<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: December 31, 1994
_____________________________
Commission file number: 1-9344
_____________________________
AIRGAS, INC.
______________________________________________________________________________
(Exact name of Registrant as specified in its charter)
Delaware 56-0732648
_______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Radnor Corporate Center, Suite 550
100 Matsonford Road
Radnor, PA 19087-4579
_______________________________________ ________________
(Address of principal executive offices) (ZIP code)
(610) 687-5253
__________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
______ ______
Common Stock outstanding at December 31, 1994: 31,349,811 shares
<PAGE> 2
AIRGAS, INC.
FORM 10-Q
December 31, 1994
INDEX
PART I - FINANCIAL INFORMATION
______________________________
Consolidated Balance Sheets as of December 31, 1994
and March 31,1994.....................................................3
Consolidated Statements of Earnings
for the Three Months Ended December 31, 1994 and 1993.................5
Consolidated Statements of Earnings
for the Nine Months Ended December 31, 1994 and 1993..................6
Consolidated Statements of Cash Flows
for the Nine Months Ended December 31, 1994 and 1993..................7
Notes to Consolidated Financial Statements.................................8
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................12
PART II - OTHER INFORMATION
___________________________
Exhibits and Reports on Form 8-K..........................................18
Signatures................................................................19
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31, March 31,
1994 1994
(Unaudited)
_____________ ________
<S> <C> <C>
ASSETS
Current Assets
Accounts receivable, less allowance for
doubtful accounts of $4,968 at December 31,
1994 and $4,207 at March 31, 1994 $ 92,203 $ 79,034
Inventories 65,877 51,721
Prepaid expenses and other current assets 11,649 8,367
_______ _______
Total current assets 169,729 139,122
_______ _______
Plant and equipment, at cost 453,776 390,832
Less accumulated depreciation and amortization (113,949) (96,201)
_______ _______
Net plant and equipment 339,827 294,631
Other noncurrent assets 57,772 30,421
Goodwill, net of accumulated amortization of
$14,117 at December 31, 1994 and $11,875
at March 31, 1994 76,827 50,723
_______ _______
Total assets $644,155 $514,897
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE>
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except per share amounts)
<CAPTION>
December 31, March 31,
1994 1994
(Unaudited)
___________ ________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current Liabilities
Current portion of long-term debt $ 12,864 $ 10,304
Accounts payable, trade 36,192 34,644
Accrued expenses and other current liabilities 54,071 47,103
_______ _______
Total current liabilities 103,127 92,051
_______ _______
Long-term debt 287,645 205,311
Deferred income taxes 60,537 53,096
Other non-current liabilities 7,652 6,635
Minority interest in subsidiaries 1,349 937
Stockholders' equity
Common stock $.01 par value, 200,000 shares
authorized, 31,350 and 32,897
shares issued at December 31, 1994 and
March 31, 1994, respectively 314 329
Capital in excess of par value 59,696 56,330
Retained earnings 124,200 102,161
Cumulative translation adjustment (365) (471)
Less treasury stock, 1,877 common shares
at cost at March 31, 1994. -0- (1,482)
_______ _______
Total stockholders' equity 183,845 156,867
_______ _______
Total liabilities and stockholders' equity $644,155 $ 514,897
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
<TABLE>
AIRGAS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1994 December 31, 1993
__________________ __________________
<S> <C> <C>
Net sales:
Distribution $165,582 $121,292
Manufacturing 8,530 8,789
_______ _______
Total net sales 174,112 130,081
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation and
amortization)
Distribution 80,809 59,109
Manufacturing 5,716 5,576
Selling, distribution and
administrative expenses 59,276 45,597
Depreciation and amortization 9,734 7,758
_______ _______
Total costs and expenses 155,535 118,040
_______ _______
Operating income:
Distribution 17,101 10,232
Manufacturing 1,476 1,809
_______ _______
18,577 12,041
Interest expense, net (4,869) (3,002)
Other income, net 189 146
Minority interest (159) (78)
_______ _______
Earnings before income taxes 13,738 9,107
Income taxes 5,948 4,052
_______ _______
Net earnings $ 7,790 $ 5,055
======= =======
Earnings per share $ .24 $ .16
======= =======
Weighted average shares 33,047 32,468
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
<TABLE>
AIRGAS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Nine Months Ended Nine Months Ended
December 31, 1994 December 31, 1993
__________________ __________________
<S> <C> <C>
Net sales:
Distribution $474,019 $348,339
Manufacturing 24,541 24,439
_______ _______
Total net sales 498,560 372,778
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation and
amortization)
Distribution 232,886 171,242
Manufacturing 15,984 15,282
Selling, distribution and
administrative expenses 171,042 129,557
Depreciation and amortization 27,255 22,778
_______ _______
Total costs and expenses 447,167 338,859
_______ _______
Operating income:
Distribution 46,867 28,974
Manufacturing 4,526 4,945
_______ _______
51,393 33,919
Interest expense, net (12,521) (9,261)
Other income, net 409 327
Minority interest (412) (203)
_______ _______
Earnings before income taxes 38,869 24,782
Income taxes 16,830 10,902
_______ _______
Net earnings $ 22,039 $ 13,880
======= =======
Earnings per share $ .67 $ .43
======= =======
Weighted average shares 32,991 32,635
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 7
<TABLE>
AIRGAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION> Nine Months Ended Nine Months Ended
December 31, 1994 December 31, 1993
__________________ __________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 22,039 $ 13,880
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 27,255 22,778
Deferred income taxes 7,573 4,361
Equity in earnings of joint venture (543) (935)
(Gain) loss on sale of plant and equipment 26 (114)
Minority interest in earnings 412 203
Changes in assets and liabilities,
excluding effects of business
acquisitions:
Trade receivables, net (1,772) (1,878)
Inventories (3,068) (32)
Prepaid expenses and other
current assets (991) (168)
Accounts payable, trade (4,366) (366)
Accrued expenses and other current
liabilities 184 2,408
Other assets and liabilities, net (1,506) (59)
_______ _______
Net cash provided by operating activities 45,243 40,078
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (25,185) (14,240)
Proceeds from sale of plant and
equipment 1,641 1,962
Business acquisitions, net of cash acquired (76,975) (47,618)
Purchase of temporary investment (16,904) -0-
Other, net 300 205
_______ _______
Net cash used by investing activities (117,123) (59,691)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 87,284 32,552
Repayment of debt (19,272) (16,607)
Exercise of options and warrants 922 2,587
Cash overdraft 2,948 1,288
_______ _______
Net cash provided by financing
activities 71,882 19,820
_______ _______
EFFECTS OF DISCONTINUED ACTIVITIES, NET (2) (207)
_______ _______
CHANGE IN CASH $ -0- $ -0-
Cash - beginning of period -0- -0-
_______ _______
Cash - end of period $ -0- $ -0-
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 8
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
_____________________
The consolidated financial statements include the accounts of Airgas,
Inc. and its subsidiaries (the "Company").
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to interim
financial statements. These statements do not include all disclosures
required for annual financial statements. These financial statements should
be read in conjunction with the more complete disclosures contained in the
Company's audited consolidated financial statements for the year ended March
31, 1994.
The financial statements reflect, in the opinion of management, all
adjustments necessary to present fairly the Company's consolidated
balance sheets at December 31, 1994 and March 31, 1994; the consolidated
statements of earnings for the three and nine months ended December 31, 1994
and 1993; and the consolidated statements of cash flows for the nine months
ended December 31, 1994 and 1993. The interim operating results are not
necessarily indicative of the results to be expected for an entire year.
Certain reclassifications have been made to prior year balances to
conform to the current year presentation.
2. Acquisitions
____________
From April 1, 1994 to December 31, 1994, the Company has acquired twelve
businesses engaged in the distribution of industrial, medical and specialty
gases and welding supplies with annual sales of approximately $96 million.
The aggregate purchase price, including amounts related to non-competition and
confidentiality agreements, amounted to approximately $76 million plus the
assumption of certain liabilities. Acquisitions have been recorded using the
purchase method of accounting, and, accordingly, results of their operations
have been included in the Company's consolidated financial statements since
the effective dates of the respective acquisitions.
On February 1, 1995, the Company signed a letter agreement to acquire
Tech-Weld, Inc. of Houston, Texas, a distributor of industrial, medical and
specialty gases and related equipment which operates out of three locations in
the Houston area. The company has annual sales of approximately $10 million.
Closing is anticipated in March 1995.
<PAGE> 9
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
3. Inventories
___________
Inventories consist of:
<TABLE>
(In thousands)
<CAPTION>
December 31, March 31,
1994 1994
________ ________
<S> <C> <C>
Finished goods $ 65,244 $ 51,263
Raw materials 1,367 1,117
_______ _______
66,611 52,380
Less reduction to LIFO cost (734) (659)
_______ _______
$ 65,877 $ 51,721
======= =======
</TABLE>
4. Plant and Equipment
___________________
The major classes of plant and equipment are as follows:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1994 1994
_____________ _________
<S> <C> <C>
Land and land improvements $ 18,104 $ 15,879
Building and leasehold improvements 41,170 30,494
Machinery and equipment, including
cylinders 364,984 322,336
Transportation equipment 27,043 20,830
Construction in progress 2,475 1,293
_______ _______
$453,776 $390,832
======= =======
</TABLE>
<PAGE> 10
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
5. Other Noncurrent Assets
_______________________
Other noncurrent assets include:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1994 1994
_____________ _________
<S> <C> <C>
Investment in a joint venture $ 1,300 $ 1,308
Noncompete agreements and other
intangible assets, at cost, net
of accumulated amortization of
35.4 million at December 31, 1994
and $30.0 million at March 31, 1994 31,682 26,673
Temporary investment, at cost 16,904 -0-
Other assets 7,886 2,440
_______ _______
$ 57,772 $ 30,421
======= =======
<FN>
Temporary investment includes 740,000 shares of CBI Industries, Inc. ("CBI")
common stock which were purchased during the Company's third quarter. The
shares were purchased in contemplation of a transaction with CBI or CBI's
Liquid Carbonic Industries subsidiary. During January 1995, as a result of
the Company's decision not to make a bid for CBI, the Company sold its shares
of CBI common stock for $17.5 million, net of expenses. At December 31, 1994,
the Company has classified its investment in the CBI shares as a noncurrent
asset since the net proceeds from the sale were used to repay borrowings under
the Company's long-term revolving credit facilities. A gain of approximately
$600,000 will be recorded as "other income" during the quarter ending March
31, 1995.
</TABLE>
<PAGE> 11
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
6. Accrued Expenses and Other Current Liabilities
______________________________________________
Accrued expenses and other current liabilities include:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1994 1994
_____________ _________
<S> <C> <C>
Cash overdraft $ 9,995 $ 7,047
Insurance payable and related
reserves 7,112 5,341
Customer cylinder deposits 6,070 3,325
Other accrued expenses and current
liabilities 30,894 31,390
_______ _______
$ 54,071 $ 47,103
======= =======
</TABLE>
7. Earnings Per Share
__________________
Earnings per share amounts were determined using the treasury
stock method.
8. Commitments and Contingencies
_____________________________
The Company is involved in various legal proceedings which have arisen in
the ordinary course of its business and have not been finally adjudicated.
These actions, when ultimately concluded and determined will not, in the
opinion of management, have a material adverse effect upon the Company's
financial condition, results of operations or liquidity.
9. Stockholders' Equity
____________________
On January 16, 1995, the Company announced that it had instituted a
stock repurchase program and that the Board of Directors approved the
repurchase of up to one million shares of Airgas common stock. During
January, the Company purchased 50,000 shares. The purchase of additional
shares is dependent on prevailing market conditions.
In April 1994, the Company retired 1,877,000 shares of treasury stock.
<PAGE> 12
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
_____________________
Three Months Ended December 31, 1994 Compared to the
Three Months Ended December 31, 1993.
Net earnings increased 54% to $7,790,000 or $.24 per share during the
third quarter ended December 31, 1994, from $5,055,000 or $.16 per share in
the same quarter of the prior year. The increase in net earnings was
primarily due to an increase in gross profits from higher same-store
distribution sales, earnings generated by industrial gas distribution
businesses acquired since October 1, 1993 and an increase in distribution
gross profit margins.
The Company's program to acquire businesses engaged in the distribution
of industrial, medical and specialty gases and related equipment continued
during the quarter ended December 31, 1994 with the acquisition of four
distributors having aggregate annual sales of approximately $36 million.
Since its formation, the Company has acquired over 150 distributors.
Net sales increased 34% during the quarter ended December 31, 1994
compared to the same quarter in the prior year:
<TABLE>
(in thousands)
<CAPTION>
Increase
1994 1993 (Decrease)
____ ____ __________
<S> <C> <C> <C>
Distribution $165,582 $121,292 $ 44,290
Manufacturing 8,530 8,789 (259)
_______ _______ _______
$174,112 $130,081 $ 44,031
======= ======= =======
</TABLE>
During the quarter ended December 31, 1994, distribution sales increased
approximately $44.3 million due to an estimated $37.4 million increase
resulting from the acquisition of 21 industrial gas distributors since October
1, 1993 and a $6.9 million increase in same-store sales (an approximate 5%
same-store sales increase from the quarter ended December 31, 1993). The
Company estimates same-store sales based upon a comparison of current period
sales to the prior period's sales, adjusted for acquisitions and dispositions.
The increase in same-store sales is primarily a result of increased volume in
hardgoods sales with increases also reflected in gas business. Hardgoods and
gas volumes have primarily increased as a result of the general improvement in
the economy and certain gas marketing programs. Same-store sales have also
increased slightly as a result of price increases initiated during previous
periods. Future same-store sales improvement is dependent on continued growth
in the economy.
<PAGE> 13
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Compared to the same quarter in the prior year, distribution gross
profit increases associated with acquisitions are estimated to total $18.9
million. Gross profits associated with distribution same-store sales
improvement are estimated to total $3.7 million. These improvements were
caused by improved hardgoods gross profit margins resulting from the Company's
national purchasing program as well as improved gas and rental gross margins
due to price increases to customers.
Operating income increased 54% during the quarter ended December 31,
1994 compared to the same quarter in the prior year:
<TABLE>
(in thousands)
<CAPTION>
Increase
1994 1993 (Decrease)
____ ____ _________
<S> <C> <C> <C>
Distribution $17,101 $10,232 $ 6,869
Manufacturing 1,476 1,809 (333)
______ ______ ______
$18,577 $12,041 $ 6,536
====== ====== ======
</TABLE>
Distribution operating income as a percentage of net sales increased to
10.3% during the quarter ended December 31, 1994 compared to 8.4% from the
year earlier period. Distribution operating income increased as a result of
the operating income provided by acquisitions, an increase in gross profits
from higher same-store sales and improved gross profit margins. Selling,
distribution and administrative expenses, relative to sales, have declined as
a result of acquisition consolidation efforts during the past year and
controlling expenses such as business insurance through better claims
management and reduced incident rates. Also, many operating costs are
relatively fixed even though the Company's same-store sales continue to
improve. Partially offsetting these improvements were normal salary
increases.
Manufacturing operating income decreased $333,000 compared to the prior
year period due to a product shift towards lower margin export sales of carbon
products, slightly lower profits from the sale of calcium carbide combined
with higher raw material costs, principally ammonium nitrate, for the
Company's nitrous oxide plants.
Interest expense, net, increased approximately $1.9 million during the
quarter ended December 31, 1994 from the year earlier period primarily as a
result of the increase in average outstanding debt associated with the
acquisition of industrial gas distributors since October 1, 1993 combined with
slightly higher interest rates. As discussed in "Liquidity and Capital
Resources" below, the Company has hedged floating interest rates under certain
borrowings with interest rate swap agreements.
<PAGE> 14
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
After tax cash flow (net earnings plus depreciation, amortization and
deferred income taxes) increased 37% during the quarter ended December 31,
1994 to approximately $20.2 million from $14.8 million during the prior
period. After tax cash flow, exclusive of capital expenditures and working
capital changes, is important since it measures the Company's ability to repay
debt through operations and provides the Company with the ability to pursue
investment alternatives such as acquisitions.
Results of Operations
_____________________
Nine Months Ended December 31, 1994 Compared to the Nine Months
Ended December 31, 1993.
Net earnings increased 59% to $22,039,000 or $.67 per share during the
nine months ended December 31, 1994, from $13,880,000 or $.43 per share in the
prior year. The increase in net earnings was primarily due to an increase in
gross profits from higher same-store distribution sales, earnings generated by
industrial gas distribution businesses acquired since April 1, 1993 and an
increase in gross profit margins.
Net sales increased 34% during the nine months ended December 31, 1994
compared to the same period in the prior year:
<TABLE>
(in thousands)
<CAPTION>
1994 1993 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $474,019 $348,339 $125,680
Manufacturing 24,541 24,439 102
_______ _______ _______
$489,560 $372,778 $125,782
======= ======= =======
</TABLE>
During the nine months ended December 31, 1994, distribution sales
increased approximately $125.7 million due to an estimated $103.2 million
increase resulting from the acquisition of 29 industrial gas distributors
since April 1, 1993 and a $22.5 million increase in same-store sales (an
approximate 5% same-store sales increase from the nine months ended December
31, 1993). The Company estimates same-store sales based upon a comparison of
current period sales to the prior period's sales, adjusted for acquisitions
and dispositions. The increase in same-store sales is primarily a result of
increased volume in hardgoods sales with increases also reflected in gas
business. Hardgoods and gas volumes have primarily increased as a result of
the general improvement in the economy and certain gas marketing programs.
Same-store sales have also increased slightly as a result of price increases
initiated during previous periods. Future same-store sales improvement is
dependent on continued growth in the economy.
<PAGE> 15
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Compared to the same period in the prior year, distribution gross profit
increases associated with acquisitions are estimated to total $53 million.
Gross profits associated with distribution same-store sales improvement are
estimated to total $11 million. These improvements were caused by improved
hardgoods gross profit margins resulting from the Company's national
purchasing program as well as improved gas and rental gross margins due to
price increases to customers.
Operating income increased 52% during the nine months ended December 31,
1994 compared to the same period in the prior year:
<TABLE>
(in thousands)
<CAPTION>
1994 1993 Increase
(Decrease)
____ ____ __________
<S> <C> <C> <C>
Distribution $46,867 $28,974 $17,893
Manufacturing 4,526 4,945 (419)
______ ______ ______
$51,393 $33,919 $17,474
====== ====== ======
</TABLE>
Distribution operating income as a percentage of net sales increased to
9.9% in 1994 from 8.3% in 1993. Distribution operating income increased as a
result of the operating income provided by acquisitions, an increase in gross
profits from higher distribution same-store sales and improved gross profit
margins. Selling, distribution and administrative expenses, relative to
sales, have declined as a result of acquisition consolidation efforts during
the past year and controlling expenses such as business insurance through
better claims management and reduced incident rates. Also, many operating
costs are relatively fixed even though the Company's same-store sales continue
to improve. Partially offsetting these improvements were normal salary
increases.
Manufacturing operating income decreased $419,000 compared to the prior
year period due to a product shift towards lower margin export sales of carbon
products, slightly lower profits from the sale of calcium carbide combined
with higher raw material costs, principally ammonium nitrate, for the
Company's nitrous oxide plants.
Interest expense, net, increased $3.3 million during the nine months
ended December 31, 1994 from the year earlier period primarily as a result of
the increase in average outstanding debt associated with the acquisition of
industrial gas distributors since April 1, 1993 combined with slightly higher
interest rates. As discussed in "Liquidity and Capital Resources" below, the
Company has hedged floating interest rates under certain borrowings with
interest rate swap agreements.
<PAGE> 16
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
After tax cash flow (net earnings plus depreciation, amortization and
deferred income taxes) increased 39% during the nine months ended December 31,
1994 to $56.9 million from $41.0 million during the prior period. After tax
cash flow, exclusive of capital expenditures and working capital changes, is
important since it measures the Company's ability to repay debt through
operations and provides the Company with the ability to pursue investment
alternatives such as acquisitions.
Liquidity and Capital Resources
_______________________________
The Company has financed its operations, capital expenditures and
acquisitions with borrowings, issuance of common stock and funds provided by
operating activities.
Cash flows from operating activities totaled $45.2 million for the nine
months ended December 31, 1994. Increased earnings were offset by an increase
in working capital of $10 million. Working capital increased primarily as a
result of an increase in accounts receivable based on higher sales, building
inventory levels to meet increased hardgoods sales volumes and the payment of
trade accounts payable. Although accounts receivable and inventory levels
have increased, days-sales outstanding and days-supply of inventory levels
have improved since March 31, 1994.
Cash used by investing activities totaled $117.1 million for the nine
months ended December 31, 1994 which was primarily comprised of $25.2 million
for capital expenditures, $77 million related to acquisitions and $16.9
million related to the purchase of 740,000 shares of CBI Industries, Inc.
("CBI") common stock during the third quarter. The shares were purchased in
contemplation of a transaction with CBI or CBI's Liquid Carbonic Industries
subsidiary. During January 1995, as a result of the Company's decision not to
make a bid for CBI, the Company sold its shares of CBI common stock for $17.5
million, net of expenses. At December 31, 1994, the Company has classified
its investment in the CBI shares as a noncurrent asset since the net proceeds
from the sale were used to repay borrowings under the Company's long-term
revolving credit facilities. A gain of approximately $600,000 will be
recorded as "other income" during the quarter ending March 31, 1995.
The Company's use of cash for capital expenditures is partially
attributable to the continued assimilation of certain fiscal 1994 and 1995
acquisitions which require capital expenditures in areas such as the combining
of cylinder fill plants, improving truck fleets, purchase of cylinders in
order to return cylinders rented from third parties and computer conversions.
Additionally, capital expenditure costs have increased during fiscal 1995 as a
result of the purchase of equipment necessary to facilitate gas sales growth.
Costs incurred for the nine months ended December 31, 1994 which represent
maintenance capital expenditures are estimated to total $7.5 million ($4.5
million for the nine months ended December 31, 1993). Compared to the first
two quarters, capital expenditures were down approximately $2 million during
the third quarter of fiscal 1995. The Company anticipates that the level of
capital expenditures will continue to decline during the fourth quarter of
fiscal 1995.
<PAGE> 17
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Financing activities provided cash of $71.9 million for the nine months
ended December 31, 1994 with total debt outstanding increasing by $84.9
million from March 31, 1994. As discussed above, excluding debt associated
with the purchase of CBI shares, debt increased by $68 million. Debt incurred
in connection with the acquisition of industrial gas distribution businesses,
including seller notes and assumed notes, totaled $93.9 million.
One of the Company's primary sources of borrowings is an unsecured
revolving credit facility with various commercial banks. At December 31,
1994, the facility provided for borrowings up to $250 million, with sub-limits
for money market loans, bankers acceptances and the issuance of letters of
credit. On December 31, 1994, the Company had approximately $139 million in
borrowings under the facility and $28 million committed under letters of
credit, resulting in availability under the facility of approximately $83
million. The facility provides for quarterly interest payments payable
currently with equal quarterly principal payments beginning in September 1996
and continuing through June 2001.
In November 1994, the Company entered into a new $100 million unsecured
revolving credit facility with various commercial banks to provide additional
availability for the Company's ongoing acquisition and investment programs.
The facility currently bears interest at the Libor rate plus 1/2% and matures
on July 1, 1996. On December 31, 1994, the Company had approximately $75
million in borrowings under the facility resulting in availability under the
facility of approximately $25 million.
The Company also has unsecured line of credit agreements which provide
for borrowings aggregating $25 million. At December 31, 1994, $15 million was
outstanding under these agreements.
At December 31, 1994, the effective interest rate related to the $229
million of outstanding borrowings under the above credit lines was
approximately 6.7%.
The Company had $27.9 million outstanding at December 31, 1994 related
to senior subordinated notes which bear interest at a fixed rate of 11.375%
and require principal payments through August 1998.
The Company's loan agreements contain restrictive covenants which
include the maintenance of a minimum equity level, maintenance of certain
financial ratios and restrictions on additional borrowings and the level of
dividend payments.
In managing interest rate exposure, principally under the Company's
floating rate revolving credit facilities, the Company has entered into nine
interest rate swap agreements during the period from June 1992 through
November 1994. The swap agreements are with major financial institutions and
have a total notional principal amount of $107.5 million at December 31, 1994.
Approximately $100 million of the swap agreements require fixed interest
payments based on an average effective rate of 6.9% for remaining periods
ranging between 3 and 8 years. One swap agreement requires floating rates
($7.5 million notional amount with an interest rate of 5.4% at December 31,
1994). The Company continually monitors its positions and the credit ratings
of its counterparties, and does not anticipate nonperformance by the
counterparties.
<PAGE> 18
AIRGAS, INC.
The Company will continue to look for appropriate acquisitions and will
fund such acquisitions through cash flow from operations and with debt and
other available sources.
The Company does not currently pay dividends.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
________
11. Calculation of earnings per share.
b. Reports on Form 8-K
___________________
On December 30, 1994, the Company filed a current report on Form 8-K
which provided, under Item 5, audited financial statements and pro forma
information for a substantial majority of individually insignificant
businesses acquired through November 1, 1994 in accordance with Regulation
S-X, Rule 3-05 (b)(1)(i).
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
February 7, 1995 /s/Britton H. Murdoch
________________ _______________________
Date Britton H. Murdoch
Vice President and
Chief Financial Officer
<PAGE>
<PAGE> 20
<TABLE>
EXHIBIT 11
AIRGAS, INC.
EARNINGS PER SHARE CALCULATIONS
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1994 1993 1994 1993
____ ____ ____ ____
<S> <C> <C> <C> <C>
Adjustment of Weighted Average
Shares Outstanding:
Shares of common stock
outstanding
- - weighted 31,346,559 30,731,709 31,283,009 30,945,311
Net common stock equivalents 1,700,825 1,736,628 1,707,808 1,689,324
__________ __________ __________ __________
Adjusted shares outstanding 33,047,384 32,468,337 32,990,817 32,634,635
========== ========== ========== ==========
Net earnings $ 7,790,000 $ 5,055,000 $22,039,000 $13,880,000
========== ========== ========== ==========
Primary Earnings Per Share $ .24 $ .16 $ .67 $ .43
========== ========== ========== ==========
</TABLE>
Earnings per share amounts were determined using the treasury stock method.
This method assumes the exercise of all dilutive outstanding options and
warrants and the use of the aggregate proceeds therefrom to acquire the
Company's outstanding common stock. Net earnings were divided by the weighted
average number of shares outstanding adjusted for the assumed exercise of the
options and warrants outstanding and repurchase of common stock to calculate
per share amounts.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 92,203
<ALLOWANCES> 4,968
<INVENTORY> 65,877
<CURRENT-ASSETS> 169,729
<PP&E> 453,776
<DEPRECIATION> 113,949
<TOTAL-ASSETS> 644,155
<CURRENT-LIABILITIES> 103,127
<BONDS> 0
<COMMON> 314
0
0
<OTHER-SE> 183,531
<TOTAL-LIABILITY-AND-EQUITY> 644,155
<SALES> 498,560
<TOTAL-REVENUES> 498,560
<CGS> 248,870
<TOTAL-COSTS> 248,870
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,521
<INCOME-PRETAX> 38,869
<INCOME-TAX> 16,830
<INCOME-CONTINUING> 22,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,039
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
