Airgas Inc. (ARG) will redeem all $215 million of its remaining outstanding 7.125% Senior Subordinated Notes (maturing in Oct 2018) on Oct 2, 2013, at a price of 103.563%.
The notes will be redeemed utilizing proceeds of commercial paper issuances. In its fiscal third quarter (ending Dec 31, 2013), Airgas will recognize a loss on the early extinguishment of debt of approximately $6 million after tax, (or 8 cents per share). This includes the redemption premium and the write-off of unamortized debt issuance costs.
Airgas posted adjusted earnings of $1.14 a share in first-quarter fiscal 2014 (ended Jun 30, 2013), up 1% from $1.13 earned in the year-ago quarter. Airgas ended fiscal first quarter with a cash balance of $71 million and long-term debt of $2.5 billion at Jun 30, 2013. Debt-to-capitalization ratio was 60% at the same date.
Airgas expects adjusted earnings per share (excluding one-time items) for the second quarter of fiscal 2014 to increase 17–21% year over year to $1.23–$1.27. For fiscal 2014, Airgas revised earnings in the new range of $5.00 to $5.15 from its previous band of $5.00 to $5.35, reflecting 15% to 18% annual growth.
The fiscal 2014 guidance reflected the impact on interest expense in the second half of the year from the potential full redemption of the 7.125% notes utilizing proceeds of commercial paper issuances, which carry substantially lower interest rates. This excludes the abovementioned loss on the early extinguishment of debt, which has been considered as a special charge by the company.
Airgas’ fiscal 2014 guidance is based on modest sequential improvement in daily sales volumes and low-to-mid single-digit year-over-year organic sales growth rates. Strong cash flow continues to be a benchmark for Airgas’ business model.
Airgas is well positioned for growth in its strategic initiatives such as sales and marketing alignment with customers, SAP and the associated benefits, total access and eBusiness; as well as renewed focus on day-to-day selling and customer service.
Airgas is also optimistic on the long-term prospects of the U.S. manufacturing and energy industries, as well as nonresidential construction and unique value proposition and a less challenging platform.
Pa.-based Airgas, through its subsidiaries, distributes industrial, medical and specialty gases as well as hardgoods in the U.S. The company also markets its products and services through e-business, catalog and telesales channels.
Airgas currently retains a Zacks Rank #3 (Hold). However, other stocks with a favorable Zacks Rank in the diversified chemical industry are Northern Technologies International Corp. (NTIC), Cytec Industries Inc. (CYT) and Eastman Chemical Co. (EMN) with a Zacks Rank #1 (Strong Buy).
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