )     (13,630 )     (9,371 )
Loss on debt extinguishment (c)
     —       —       (12,099 )     —  
Other income, net
     242       848       1,601       2,462  
 
                        
Earnings before income tax expense and minority interest
     72,951       58,603       257,144       208,037  
 
                                
Income tax expense
     (28,505 )     (21,894 )     (99,883 )     (77,866 )
Minority interest in earnings of consolidated affiliate
     (711 )     (711 )     (2,845 )     (2,656 )
 
                        
Income from continuing operations before the cumulative effect of a change in accounting principle
     43,735       35,998       154,416       127,515  
Loss from discontinued operations, net of tax (a)
     —       —       —       (1,424 )
Cumulative effect of a change in accounting principle, net of tax (f)
     —       (2,540 )     —       (2,540 )
 
                        
Net earnings
   $ 43,735     $ 33,458     $ 154,416     $ 123,551  
 
                        
 
                                
NET EARNINGS PER COMMON SHARE (g)
                                
BASIC
                                
Earnings from continuing operations before the cumulative effect of a change in accounting principle
   $ 0.56     $ 0.47     $ 1.98     $ 1.66  
Earnings (loss) from discontinued operations
     —       —       —       (0.02 )
Cumulative effect per share of a change in accounting principle
     —       (0.04 )     —       (0.03 )
 
                        
Net earnings per share
   $ 0.56     $ 0.43     $ 1.98     $ 1.61  
 
                        
 
                                
DILUTED
                                
Earnings from continuing operations before the cumulative effect of a change in accounting principle
   $ 0.54     $ 0.45     $ 1.92     $ 1.62  
Earnings (loss) from discontinued operations
     —       —       —       (0.02 )
Cumulative effect per share of a change in accounting principle
     —       (0.03 )     —       (0.03 )
 
                        
Net earnings per share
   $ 0.54     $ 0.42     $ 1.92     $ 1.57  
 
                        
 
                                
Weighted average shares outstanding (g):
                                
Basic
     78,579       77,292       78,025       76,624  
Diluted
     83,160       82,174       82,566       81,152  
See attached notes.

 

 

4Q07 Earnings Final NR/Page 5 of 12
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
                 
    (Unaudited)        
    March 31,     March 31,  
    2007     2006  
ASSETS
                
Cash
   $ 25,931     $ 34,985  
Trade accounts receivable, net (e)
     193,664       132,245  
Inventories, net
     250,308       229,523  
Deferred income tax asset, net
     31,004       30,141  
Prepaid expenses and other current assets
     48,592       31,622  
 
            
TOTAL CURRENT ASSETS
     549,499       458,516  
 
                
Plant and equipment, net
     1,865,418       1,398,757  
Goodwill
     832,162       566,074  
Other intangible assets, net
     62,935       26,248  
Other non-current assets
     23,443       24,817  
 
            
TOTAL ASSETS
   $ 3,333,457     $ 2,474,412  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Accounts payable, trade
   $ 146,385     $ 143,752  
Accrued expenses and other current liabilities
     241,275       200,001  
Current portion of long-term debt
     40,296       131,901  
 
            
TOTAL CURRENT LIABILITIES
     427,956       475,654  
 
                
Long-term debt
     1,309,719       635,726  
Deferred income tax liability, net
     373,246       327,818  
Other non-current liabilities
     39,963       30,864  
Minority interest in affiliate
     57,191       57,191  
 
                
Stockholders’ equity
     1,125,382       947,159  
 
            
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 3,333,457     $ 2,474,412  
 
            
See attached notes.

 

 

4Q07 Earnings Final NR/Page 6 of 12
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
                 
    (Unaudited)        
    Year Ended     Year Ended  
    March 31, 2007     March 31, 2006  
CASH FLOWS FROM OPERATING ACTIVITIES
                
Net earnings
   $ 154,416     $ 123,551  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                
Depreciation
     138,818       122,396  
Amortization
     8,525       5,146  
Deferred income taxes
     51,911       47,148  
Loss on divestiture
     —       1,900  
Loss (gain) on sales of plant and equipment
     39       (1,330 )
Minority interest in earnings
     2,845       2,656  
Stock-based compensation expense
     15,448       —  
Stock issued for employee stock purchase plan
     11,952       10,534  
Loss on debt extinguishment
     12,099       —  
Cumulative effect of a change in accounting principle
     —       2,540  
Changes in assets and liabilities, excluding effects of business acquisitions and divestitures:
                
Securitization of trade receivables
     20,200       54,300  
Trade receivables, net
     (37,687 )     (17,021 )
Inventories, net
     (1,491 )     (14,087 )
Prepaid expenses and other current assets
     (23,326 )     12,603  
Accounts payable, trade
     (23,351 )     1,533  
Accrued expenses and other current liabilities
     266       9,323  
Other long-term assets
     1,805       3,340  
Other long-term liabilities
     (2,363 )     (2,363 )
 
            
Net cash provided by operating activities
     330,106       362,169  
 
            
 
                
CASH FLOWS FROM INVESTING ACTIVITIES
                
Capital expenditures
     (243,583 )     (214,193 )
Proceeds from sales of plant and equipment
     8,685       8,202  
Proceeds from divestitures
     —       14,562  
Business acquisitions and holdback settlements
     (687,892 )     (153,428 )
Other, net
     (474 )     170  
 
            
Net cash used in investing activities
     (923,264 )     (344,687 )
 
            
 
                
CASH FLOWS FROM FINANCING ACTIVITIES
                
Proceeds from borrowings
     1,591,464       568,379  
Repayment of debt
     (1,008,186 )     (606,532 )
Purchase of treasury stock
     —       (12,771 )
Financing costs
     (5,103 )     —  
Premium paid on call of senior subordinated notes
     (10,267 )     —  
Minority interest in earnings
     (2,845 )     (2,656 )
Minority stockholder note prepayment
     —       21,000  
Proceeds from exercise of stock options
     15,107       19,707  
Tax benefit realized from the exercise of stock options
     9,013       —  
Dividends paid to stockholders
     (21,980 )     (18,449 )
Cash overdraft
     16,901       16,185  
 
            
Net cash provided by (used in) financing activities
     584,104       (15,137 )
 
            
 
                
Change in cash
   $ (9,054 )   $ 2,345  
Cash – Beginning of period
     34,985       32,640  
 
            
Cash – End of period
   $ 25,931     $ 34,985  
 
            
See attached notes.

 

 

4Q07 Earnings Final NR/Page 7 of 12
 
Notes:
(a)   The Company divested its subsidiary, Rutland Tool & Supply Co. (“Rutland Tool”), in December 2005. The results of Rutland Tool for the year ended March 31, 2006 have been classified in the Consolidated Statement of Earnings as “discontinued operations.”
 
(b)   Effective April 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment, (“SFAS 123R”) using the modified prospective method. The new standard requires the Company to estimate the value of stock options issued to employees, including options to purchase shares under its Employee Stock Purchase Plan, and recognize the estimated cost in earnings over the period in which the options vest. Prior to the adoption of SFAS 123R, the Company used the intrinsic value method outlined in Accounting Principles Board Opinion No. 25 to account for stock-based compensation. For the year ended March 31, 2007, the Company recognized stock-based compensation expense of $0.13 per diluted share, which is approximately $0.03 per diluted share per quarter. Since the Company adopted SFAS 123R prospectively, no stock-based compensation expense was reflected in earnings prior to April 1, 2006.
 
(c)   On October 27, 2006, the Company redeemed its $225 million 9.125% senior subordinated notes (the “Notes”) in full at a premium of 104.563% of the principal amount with proceeds from the Company’s revolving credit line. In conjunction with the redemption of the Notes, the Company recognized a charge on the early extinguishment of debt of $12 million ($7.9 million after tax, or approximately $0.10 per diluted share) in October 2006. The charge included the redemption premium and the write-off of unamortized debt issuance costs. Under existing covenant restrictions, liquidity was not significantly affected by the redemption of the Notes.
 
(d)   Selling, distribution and administrative expenses in the year ended March 31, 2006 include losses related to hurricanes Katrina and Rita of $2.2 million ($1.4 million after tax), or $0.02 per diluted share. The losses were primarily recognized in the quarter ended September 30, 2005.
 
(e)   The Company participates in a securitization agreement with three commercial banks to sell up to $285 million of qualified trade receivables. Net proceeds from the securitization were used to reduce borrowings under the Company’s revolving credit facilities. The amount of outstanding receivables sold under the agreement was $264.4 million and $244.2 million at March 31, 2007 and March 31, 2006, respectively.
 
(f)   In the fourth quarter of fiscal 2006, the Company adopted Financial Accounting Standards Board Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations. Accordingly, the Company recorded a cumulative effect of a change in accounting principle of $2.5 million to recognize the net liabilities principally associated with removing bulk storage tanks from customer locations upon the termination of gas supply agreements.

 

 

4Q07 Earnings Final NR/Page 8 of 12
(g)   The tables below present the computation of basic and diluted earnings per share:
                                 
    March 31,     March 31,  
    (Unaudited)     (Unaudited)        
(In thousands, except per share amounts)   2007     2006     2007     2006  
Basic Earnings per Share Computation
                                
Numerator
                                
 
                                
Income from continuing operations before the cumulative effect of a change in accounting principle
   $ 43,735     $ 35,998     $ 154,416     $ 127,515  
Loss from discontinued operations
     —       —       —       (1,424 )
Cumulative effect of a change in accounting principle
     —       (2,540 )     —       (2,540 )
 
                        
Net earnings
   $ 43,735     $ 33,458     $ 154,416     $ 123,551  
 
                        
 
                                
Denominator
                                
 
                                
Basic shares outstanding
     78,579       77,292       78,025       76,624  
 
                        
 
                                
Basic earnings per share from continuing operations before the cumulative effect of a change in accounting principle
   $ 0.56     $ 0.47     $ 1.98     $ 1.66  
Basic loss per share from discontinued operations
     —       —       —       (0.02 )
Basic loss per share from the cumulative effect of a change in accounting principle
     —       (0.04 )     —       (0.03 )
 
                        
Basic net earnings per share
   $ 0.56     $ 0.43     $ 1.98     $ 1.61  
 
                        
                                 
    Three Months Ended     Year Ended  
    March 31,     March 31,  
    (Unaudited)     (Unaudited)        
(In thousands, except per share amounts)   2007     2006     2007     2006  
Diluted Earnings per Share Computation
                                
Numerator
                                
 
                                
Income from continuing operations before the cumulative effect of a change in accounting principle
   $ 43,735     $ 35,998     $ 154,416     $ 127,515  
Plus: Preferred stock dividends (1) (2)
     711       711       2,845       2,845  
Plus: Income taxes on earnings of National Welders (3)
     438       220       1,166       730  
 
                        
Income from continuing operations before the cumulative effect of a change in accounting principle, assuming preferred stock conversion
     44,884       36,929       158,427       131,090  
Loss from discontinued operations
     —       —       —       (1,424 )
Cumulative effect of a change in accounting principle
     —       (2,540 )     —       (2,540 )
 
                        
Net earnings
   $ 44,884     $ 34,389     $ 158,427     $ 127,126  
 
                        
 
                                
Denominator
                                
 
                                
Basic shares outstanding
     78,579       77,292       78,025       76,624  
 
                                
Incremental shares from assumed conversions:
                                
 
                                
Stock options and warrants
     2,254       2,555       2,214       2,201  
Preferred stock of National Welders (1)
     2,327       2,327       2,327       2,327  
 
                        
 
Diluted shares outstanding
     83,160       82,174       82,566       81,152  
 
                        
Diluted earnings per share from continuing operations before the cumulative effect of a change in accounting principle
   $ 0.54     $ 0.45     $ 1.92     $ 1.62  
Diluted loss per share from discontinued operations
     —       —       —       (0.02 )
Diluted loss per share from the cumulative effect of a change in accounting principle
     —       (0.03 )     —       (0.03 )
 
                        
Diluted net earnings per share
   $ 0.54     $ 0.42     $ 1.92     $ 1.57  
 
                        

 

 

4Q07 Earnings Final NR/Page 9 of 12
  (1)   Pursuant to a joint venture agreement between the Company and the holders of the preferred stock of National Welders, until June 2009, the preferred shareholders have the option to exchange their 3.2 million preferred shares of National Welders either for cash at a price of $17.78 per share or to tender them to the joint venture in exchange for approximately 2.3 million shares of Airgas common stock. If Airgas common stock has a market value of $24.45 per share, the stock and cash redemption options are equivalent.
 
  (2)   If the preferred stockholders of National Welders convert their preferred stock to Airgas common stock, the 5% preferred stock dividend, recognized as “Minority interest in earnings of consolidated affiliate,” would no longer be paid to the preferred stockholders, resulting in additional net earnings for Airgas.
 
  (3)   The earnings of National Welders for tax purposes are treated as a deemed dividend to Airgas, net of an 80% dividend exclusion. Upon the assumed conversion of National Welders preferred stock to Airgas common stock, National Welders would become a wholly owned subsidiary of Airgas. As a wholly owned subsidiary, the net earnings of National Welders would not be subject to additional tax at the Airgas level.
(h)   On March 9, 2007, the Company acquired Linde’s divested U.S. bulk gas assets for $495 million in cash. The acquisition includes eight air separation plants and related bulk gas business with about 300 employees. The business generated $176 million in revenues during calendar year 2006. The Company formed a new business unit, Airgas Merchant Gases, to manage production, distribution and administrative functions for the air separation plants. Most of the acquired bulk gas customers and related service equipment were assumed by existing Distribution business units. Airgas Merchant Gases, which is reflected in the All Other Operations business segment below, will operate principally as an internal supplier to the business units in the Distribution business segment.

 

 

4Q07 Earnings Final NR/Page 10 of 12
(i)   Business segment information for the Company’s Distribution and All Other Operations segments is shown below:
                                                                 
    Three Months Ended     Three Months Ended  
    March 31, 2007     March 31, 2006  
            All                             All              
            Other                             Other              
(In thousands)   Dist.     Ops.     Elim     Combined     Dist.     Ops.     Elim     Combined  
Gas and rent
   $ 372,775     $ 129,886     $ (18,749 )   $ 483,912     $ 326,698     $ 104,227     $ (14,278 )   $ 416,647  
Hardgoods
     346,657       24,876       (1,584 )     369,949       310,595       20,764       (1,110 )     330,249  
 
                                                
Total net sales
     719,432       154,762       (20,333 )     853,861       637,293       124,991       (15,388 )     746,896  
 
                                                                
Cost of products sold, excluding deprec. expense
     364,063       75,612       (20,333 )     419,342       328,761       60,542       (15,388 )     373,915  
Selling, distribution and administrative expenses
     249,631       53,532       —       303,163       221,719       44,440       —       266,159  
Depreciation expense
     28,711       7,884       —       36,595       25,277       6,604       —       31,881  
Amortization expense
     1,262       546       —       1,808       969       230       —       1,199  
 
                                                
Operating income
     75,765       17,188       —       92,953       60,567       13,175       —       73,742  
 
                                                
                                                                 
    Year Ended     Year Ended  
    March 31, 2007     March 31, 2006  
            All                             All              
            Other                             Other              
(In thousands)   Dist.     Ops.     Elim     Combined     Dist.     Ops.     Elim     Combined  
Gas and rent
   $ 1,399,186     $ 485,209     $ (60,934 )   $ 1,823,461     $ 1,238,612     $ 415,560     $ (54,242 )   $ 1,599,930  
Hardgoods
     1,292,628       94,462       (5,500 )     1,381,590       1,157,326       77,870       (5,516 )     1,229,680  
 
                                                
Total net sales
     2,691,814       579,671       (66,434 )     3,205,051       2,395,938       493,430       (59,758 )     2,829,610  
 
                                                                
Cost of products sold, excluding deprec. expense
     1,355,367       278,157       (66,434 )     1,567,090       1,223,435       238,301       (59,758 )     1,401,978  
Selling, distribution and administrative expenses
     953,858       195,308       —       1,149,166       864,192       167,140       —       1,031,332  
Depreciation expense
     109,455       29,363       —       138,818       95,615       26,781       —       122,396  
Amortization expense
     6,426       2,099       —       8,525       4,230       916       —       5,146  
 
                                                
Operating income
     266,708       74,744       —       341,452       208,466       60,292       —       268,758  
 
                                                

 

 

4Q07 Earnings Final NR/Page 11 of 12

Reconciliation of Non-GAAP Financial Measure (Unaudited)

Adjusted Income from Continuing Operations:
Reconciliation and computation of adjusted income from continuing operations:
                                 
    Three Months Ended   Three Months Ended
    March 31, 2007   March 31, 2006
(In thousands, except per share amounts)   Dollars   Diluted EPS   Dollars   Diluted EPS
Income from continuing operations
   $ 43,735     $ 0.54     $ 35,998     $ 0.45  
Less stock-based compensation not recognized in prior period, net of tax
     —       —       (1,484 )   $ (0.02 )
         
Adjusted income from continuing operations
   $ 43,735     $ 0.54     $ 34,514     $ 0.43  
         
 
                                
Year over year increase in Adjusted Income from Continuing Operations
     27 %     26 %                
                     
                                 
    Year Ended   Year Ended
    March 31, 2007   March 31, 2006
(In thousands, except per share amounts)   Dollars   Diluted EPS   Dollars   Diluted EPS
Income from continuing operations
   $ 154,416     $ 1.92     $ 127,515     $ 1.62  
Plus charge for early extinguishment of debt, net of tax
     7,865       0.10       —       —  
Less tax benefit related to state tax law change
     (1,789 )     (0.02 )     —       —  
Plus losses related to hurricanes, net of tax
     —       —       1,364     $ 0.02  
Less stock-based compensation not recognized in prior period, net of tax
     —       —       (8,035 )   $ (0.10 )
         
Adjusted income from continuing operations
   $ 160,492     $ 2.00     $ 120,844     $ 1.54  
         
 
                                
Year over year increase in Adjusted Income from Continuing Operations
     33 %     30 %                
                     
The Company believes this adjusted income from continuing operations computation provides meaningful insight into earnings growth by adjusting for significant unusual items and the prospective implementation of SFAS 123R.
Adjusted Operating Margin:
Reconciliation and computation of adjusted operating margin:
                 
    Three Months Ended
    March 31,   March 31,
(In thousands)   2007   2006
Operating Income
   $ 92,953     $ 73,742  
Less pro-forma stock-based compensation
     —       (2,318 )
     
Adjusted operating income
   $ 92,953     $ 71,424  
 
                
Net Sales
   $ 853,861     $ 746,896  
 
                
     
Adjusted Operating Margin
     10.9 %     9.6 %
     
The Company believes this adjusted operating margin computation provides meaningful insight into earnings growth by adjusting for the prospective implementation of SFAS 123R.

 

 

4Q07 Earnings Final NR/Page 12 of 12
Return on Capital:
Reconciliation and computation of return on capital:
                 
(In thousands)   March 31, 2007     March 31, 2006  
Operating Income — Trailing Four Quarters
   $ 341,452     $ 268,758  
 
            
 
                
Five Quarter Average of Total Assets
   $ 2,673,020     $ 2,378,824  
Five Quarter Average of Securitized Trade Receivables
     246,240       216,360  
Five Quarter Average of Current Liabilities (exclusive of debt)
     (344,211 )     (326,618 )
 
            
Five Quarter Average Capital Employed
   $ 2,575,049     $ 2,268,566  
 
            
 
                
Return on Capital
     13.3 %     11.8 %
 
            
Quarterly averages used in the computation of return on capital above reflect the impact of material acquisitions as of their acquisition date.
The Company believes this return on capital computation helps investors assess how effectively the Company uses the capital invested in its operations.