<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, 1995
_____________________________
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 February 1, 1996: 31,785,427 shares
<PAGE> 2
AIRGAS, INC.
FORM 10-Q
December 31, 1995
INDEX
PART I - FINANCIAL INFORMATION
______________________________
Consolidated Balance Sheets as of December 31, 1995
and March 31,1995.....................................................3
Consolidated Statements of Earnings
for the Three Months Ended December 31, 1995 and 1994................5
Consolidated Statements of Earnings
for the Nine Months Ended December 31, 1995 and 1994..................6
Consolidated Statements of Cash Flows
for the Nine Months Ended December 31, 1995 and 1994..................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..........................................19
Signatures................................................................20
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31, March 31,
1995 1995
(Unaudited)
_____________ ________
<S> <C> <C>
ASSETS
Current Assets
Trade receivables, less allowance for
doubtful accounts of $3,820 at December 31,
1995 and $4,161 at March 31, 1995 $105,737 $ 93,423
Inventories 79,796 65,947
Prepaid expenses and other current assets 15,094 10,467
_______ _______
Total current assets 200,627 169,837
_______ _______
Plant and equipment, at cost 540,330 464,983
Less accumulated depreciation and amortization (144,331) (118,715)
_______ _______
Plant and equipment, net 395,999 346,268
Other non-current assets 52,068 41,388
Goodwill, net of accumulated amortization of
$18,170 at December 31, 1995 and $15,094
at March 31, 1995 116,137 88,144
_______ _______
Total assets $764,831 $645,637
======= =======
<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,
1995 1995
(Unaudited)
___________ ________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current Liabilities
Current portion of long-term debt $ 11,715 $ 11,780
Accounts payable, trade 40,737 43,782
Accrued expenses and other current liabilities 62,736 60,191
_______ _______
Total current liabilities 115,188 115,753
_______ _______
Long-term debt 334,176 259,970
Deferred income taxes 76,766 67,540
Other non-current liabilities 15,511 11,116
Minority interest in subsidiaries 1,554 1,606
Stockholders' equity
Common stock $.01 par value, 200,000 shares
authorized, 32,911 and 31,501
shares issued at December 31, 1995 and
March 31, 1995, respectively 329 315
Capital in excess of par value 88,383 62,135
Retained earnings 162,246 133,640
Cumulative translation adjustment (406) (469)
Treasury stock, 1,178 and 236 common shares
at cost at December 31, 1995 and
March 31, 1995, respectively (28,916) (5,969)
_______ _______
Total stockholders' equity 221,636 189,652
_______ _______
Total liabilities and stockholders' equity $764,831 $ 645,637
======= =======
<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, 1995 December 31, 1994
__________________ __________________
<S> <C> <C>
Net sales:
Distribution $199,066 $165,582
Manufacturing 9,483 8,530
_______ _______
Total net sales 208,549 174,112
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation and
amortization)
Distribution 97,504 80,809
Manufacturing 6,343 5,716
Selling, distribution and
administrative expenses 69,812 59,276
Depreciation and amortization 11,906 9,734
_______ _______
Total costs and expenses 185,565 155,535
_______ _______
Operating income:
Distribution 21,303 17,101
Manufacturing 1,681 1,476
_______ _______
22,984 18,577
Interest expense, net (6,305) (4,869)
Other income, net 290 189
Minority interest (127) (159)
_______ _______
Earnings before income taxes 16,842 13,738
Income taxes 7,025 5,948
_______ _______
Net earnings $ 9,817 $ 7,790
======= =======
Earnings per share $ .30 $ .24
======= =======
Weighted average shares 33,100 33,050
======= =======
<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, 1995 December 31, 1994
__________________ __________________
<S> <C> <C>
Net sales:
Distribution $575,156 $474,019
Manufacturing 26,695 24,541
_______ _______
Total net sales 601,851 498,560
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation and
amortization)
Distribution 281,849 232,886
Manufacturing 17,372 15,984
Selling, distribution and
administrative expenses 201,946 171,042
Depreciation and amortization 33,519 27,255
_______ _______
Total costs and expenses 534,686 447,167
_______ _______
Operating income:
Distribution 62,042 46,867
Manufacturing 5,123 4,526
_______ _______
67,165 51,393
Interest expense, net (17,760) (12,521)
Other income, net 656 409
Minority interest (492) (412)
_______ _______
Earnings before income taxes 49,569 38,869
Income taxes 20,963 16,830
_______ _______
Net earnings $ 28,606 $ 22,039
======= =======
Earnings per share $ .87 $ .67
======= =======
Weighted average shares 32,900 32,990
======= =======
<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, 1995 December 31, 1994
__________________ __________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 28,606 $ 22,039
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 33,519 27,255
Deferred income taxes 8,874 7,573
Equity in earnings of unconsolidated
affiliates (1,036) (543)
(Gain) Loss on sale of plant and equipment (202) 26
Minority interest in earnings 492 412
Stock issued for employee benefit plan 2,459 1,947
Changes in assets and liabilities,
excluding effects of business acquisitions:
Trade receivables, net (418) (1,772)
Inventories (2,291) (3,068)
Prepaid expenses and other current assets (3,710) (991)
Accounts payable, trade (9,727) (4,366)
Accrued expenses and other current
liabilities 3,091 184
Other assets and liabilities, net (1,580) (3,453)
_______ _______
Net cash provided by operating activities 58,077 45,243
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (28,680) (25,185)
Proceeds from sale of plant and equipment 2,871 1,641
Business acquisitions, net of cash acquired (48,681) (76,975)
Purchase of temporary investment 0 (16,904)
Dividend from joint venture 652 550
Other, net (422) (250)
_______ _______
Net cash used by investing activities (74,260) (117,123)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 443,106 308,869
Repayment of debt (406,857) (240,857)
Repurchase of Airgas, Inc. common stock (22,947) 0
Exercise of options and warrants 3,490 922
Net overdraft (665) 2,948
_______ _______
Net cash provided by financing
activities 16,127 71,882
_______ _______
EFFECTS OF DISCONTINUED ACTIVITIES, NET 56 (2)
_______ _______
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, 1995.
The financial statements reflect, in the opinion of management, all
adjustments (normal recurring adjustments) necessary to present fairly the
Company's consolidated balance sheets at December 31, 1995 and March 31, 1995;
the consolidated statements of earnings for the three and nine months ended
December 31, 1995 and 1994; and the consolidated statements of cash flows for
the nine months ended December 31, 1995 and 1994. The interim operating
results are not necessarily indicative of the results to be expected for an
entire year.
(2) ACQUISITIONS
____________
From April 1, 1995 to December 31, 1995, the Company acquired twenty-
nine businesses engaged in the distribution of industrial, medical and
specialty gases and welding supplies with annual sales of approximately $102
million. The aggregate purchase price, including amounts related to non-
competition and confidentiality agreements, amounted to approximately $115
million and includes cash and real estate acquired of $1.5 million and $4.8
million, respectively. Subsequent to December 31, 1995, through February 1,
1996, the Company acquired six industrial gas distribution businesses with an
aggregate purchase price of approximately $88 million. 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.
<PAGE> 9
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(3) INVENTORIES
___________
Inventories consist of:
<TABLE>
(In thousands)
<CAPTION>
December 31, March 31,
1995 1995
________ ________
<S> <C> <C>
Finished goods $79,553 $ 65,693
Raw materials 1,394 1,315
______ ______
80,947 67,008
Less reduction to LIFO cost ( 1,151) (1,061)
_______ _______
$79,796 $ 65,947
======= =======
</TABLE>
(4) PLANT AND EQUIPMENT
___________________
The major classes of plant and equipment are as follows:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1995 1995
_____________ _________
<S> <C> <C>
Land and land improvements $ 18,731 $ 17,571
Building and leasehold improvements 50,336 43,714
Machinery and equipment, including
cylinders 438,074 376,284
Transportation equipment 30,838 25,944
Construction in progress 2,351 1,470
_______ _______
$540,330 $464,983
======= =======
</TABLE>
<PAGE> 10
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(5) OTHER NON-CURRENT ASSETS
_______________________
Other non-current assets include:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1995 1995
_____________ _________
<S> <C> <C>
Investment in unconsolidated
affiliates $ 9,152 $ 5,473
Noncompete agreements and other
intangible assets, at cost, net
of accumulated amortization of
$44.0 million at December 31, 1995
and $37.4 million at March 31, 1995 38,747 31,955
Other assets 4,169 3,960
_______ _______
$ 52,068 $ 41,388
======= =======
</TABLE>
(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
______________________________________________
Accrued expenses and other current liabilities include:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1995 1995
_____________ _________
<S> <C> <C>
Cash overdraft $ 10,973 $ 11,638
Insurance payable and related
reserves 5,652 6,304
Customer cylinder deposits 6,547 6,242
Other accrued expenses and current
liabilities 39,564 36,007
_______ _______
$ 62,736 $ 60,191
======= =======
</TABLE>
<PAGE> 11
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(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.
<PAGE> 12
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL REVIEW
________________
OVERVIEW
________
The Company's financial results for the third quarter ended December 31,
1995 reflect substantial growth compared with the same quarter in the prior
year. Net sales of $208.5 million, net earnings of $9.8 million and earnings
per share of $.30 represent increases over the prior period of 20%, 26% and
25%, respectively. Net sales increased during the third quarter ended
December 31, 1995 over the same period in the prior year primarily due to the
acquisition of industrial gas distribution companies and an increase in
same-store distribution sales. Same-store sales increased approximately 2%
compared to the third quarter last year. Growth in October was followed by a
slowdown in November and December. A soft economy, combined with inclement
weather and the federal government shutdown have held down same-store sales
growth. Continued softness in the economy, and other factors, including the
continued federal government shutdown and the impact of January weather, may
impact same-store sales growth and earnings in the fourth quarter.
The increase in net earnings was primarily due to an increase in gross
profit margins and earnings generated by industrial gas distribution
businesses acquired since October 1, 1994 and an increase in gross profits
from higher same-store distribution sales.
After tax cash flow (net earnings plus depreciation, amortization and
deferred income taxes) increased 22% to $24.7 million from $20.2 million in
the third quarter last year. After tax cash flow is an important measurement
of the Company's ability to repay debt through operations and provides the
Company with the ability to pursue investment alternatives such as
acquisitions and the repurchase of Company stock.
RESULTS OF OPERATIONS: THREE MONTHS ENDED December 31, 1995 COMPARED TO THE
THREE MONTHS ENDED DECEMBER 31, 1994
_____________________________________
Net sales increased 20% during the quarter ended December 31, 1995
compared to the same quarter in the prior year:
<TABLE>
(in thousands)
<CAPTION> 1995 1994 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $199,066 $165,582 $ 33,484
Manufacturing 9,483 8,530 953
_______ _______ _______
$208,549 $174,112 $ 34,437
======= ======= =======
</TABLE>
For the quarter ended December 31, 1995, distribution sales increased
approximately $30.4 million resulting from the acquisition of 49 industrial
gas distributors since October 1, 1994 and approximately $3.1 million from
same-store sales. The Company estimates that had all acquisitions during the
quarter ended December 31, 1995 been consummated on October 1, 1995,
distribution sales for the third quarter ended December 31, 1995 would have
<PAGE> 13
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
been approximately $2.0 million higher. The increase in same-store sales of
approximately 2% was the result of slightly higher prices and increased volume
of gas and rental businesses. Hardgoods same-store sales were flat. The
Company estimates same-store sales based on a comparison of current period
sales to the prior period's sales, adjusted for acquisitions. Future
same-store sales growth is primarily dependent on the economy, and to a lesser
extent, the Company's ability to expand markets for new and existing products
and to increase prices. The Company believes that sales of lower margin
hardgoods are adversely impacted during a recession, and conversely, are
typically the fastest to rebound during an economic recovery.
Sales for the Company's manufacturing operations increased 11% during
the quarter ended December 31, 1995 compared to the same quarter in the prior
year primarily as a result of an increase in the demand for carbon products
and nitrous oxide.
The increase in distribution gross profit of $16.8 million over 1994 was
attributable to increases associated with acquisitions of $14.2 million and
same-store gross profit growth of $2.6 million. The majority of the $2.6
million same-store gross profit growth came from higher prices and volume
growth in gas and rent revenues. Higher gas and rent volumes were partially
attributable to the success of gas marketing programs, principally small bulk
and specialty gases. On a same-store basis, distribution gross margins
increased an estimated 0.3% compared to 1994 primarily due to improved gas and
rent gross margins. Lower margin bulk gases partially offset some margin
improvements.
Selling, distribution and administrative expenses as a percentage of
sales decreased to 33.5% compared to 34.0% in 1994. The decrease was a result
of acquisition consolidation efforts and from controlling certain operating
costs, such as business insurance costs through improved claims management and
reduced incident rates. Through improved management efforts, the Company has
also reduced its bad debt expense. Also, certain operating costs, such as
occupancy costs, are relatively fixed and do not increase proportionately
with the increase in same-store sales. Partially offsetting these
improvements were normal salary increases and slightly higher distribution
costs.
Operating income increased 24% during the quarter ended December 31,
1995 compared to the same quarter in the prior year:
<TABLE>
(in thousands)
<CAPTION> 1995 1994 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $21,303 $17,101 $ 4,202
Manufacturing 1,681 1,476 205
______ ______ ______
$22,984 $18,577 $ 4,407
====== ====== ======
</TABLE>
Distribution operating income as a percentage of net distribution sales
increased to 10.7% during the third quarter ended December 31, 1995 compared
to 10.3% in the same quarter in the prior year. The improvement in
distribution operating income in 1995 was a result of the increase in gross
<PAGE> 14
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
profits from higher same-store sales, improved gross profit margins and
operating income provided by acquisitions.
Manufacturing operating income increased $205 thousand compared to 1994
due to strong demand for carbon products and nitrous oxide during the third
quarter ended December 31, 1995.
Interest expense, net, increased $1.4 million compared to 1994 primarily
as a result of the increase in average outstanding debt associated with the
acquisition of industrial gas distributors since October 1, 1994, interest
costs associated with the repurchase of Company common stock and slightly
higher interest rates, offset by cash flow before acquisitions. As discussed
in "Liquidity and Capital Resources" below, the Company has hedged floating
interest rates under certain borrowings with interest rate swap agreements.
Income tax expense represented 41.7% of pre-tax earnings in 1995 compared
to 43.3% in 1994. The decrease in the effective income tax rate was primarily
due to an increase in pre-tax earnings relative to non-deductible goodwill and
other basis differences and as a result of the implementation of certain state
tax planning strategies.
<PAGE> 15
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS: NINE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO THE
NINE MONTHS ENDED DECEMBER 31, 1994
____________________________________
Net sales increased 21% during the nine months ended December 31, 1995
compared to the same period in the prior year:
<TABLE>
(in thousands)
<CAPTION> 1995 1994 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $575,156 $474,019 $101,137
Manufacturing 26,695 24,541 2,154
_______ _______ _______
$601,851 $498,560 $103,291
======= ======= =======
</TABLE>
For the nine months ended December 31, 1995, distribution sales
increased approximately $89.6 million resulting from the acquisition of 56
industrial gas distributors since April 1, 1994 and approximately $11.5
million from same-store sales. The Company estimates that had all
acquisitions during the nine months ended December 31, 1995 been consummated
on April 1, 1995, distribution sales for the nine months ended December 31,
1995 would have been approximately $34.4 million higher. The increase in
same-store sales of approximately 2% was primarily the result of increased
volume of hardgoods sales and increases in gas and rents. The Company
estimates same-store sales based on a comparison of current period sales to
the prior period's sales, adjusted for acquisitions. Future same-store sales
growth is dependent on the economy and the Company's ability to expand markets
for new and existing products and to increase prices. The Company believes
that sales of lower margin hardgoods are adversely impacted during a
recession, and conversely, are typically the fastest to rebound during an
economic recovery.
Sales for the Company's manufacturing operations increased 9%
compared to 1994 primarily as a result of an increase in the volume of lower
margin exports and increased demand for carbon products and nitrous oxide.
The increase in distribution gross profit of $52.2 million over 1994,
was attributable to increases associated with acquisitions of $42.8 million
and same-store gross profit growth of $9.4 million. The same-store gross
profit growth was attributable to increased hardgoods volumes combined with
improved gross margins resulting from the Company's national purchasing
arrangements, success of gas marketing programs and improved gas and rental
gross margins. On a same-store basis, distribution gross margins increased an
estimated 0.5% for the nine months ended December 31, 1995 compared to the
same period in the prior year.
<PAGE> 16
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Selling, distribution and administrative expenses as a percentage of
sales decreased to 33.6% compared to 34.3% in 1994. The decrease was a result
of acquisition consolidation efforts and from controlling certain operating
costs, such as business insurance costs through improved claims management and
reduced incident rates. Through improved management efforts, the Company has
also reduced its bad debt expense. Also, certain operating costs, such as
occupancy costs, are relatively fixed and did not increase proportionately
with the increase in same-store sales. Partially offsetting these
improvements were normal salary increases and slightly higher distribution
costs.
Operating income increased 31% during the nine months ended December 31,
1995 compared to the same period in the prior year:
<TABLE>
(in thousands)
<CAPTION>
1995 1994 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $62,042 $46,867 $15,175
Manufacturing 5,123 4,526 597
______ ______ ______
$67,165 $51,393 $15,772
====== ====== ======
</TABLE>
Distribution operating income as a percentage of net distribution sales
increased to 10.8% compared to 9.9% in 1994. The improvement in distribution
operating income in 1995 was a result of the increase in gross profits from
higher same-store sales, improved gross profit margins and operating income
provided by acquisitions.
Manufacturing operating income increased $597 thousand compared to 1994
due to increased demand for carbon products and nitrous oxide, lower
production and delivery costs related to the calcium carbide and nitrous oxide
business, partially offset by an increase in lower margin sales of carbon
products.
Interest expense, net, increased $5.2 million compared to 1994 primarily
as a result of the increase in average outstanding debt associated with the
acquisition of industrial gas distributors since April 1, 1994, interest costs
associated with the repurchase of Company common stock and slightly higher
interest rates, offset by cash flow before acquisitions. As discussed in
"Liquidity and Capital Resources" below, the Company has hedged floating
interest rates under certain borrowings with interest rate swap agreements.
Income tax expense represented 42.3% of pre-tax earnings in 1995 compared
to 43.3% in 1994. The decrease in the effective income tax rate was primarily
due to an increase in pre-tax earnings relative to non-deductible goodwill and
other basis differences and as a result of the implementation of certain state
tax planning strategies.
<PAGE> 17
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
The Company has primarily financed its operations, capital expenditures,
stock repurchases, and acquisitions with borrowings and funds provided by
operating activities.
Cash flows from operating activities totaled $58.1 million for the nine
months ended December 31, 1995. Depreciation and amortization represent $33.5
million of cash flow from operating activities. Deferred income taxes of $8.9
million principally resulted from temporary differences. Working capital
components of cash flow increased $13.1 million as a result of an increase in
accounts receivable, inventories, prepaid expenses and other current assets
and a decrease in trade accounts payable, offset by an increase in accrued
expenses and other current liabilities. Days-sales outstanding and days-supply
of inventory levels have increased slightly from March 31, 1995 levels,
principally due to fiscal 1996 acquisitions. Accounts payable decreased $9.7
million due to payments to vendors. Other current liabilities have increased
due to accrued interest, income taxes and real estate taxes.
Cash used by investing activities totaled $74.3 million for the nine
months ended December 31, 1995 which was primarily comprised of $28.7 million
for capital expenditures and $48.7 million related to acquisitions.
The Company's use of cash for capital expenditures was partially
attributable to the continued assimilation of certain prior period
acquisitions which required the Company to make capital expenditures in areas
such as combining cylinder fill plants, improving truck fleets and purchasing
cylinders in order to return cylinders rented from third parties.
Additionally, capital expenditures include the purchase of cylinders and bulk
tanks necessary to facilitate gas sales growth. The Company estimates that
its maintenance capital expenditures are approximately 2% of net sales. The
Company considers the replacement of existing capital assets to be maintenance
capital expenditures.
Financing activities provided cash of $16.1 million for the nine months
ended December 31, 1995 with total debt outstanding increasing by $74.1
million from March 31, 1995. Debt incurred in connection with the acquisition
of industrial gas distribution businesses, including seller notes and assumed
notes, totalled $86.3 million.
In January 1995, the Company approved a one million share stock
repurchase program. Through December 31, 1995, the Company purchased one
million shares at an aggregate cost of $24.3 million. On October 27, 1995,
the Company announced an additional one million share stock repurchase
program. Through February 6, 1996, the Company has purchased 177,600 shares
at an aggregate cost of $4.6 million under this program. The impact of the
stock repurchases on earnings per share amounts was immaterial for the nine
months ended December 31, 1995. The purchase of shares is dependent on
prevailing market conditions.
The Company's primary source of borrowing is a $375 million unsecured
revolving credit facility with various commercial banks which matures on
August 10, 2000. At December 31, 1995, the Company had approximately $210
<PAGE> 18
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
million in borrowings under the facility and approximately $45 million
committed under letters of credit, resulting in availability under the
facility of approximately $120 million.
The Company also has unsecured line of credit agreements with no fixed
date maturity with various commercial banks. At December 31, 1995, these
agreements totaled $60 million, under which the Company had aggregate
outstanding borrowings of $31 million.
At December 31, 1995, the effective interest rate related to outstanding
borrowings under all credit lines was approximately 6.22%.
On February 5, 1996, the Company entered into a new $100 million
unsecured revolving credit facility with a group of commercial banks which
matures on July 1, 1997. The facility is intended to provide additional
availability for the Company's ongoing acquisition and investment programs.
The terms and conditions of this facility are similar to the Company's
existing $375 million facility.
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
thirteen interest rate swap agreements during the period from June 1992
through December 31, 1995. The swap agreements are with major financial
institutions and have a total notional principal amount of $146 million at
December 31, 1995. Approximately $126 million of the notional principal
amount of the swap agreements require fixed interest payments based on an
average effective rate of 6.96% for remaining periods ranging between 2 and 7
years. Two swap agreements require floating rates ($19.5 million notional
amount at 5.91% at December 31, 1995). The Company continually monitors its
positions and the credit ratings of its counterparties, and does not
anticipate nonperformance by the counterparties.
The Company will continue to look for appropriate acquisitions and
expects to fund such acquisitions, future capital expenditure requirements and
commitments related to foreign investments primarily through the use of cash
flow from operations, debt, common stock for certain stock acquisition
candidates and other available sources. Subsequent to December 31, 1995,
through February 1, 1996, the Company acquired four industrial gas
distribution businesses with an aggregate purchase price of approximately $83
million.
The Company does not currently pay dividends.
OTHER
_____
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 121 - "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" effective for
fiscal years beginning after December 15, 1995. This statement provides
guidance for the recognition of impairment losses related to long-lived assets
such as property, plant and equipment, and certain intangibles and related
goodwill for (1) assets to be held and used and (2) assets to be disposed of.
<PAGE> 19
AIRGAS, INC.
Management believes that the adoption of this statement will not have a
material impact on earnings, financial condition or liquidity of the Company.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 - "Accounting for Stock - Based Compensation," effective for
fiscal years beginning after December 15, 1995. This statement establishes a
fair value based method of accounting for stock-based compensation plans.
Management has not yet determined the impact of the adoption of this
statement.
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 November 28, 1995, the Company filed a current report on Form 8-K
which provided, under Item 5, audited financial statements and pro forma
information for three individually insignificant businesses acquired through
October 1, 1995 in accordance with Regulation S-X, Rule 3-05 (b) (1) (i).
On November 28, 1995, the Company filed a current report on Form 8-K
under Item 5, which announced certain management promotions.
<PAGE>
<PAGE> 20
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, 1996 /s/Britton H. Murdoch
_________________ _______________________
Date Britton H. Murdoch
Vice President and
Chief Financial Officer
<PAGE>
<PAGE>
<PAGE> EX-1
<TABLE>
EXHIBIT 11
AIRGAS, INC.
EARNINGS PER SHARE CALCULATIONS
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
____ ____ ____ ____
<S> <C> <C> <C> <C>
Adjustment of Weighted Average
Shares Outstanding:
Shares of common stock
outstanding
- - weighted 31,622,000 31,347,000 31,272,000 31,283,000
Net common stock equivalents 1,478,000 1,703,000 1,628,000 1,707,000
__________ __________ __________ __________
Adjusted shares outstanding 33,100,000 33,050,000 32,900,000 32,990,000
========== ========== ========== ==========
Net earnings $ 9,817,000 $ 7,790,000 28,606,000 22,039,000
========== ========== ========== ==========
Primary and fully diluted
earnings per share $ .30 $ .24 $ .87 $ .67
========== ========= ========== =========
</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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 105,737
<ALLOWANCES> 3,820
<INVENTORY> 79,796
<CURRENT-ASSETS> 200,627
<PP&E> 540,330
<DEPRECIATION> 144,331
<TOTAL-ASSETS> 764,831
<CURRENT-LIABILITIES> 115,188
<BONDS> 0
<COMMON> 329
0
0
<OTHER-SE> 221,307
<TOTAL-LIABILITY-AND-EQUITY> 764,831
<SALES> 601,851
<TOTAL-REVENUES> 601,851
<CGS> 299,221
<TOTAL-COSTS> 299,221
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,760
<INCOME-PRETAX> 49,569
<INCOME-TAX> 20,963
<INCOME-CONTINUING> 28,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,606
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
