<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: June 30, 1996
_____________________________
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 August 1, 1996: 64,475,912 shares
<PAGE> 2
AIRGAS, INC.
FORM 10-Q
June 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
______________________________
Consolidated Balance Sheets as of June 30, 1996
and March 31, 1996....................................................3
Consolidated Statements of Earnings
for the Three Months Ended June 30, 1996 and 1995.....................5
Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 1996 and 1995.....................6
Notes to Consolidated Financial Statements.................................7
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................11
PART II - OTHER INFORMATION
___________________________
Exhibits and Reports on Form 8-K..........................................17
Signatures................................................................18
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
June 30, March 31,
1996 1996
(Unaudited)
_____________ ________
<S> <C> <C>
ASSETS
Current Assets
Trade receivables, less allowances for
doubtful accounts of $3,819 at June 30,
1996 and $3,396 at March 31, 1996 $139,228 $120,811
Inventories 106,113 86,162
Prepaid expenses and other current assets 16,508 11,601
_________ _______
Total current assets 261,849 218,574
_________ _______
Plant and Equipment, at cost 617,211 586,328
Less accumulated depreciation and amortization (156,592) (147,451)
_________ _______
Plant and equipment, net 460,619 438,877
Other Non-current Assets 117,598 60,948
Goodwill, net of accumulated amortization of
$21,121 at June 30, 1996 and $19,552
at March 31, 1996 212,113 165,243
_________ _______
Total assets $1,052,179 $883,642
========= =======
<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>
June 30, March 31,
1996 1996
(Unaudited)
___________ ________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current Liabilities
Current portion of long-term debt $ 17,644 $ 12,179
Accounts payable, trade 57,703 52,528
Accrued expenses and other current liabilities 76,149 72,279
_________ _______
Total current liabilities 151,496 136,986
_________ _______
Long-Term Debt 522,288 385,832
Deferred Income Taxes 90,233 88,400
Other Non-current Liabilities 36,044 34,490
Minority Interest in Subsidiaries 1,954 1,725
Stockholders' Equity
Common stock $.01 par value, 200,000 shares
authorized, 66,788 and 66,314
shares issued at June 30, 1996 and
March 31, 1996, respectively 669 663
Capital in Excess of Par Value 94,296 91,512
Retained earnings 184,510 173,360
Cumulative Translation Adjustment (395) (410)
Treasury Stock, 2,355 common shares at
cost at June 30, 1996 and March 31, 1996,
respectively (28,916) (28,916)
_________ _______
Total stockholders' equity 250,164 236,209
_________ _______
Total liabilities and stockholders' equity $1,052,179 $ 883,642
========= =======
<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
June 30, 1996 June 30, 1995
__________________ __________________
<S> <C> <C>
Net sales:
Gas Distribution $248,129 $185,634
Industrial Distribution 16,452 -
Manufacturing 9,517 8,638
_______ _______
Total net sales 274,098 194,272
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation and
amortization)
Gas Distribution 126,590 90,921
Industrial Distribution 13,432 -
Manufacturing 6,330 5,736
Selling, distribution and
administrative expenses 86,187 65,137
Depreciation and amortization 14,238 10,441
_______ _______
Total costs and expenses 246,777 172,235
_______ _______
Operating income:
Gas Distribution 24,944 20,479
Industrial Distribution 544 -
Manufacturing 1,833 1,558
_______ _______
27,321 22,037
Interest expense, net (8,281) (5,588)
Other income, net 281 211
Minority interest (229) (191)
_______ _______
Earnings before income taxes 19,092 16,469
Income taxes 7,942 7,015
_______ _______
Net earnings $ 11,150 $ 9,454
======= =======
Earnings per share $ .17 $ .15
======= =======
Weighted average shares 67,095 65,152
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
AIRGAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended Three Months Ended
June 30, 1996 June 30, 1995
__________________ __________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 11,150 $ 9,454
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 14,238 10,441
Deferred income taxes 2,382 2,806
Equity in earnings of unconsolidated
affiliates (315) (297)
Gain on sale of plant and equipment 3 0
Minority interest in earnings 229 191
Stock issued for employee benefit plan 1,146 790
Changes in assets and liabilities,
excluding effects of business
acquisitions:
Trade receivables, net (5,104) 1,534
Inventories (10,494) (1,773)
Prepaid expenses and other
current assets (3,190) (1,153)
Accounts payable, trade 220 (5,919)
Accrued expenses and other current
liabilities 278 (1,363)
Other assets and liabilities, net (5,513) 598
_______ _______
Net cash provided by operating activities 5,030 15,309
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (14,814) (8,592)
Proceeds from sale of plant and
equipment 947 379
Business acquisitions, net of cash acquired (78,877) (13,094)
Investment in unconsolidated affiliates (27,917) 0
Other, net 403 213
_______ _______
Net cash used by investing activities (120,258) (21,094)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 239,589 81,336
Repayment of debt (123,832) (60,000)
Repurchase of treasury stock 0 (15,540)
Exercise of options and warrants 1,004 1,674
Net overdraft (1,533) (1,685)
_______ _______
Net cash provided by financing
activities 115,228 5,785
_______ _______
CHANGE IN CASH $ 0 $ 0
Cash - beginning of period 0 0
_______ _______
Cash - end of period $ 0 $ 0
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 7
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"). Unconsolidated affiliates are
accounted for on the equity method and generally consist of 20 - 50% owned
operations where control does not exist or is considered temporary.
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, 1996.
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 June 30, 1996 and March 31, 1996;
the consolidated statements of earnings for the three months ended June 30,
1996 and 1995; and the consolidated statements of cash flows for the three
months ended June 30, 1996 and 1995. The interim operating results are not
necessarily indicative of the results to be expected for an entire year.
(2) ACQUISITIONS
____________
From April 1, 1996 to June 30, 1996, the Company acquired nine
businesses engaged in the distribution of industrial, medical and specialty
gases and welding supplies and one distributor of safety and industrial
supplies, with annual sales of approximately $107 million. The aggregate
purchase price, including amounts related to non-competition and
confidentiality agreements, amounted to approximately $99 million and includes
cash and real estate acquired of $368 thousand and $2 million, respectively.
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.
Subsequent to June 30, 1996, the Company has acquired industrial gas
distribution businesses with annual sales of approximately $9 million. In
addition, on August 1, 1996, the Company announced that it signed a letter of
intent to acquire Rutland Tool & Supply Co., Inc. ("Rutland"). In the
proposed transaction, Rutland shareholders will receive approximately $65
million of Airgas common stock in exchange for all of their Rutland stock.
The Rutland acquisition is expected to close by September 1, 1996.
<PAGE> 8
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(3) INVENTORIES
___________
Inventories consist of:
<TABLE>
(In thousands)
<CAPTION>
June 30, March 31,
1996 1996
________ ________
<S> <C> <C>
Finished goods $106,994 $ 85,626
Raw materials 525 1,879
_______ _______
107,519 87,505
Less reduction to LIFO cost ( 1,406) (1,343)
_______ _______
$106,113 $ 86,162
======= =======
</TABLE>
(4) PLANT AND EQUIPMENT
___________________
The major classes of plant and equipment are as follows:
<TABLE>
(In thousands)
<CAPTION> June 30, March 31,
1996 1996
_____________ _________
<S> <C> <C>
Land and land improvements $ 21,292 $ 20,066
Building and leasehold improvements 59,041 58,153
Machinery and equipment, including
cylinders 499,107 472,868
Transportation equipment 35,285 33,724
Construction in progress 2,486 1,517
_______ _______
$617,211 $586,328
======= =======
</TABLE>
<PAGE> 9
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(5) OTHER NON-CURRENT ASSETS
_______________________
Other non-current assets include:
<TABLE>
(In thousands)
<CAPTION> June 30, March 31,
1996 1996
_____________ _________
<S> <C> <C>
Investment in unconsolidated
affiliates $ 57,089 $ 9,332
Noncompete agreements and other
intangible assets, at cost, net
of accumulated amortization of
$49.5 million at June 30, 1996
and $46.7 million at March 31, 1996 51,983 47,530
Other assets 8,526 4,086
_______ _______
$117,598 $ 60,948
======= =======
Investment in unconsolidated affiliates at June 30, 1996 includes the
Company's investment of approximately $47.6 million in cash and notes related
to the June 28, 1996 purchase of 45% of the voting capital stock of National
Welders Supply Company, Inc.
</TABLE>
(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
______________________________________________
Accrued expenses and other current liabilities include:
<TABLE>
(In thousands)
<CAPTION> June 30, March 31,
1996 1996
_____________ _________
<S> <C> <C>
Cash overdraft $ 14,173 $ 15,706
Insurance payable and related
reserves 5,888 5,297
Customer cylinder deposits 8,325 7,058
Other accrued expenses and current
liabilities 47,763 44,218
_______ _______
$ 76,149 $ 72,279
======= =======
</TABLE>
<PAGE> 10
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.
On July 26, 1996, Praxair, Inc. ("Praxair") filed suit against the
Company in the Circuit Court of Mobile County, Alabama. The complaint alleges
tortious interference with business or contractual relations with respect to
Praxair's Right of First Refusal contract with National Welders Supply
Company, Inc. ("National Welders") by the Company in connection with the
Company's formation of a joint venture with the majority shareholders of
National Welders. Praxair is seeking compensatory damages in excess of $100
million and punitive damages. The Company believes that Praxair's claims are
without merit and intends to defend vigorously against such claims.
<PAGE> 11
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 quarter ended June 30, 1996
reflect substantial growth compared with the first quarter last year. Net
sales of $274.1 million, net earnings of $11.1 million and earnings per share
of $.17 represent increases over the prior period of 41%, 18% and 13%,
respectively. Net sales increased during the quarter ended June 30,
1996 over the same period in the prior year primarily due to an increase in
same-store distribution sales and the acquisition of distribution companies.
The increase in net earnings was primarily due to an increase in gross
profits from higher same-store distribution sales, which were up approximately
4.5% quarter-over-quarter, and earnings and cash flow generated by the 50
distribution businesses acquired since April 1, 1995.
The Company intends to strategically broaden its product line in order to
increase sales to existing customers and to take advantage of its distribution
network. Recent product line additions have included returnable containers,
specialty gases (such as refrigerants and sterilizing gases) and additional
hardgoods (such as industrial supplies, safety products and coatings). In
April 1996, the Company acquired IPCO Safety Products Company (IPCO), a $55
million distributor of industrial safety equipment and supplies. IPCO
represents the Company's first acquisition in its Industrial Distribution
Division (IDD) segment. The Company's strategy is to acquire additional
industrial distribution companies with a focus on increasing same-store sales
of new industrial product lines through both the acquired businesses and its
existing distribution customers. The Company continued its strategy with the
announcement of its intent to acquire Rutland Tool & Supply Co., Inc., a $65
million distributor of metal working and industrial tools and supplies. The
Rutland acquisition is expected to close September 1, 1996. The Company
believes the selective addition of complementary product offerings will enable
it to better serve its diverse, expanding customer base.
After tax cash flow (net earnings plus depreciation, amortization and
deferred income taxes) increased 22% to the record level of $27.8 million from
$22.7 million in the 1995 quarter. 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.
<PAGE> 12
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 1995
__________________________
Net sales increased 41% during the quarter ended June 30, 1996 compared
to the same quarter in the prior year:
<TABLE>
(in thousands)
<CAPTION> 1996 1995 Increase
____ ____ __________
<S> <C> <C> <C>
Gas Distribution $248,129 $185,634 $ 62,495
Industrial Distribution 16,452 - 16,452
Manufacturing 9,517 8,638 879
_______ _______ _______
$274,098 $194,272 $ 79,826
======= ======= =======
</TABLE>
For the quarter ended June 30, 1996, Gas Distribution sales increased
approximately $53 million resulting from the acquisition of 49 distributors
since April 1, 1995 and approximately $9 million from same-store sales. The
Company estimates that had all acquisitions during the quarter ended June 30,
1996 been consummated on April 1, 1996, Gas Distribution sales for 1996 would
have been approximately $4 million higher. The increase in same-store sales of
approximately 3.8% is partially attributable to an increased volume of lower
margin hardgoods sales and refrigerant gases. 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, to a lesser extent, the Company's ability to
expand markets for new and existing products and to increase prices.
Management believes the Company's broad customer base and geographic diversity
help to reduce the adverse effects of an economic downturn on the Company.
Also, management believes that the gas portion of its Gas Distribution
business is somewhat resistant to an economic downturn. Management further
believes that sales of certain lower margin non-consumable hardgoods
equipment, such as welding machines, are more likely to be adversely impacted
during a downturn in the economy and, conversely, are typically the fastest to
rebound during an economic recovery.
IDD's sales consist solely of hardgoods products. IDD's same store sales
increased approximately 17% during the quarter ended June 30, 1996 compared to
1995.
Sales for the Company's manufacturing operations increased 10% during the
quarter ended June 30, 1996 primarily as a result of an increase in the demand
for carbon products.
<PAGE> 13
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The increase in Gas Distribution gross profit of $26.8 million over 1995
resulted from acquisitions which contributed $23.7 million and from same-store
gross profit growth of $3.1 million. The same-store gross profit growth is
attributable to increased sales of lower margin hardgoods and refrigerant
gases, increased sales of gases related to the Company's small bulk program,
and growth in rental income as a result of price increases and better
utilization of the Company's cylinder population. Sales of lower margin
hardgoods and refrigerant gases, combined with recent acquisitions which have
a higher mix of lower margin hardgoods, contributed to the decrease in gross
margin from 51% in 1995 to 49% in the current quarter.
Selling, distribution and administrative expenses as a percentage of
gross profit increased to 78.6% compared to 77.4% in 1995. Of such expenses,
distribution expenses and selling, general and administrative expenses
increased as a percent of gross margin over 1995. Offsetting these increases
were decreases in salaries, occupancy costs and depreciation and amortization
as a percent of gross margin.
Operating income increased 24% in 1996 compared to 1995:
<TABLE>
(in thousands)
<CAPTION>
1996 1995 Increase
____ ____ __________
<S> <C> <C> <C>
Gas Distribution $24,944 $20,479 $ 4,465
Industrial Distribution 544 - 544
Manufacturing 1,833 1,558 275
______ ______ ______
$27,321 $22,037 $ 5,284
====== ====== ======
</TABLE>
Gas Distribution operating income as a percentage of Gas Distribution
sales decreased to 10.1% compared to 11% in 1995. The lower operating income
margin is primarily a result of Gas Distribution acquisitions completed in the
last 12 to 24 months which have a greater mix of lower margin hardgoods, with
an overall operating income margin of approximately 7 to 8%. Operating
margins have also been impacted by the loss of certain acquisition sales and
acquisition consolidation costs.
<PAGE> 14
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
IDD operating income as a percent of sales was 3.3% during the quarter
ended June 30, 1996. Operating margins were impacted by certain low margin
sales and an increase in salaries and wages expenses. In connection with the
expansion of IDD, the Company has increased the staffing for certain sales and
management positions.
Manufacturing operating income increased $275 thousand compared to 1995
due to strong demand for carbon products.
Interest expense, net, increased $2.7 million compared to 1995 primarily
as a result of the increase in average outstanding debt associated with the
acquisition of distribution businesses acquired since April 1, 1995, offset by
slightly lower 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.
Income tax expense represented 41.6% of pre-tax earnings in 1996 compared
to 42.6% in 1995. The decrease in the effective income tax rate was primarily
a result of certain tax planning strategies implemented during fiscal 1996.
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 $5.0 million for the three
months ended June 30, 1996. Depreciation and amortization represent $14.2
million of cash flow from operating activities. Deferred income taxes of $2.4
million principally resulted from temporary differences. Working capital
components of cash flow increased $18.3 million as a result of an increase in
accounts receivable associated with higher same store sales, an increase in
inventory levels to meet increased hardgoods and refrigerant gas sales volumes
and an increase in prepaid expenses and other current assets. The increase in
other assets and liabilities, net, primarily relates to amounts paid in
connection with securing a product supply agreement. Days-sales outstanding
and days-supply of inventory levels are comparable to March 31, 1996 levels.
Cash used by investing activities totaled $120.2 million which was
primarily comprised of $14.8 million for capital expenditures, $78.9 million
related to acquisitions and $27.9 million related to the Company's investment
in National Welders Supply (see footnote 5 and Item 6, Exhibits and Reports on
Form 8-K).
The Company's use of cash for capital expenditures was partially
attributable to the continued assimilation of certain acquisitions which has
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.
<PAGE> 15
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
In addition, the Company has recently undertaken initiatives to further
develop its industrial gas customer base to selectively include customers
which require large volume supplies of gases, such as nitrogen. For these
customers, the Company will enter into a long-term supply contract and will
construct an air separation plant near the customer's facility or facilities.
The Company has entered into agreements with two customers and is constructing
two air separation plants which will begin production during fiscal 1998.
Upon completion, as lessee, the Company intends to lease the plants under
long-term operating leases.
Financing activities provided cash of $115.8 million with total debt
outstanding increasing by $141.9 million from March 31, 1996. Debt incurred
in connection with the acquisition of distribution businesses and the
Company's investment in National Welders Supply, including seller notes and
assumed notes, totalled $105 million.
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 June 30, 1996, the Company had approximately $216
million in borrowings under the facility and approximately $78 million
committed under letters of credit, resulting in unused availability under the
facility of approximately $81 million.
On February 5, 1996, the Company entered into a $100 million unsecured
revolving credit facility with a group of commercial banks which matures on
July 1, 1997. The facility has provided additional availability to finance
the Company's ongoing acquisition program. The terms and conditions of this
facility are similar to the Company's existing $375 million facility. At June
30, 1996, the Company had $100 million outstanding under the facility. The
Company intends to terminate its $100 million facility in conjunction with an
anticipated increase in the Company's $375 million revolving credit facility
in September 1996, which will have terms and conditions similar to its
existing $375 million facility.
On June 28, 1996, the Company entered into an additional $100 million
unsecured revolving credit facility with a commercial bank which matures on
July 1, 1997. The terms and conditions of this facility are also similar to
the Company's existing $375 million facility. At June 30, 1996, the Company
had $60 million outstanding under the facility. The Company intends to
terminate its $100 million facility in conjunction with an anticipated
increase in the Company's $375 million revolving credit facility in September
1996, which will have terms and conditions similar to its existing $375
million facility.
On August 8, 1996, the Company commenced a medium term note program
pursuant to a registration statement filed with the Securities and Exchange
Commission on July 15, 1996, which provides for the issuance of its securities
with an aggregate public offering price of up to $450 million. The Company
intends to use the program to refinance bank debt and for general corporate
purposes.
The Company has a CDN $50 million Canadian credit facility ($37 million
U.S.) with various commercial banks which matures on November 14, 1998. At
June 30, 1996, the Company had approximately CDN $38 million ($28 million
U.S.) in borrowings outstanding under the facility, resulting in unused
availability under the facility of approximately CDN $12 million ($9 million
U.S.).
<PAGE> 16
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company also has unsecured line of credit agreements with various
commercial banks. At June 30, 1996, these agreements totaled $60 million,
under which the Company had aggregate outstanding borrowings of $27 million.
At June 30, 1996, the effective interest rate related to outstanding
borrowings under all credit lines was approximately 5.91%. The Company's loan
agreements contain covenants which include the maintenance of a minimum equity
level, maintenance of certain financial ratios, restrictions on additional
borrowings and limitations on dividends.
In managing interest rate exposure, principally under the Company's
floating rate revolving credit facilities, the Company has entered into
18 interest rate swap agreements during the period from June 1992
through June 30, 1996. The swap agreements are with major financial
institutions and aggregate $224 million in notional principal amount at
June 30, 1996. Approximately $205 million of the notional principal
amount of the swap agreements require fixed interest payments based on an
average effective rate of 6.53% for remaining periods ranging between 1 and 8
years. Two swap agreements require floating rates ($19.5 million notional
amount at 5.53% at June 30, 1996). Under the terms of seven of the swap
agreements, the Company has elected to receive the discounted value of the
counterparty's interest payments upfront. At June 30, 1996, approximately $23
million of such payments were included in other liabilities. 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 acquisition candidates
and other available sources. Subsequent to June 30, 1996, the Company has
acquired distribution businesses with annual sales of approximately $9
million. In addition, on August 1, 1996, the Company announced that it signed
a letter of intent to acquire Rutland Tool & Supply Co., Inc. The Company
anticipates issuing $65 million of common stock in connection with this
acquisition.
The Company does not currently pay dividends.
OTHER
_____
New Accounting Pronouncements
In the first quarter of fiscal 1997, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of." The statement requires the recognition of an impairment
loss for an asset held for use when the estimate of undiscounted future cash
flows expected to be generated by the asset is less than its carrying amount.
Measurement of the impairment loss is based on fair value of the asset.
Management believes that the adoption of this statement will not have a
material impact on earnings, financial condition or liquidity of the Company.
The Company accounts for stock options according to the provisions of
Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued
to Employees." In October 1995, the Financial Accounting Standards Board
issued FASB Statement No. 123, "Accounting for Stock-Based Compensation." The
new standard defines a fair value method of accounting for stock options and
<PAGE> 17
AIRGAS, INC.
similar equity instruments. Companies may elect to continue to use existing
accounting rules or adopt the fair value method for expense recognition.
Companies that elect to continue to use existing accounting rules are required
to provide pro-forma disclosures of net income and earnings per share assuming
the fair value method was adopted. The Company has elected to continue to use
existing accounting rules. Accordingly, the Company will present the required
pro-forma disclosure provisions for its fiscal year ending March 31, 1997. As
the Company will continue to account for stock-based compensation using the
intrinsic value method, this statement will not have a material impact on
earnings, financial condition or liquidity of the Company.
Forward-looking Statements
This report contains forward-looking statements. In connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, there are certain important factors that could cause the Company's
actual results to differ materially from those included in such forward-
looking statements. Some of the important factors which could cause actual
results to differ materially from those projected include, but are not limited
to: the Company's ability to continue to identify and complete strategic
acquisitions to enter new markets and expand existing business; continued
availability of financing to provide additional sources of funding for future
acquisitions; capital expenditure requirements and foreign investments; the
effects of competition from independent distributors and vertically integrated
gas producers on products and pricing, growth and acceptance of new product
lines through the Company's sales and marketing programs; changes in product
prices from gas producers and name-brand manufacturers and suppliers of
hardgoods; uncertainties regarding accidents or litigation which may arise in
the ordinary course of business; and the effects of, and changes in the
economy, monetary and fiscal policies, laws and regulations, inflation and
monetary fluctuations and fluctuations in interest rates, both on a national
and international basis.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 26, 1996, Praxair, Inc. ("Praxair") filed suit against the
Company in the Circuit Court of Mobile County, Alabama. The complaint
alleges tortious interference with business or contractual relations with
respect to Praxair's Right of First Refusal contract with the majority
shareholders of National Welders Supply Company, Inc. ("National
Welders") by the Company in connection with the Company's formation of a
joint venture with National Welders. Praxair is seeking compensatory
damages in excess of $100 million and punitive damages. The Company
believes that Praxair's claims are without merit and intends to defend
vigorously against such claims.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
________
11. Calculation of earnings per share.
<PAGE> 18
b. Reports on Form 8-K
___________________
On April 5, 1996, the Company filed a current report on Form 8-K, which
provided under Item 5, audited financial statements and pro forma
information for five individually insignificant businesses acquired
through February 1, 1996, in accordance with Regulation S-X, Rule 3-05
(b)(l)(i).
On May 7, 1996, the Company filed a current report on Form 8-K, which
provided under Item 5, cautionary statements identifying important
factors that could cause the Company's actual results to differ
materially from those projected in forward looking statements made by or
on behalf of the Company. This filing was made in connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995.
On June 28, 1996, the Company filed a current report on Form 8-K,
providing under Item 2, the terms of a joint venture agreement by and
among the Company, National Welders Supply Company, Inc. ("NWS"), J.A.
Turner, Jr., Judith Carpenter, J.A. Turner, III and Linerieux B. Turner
and certain other parties. The Company acquired approximately 45% of the
voting capital stock of NWS for a payment in cash and notes totalling
approximately $47.6 million.
<PAGE>
<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.
August 12, 1996 /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
June 30,
1996 1995
____ ____
<S> <C> <C>
Adjustment of Weighted Average
Shares Outstanding:
Shares of common stock
outstanding
- - weighted 64,239,000 61,890,000
Net common stock equivalents 2,856,000 3,262,000
__________ __________
Adjusted shares outstanding 67,095,000 65,152,000
========== ==========
Net earnings $11,150,000 $ 9,454,000
========== ==========
Primary and fully diluted
Earnings Per Share $ .17 $ .15
========== ==========
</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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 139,228
<ALLOWANCES> 3,819
<INVENTORY> 106,113
<CURRENT-ASSETS> 261,849
<PP&E> 617,211
<DEPRECIATION> 156,592
<TOTAL-ASSETS> 1,052,179
<CURRENT-LIABILITIES> 151,496
<BONDS> 0
<COMMON> 669
0
0
<OTHER-SE> 249,495
<TOTAL-LIABILITY-AND-EQUITY> 1,052,179
<SALES> 274,098
<TOTAL-REVENUES> 274,098
<CGS> 146,352
<TOTAL-COSTS> 146,352
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,281
<INCOME-PRETAX> 19,092
<INCOME-TAX> 7,942
<INCOME-CONTINUING> 11,150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,150
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
