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Airgas Reports Record 4th Quarter Income From Continuing Operations of $0.45 Per Share

Posted on: Monday, 1 May 2006, 09:02 CDT

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 and earnings, for its fourth quarter ended March 31, 2006.

Quarterly income from continuing operations grew 51% to $36 million, or $0.45 per diluted share, compared to $24 million or $0.31 per diluted share, a year ago. Quarterly results a year ago included expenses of $0.02 per diluted share related to acquisition integration and employee separation costs. Current quarter net income grew 39% to $33 million, or $0.42 per share, including a non-cash, after-tax charge of $3 million, or $.03 per share, to reflect the adoption of an accounting change.

Fourth quarter sales increased 16% to $747 million reflecting strong same-store sales growth, as well as acquisitions. Total same-store sales were up 12% compared to the same quarter a year ago, with gas and rent up 10% and hardgoods up 13%. Sales results reflect broad demand from industrial, energy, and non-residential construction market segments.

"Our business momentum continues to be very strong. Our emphasis on profitable growth is showing results, as evidenced by a 180 basis point improvement in operating margins, to 9.9% in the fourth quarter," said Airgas Chairman and Chief Executive Officer, Peter McCausland. "This quarter, we saw particularly strong performance from our Gas Operations units and from our Distribution companies along the Gulf Coast and in the Western half of the U.S."

Sales in fiscal 2006 increased 20% to $2.8 billion. Earnings from continuing operations for the year ended March 31, 2006 were $1.62 per diluted share compared to prior year results of $1.19 per diluted share. Current year results from continuing operations include charges of $0.02 per diluted share from asset losses related to hurricanes Katrina and Rita. Prior year results from continuing operations included expenses of $0.05 per diluted share related to acquisition integration and employee separation costs. Current year results from discontinued operations include a $0.02 per diluted share loss on the divestiture of Rutland Tool. The discontinued operations of Rutland Tool contributed earnings of $0.01 per diluted share in the prior year. For the full fiscal year 2006, net income was $124 million, or $1.57 per diluted share, including the $0.03 charge for the adoption of the accounting change.

Effective March 31, 2006, the Company adopted Financial Accounting Standards Board Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" (FIN 47). The $3 million after-tax charge was recorded as the cumulative effect of a change in accounting principle related to asset retirement obligations. The ongoing expense resulting from the adoption of FIN 47 is anticipated to be immaterial.

"We delivered outstanding financial results in fiscal 2006, growing earnings per share from continuing operations by 36%. Net cash from operations was $362 million, facilitating healthy reinvestment in growth. We purchased over $100 million of cylinders, cryogenic tanks, and rental welding machines to support our strong momentum. In addition, we spent $128 million to acquire 13 companies with combined annual sales of $141 million," commented McCausland.

He also said, "Airgas associates continue to raise the standards for performance. The external environment during the year was mixed, with strong economic activity giving us wind at our back, yet with considerable inflationary cost pressures and hurricane-related disruptions in product supply. Our associates did a great job staying ahead of the cost curve and keeping our customers supplied while preserving our margins."

For the year, free cash flow was $116 million, compared to $63 million in the prior year. The definition of free cash flow and reconciliation to the Consolidated Statement of Cash Flows is attached.

McCausland continued, "We expect earnings per diluted share of $1.76 to $1.84 in fiscal 2007, including the impact of about $0.11 of stock-based compensation expense. First quarter expectations are $0.42 to $0.44. We anticipate continued strong performance across the board, as we leverage our industry-leading infrastructure and entrepreneurial Airgas culture by focusing on customer-centric execution."

The Company will conduct an earnings teleconference at 11:00 a.m. Eastern Time on Monday, May 1. The teleconference will be available by calling (800) 822-4794. 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 2 at http://www.shareholder.com/arg/medialist.cfm. A replay of the teleconference will be available through May 9. To listen, call (888) 203-1112 and enter passcode 7355459.

About Airgas, Inc.

Airgas, Inc. (NYSE:ARG), through its subsidiaries, is the largest U.S. distributor of industrial, medical, and specialty gases, and related 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. Its 10,000 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 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 business momentum continuing to be very strong; our continued emphasis on profitable growth; our expectation of earnings per diluted share of $1.76 to $1.84 in fiscal 2007 and $0.42 to $0.44 in the first quarter; our expectation of $0.11 per diluted share of stock-based compensation expense; our ongoing expense from the adoption of FIN 47 being immaterial; and our expectation of continued strong performance across the board as we leverage our industry-leading infrastructure and entrepreneurial Airgas culture by focusing on customer-centric execution. The Company intends 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 the Company 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: the Company's inability to implement price increases; supply cost pressures; increased industry competition; an economic downturn; adverse changes in customer buying patterns; significant fluctuations in interest rates; the impact of unexpected stock-based compensation expense; increases in energy costs; the effect 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, 2005 and Forms 10-Q dated June 30, 2005, September 30, 2005, and December 31, 2005, filed by the Company with the Securities and Exchange Commission.

Consolidated statements of earnings, consolidated condensed balance sheets, consolidated statements of cash flows, and a reconciliation of non-GAAP financial measures follow. AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except per share data) Three Months Ended Year Ended March 31, March 31, 2006 2005 2006 2005 --------- --------- ----------- ----------- Net sales $746,896 $644,366 $2,829,610 $2,367,782 --------- --------- ----------- ----------- Costs and expenses: Cost of products sold (excl. deprec.) 373,915 316,345 1,401,978 1,151,782 Selling, distribution and administrative expenses (c) 266,159 245,108 1,031,332 902,468 Depreciation 31,881 29,143 122,396 105,614 Amortization 1,199 1,319 5,146 5,464 --------- --------- ----------- ----------- Total costs and expenses 673,154 591,915 2,560,852 2,165,328 --------- --------- ----------- ----------- Operating income 73,742 52,451 268,758 202,454 Interest expense, net (13,281) (13,285) (53,812) (51,245) Discount on securitization of trade receivables (a) (2,706) (1,495) (9,371) (4,711) Other income, net 848 427 2,462 1,129 --------- --------- ----------- ----------- Earnings before income tax expense and minority interest 58,603 38,098 208,037 147,627 Income tax expense (21,894) (13,750) (77,866) (54,261) Minority interest in earnings of consolidated affiliate (711) (452) (2,656) (1,808) --------- --------- ----------- ----------- Income from continuing operations before the cumulative effect of a change in accounting principle 35,998 23,896 127,515 91,558 Income (loss) from discontinued operations, net of tax (d) - 260 (1,424) 464 Cumulative effect of a change in accounting principle, net of tax (e) (2,540) - (2,540) - --------- --------- ----------- ----------- Net earnings $ 33,458 $ 24,156 $ 123,551 $ 92,022 ========= ========= =========== =========== NET EARNINGS PER COMMON SHARE (f) BASIC Earnings from continuing operations before the cumulative effect of a change in accounting principle $ 0.47 $ 0.32 $ 1.66 $ 1.22 Earnings (loss) from discontinued operations - - (0.02) 0.01 Cumulative effect per share of a change in accounting principle (0.04) - (0.03) - --------- --------- ----------- ----------- Net earnings per share $ 0.43 $ 0.32 $ 1.61 $ 1.23 ========= ========= =========== =========== DILUTED Earnings from continuing operations before the cumulative effect of a change in accounting principle $ 0.45 $ 0.31 $ 1.62 $ 1.19 Earnings (loss) from discontinued operations - - (0.02) 0.01 Cumulative effect per share of a change in accounting principle (0.03) - (0.03) - --------- --------- ----------- ----------- Net earnings per share $ 0.42 $ 0.31 $ 1.57 $ 1.20 ========= ========= =========== =========== Weighted average shares outstanding: Basic 77,292 75,638 76,624 74,911 Diluted (f) 82,174 77,639 81,152 76,957 AIRGAS, INC

. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in thousands) March 31, March 31, 2006 2005 ------------ ------------ ASSETS Cash $ 34,985 $ 32,640 Trade accounts receivable, net (a) 132,245 148,834 Inventories, net 229,523 221,609 Deferred income tax asset, net 30,141 26,263 Prepaid expenses and other current assets 31,622 36,911 ------------ ------------ TOTAL CURRENT ASSETS 458,516 466,257 Plant and equipment, net 1,398,757 1,269,342 Goodwill 566,074 511,196 Other intangible assets, net 26,248 16,507 Other non-current assets 24,817 28,561 ------------ ------------ TOTAL ASSETS $ 2,474,412 $ 2,291,863 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, trade 143,752 143,208 Accrued expenses and other current liabilities 195,357 183,132 Current portion of long-term debt 131,901 6,948 ------------ ------------ TOTAL CURRENT LIABILITIES 471,010 333,288 Long-term debt 635,726 801,635 Deferred income tax liability, net 332,462 282,186 Other non-current liabilities 30,864 24,391 Minority interest in affiliate (b) 57,191 36,191 Stockholders' equity 947,159 814,172 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,474,412 $ 2,291,863 ============ ============ See attached notes. AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year Ended Year Ended March 31, 2006 March 31, 2005 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 123,551 $ 92,022 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 122,396 105,614 Amortization 5,146 5,464 Deferred income taxes 47,148 31,639 Loss (gain) on divestiture 1,900 (360) Gain on sales of plant and equipment (1,330) (321) Minority interest in earnings 2,656 1,808 Stock issued for employee stock purchase plan 10,534 9,907 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 54,300 27,300 Trade receivables, net (17,021) (39,583) Inventories, net (14,087) (32,356) Prepaid expenses and other current assets 12,603 (8,149) Accounts payable, trade 1,533 27,984 Accrued expenses and other current liabilities 9,323 (574) Other long-term assets 3,340 4,107 Other long-term liabilities (2,363) (2,185) -------------- -------------- Net cash provided by operating activities 362,169 222,317 -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (214,193) (167,977) Proceeds from sales of plant and equipment 8,202 5,361 Proceeds from divestitures 14,562 828 Business acquisitions and holdback settlements (153,428) (191,820) Other, net 170 171 -------------- -------------- Net cash used in investing activities (344,687) (353,437) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 568,379 621,450 Repayment of debt (606,532) (494,684) Purchase of treasury Stock (12,771) - Financing costs - (2,531) Termination of interest rate hedge - 3,948 Minority interest in earnings (2,656) (1,808) Exercise of stock options 19,707 20,374 Minority stockholder note prepayment 21,000 - Dividends paid to stockholders (18,449) (13,643) Cash overdraft 16,185 5,592 -------------- -------------- Net cash (used in) provided by financing activities (15,137) 138,698 -------------- -------------- Change in cash $ 2,345 $ 7,578 Cash - Beginning of period 32,640 25,062 -------------- -------------- Cash - End of period $ 34,985 $ 32,640 ============== ============== See attached notes. Notes: (a) The Company participates in a securitization agreement with two commercial banks to sell up to $250 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 $244.2 million and $189.9 million at March 31, 2006 and March 31, 2005, respectively. (b) In June 2005, the Company's consolidated affiliate, National Welders, entered into an agreement with its preferred stockholders under which the preferred stockholders prepaid their $21 million note payable to National Welders. National Welders used the proceeds from the prepayment of the preferred stockholders' note to pay-off its $21 million term loan, which had been collateralized by the preferred stockholders' note. The preferred stockholders' note payable to National Welders had been reflected as a reduction of "Minority interest in affiliate" in the consolidated financial statements of the Company. Consequently, the prepayment of the preferred stockholders' note resulted in a $21 million increase to the Company's "Minority interest in affiliate." Additionally, the preferred stockholders and National Welders agreed to modify the dates between which the preferred stockholders have the option to redeem their preferred stock for cash or Airgas common stock to commence in June 2005 (previously June 2006) and expire in June 2009. (c) Selling, distribution and administrative expenses in the year ended March 31, 2006 include an estimated loss related to hurricanes Katrina and Rita of $2.2 million ($1.4 million after tax), or $0.02 per diluted share. The loss estimate, recognized primarily in the quarter ended September 30, 2005, is comprised of property damage and an additional provision for uncollectible trade receivables associated with customers in the affected areas. (d) On December 1, 2005, the Company completed the sale of its subsidiary, Rutland Tool & Supply Co (Rutland Tool). Rutland Tool distributed metalworking tools, machine tools and MRO supplies from seven locations and had about 180 employees. Proceeds of the sale were approximately $15 million. As a result of the divestiture, the Company reflected the operating results of Rutland Tool as "discontinued operations" and recognized a loss of approximately $3.1 million, $1.9 million after-tax, or $0.02 per diluted share, on the sale. The loss principally relates to the write-off of leasehold improvements and lease termination costs for long-term lease commitments that were not assumed by the purchaser. The operating results of Rutland Tool were previously reflected in the Distribution business segment. The net sales and earnings (loss) before income taxes of Rutland Tool (including the loss on sale) for the three months and years ended March 31, 2006 and 2005, which were segregated and reported as discontinued operations, are outlined below: Three Months Ended Year Ended (Amounts in thousands) March 31, March 31, 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Net sales $ - $ 11,703 $ 32,783 $ 43,627 Earnings (loss) before income taxes - 445 (2,391) 786 (e) Effective March 31, 2006, the Company adopted Financial Accounting Standards Board Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 provides guidance on estimating an asset retirement obligation's fair value as required under SFAS 143, "Accounting for Asset Retirement Obligations." At March 31, 2006, the Company recognized a $6 million non-current liability for asset retirement obligations and $1.9 million in capitalizable costs net of accumulated depreciation. A charge of $2.5 million, net of a deferred tax benefit of $1.6 million, was also recorded as the cumulative effect of a change in accounting principle. The Company's asset retirement obligations are primarily associated with requirements to remove bulk gas storage tanks from customer locations upon the termination of gas supply contracts and from leased facilities upon the termination of lease agreements. The ongoing expense on an annual basis resulting from the adoption of FIN 47 is not anticipated to be material. (f) The tables below present the computation of basic and diluted earnings per share: Three Months Year Ended Ended (In thousands, except per March 31, March 31, share amounts) 2006 2005 2006 2005 --------- --------- --------- --------- Basic Earnings per Share Computation Numerator --------- Income from continuing operations before the cumulative effect of a change in accounting principle $ 35,998 $ 23,896 $127,515 $ 91,558 Income (loss) from discontinued operations - 260 (1,424) 464 Cumulative effect of a change in accounting principle (2,540) - (2,540) - --------- --------- --------- --------- Net earnings $ 33,458 $ 24,156 $123,551 $ 92,022 ========= ========= ========= ========= Denominator ----------- Basic shares outstanding 77,292 75,638 76,624 74,911 ========= ========= ========= ========= Basic earnings per share from continuing operations before the cumulative effect of a change in accounting principle $ 0.47 $ 0.32 $ 1.66 $ 1.22 Basic earning (loss) per share from discontinued operations - - (0.02) 0.01 Cumulative effect of a change in accounting principle (0.04) - (0.03) - --------- --------- --------- --------- Basic net earnings per share $ 0.43 $ 0.32 $ 1.61 $ 1.23 ========= ========= ========= ========= Three Months Year Ended Ended March 31, March 31, (In thousands, except per share amounts) 2006 2005(4) 2006 2005(4) ---------- ---------- ---------- ---------- Diluted Earnings per Share Computation Numerator -------------------------- Income from continuing operations before the cumulative effect of a change in accounting principle $ 35,998 $ 23,896 $ 127,515 $ 91,558 Plus: Preferred stock dividends (1)(2) 711 - 2,845 - Plus: Income taxes on earnings of National Welders (3) 220 - 730 - ---------- ---------- ---------- ---------- Income from continuing operations before the cumulative effect of a change in accounting principle, assuming preferred stock conversion 36,929 23,896 131,090 91,558 Income (loss) from discontinued operations - 260 (1,424) 464 Cumulative effect of a change in accounting principle (2,540) - (2,540) - ---------- ---------- ---------- ---------- Net earnings assuming preferred stock conversion $ 34,389 $ 24,156 $ 127,126 $ 92,022 ========== ========== ========== ========== Denominator -------------------------- Basic shares outstanding 77,292 75,638 76,624 74,911 Incremental shares from assumed conversions: -------------------------- Stock options and warrants 2,555 2,001 2,201 2,046 Preferred stock of National Welders (1) 2,327 - 2,327 - ---------- ---------- ---------- ---------- Diluted shares outstanding 82,174 77,639 81,152 76,957 ========== ========== ========== ========== Diluted earnings per share from continuing operations before the cumulative effect of a change in accounting principle $ 0.45 $ 0.31 $ 1.62 $ 1.19 Diluted earnings (loss) per share from discontinued operations - - (0.02) 0.01 Diluted earnings per share from the cumulative effect of a change in accounting principle (0.03) - (0.03) - ---------- ---------- ---------- ---------- Diluted net earnings per share $ 0.42 $ 0.31 $ 1.57 $ 1.20 ========== ========== ========== ========== (1) Pursuant to a joint venture agreement between the Company and the holders of the preferred stock of National Welders, between June 2005 and 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. (4) The assumed conversion of National Welders preferred stock to Airgas common stock is not presented because it is anti-dilutive. (g) Business segment information for the Company's Distribution and All Other Operations segments is shown below: (Unaudited) Three Months Ended March 31, 2006 ----------------------------------------------- (In thousands) Dist. All Other Elim Combined Ops. ----------- ----------- ----------- ----------- Gas and rent $ 326,698 $ 104,227 $ (14,278) $ 416,647 Hardgoods 310,595 20,764 (1,110) 330,249 ----------- ----------- ----------- ----------- Total net sales 637,293 124,991 (15,388) 746,896 Cost of products sold, excluding deprec. expense 328,761 60,542 (15,388) 373,915 Selling, distribution and administrative expenses 221,719 44,440 - 266,159 Depreciation expense 25,277 6,604 - 31,881 Amortization expense 969 230 - 1,199 ----------- ----------- ----------- ----------- Operating income 60,567 13,175 - 73,742 =========== =========== =========== =========== (Unaudited) Three Months Ended March 31, 2005 ----------------------------------------------- (In thousands) Dist. All Other Elim Combined Ops. ----------- ----------- ----------- ----------- Gas and rent $ 292,538 $ 79,175 $ (13,390) $ 358,323 Hardgoods 269,463 17,473 (893) 286,043 ----------- ----------- ----------- ----------- Total net sales 562,001 96,648 (14,283) 644,366 Cost of products sold, excluding deprec. expense 285,735 44,893 (14,283) 316,345 Selling, distribution and administrative expenses 208,915 36,193 - 245,108 Depreciation expense 22,681 6,462 - 29,143 Amortization expense 1,195 124 - 1,319 ----------- ----------- ----------- ----------- Operating income 43,475 8,976 - 52,451 =========== =========== =========== =========== Year Ended March 31, 2006 ----------------------------------------------- (In thousands) Dist. All Other Elim Combined Ops. ----------- ----------- ----------- ----------- Gas and rent $1,238,612 $ 415,560 $ (54,242) $1,599,930 Hardgoods 1,157,326 77,870 (5,516) 1,229,680 ----------- ----------- ----------- ----------- Total net sales 2,395,938 493,430 (59,758) 2,829,610 Cost of products sold, excluding deprec. expense 1,223,435 238,301 (59,758) 1,401,978 Selling, distribution and administrative expenses 864,192 167,140 - 1,031,332 Depreciation expense 95,615 26,781 - 122,396 Amortization expense 4,230 916 - 5,146 ----------- ----------- ----------- ----------- Operating income 208,466 60,292 - 268,758 =========== =========== =========== =========== Year Ended March 31, 2005 ----------------------------------------------- (In thousands) Dist. All Other Elim Combined Ops. ----------- ----------- ----------- ----------- Gas and rent $1,056,661 $ 318,748 $ (49,300) $1,326,109 Hardgoods 978,451 66,863 (3,641) 1,041,673 ----------- ----------- ----------- ----------- Total net sales 2,035,112 385,611 (52,941) 2,367,782 Cost of products sold, excluding deprec. expense 1,030,284 174,439 (52,941) 1,151,782 Selling, distribution and administrative expenses 761,227 141,241 - 902,468 Depreciation expense 81,419 24,195 - 105,614 Amortization expense 4,943 521 - 5,464 ----------- ----------- ----------- ----------- Operating income 157,239 45,215 - 202,454 =========== =========== =========== =========== Reconciliation of Non-GAAP Financial Measure (Unaudited) -------------------------------------------------------- Free Cash Flow: --------------- Reconciliation of net cash provided by operating activities per the Consolidated Statement of Cash Flows to Free Cash Flow: Year Ended Year Ended (Amounts in thousands) March 31, 2006 March 31, 2005 -------------- -------------- Net cash provided by operating activities $ 362,169 $ 222,317 Less net cash provided by operating activities of NWS (1) (23,497) (19,612) Plus: Management fees paid by NWS (1) 1,234 1,089 Operating lease buyouts 14,558 24,130 Proceeds from sale of PP&E 8,202 5,361 Less: Cash provided by the securitization of trade receivables (54,300) (27,300) Capital expenditures (214,193) (167,977) Add back capital expenditures of NWS (1) 21,362 24,584 -------------- -------------- Free Cash Flow $ 115,535 $ 62,592 ============== ============== Free Cash Flow provides investors meaningful insight into the Company's ability to generate cash from operations, which can be used at management's discretion for acquisitions, the prepayment of debt or to support other investing and financing activities. (1) National Welders Supply Co. ("NWS") is a consolidated corporate joint venture meeting the definition of a variable interest entity and for which the Company is the primary beneficiary as described under FIN 46R. The liabilities of NWS are non-recourse to the Company. Likewise, the cash flows in excess of a management fee paid by NWS are not available to the Company. Accordingly, the cash flows of NWS have been excluded from the Company's non-GAAP liquidity measures.

Source: Business Wire

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