A strong year despite the downturn

With all that occurred last year – from the housing collapse to auto bailouts – I could easily be writing about the worst financial year in Airgas history. Instead, I’m writing about the best.

Sales increased 8 percent to $4.3 billion and we posted record earnings of $3.12 per diluted share, up 17 percent from $2.66 in the previous year. This strong performance was driven by healthy sales growth in the first half of the year and our ability to quickly curtail costs and capital spending in response to the slowing economy in the second half of the year.

We also reached $328 million in free cash flow, a 46 percent increase from the previous year and the highest level in our company history. In a down economy, our free cash flow actually rises because our capital spending reverts to maintenance levels, working capital shrinks, and variable expenses fall. The increase in cash flow means we can pay down debt and realize interest savings, and gives us the flexibility and resources to pursue our growth strategies.

Last year, we completed 14 acquisitions, adding more than $205 million in annual revenues. This coming year, potential sellers will be harder to find, as they step back to assess their business in the wake of economic challenges. We will, however, continue to be aggressive in our search for businesses that bolster our core gas business, strengthen our adjacent offerings and give us entry into new markets.

Our solid financial performance even in the face of such a weak sales environment can be attributed in large part to the performance of our strategic products. Ten years ago, we expanded our business to include these higher-growth categories: bulk, medical and specialty gases; safety products, and carbon dioxide and dry ice. Today, they account for about 40 percent of our revenues and continue to outperform the traditional industrial gas and welding supply offerings.

In fiscal 2009, we grew organic revenues in medical gases by 7 percent, specialty gases by 8 percent and bulk gases by 10 percent, all enviable increases in today’s economy. Safety sales were up by 1 percent and carbon dioxide and dry ice were up by 2 percent, still welcome growth in a year when other gases and hardgoods were down overall.