<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
April 5, 1996
AIRGAS, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 1-9344 56-0732648
_______________ _______________________ _____________
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) No.)
100 Matsonford Road, Suite 550
Radnor, PA 19087
_______________________________________
(Address of principal executive offices)
Registrant's telephone number, including area code: (610) 687-5253
_______________
<PAGE> 2
Item 5. Other Events.
____________
From April 1, 1995 through February 1, 1996, the Registrant has acquired
thirty-eight individually insignificant businesses. The Registrant is filing
this current report on Form 8-K in order to provide audited financial
statements and pro forma information for five individually insignificant
business acquisitions in accordance with the requirements set forth in
Regulation S-X, Rule 3-05(b)(1)(i). The Registrant applied the conditions set
forth in Rule 1-02(w) to determine if the aggregate impact of the acquisitions
exceeds 20% of one of the conditions set forth in the rule.
The aggregate purchase price for the individually insignificant businesses,
including amounts related to non-competition and confidentiality agreements,
amounted to $212.8 million plus the assumption of certain liabilities. The
purchase prices for the businesses were determined by arms-length
negotiations. The Registrant is providing audited financial statements for
five of the individually insignificant businesses described below.
Effective October 5, 1995, Delta Airgas, Inc. ("Delta"), a 98% owned
subsidiary of U.S. Airgas, Inc., a wholly-owned subsidiary of the Registrant,
purchased all of the issued and outstanding stock of Langdon Oxygen Company
("Langdon"). Langdon was acquired with the issuance of 210 thousand shares of
the Registrant's common stock.
Effective November 1, 1995, Trinity Airgas, Inc. ("Trinity"), a 95% owned
subsidiary of U.S. Airgas, Inc., purchased all of the issued and outstanding
stock of Kennedy Welding Supply Corporation ("Kennedy").
Effective January 1, 1996, Midwest Airgas, Inc. ("Midwest"), a wholly-owned
subsidiary of U.S. Airgas, Inc., purchased all of the issued and outstanding
stock of Iatech Sales Company ("Iatech").
Effective January 1, 1996, Gateway Airgas, Inc. ("Gateway"), a wholly-owned
subsidiary of U.S. Airgas, Inc., purchased all of the issued and outstanding
stock of Acetylene Gas Company ("Acetylene").
Effective February 1, 1996, Airgas Texas, Inc. ("Airgas Texas"), a
wholly-owned subsidiary of U.S. Airgas, Inc., purchased substantially all of
the assets of Welders Equipment Company, Inc. ("Welders Equipment").
The aggregate cash paid for these five acquisitions was approximately $66.6
million plus the assumption of certain liabilities. In addition, non-
competition and confidentiality agreements were entered into with the
shareholders of these businesses totaling $9.3 million, of which $2.5 million
was paid at closing and $6.8 million will be paid over the terms of the
individual agreements. Consulting agreements totaling $3.3 million were also
entered into, of which $400 was paid at closing and $2.9 million is payable
over the terms of the individual agreements.
The acquisitions were financed using the Registrant's revolving credit
facilities with NationsBank of North Carolina, N.A., the issuance of
promissory notes to the sellers, the issuance of the Registrant's common stock
and the assumption of certain liabilities.
<PAGE> 3
At the time of the acquisitions described above, all of the aforementioned
businesses were engaged in the distribution and marketing of industrial gases
and related welding equipment and supplies. The Registrant intends to continue
to use the acquired assets to operate industrial gas and welding supply
businesses.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
__________________________________________________________________
(a) Financial Statements
1. Audited balance sheet of Langdon Oxygen Company as of September 30,
1995 and the related statements of income, retained earnings and cash
flows for the nine months then ended.
2. Audited balance sheet of Kennedy Welding Supply Corporation as of
October 31, 1995 and the related statements of operations,
stockholders' equity and cash flows for the ten months then ended.
3. Audited consolidated balance sheet of IaTech Sales Co. and subsidiary
as of December 31, 1995 and the related consolidated statements of
earnings, stockholders' equity and cash flows for the year then
ended.
4. Audited consolidated balance sheet of Acetylene Gas Company and
subsidiary as of December 31, 1995 and the related consolidated
statements of earnings, stockholders' equity and cash flows for the
year then ended.
5. Audited consolidated balance sheet of Welders Equipment Company and
subsidiary as of September 30, 1995 and the related consolidated
statements of earnings, stockholders' equity and cash flows for the
year then ended.
(b) Pro Forma Financial Information
The tables on pages five through eleven set forth selected pro forma
balance sheet and operating data of the Registrant for the year ended
March 31, 1995 and the nine months ended December 31, 1995 as if the
acquisitions had been consummated on April 1, 1994 and April 1, 1995,
respectively.
(c) Exhibits.
23.1 Consent of Bell & Company
23.2 Consent of Cawthron, Wommack & Coker, P.C.
23.3 Consent of Cornwell & Co., P.C.
23.4 Consent of Curry, Lenhardt & Company, LLP
23.5 Consent of KPMG Peat Marwick LLP
<PAGE> 4
Signatures
__________
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AIRGAS, INC.
BY: /s/Britton H. Murdoch
_____________________
(Britton H. Murdoch)
Vice President-Finance
Chief Financial Officer
DATED: April 5, 1996
<PAGE>
<PAGE> 5
<TABLE>
AIRGAS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<CAPTION>
December 31, 1995
________________________________________________________
Acetylene Welders
Airgas, Inc. IaTech Gas Equipment Notes Pro
Balance Sheet Data (Historical) Sales Co. Company Company Ref. Forma
__________________ ____________ _________ _________ ________ ___ _____
<S> <C> <C> <C> <C> <C> <C>
Accounts Receivable,
Net $105,737 $ 758 $2,773 $3,190 (1) $112,458
Inventories 79,796 1,248 1,310 1,780 (1) 84,134
Other Current Assets 15,094 9 3 1,332 (1) 16,438
_______ _____ _____ _____ _______
200,627 2,015 4,086 6,302 213,030
Property, Plant &
Equipment, Net 395,999 4,184 13,336 12,269 (2) 425,788
Goodwill, Net 116,137 1,255 12,248 19,877 (3) 149,517
Investments and Other
Noncurrent Assets 52,068 1,380 6,023 978 (4) 60,448
_______ ______ ______ ______ _______
764,831 8,834 35,693 39,426 848,783
======= ===== ====== ====== =======
Current Portion of
Long-Term Debt 11,715 40 127 205 (1) 12,087
Accounts Payable,Trade 40,737 536 1,455 642 43,370
Accrued Expenses and
Other Current
Liabilities 62,736 883 1,876 1,478 (1) 66,972
_______ ______ ______ ______ _______
Current Liabilities 115,188 1,459 3,458 2,325 122,429
Long Term Debt 334,176 6,749 25,523 36,941 (5) 403,388
Other Liabilities 17,065 520 3,884 160 21,628
Deferred Income Taxes 76,766 107 2,829 - 79,702
Stockholders' Equity 221,636 - - - 221,636
_______ ______ ______ ______ _______
$764,831 $ 8,835 $35,694 $39,426 $848,783
======= ====== ====== ====== =======
<FN>
(1) Represents the fair value of current assets acquired and current
liabilities assumed at the acquisition date.
(2) The carrying amount reflects fair market value at the date of
acquisition.
(3) Represents cost in excess of net assets acquired.
(4) Represents the fair market value of a non-competition agreement and other
noncurrent assets of the acquired business.
(5) Represents debt incurred to finance the business acquisition plus
assumption of certain noncurrent liabilities.
</TABLE>
<PAGE> 6
<TABLE>
AIRGAS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
<CAPTION>
Year Ended March 31, 1995
____________________________________________
Kennedy
Langdon Welding
Oxygen Supply IaTech
Company Corporation Sales Co.
Airgas, Inc. (Historical) (Historical) (Historical)
Operating Data (Historical) (Note 1) (Note 1) (Note 1)
________________ ____________ ____________ ___________ ____________
<S> <C> <C> <C> <C>
Net Sales $687,983 $ 9,109 $ 4,489 $ 8,516
Cost of Products Sold
(Excluding Depreciation
and Amortization) 342,876 5,382 2,354 5,671
Selling, Distribution
& Administrative Expenses 235,639 3,141 1,735 2,265
Depreciation & Amortization 36,868 282 125 159
_______ ______ ______ ______
Total Costs & Expenses 615,383 8,805 4,214 8,095
_______ ______ ______ ______
Operating Income 72,600 304 275 421
Interest Expense, Net (17,625) (66) (19) (57)
Other Income, Net 1,067 46 15 -
Minority Interest (669) - - -
_______ ______ ______ ______
Earnings Before Income Taxes 55,373 284 271 364
Income Taxes 23,894 94 45 90
_______ ______ ______ ______
Net Earnings $ 31,479 $ 190 $ 226 $ 274
======= ====== ====== ======
Earnings Per Share (3) $ .96
=======
Weighted Average Shares 32,762
=======
</TABLE>
(Columns Continued On Next Page)
<PAGE> 7
<TABLE>
AIRGAS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
<CAPTION>
Year Ended March 31, 1995
_______________________________________________
Welders
Acetylene Equipment
Gas Company Company Pro Forma
(Historical) (Historical) Adjustments Note Pro
Operating Data (Note 1) (Note 1) (Note 2) Ref. Forma
________________ ___________ __________ __________ ____ ______
<S> <C> <C> <C> <C> <C>
Net Sales $ 18,667 $22,778 $ - $751,542
Cost of Products Sold
(Excluding Depreciation
and Amortization) 12,501 12,866 - 381,650
Selling, Distribution
& Administrative Expenses 4,321 7,352 - 254,453
Depreciation & Amortization 761 567 2,971 a 41,733
______ _____ ______ _______
Total Costs & Expenses 17,583 20,785 2,971 677,836
______ ______ ______ _______
Operating Income 1,084 1,993 (2,971) 73,706
Interest Expense, Net (394) (32) (4,782) b (22,975)
Other Income, Net 41 (335) 400 c 1,234
Minority Interest - - - (669)
______ _____ ______ _______
Earnings Before Income Taxes 731 1,626 (7,353) 51,296
Income Taxes 278 48 (1,998) d 22,451
______ _____ ______ _______
Net Earnings $ 453 $1,578 $(5,355) $ 28,845
====== ===== ===== =======
Earnings Per Share (3) $ .88
=======
Weighted Average Shares 32,972
=======
<FN>
Notes:
(1) Includes unaudited compiled financial data for the twelve months ended
March 31, 1995.
(2) See page 10 for explanation of pro forma adjustments.
(3) See earnings per share calculations on page 11.
</TABLE>
<PAGE> 8
<TABLE>
AIRGAS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
<CAPTION>
Nine Months Ended December 31, 1995
_________________________________________________
Kennedy
Langdon Welding
Oxygen Supply
Company Corporation IaTech
(Historical) (Historical) Sales Co.
Airgas, Inc. (6 Months) (7 Months) (Historical)
Operating Data (Historical) (Note 1) (Note 2) (Note 3)
________________ ____________ ____________ ___________ ____________
<S> <C> <C> <C> <C>
Net Sales $601,851 $ 5,368 $ 3,048 $ 6,742
Cost of Products Sold
(Excluding Depreciation
& Amortization) 299,221 3,259 1,603 4,416
Selling, Distribution &
Administrative Expenses 201,946 1,805 1,203 1,915
Depreciation & Amortization 33,519 155 74 122
_______ ______ ______ _____
Total Costs & Expenses 534,686 5,219 2,880 6,453
_______ ______ ______ _____
Operating Income 67,165 149 168 289
Interest Expense, Net (17,760) (91) (9) (36)
Other Income, Net 656 (28) 9 36
Minority Interest (492) - - -
_______ ______ ______ _____
Earnings Before Income Taxes 49,569 30 168 289
Income Taxes 20,963 43 59 181
_______ ______ ______ ______
Net Earnings $ 28,606 $ (13) $ 109 $ 108
======= ====== ====== ======
Earnings Per Share (6) $ .87
=======
Weighted Average Shares 32,900
=======
<FN>
(Columns Continued On Next Page)
</TABLE>
<PAGE> 9
<TABLE>
AIRGAS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
<CAPTION> Nine Months Ended December 31, 1995
_______________________________________________
Welders
Acetylene Equipment
Gas Company Company Pro Forma
(Historical) (Historical) Adjustments Note Pro
Operating Data (Note 3) (Note 3) (Note 4) Ref. Forma
________________ ___________ __________ __________ ____ ______
<S> <C> <C> <C> <C> <C>
Net Sales $15,691 $17,140 $ - $649,840
Cost of Products Sold
(Excluding Depreciation
& Amortization) 10,683 9,848 - 329,030
Selling, Distribution &
Administrative Expenses 3,973 5,656 - 216,498
Depreciation & Amortization 654 492 1,929 a 36,945
______ ______ _____ _______
Total Costs & Expenses 15,310 15,996 1,929 582,473
______ ______ _____ _______
Operating Income 381 1,144 (1,929) 67,367
Interest Expense, Net (342) 20 (3,798) b (22,016)
Other Income, Net (3) (23) - c 647
Minority Interest - - - (492)
______ ______ _____ _______
Earnings Before Income Taxes 36 1,141 (5,727) 45,506
Income Taxes -0- 52 (1,824) d 19,474
______ ______ ______ _______
Net Earnings $ 36 $ 1,089 $ (3,903) $ 26,032
====== ====== ====== =======
Earnings Per Share (5) $.79
=======
Weighted Average Shares 33,040
=======
<FN>
Notes:
(1) Includes the unaudited compiled financial data for the six months ended
September 30, 1995.
(2) Includes the unaudited compiled financial data for the seven months ended
October 31, 1995.
(3) Includes the unaudited compiled financial data for the nine months ended
December 31, 1995.
(4) See page 10 for explanations of pro forma adjustments.
(5) See earnings per share calculations on page 11.
</TABLE>
<PAGE> 10
(a) Depreciation and amortization expense, has been increased by $2,971 for
the year ended March 31, 1995 and by $1,929 for the nine months ended
December 31, 1995. The adjustments were made to reflect the purchase
accounting adjustments related to the acquired fixed assets, goodwill,
non-competition agreements and the estimated capital improvements
necessary to operate the acquired businesses, net of a decrease in
depreciation expense related to a prior period adjustment.
(b) The pro forma interest expense adjustments of $4,782 and $3,798 for the
year ended March 31, 1995 and the nine months ended December 31, 1995,
respectively, reflect the debt incurred in financing the business
acquisitions at the Registrant's effective interest rates.
(c) Other expenses were reduced by $400 for the year ended March 31, 1995
related to the expense incurred from a lawsuit settlement because the
Registrant acquired the assets of the business and did not assume any
liabilities in the transaction.
(d) Income taxes adjustments have been made to reflect the Registrant's
effective tax rate and include a provision for income taxes for the
businesses which were previously taxed under Subchapter S of the Internal
Revenue Code.
<PAGE>
<PAGE> 11
<TABLE>
AIRGAS, INC.
EARNINGS PER SHARE CALCULATIONS
(DOLLARS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
<CAPTION>
Year Ended Nine Months Ended
March 31, 1995 December 31, 1995
Adjustment of Weighted Average
Shares Outstanding Historical Pro Forma Historical Pro Forma
______________________________ ___________ _________ __________ _________
<S> <C> <C> <C> <C>
Shares of Common Stock
Outstanding - Weighted 31,074 31,284 31,272 31,412
Net Common Stock Equivalents 1,688 1,688 1,628 1,628
______ ______ ______ ______
Adjusted Shares Outstanding 32,762 32,972 32,900 33,040
====== ====== ====== ======
Net Earnings $31,479 $28,845 $28,606 $26,032
====== ====== ====== ======
Earnings Per Share $ .96 $ .88 $ .87 $ .79
====== ====== ====== ======
<FN>
Earnings per share amounts were determined using the treasury stock method.
This method assumes the exercise of all outstanding options and warrants and
the use of the aggregate proceeds therefrom to acquire the Registrant's
outstanding common stock. Net earnings were divided by the 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>
<PAGE>
<PAGE> 12
LANGDON OXYGEN COMPANY
FINANCIAL STATEMENTS
with Independent Auditors' Report
SEPTEMBER 30, 1995
TEXARKANA, TEXAS
<PAGE>
<PAGE> 13
TABLE OF CONTENTS
Independent Auditors' Report 1
Balance Sheet 2
Statement of Income 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to the Financial Statements 6-11
<PAGE> 14
Independent Auditors' Report
To the Board of Directors
of Langdon Oxygen Company
We have audited the accompanying balance sheet of Langdon Oxygen Company as of
September 30, 1995, and the related statements of income, retained earnings,
and cash flows for the nine months then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Langdon Oxygen Company as of
September 30, 1995, and the results of its operations and its cash flows for
the nine months then ended in conformity with generally accepted accounting
principles.
BELL & COMPANY
TEXARKANA, TEXAS
January 10, 1996
<PAGE> 15
Langdon Oxygen Company
Balance Sheet
September 30, 1995
Assets
Current assets
Cash $ 188,874
Trade receivables, less allowance
for doubtful accounts of $288,816 1,209,402
Inventories 1,262,727
Deferred tax asset 115,197
_________
Total current assets 2,776,200
_________
Plant and equipment
Plant and equipment, at cost 5,819,828
Less accumulated depreciation (3,364,321)
_________
Plant and equipment, net 2,455,507
_________
Other non-current assets
Investment in unconsolidated
subsidiary 329,442
Other 73,456
_______
Total other non-current assets 402,898
_______
Total Assets $5,634,605
=========
<PAGE> 16
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $311,000
Current portion of long-term debt 127,438
Accounts payable, trade 983,160
Income taxes payable 64,203
Accrued expenses and other
current liabilities 205,699
_________
Total current liabilities 1,691,500
_________
Long-term debt 1,242,310
_________
Deferred income taxes 51,507
_________
Stockholders' equity
Common stock, par value, $1;
10,000 shares authorized
and issued 10,000
_________
Retained earnings 3,378,539
_________
3,388,539
Less treasury stock, 3,484 shares,
at cost (739,251)
_________
Total stockholders' equity 2,649,288
_________
Total Liabilities and Stockholders' Equity $5,634,605
=========
<PAGE> 17
Langdon Oxygen Company
Statement of Income
For the Nine Months Ended September 30, 1995
Sales $7,852,935
Costs and expenses
Cost of products sold 4,759,826
Selling, distribution and administrative
expenses 2,556,234
Depreciation expense 209,127
_________
Total costs and expenses 7,525,187
Operating income 327,748
Other income and expenses
Interest expense (118,052)
Other expenses, net (21,194)
_______
Total other income and expenses (139,246)
_______
Income before income taxes 188,502
Income taxes 68,131
_______
Net income $120,371
=======
<PAGE> 18
Langdon Oxygen Company
Statement of Stockholders' Equity
For the Nine Months Ended September 30, 1995
Common Retained Treasury
Stock Earnings Stock Total
Balance-January 1, 1995 $ 10,000 $3,258,168 $(739,251) $2,528,917
Net income - 120,371 - 120,371
_______ _________ _______ ________
Balance-December 31, 1995 $ 10,000 $3,378,539 $(739,251) $2,649,288
======= ========= ======= =========
See accompanying notes.
<PAGE> 19
Langdon Oxygen Company
Statement of Cash Flows
For the Nine Months Ended September 30, 1995
Cash flows from operating activities
Net income $120,371
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 209,127
Deferred income taxes (benefit) (49,083)
Provision for bad debts 112,760
Gain on sale of equipment (3,734)
(Increase) in accounts receivable (306,174)
(Increase) in inventories (172,907)
Decrease in prepaid expenses & other assets 8,011
(Increase) in other noncurrent assets (14,958)
Increase in accounts payable 58,871
Increase in accrued expenses and other
current liabilities 150,489
Increase in income tax payable 64,203
_______
Net cash provided by operating activities 176,976
_______
Cash flows from investing activities
Proceeds from sale of equipment 18,000
Purchases of plant and equipment (357,202)
_______
Net cash used by investing activities (339,202)
_______
Cash flows from financing activities
Increase in short-term debt 216,000
Proceeds from long-term borrowings 132,464
_______
Net cash used by financing activities 348,464
_______
Net increase in cash 186,238
Cash - beginning of period 2,636
______
Cash - end of period $ 188,874
=======
Supplementary Disclosures of Cash Flows Information
___________________________________________________
Cash paid during the period for interest $109,720
=======
Cash paid during the period for income taxes $ 45,000
=======
<PAGE> 20
Langdon Oxygen Company
Notes to Financial Statements
September 30, 1995
1. Summary of Significant Accounting Policies
a. Description of Operations - Langdon Oxygen Company (the "Company") is a
multi-state distribution company that markets welding equipment, medical
supplies and industrial gases. The Company has five locations:
Texarkana and Mt. Pleasant, Texas; Texarkana and Hope, Arkansas; and
Idabel, Oklahoma.
b. Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid cash investments with original
maturities of 3 months or less to be cash equivalents.
c. Inventories - Inventories are stated at the lower of cost or market
value by the first-in, first-out (FIFO) method. Inventories consist
primarily of industrial gases, welding supplies and equipment.
d. Plant and Equipment - Plant and equipment are stated at cost.
Depreciation is provided using the straight-line method for financial
statement purposes over the useful lives of the related assets.
e. Income Taxes - Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
f. Financial Instruments - The carrying amounts for accounts receivable,
accounts payable and long-term debt approximate fair value because of
the short maturity of these financial instruments. Long-term debt is
stated at fair value as these amounts were paid off in connection with
the reorganization of the Company as described in Note 10.
g. Use of Estimates - Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
<PAGE> 21
Langdon Oxygen Company
Notes to Financial Statements
September 30, 1995
2. Plant and Equipment
Plant and equipment by major categories are as follows:
Category Useful Lives Amount
________ _____________ ______
Land $425,258
Buildings 25 yrs. 1,288,669
Leasehold improvements 15 yrs. 199,721
Oxygen cylinders 7 yrs. 1,604,864
Acetylene cylinders 7 yrs. 500,521
Furniture & fixtures 7 yrs. 998,806
Vehicles 5 yrs. 801,989
_________
$5,819,828
=========
Depreciation and amortization of plant and equipment charged to operations
during the nine months ended September 30, 1995 amounted to $209,127.
3. Investment in Unconsolidated Subsidiary
The Company holds a 39% interest in American Oxygen Company, Inc., a Texas
Corporation. The investment is accounted for using the equity method.
Market values are not available for the privately held company and the
carrying value of the investment on the accompanying balance sheet is based
on the financial statements of American Oxygen Company, Inc., as of
December 31, 1994. No interim earnings information for 1995 was available
at September 30, 1995.
4. Notes Payable
Notes payable consist of the following:
Non-interest bearing advance from a share-
holder, no stated repayment terms,unsecured $ 30,000
9.75% line of credit from a bank, interest
due monthly, principle due August, 1996,
secured by accounts receivable and inventories 281,000
_______
$311,000
=======
<PAGE> 22
Langdon Oxygen Company
Notes to Financial Statements
September 30, 1995
5. Long-term Debt
Long-term debt consists of the following:
8% note payable to a former shareholder
in monthly installments of $7,774, including
interest, secured by shares of Langdon
Oxygen Company common stock held in treasury $ 684,252
8% note payable to an individual in monthly
installments of $386, including interest,
secured by land 8,482
8.5% note payable to a bank in monthly
installments of $395, including interest,
secured by a vehicle 2,378
8.5% note payable to Coyne Cylinder in
monthly installments of $497, including
interest, secured by cylinders 3,032
8% note payable to a bank in monthly
installments of $467, including interest,
secured by a vehicle 2,725
5.5% note payable to a bank in monthly
installments of $343, including interest,
secured by land 2,935
2.9% note payable to a credit corporation in
monthly installments of $394, including interest,
secured by a vehicle 9,364
6.65% note payable to a credit corporation in
monthly installments of $614, including interest,
secured by a vehicle 11,717
<PAGE> 23
Langdon Oxygen Company
Notes to Financial Statements
September 30, 1995
5. Long-term Debt (continued)
8.75% note payable to a bank in monthly
installments of $9,500, including interest,
secured by inventories, cylinders, and certain
real estate $644,863
_________
Total long-term debt 1,369,748
Less current maturities (127,438)
_________
Long-term debt, less current maturities $1,242,310
=========
Annual aggregate maturities of long-term debt are as follows:
Year Ending
September 30: Amount
____________ ______
1996 $127,438
1997 119,834
1998 119,799
1999 128,621
2000 425,861
Thereafter 448,195
_______
$1,369,748
6. Income Taxes
The provision for income taxes is composed of the following:
Current provision $117,214
Deferred benefit (49,083)
______
$ 68,131
======
<PAGE> 24
Langdon Oxygen Company
Notes to Financial Statements
September 30, 1995
6. Income Taxes (continued)
A reconciliation of income taxes at statutory rates and the actual income
tax provision is as follows:
Tax at statutory rates $ 64,091
Effect of non-deductible expenses 4,040
______
$ 68,131
======
Components of deferred tax balances as of September 30, 1995 are as
follows:
Deferred tax liabilities:
Property plant and equipment $ 35,700
Unconsolidated subsidiary 15,807
______
Total deferred tax liabilities 51,507
______
Deferred tax assets
Allowance for doubtful accounts 98,197
Accrued liabilities (including
amounts subject to compromise) 17,000
______
Total deferred tax assets 115,197
_______
Net deferred tax assets $ 63,690
======
The Company is not required to record valuation allowances for deferred tax
assets where management believes it is more likely than not that the
benefit will be realized. Management has assessed the need for a valuation
allowance and believes the asset is recoverable more likely than not.
7. Lease Commitments
The Company leases two of its operating facilities under non-cancelable
lease agreements from a former stockholder.
At September 30, 1995, future minimum rental commitments under these
non-cancelable operating leases were as follows:
<PAGE> 25
Langdon Oxygen Company
Notes to Financial Statements
September 30, 1995
9. Lease Commitments (continued)
Year Ending
September 30: Amount
____________ ______
1996 $ 27,600
1997 27,600
1998 27,600
1999 27,600
Thereafter 160,500
_______
$270,900
=======
8. Related Party Transactions
During 1995 the Company rented certain cylinders under a cancelable rental
agreement with G.P. Leasing, a company having substantial common ownership
with Langdon Oxygen Company. The amount paid to G. P. Leasing pursuant to
this operating rental agreement for the nine months ended September 30,
1995 was $116,136.
9. Contingencies
The Company is involved in various legal and regulatory proceedings which
have arisen in the ordinary course of its business and have not been
finally adjudicated. These actions, when ultimately concluded or
determined, will not, in the opinion of management, have a material adverse
impact upon the Company's consolidated financial position, results of
operations or liquidity.
10.Subsequent Events and Commitments
On October 5, 1995 shareholders of the Company unanimously approved an
agreement and plan of reorganization calling for the merger of the Company
with U.S. Airgas, Inc. (a Delaware corporation), a wholly-owned subsidiary
of Airgas, Inc. ("Airgas"). Each issued and outstanding share of common
stock of the Company was converted into shares of Airgas common stock.
<PAGE>
<PAGE> 26
KENNEDY WELDING SUPPLY CORPORATION
Financial Statements
October 31, 1995
Together With Independent Auditors' Report Thereon
<PAGE>
<PAGE> 27
C O N T E N T S
Page
Independent Auditors' Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-9
<PAGE>
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Kennedy Welding Supply Corporation
We have audited the accompanying balance sheet of Kennedy Welding Supply
Corporation as of October 31, 1995, and the related statements of operations,
stockholders' equity and cash flows for the ten months then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kennedy Welding Supply
Corporation as of October 31, 1995, and the results of its operations and its
cash flows for the ten months then ended in conformity with generally accepted
accounting principles.
CAWTHORN, WOMMACK & COKER, P.C.
Waco, Texas
December 7, 1995
<PAGE>
<PAGE> 29
KENNEDY WELDING SUPPLY CORPORATION
Balance Sheet
October 31, 1995
ASSETS
Current Assets
Cash $ 240,929
Trade accounts receivable - less
allowance for doubtful accounts of $ 37,699 566,844
Inventories 457,388
Federal income tax receivable 2,752
Deferred tax asset 12,818
Prepaid expenses 33,150
_________
Total Current Assets 1,313,881
Property and Equipment, net 393,843
Other Assets 6,000
_________
Total Assets $ 1,713,724
=========
LIABILITIES
Current Liabilities
Current portion of long-term debt $ 73,451
Trade accounts payable 138,824
Other accrued liabilities 94,287
________
Total Current Liabilities 306,562
Long-Term Debt, net of current portion 45,912
Customer Deposits 23,727
Deferred Tax Liability 2,129
________
Total Liabilities 378,330
STOCKHOLDERS' EQUITY
Common stock - $ 1 par, 100,000 shares authorized,
38,638.5 shares issued and outstanding 38,639
Retained earnings 1,296,755
_________
Total Stockholders' Equity 1,335,394
_________
Total Liabilities and Stockholders' Equity $ 1,713,724
=========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 30
KENNEDY WELDING SUPPLY CORPORATION
Statement of Operations
For the Ten Months Ended October 31, 1995
Sales $ 4,338,593
Cost of Goods Sold 2,292,473
_________
Gross Profit 2,046,120
Operating Expenses 1,781,528
_________
Operating Income 264,592
Other Income 13,094
________
Income Before Income Taxes 277,686
Income Taxes
Current 94,591
Deferred (benefit) (2,467)
_______
Total Income Taxes 92,124
_______
Net Income $ 185,562
=========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 31
KENNEDY WELDING SUPPLY CORPORATION
Statement of Stockholders' Equity
For the Ten Months Ended October 31, 1995
Total
Common Retained Stockholders'
Stock Earnings Equity
Balance - December 31, 1994 $ 38,639 $ 1,111,193 $ 1,149,832
Net income 185,562 185,562
__________ __________ __________
Balance - October 31, 1995 $ 38,639 $ 1,296,755 $ 1,335,394
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 32
KENNEDY WELDING SUPPLY CORPORATION
Statement of Cash Flows
For the Ten Months Ended October 31, 1995
Cash flows provided by operating activities:
Net income $ 185,562
Adjustments to reconcile net income to net cash
provided by operating activities
Bad debt provision 64,797
Depreciation expense 103,753
Gain on sale of property and equipment (5,564)
Deferred tax benefit (2,467)
(Increase) decrease in:
Trade accounts receivable (140,597)
Inventories (8,114)
Federal income tax receivable (2,752)
Prepaid expenses 11,714
Increase (decrease) in:
Trade accounts payable 16,586
Federal income tax payable (2,079)
Other accrued liabilities 42,612
Customer deposits (8,268)
________
Net cash provided by operating activities 255,183
________
Cash flows provided by investing activities:
Purchase of property and equipment (23,302)
Proceeds from sale of property and equipment 5,750
Proceeds from collection of notes receivable 32,544
_______
Net cash provided by investing activities 14,992
_______
Cash flows used for financing activities:
Repayment of long-term debt (96,979)
_______
Net cash used for financing activities (96,979)
_______
Net increase in cash 173,196
Cash at beginning of period 67,733
_______
Cash at end of period $ 240,929
=======
Supplemental disclosures:
Interest paid during the period $ 14,117
Federal income taxes paid during the period 99,422
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 33
KENNEDY WELDING SUPPLY CORPORATION
Notes to Financial Statements
1. Nature of the Company and Significant Accounting Policies
Financial Statement Presentation
Kennedy Welding Supply Corporation (the Company) distributes and markets
welding equipment and supplies and industrial gases in the north-central Texas
area.
The following is a summary of certain significant accounting policies
followed in the preparation of these financial statements.
Inventories
Inventories are stated at the lower of cost, determined by the first-in,
first-out (FIFO) method, or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts, and
any resulting gain or loss is recognized in income for the period. The cost
of maintenance and repairs is charged to expense as incurred; significant
renewals and betterments are capitalized.
Income Taxes
Income taxes are provided for the tax effects of the transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of allowance
for doubtful accounts and accumulated depreciation for financial and income
tax reporting. The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled. Deferred
tax assets and liabilities are reflected at currently enacted income tax rates
applicable to the period in which the deferred tax assets or liabilities are
expected to be realized or settled. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes. There is no income tax in the State of Texas.
Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and
cash equivalents are defined as those amounts in the balance sheet caption
"cash" which includes petty cash on hand and demand deposit checking accounts
held at banks.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
-6-
<PAGE> 34 KENNEDY WELDING SUPPLY CORPORATION
Notes to Financial Statements (Continued)
1. Nature of the Company and Significant Accounting Policies (Continued)
Use of Estimate (Continued)
The material estimate that is particularly susceptible to significant
change relates to the determination of the allowance for doubtful accounts.
A majority of the company's accounts receivable are from entities in the
Dallas - Fort Worth Metroplex area. Accordingly, the ultimate collectibility
of the Company's account receivable is susceptible to changes in local market
conditions.
While management uses available information to recognize losses on
accounts receivable, future additions to the allowance may be necessary based
on changes in local economic conditions. Therefore, it is reasonably possible
that the allowance for doubtful accounts may change materially in the near
term.
Fair Value of Financial Instruments
The carrying amounts for accounts receivable, accounts payable, and
long-term debt approximate fair value because of the short maturity of these
financial instruments.
Long-term debt is stated at fair value as these amounts were paid in
full in connection with the sale of the Company's stock as discussed at
footnote ten.
2. Inventories
At October 31, 1995, inventories consisted of:
Welding products $ 371,974
Gases 18,853
Cylinders 66,561
_________
Total Inventories $ 457,388
=========
3. Property and Equipment
At October 31, 1995, property and equipment consisted of the following:
Estimated Useful Life
Land - $ 51,161
Building and leasehold improvements 6 - 35 years 181,280
Vehicles 6 years 321,128
Cylinders 6 years 462,876
Furniture and fixtures 6 years 389,089
Rental equipment 2 - 4 years 29,098
__________
1,434,632
Accumulated depreciation (1,040,789)
__________
Total Property and Equipment, net $ 393,843
==========
Depreciation charged to expense was $ 103,753 for the ten months ended
October 31, 1995.
-7-
<PAGE> 35
KENNEDY WELDING SUPPLY CORPORATION
Notes to Financial Statements (Continued)
4. Long-Term Debt
The Company's long-term debt at October 31, 1995, was comprised of the
following:
Note to a company bearing interest at 9.75%, due in
monthly installments of $ 590 through August 20,
1996, secured by 225 cylinders $ 5,082
Notes to a financial institution, bearing interest
from base rate plus .50% (9.25% at October 31,
1995) to 9.75% due in monthly installments through
October 30, 1997, secured by certain real estate,
equipment, cylinders and vehicles 98,281
$ 200,000 line of credit with a financial institution,
bearing interest at base rate plus .50% (9.25% at
October 31, 1995), maturing April 30, 1996, secured
by accounts receivable and inventory 16,000
119,363
_______
Less: current portion (73,451)
Long-Term Debt, net $ 45,912
============
5. Federal Income Tax
The effective income tax rate is different than would be expected if the
statutory rate were applied to income from continuing operations primarily
because of nondeductible expenses.
At October 31, 1995, the Company's deferred tax asset and liability are
composed of the following:
Current Noncurrent
Gross deferred tax assets $ 12,818 $ -
Gross deferred tax liabilities - (2,129)
Valuation allowance - -
_________ _________
Deferred Tax Asset (Liability) $ 12,818 $ (2,129)
========= =========
Management has assessed the need for a valuation allowance and believes
the deferred tax asset is recoverable more likely than not.
The tax effect of each type of significant item that gave rise to
deferred taxes are:
Current Noncurrent
Allowance for doubtful accounts $ 12,818 $ -
Accumulated depreciation - (2,129)
_________ _________
Deferred Tax Asset (Liability) $ 12,818 $ (2,129)
========= =========
-8-
<PAGE> 36
KENNEDY WELDING SUPPLY CORPORATION
Notes to Financial Statements (Continued)
6. Related Party Transactions
During the ten months ended October 31, 1995, the Company leased
cylinders and a building from entities owned by stockholders of the Company.
The Company made lease payments of approximately $ 229,500 to these entities
during the period.
7. Leases
The Company is leasing buildings and cylinders under month-to-month
operating lease agreements. Rental payments for the ten months ended October
31, 1995, totaled approximately $ 303,300.
8. Concentrations of Credit Risk
The Company distributes and markets welding equipment and supplies and
industrial gases to customers primarily in north-central Texas. The
customers' ability to repay is dependent upon the area's economy.
At October 31, 1995, the Company has approximately $ 140,000 deposited
in a financial institution which exceeded the insurance provided by the
Federal Deposit Insurance Corporation.
9. Commitments and Contingencies
The Company is involved in various legal and regulatory proceedings
which have arisen in the ordinary course of its business, and have not been
finally adjudicated. These actions, when ultimately concluded or determined,
will not, in the opinion of management, have a material adverse impact upon
the Company's financial position, results of operations or liquidity.
10. Subsequent Event
Subsequent to October 31, 1995, the Company entered into an agreement to
sell 100% of the Company's stock to Trinity Airgas, Inc., a Delaware
corporation and subsidiary of US Airgas, Inc., a wholly-owned subsidiary of
Airgas, Inc., a Delaware corporation.
-9-
<PAGE> 37
IATECH SALES CO. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
<PAGE> 38
TABLE OF CONTENTS
Page
____
Independent Auditors' Report 1
Financial Statements:
Consolidated Balance Sheet 2-3
Consolidated Statement of Earnings 4
Consolidated Statement of Stockholders' Equity 5
Combined Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-11
<PAGE> 39
Independent Auditors' Report
To the Board of Directors
of Iatech Sales Co.:
We have audited the accompanying consolidated balance sheet of Iatech
Sales Co. and Subsidiary as of December 31, 1995, and the related consolidated
statements of earnings, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Iatech
Sales Co. and subsidiary as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
CORNWELL & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Fort Dodge, Iowa
February 12, 1996
-1-
<PAGE> 40
IATECH SALES CO. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
Assets
______
Current assets
Cash $ 544,969
Accounts receivable, trade 783,296
Inventory 1,377,624
Prepaid expenses 8,502
Other current assets 700
_________
Total current assets 2,715,091
Fixed Assets:
Land 92,927
Leasehold improvements 183,009
Building and improvements 467,905
Machinery and equipment 464,053
Cylinders 1,557,553
Furniture and fixtures 170,131
Vehicles 539,283
Computers 158,057
_________
Total gross fixed assets 3,632,918
Less: accumulated depreciation (2,626,594)
_________
Total net fixed assets 1,006,324
Non-current Assets:
Other non-current assets 9,267
Cash surrender value of life insurance 590,726
_________
Total non-current assets 599,993
________
Total assets $4,321,408
=========
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 41
IATECH SALES CO. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, trade $535,627
Federal income tax payable 71,539
Accrued expenses 69,563
Current portion of long-term debt 78,136
_______
Total current liabilities 754,865
Non-current Liabilities:
Long-term debt, less current portion 505,451
Deferred income taxes payable 107,014
_______
Total non-current liabilities 612,465
_________
Total liabilities 1,367,330
Stockholders' Equity
Common stock, par value $1.00 per share,
3,000,000 shares authorized, 2,000,000 issued
and outstanding 2,400,000
Additional paid-in capital 51,172
Retained earnings 502,906
_________
Total stockholders' equity 2,954,078
_________
Total liabilities and stockholders' equity $4,321,408
=========
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 42
IATECH SALES CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
Net Sales $8,953,482
Cost of goods sold 5,840,291
_________
Gross profit 3,113,191
Operating expenses:
Salaries, wages and benefits 1,617,001
Distribution expense 258,825
Selling, general and administrative 377,096
Occupancy expense 224,082
Depreciation and amortization (Note 2) 157,817
________
Total operating expenses 2,634,821
_________
Operating income 478,370
Interest expense (53,524)
Other income, net 38,099
________
Earnings before taxes 462,945
Income taxes (Note 8) 181,058
________
Net earnings $ 281,887
========
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 43
IATECH SALES CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995
Additional
Common Paid-in Retained
Stock Capital Earnings
_______ __________ ________
Balance - beginning $2,400,000 $ 51,172 $ 221,019
Additions:
Net income - - 281,887
_________ _______ ________
Balance - ending $2,400,000 $ 51,172 $ 502,906
========= ======= ========
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 44
IATECH SALES CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
Cash Flows From Operating Activities:
Net earnings $281,887
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 157,817
Deferred income taxes 8,923
Gain on sale of equipment (6,516)
Increase in cash surrender value of life insurance (21,555)
Changes in assets and liabilities:
Trade receivables, net 69,378
Inventories (20,857)
Prepaid expenses and other current assets 66,468
Accounts payable, trade 51,593
Accrued expenses and other current liabilities 19,679
_______
Net cash provided by operating activities 606,817
Cash Flows From Investing Activities:
Capital expenditures (147,944)
Proceeds from sale of equipment 6,925
Premiums paid for officers' life insurance (11,816)
_______
Net cash used in investing activities (152,835)
Cash Flows From Financing Activities:
Repayment of debt (139,615)
_______
Net cash used in financing activities (139,615)
_______
Cash increase 314,367
Cash - Beginning of year 230,602
_______
Cash - End of year $544,969
=======
See accompanying notes to consolidated financial statements.
-6-
<PAGE> 45
IATECH SALES CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. Nature of Business
__________________
The Company's operations consist of the sale of welding supplies and
industrial gases and the manufacture of acetylene gas, all in the state of
Iowa.
2. Summary of Significant Accounting Policies
__________________________________________
A) Basis of Presentation - The consolidated financial statements include
the accounts of Iatech Sales Co. and its wholly-owned subsidiary, Iowacetylene
Co. All significant intercompany balances and transactions have been
eliminated in consolidation.
B) Inventories - Inventories are stated at the lower of cost or market
with cost determined by the average cost method.
C) Property and Equipment - Property and equipment are stated at cost.
Depreciation is provided primarily by the straight-line method for building
and improvements. For the remaining classes, depreciation is provided using
the straight-line method for assets acquired after January 1, 1994 and the
double-declining balance method for assets acquired prior to January 1, 1994.
Depreciation is provided over the following estimated useful lives:
Years
______
Leasehold improvements 7-39
Building and improvements 7-31.5
Machinery and equipment 7-10
Cylinders 7-10
Furniture and fixtures 7-10
Vehicles 4-7
Computers 5-7
The total depreciation expense for 1995 was $156,447.
D) Non-current Assets - Costs related to the acquisition of long term
debt are deferred and amortized over the term of the related debt.
E) Income Taxes - The provision for income taxes includes federal and
state income taxes currently payable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities. The Company adopted the Statement of Accounting Standards No.
109, "Accounting for Income Taxes," (Statement No. 109) as of December 31,
1994. Statement No. 109 requires the use of the liability method of
accounting for deferred income taxes. The adoption of Statement No. 109 had
no material impact on the Company's results of operations or retained
earnings.
F) Bad Debts - Bad debts are recorded by use of the direct charge off
method. The difference between the reserve and direct charge off methods is
not material.
-7-
<PAGE> 46
IATECH SALES CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
G) Concentrations of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk consist
principally of trade receivables and cash. The Company grants credit to
customers, substantially most of whom are commercial enterprises whose
operations are located primarily in the state of Iowa. The Company performs
ongoing credit evaluation of its customers' financial condition and generally,
requires no collateral from its customers. At December 31, 1995, the Company
had no significant concentrations of credit risk.
The Company maintains its cash in bank deposit accounts at several
financial institutions which, at times, may exceed federally insured limits.
The Company has not experienced any losses in such accounts. The Company
believes it is not exposed to any significant credit risk on cash. At
December 31, 1995, the Company's uninsured cash balance was approximately
$220,000.
H) Revenue Recognition - Sales are recorded upon shipment to the
customer.
I) Financial Instruments - The carrying amounts for accounts receivable,
accounts payable and current portion of long-term debt approximate fair value
because of the short-term maturity of these financial instruments.
J) Estimates - The presentation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
K) Cash - For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash.
3. Inventories
___________
Inventories consist of the following components:
Gases $ 76,820
Welding supplies 707,543
Tools and abrasives 471,967
Cylinders 3,427
Safety equipment 117,867
_________
$1,377,624
=========
-8-
<PAGE> 47 IATECH SALES CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
4. Indebtedness
____________
Long term debt consists of the following: Balance
________
Promissory note payable to Brenton Bank bearing
interest at 8.5%, due in monthly payments of $744,
including interest through December, 2008 and
secured by a commercial mortgage on real property
located in Des Moines, Iowa with a book value of
$135,093 as of December 31, 1995. $ 69,788
Stock redemption agreement payable to Warren Metheny
bearing interest at 7%, due in annual payments of
$20,000, excluding interest, through January, 1997. $ 40,000
Installment promissory note payable to Norwest Bank
dated May 31, 1994 bearing interest at 8.75%, due in
monthly payments of $4,000 including interest
through May 30, 1999 at which time a balloon payment
is required. The note is secured by gas cylinders
located in Mason City, Iowa with a book value of
$74,968 as of December 31, 1995. $ 92,434
Life insurance policy loans to Northwestern Mutual
Life bearing interest at 6% and 8% and secured by
the cash value of the life insurance policies. The
interest rate is variable. $155,073
Industrial Development Revenue Bond, Ankeny, Iowa
Series 1985 due in monthly payments of $2,693
including interest based on 85% of the monthly
Morgan Guaranty Trust prime rate (7.23% at December
31, 1995) and secured by property, plant and
equipment. $226,292
_______
583,587
Current portion of long-term debt (78,136)
_______
Long-term debt, less current portion $505,451
=======
The aggregate maturities of long-term debt for the five years ending December
31, 2000 and thereafter are as follows:
Year Ending December 31, Aggregate Maturity
_______________________ __________________
1996 $ 78,136
1997 84,588
1998 26,413
1999 22,619
2000 24,518
2001 and thereafter 347,313
_______
$583,587
=======
-9-
<PAGE> 48
IATECH SALES CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
The fair value of long term debt as of December 31, 1995 was approximately
$584,000.
5. Income Taxes
____________
Income tax expense consisted of:
Current:
Federal $135,539
State 36,596
Deferred:
Federal 3,125
State 5,798
_______
$181,058
=======
Significant differences between taxes computed at the federal statutory rate
and the provision for income taxes were:
Taxes at U.S. federal statutory rate 34.0%
State income taxes, net of federal benefit 7.9
Increase in cash surrender value of life
insurance, nontaxable (4.7)
Other, Net 1.9
____
39.1%
====
The tax effects of cumulative temporary differences that gave rise to the
significant portion of the deferred tax liability is as follows:
Deferred Tax Liability
______________________
Property and equipment $107,014
=======
6. Benefit Plans
_____________
The Company has a defined contribution 401(K) Plan covering substantially all
full-time employees who elect to participate. Under the terms of the plan,
the Company makes matching contributions up to 3.75% of participants' wages.
Amounts expensed under the plan for 1995 was $41,762.
-10-
<PAGE> 49
IATECH SALES CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
7. Leases
______
The Company leased certain buildings and distribution equipment from related
parties for the year ended December 31, 1995. Significant items leased were
buildings in Fort Dodge, Spencer and Mason City, a liquid oxygen system and
gas cylinders. Total lease payments made to related parties, which consisted
of the three shareholders and their family members, was $244,918. The
equipment leases were terminated January 2, 1996. The three buildings will be
leased by a major industrial gas distribution company. (see Note 9) There is
no future minimum lease payments.
The Company also leased two cars during 1995 from non-related parties. Total
payments made for these leases were $10,335. These leases were terminated in
early 1996, so there is no future minimum lease payments.
8. Cash Flows
__________
Cash paid for interest expense and income taxes was as follows:
Interest $51,549
Income taxes 14,310
9. Subsequent Event
________________
Effective January 1, 1996, Midwest Airgas, Inc., a subsidiary of U.S. Airgas,
Inc., a wholly-owned subsidiary of Airgas, Inc. purchased 100% of the stock of
Iatech Sales Co. and Subsidiary. For subsequent years, the Company's
financial information will be included with the parent company.
10. Commitments and Contingencies
_____________________________
The Company is involved in various legal and regulatory 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 consolidated financial position, results of operations or liquidity.
-11-
<PAGE> 50
ACETYLENE GAS COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995<PAGE>
<PAGE> 51
C O N T E N T S
PAGE
INDEPENDENT AUDITORS' REPORT ........................... 1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET ........................... 2
CONSOLIDATED STATEMENT OF EARNINGS ................... 3
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ....... 4
CONSOLIDATED STATEMENT OF CASH FLOWS ................. 5
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS ............. 6-13
<PAGE>
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
ACETYLENE GAS COMPANY
St. Louis, Missouri
We have audited the consolidated balance sheet of ACETYLENE GAS COMPANY and
subsidiary as of December 31, 1995, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ACETYLENE GAS COMPANY and
subsidiary as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As explained in Note 9 to the financial statements, ACETYLENE GAS COMPANY and
subsidiary retroactively changed its method of accounting for cylinder leases
as of January 1, 1995.
CURRY, LENHARDT & COMPANY, LLP
Certified Public Accountants
St. Louis, Missouri
February 13, 1996
Page 1
<PAGE> 53
ACETYLENE GAS COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
______________________________________________________________________________
ASSETS
Current Assets
Cash ............................................................ $ 6,812
Accounts receivable less allowance for doubtful
accounts of $150,000 ........................................... 2,773,931
Inventories ...................................................... 1,311,585
Prepaid expenses and other current assets ....................... 285,548
_________
Total Current Assets .............................................. 4,377,876
_________
Property, Plant and Equipment .........................$ 13,335,544
Less: Accumulated depreciation and amortization ....... 5,685,012
__________
Total Property, Plant and Equipment, Net ......................... 7,650,532
Other non-current assets .......................................... 79,518
_________
Total Assets ................................................... $12,107,926
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt .............................$ 1,843,938
Accounts payable .............................................. 1,475,041
Accrued expenses and other liabilities ......................... 151,500
_________
Total Current Liabilities ........................................ 3,470,479
Long-term debt ................................................... 3,569,150
Cylinder deposits ................................................ 411,442
Deferred tax liability ........................................... 601,605
_________
Total Liabilities ................................................ 8,052,676
Stockholders' Equity
Capital stock
$100 par, 4,000 shares common
authorized, and 2,000 shares issued ...............$ 200,000
Retained earnings .................................... 3,855,250
_________
Total stockholders' equity ....................................... 4,055,250
__________
Total Liabilities and Stockholders' Equity ......................$12,107,926
==========
See accompanying notes to consolidated financial statements
Page 2
<PAGE> 54
ACETYLENE GAS COMPANY
CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
______________________________________________________________________________
Sales ...........................................................$ 20,933,164
Costs and Expenses
Cost of products sold (excluding depreciation) ............... 14,291,452
Selling, distribution and administrative expenses ............ 4,988,091
Depreciation and amortization ................................ 940,671
__________
Total costs and expenses ....................................... 20,220,214
__________
Operating income ............................................... 712,950
Interest expense, net .......................................... (454,266)
Other income, net .............................................. 2,989
________
Earnings before income tax and cumulative effect
of accounting changes ......................................... 261,673
Income taxes ................................................... 85,340
_________
Net earnings before cumulative effects of accounting changes ... 176,333
Cumulative effect of accounting change on years prior
to 1995 (net of income tax of $1,027,659) ..................... (1,793,440)
_________
Net loss ....................................................... $ (1,617,107)
=========
See accompanying notes to consolidated financial statements
Page 3
<PAGE> 55
ACETYLENE GAS COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995
______________________________________________________________________________
Common Retained
Stock Earnings
Balance January 1, 1995 as previously reported ....... $ 200,000 $ 7,290,350
Prior period adjustments ............................. - (1,817,993)
_______ _________
Balance January 1, 1995 as restated .................. 200,000 5,472,357
Net loss ............................................. - (1,617,107)
_______ _________
Balance December 31, 1995 ............................ $ 200,000 $ 3,855,250
======= =========
See accompanying notes to consolidated financial statements
Page 4
<PAGE> 56
ACETYLENE GAS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
______________________________________________________________________________
Cash Flows From Operating Activities:
Net earnings (loss) ........................................... $(1,617,107)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization .........................$ 940,671
Increase in cash surrender value of officers
life insurance ....................................... (7,940)
Loss on sale of fixed assets .......................... 39,384
Deferred income taxes ................................. 30,299
Cumulative effect of accounting change ................ 1,793,440
Changes in operating assets and liabilities:
Receivables ......................................... (338,681)
Inventories ......................................... (141,081)
Prepaid expenses and other current assets ........... (88,135)
Accounts payable .................................... 174,774
Accrued expenses and other current liabilities ...... (5,403)
_________
2,397,328
_________
Net Cash Provided By Operating Activities ........... 780,221
_________
Cash Flows From Investing Activities:
Acquisition of fixed assets ............................. (1,316,032)
Proceeds from the sale of fixed assets .................. 338,134
_________
Net Cash Used In Investing Activities .............. (977,898)
_______
Cash Flows From Financing Activities:
Proceeds from long-term borrowings ...................... 820,000
Net overdraft ........................................... (15,949)
Payments on long-term debt .............................. (607,162)
________
Net Cash Provided By Financing Activities ......... 196,889
_______
Net increase (decrease) in cash ........................... (788)
Cash at the beginning of the year ......................... 7,600
_____
Cash at the end of the year ................................. $ 6,812
=======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest ..................................................$ 452,487
Income taxes ..............................................$ 174,969
See accompanying notes to consolidated financial statements
Page 5
<PAGE> 57
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of certain significant accounting policies followed
in the preparation of the financial statements.
Nature of Business
The Company's primary operation is the sale of industrial gases and
gas-related equipment in various markets throughout Missouri, Illinois and
Kentucky.
Principles of Consolidation
The consolidated financial statements include those of the company and its
wholly-owned subsidiary, Atlas Redevelopment, with intercompany balances and
transactions eliminated.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated and
amortized over the estimated useful lives, using the straight-line method for
financial reporting, and straight-line and accelerated cost recovery system
methods for tax purposes. Upon sale or retirement, the cost and related
accumulated depreciation and amortization are eliminated from the respective
accounts and the resulting gain or loss included in current income.
Repair and maintenance charges which do not increase the useful lives of the
assets are charged to expense as incurred.
Inventories
All inventories are stated at cost computed on the first-in, first out (FIFO)
basis.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of trade receivables. Concentrations of
credit risk are limited due to the Company's large number of customers and
their dispersion across many industries.
In addition, the Company maintains its cash in bank deposit accounts at a high
credit quality financial institution. The balances, at times, may exceed
federally insured limits.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at December 31,
1995, and revenues and expenses during the year then ended. The outcome of
the estimates could differ from the estimates made in the preparation of the
financial statements.
Page 6
<PAGE> 58
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
Deferred Income Taxes
Deferred income taxes are recognized for the tax consequences in future years
of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid financial instruments with a maturity of less than three months to be
cash equivalents.
NOTE 2 - INVENTORIES
Inventories at December 31, 1995 consisted of the following:
Gases ........................................................$ 272,444
Hardgoods .................................................... 1,039,141
_________
Total ........................................................$ 1,311,585
=========
NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets include:
Prepaid insurance ............................................$ 60,710
Deferred income tax .......................................... 190,339
Income tax refunds in excess of deposits ..................... 31,799
Other current assets ......................................... 2,700
______
Total prepaid expenses and other current assets ..............$ 285,548
=======
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
The major classes of property, plant and equipment, at cost, are as follows:
Land ........................................................$ 446,678
Building & improvements ..................................... 3,742,982
Machinery and equipment, including cylinders ................ 5,915,526
Office furniture & equipment ................................ 366,332
Transportation equipment .................................... 2,864,026
__________
$13,335,544
==========
Page 7
<PAGE> 59
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT - (continued)
Depreciation and amortization for property, plant and equipment included in
costs and expenses at December 31, 1995 were computed using the methods
previously described and aggregated $872,569.
NOTE 5 - OTHER ASSETS
Other assets at December 31, 1995 consisted of the following:
Cash surrender value officers' life insurance, net of
policy loans of $46,582 ....................................... $ 71,791
Note receivable from Roe Machine Co., Inc. on sale
of equipment due in equal installments of $250,
including interest at 12%. .................................... 7,727
______
Total other assets ............................................. $ 79,518
======
NOTE 6 - INDEBTEDNESS
Long-term debt at December 31, 1995 consisted of the following:
Note payable to Barnett Mortgage Co., due in
quarterly installments of $1,036 including
interest at 8%, final payment due January,
2014; the note is secured by Florida property .............. $ 118,136
Note payable to Jerry Bartles, due in annual
installments of $25,000, including interest at 6%,
final payment of $50,000 due in January, 1997.
The note is secured by land and building in
Rolla, MO .................................................. 68,085
Note payable to Clark Credit Corporation, due
in monthly installments of $363, including
interest at 10.25%, final payment due October, 1998.
The note is secured by a 1993 Clark forklift truck ......... 10,665
Note payable Robert E. Bird, a majority stockholder of
the Company, due on demand, interest paid monthly
at prime ................................................... 425,000
Note payable to Southwest Bank, due in monthly installments
of $47,800 plus interest fluctuating at prime, balloon
payment due November, 1999. The note is secured by
accounts receivable, inventory, equipment, and real estate
at the Company's St. Louis location ....................... 3,971,202
Page 8
<PAGE> 60
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INDEBTEDNESS - (continued)
Revolving $1,000,000 line of credit agreement with
Southwest Bank, maturing April, 1996, interest is
payable monthly fluctuating at prime. The agreement
is secured by accounts receivable, inventory, equipment,
and real estate at the Company's St. Louis location ........... 820,000
_________
5,413,088
Less: Current installments ............................... 1,843,938
_________
Total Long-Term Debt ...................................... $ 3,569,150
=========
Estimated maturities of long-term debt are as follows:
Year Amount
1996 .................................................. $ 1,843,938
1997 .................................................. $ 625,585
1998 .................................................. $ 578,121
1999 .................................................. $ 2,251,488
2000 .................................................. $ 1,116
Thereafter ............................................ $ 112,840
As described in Note 16, the Company entered into a sale agreement and was
sold to Gateway Airgas, Inc., effective January 1, 1996. In connection with
the agreement, the majority of the obligations described above were repaid by
Gateway Airgas, Inc.
NOTE 7 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities include:
Accrued salaries ......................................... $ 16,012
Accrued interest ......................................... 22,160
Accrued taxes ............................................ 53,667
Accrued pension .......................................... 59,661
_______
Total accrued expenses and other current liabilities ..... $ 151,500
=======
NOTE 8 - INCOME TAXES
The provision for income taxes for the year ended December 31, 1995 consisted
of:
Current:
Federal ................................................ $ 52,191
State .................................................. 2,850
______
55,041
______
Page 9
<PAGE> 61
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES - (continued)
Deferred
Federal ................................................ 23,388
State .................................................. 6,911
______
30,299
______
Total provision for income taxes ......................... $ 85,340
======
Deferred income taxes are provided for certain income and expenses which are
recognized in different periods for tax and financial reporting purposes. The
tax effects of cumulative temporary differences that give rise to the
significant portions of deferred tax liability and deferred tax asset were as
follows:
Deferred Tax Assets:
Allowance for doubtful accounts ........................ $ 57,000
Cylinder deposits ...................................... 156,348
AMT credit carryforwards ............................... 105,953
Investment tax credit carryforwards .................... 268,817
Other .................................................. 8,339
_______
Total deferred tax assets .............................. 596,457
_______
Deferred Tax Liabilities:
Property and equipment ................................. (1,007,723)
_________
Total deferred tax liabilities ......................... (1,007,723)
_________
Net deferred tax liability ............................. $ (411,266)
=========
Management has assessed the need for a valuation allowance and believes the
deferred tax assets are recoverable more likely than not.
The Company has investment tax credit carryforwards of $268,817 available to
be offset against federal income tax in future years. These carryforwards are
subject to limitations imposed by the Tax Reform Act of 1986, and portions
expire, if unused, each year through December, 2000. In addition, the Company
has unused alternative minimum tax credits of $105,953.
NOTE 9 - CHANGE IN METHOD OF ACCOUNTING FOR CYLINDER LEASES
During 1995, the Company changed its method of accounting for cylinder leases
from operating to sales type leases. The Company believes the new method is
preferable, as it more accurately reflects the substance of the Company's
cylinder lease arrangements. The effect of this change was to decrease net
earnings for 1995 by $13,345. The cumulative effect of the change on prior
years of $1,793,440 is a one-time charge to earnings.
Page 10
<PAGE> 62
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - PRIOR PERIOD ADJUSTMENTS
Retained earnings at the beginning of 1995 has been adjusted for the following
prior period adjustments:
Refundable lease deposits
Retained earnings at the beginning of 1995 has been decreased $255,094 (net of
income tax of $156,348) to correctly reflect refundable lease deposits not
recorded in prior years. The error had no effect on net earnings for 1994.
Deferred income tax
Retained earnings at the beginning of 1995 has been decreased $1,064,312 to
correct the calculation of deferred income taxes to accurately conform with
the requirements of the Financial Accounting Standards Board. The correction
had no material effect on net earnings for 1994.
Prior impairment of long-lived asset
Retained earnings at the beginning of 1995 has been decreased $498,538 (net of
income tax of $305,555) to record the write-down for the permanent impairment
of an unused air separation plant in Benton, Illinois. Had the write-down
been recorded in the year management determined the asset to be permanently
impaired, net earnings for 1994 would have been increased $126,463 (net of
income tax of $77,510).
NOTE 11 - INTEREST EXPENSE, NET
Interest expense, net, consists of:
Interest expense .......................................... $ 455,556
Finance charge income ..................................... (1,290)
_______
Total interest expense, net ............................... $ 454,266
=======
NOTE 12 - OTHER INCOME, NET
Other income, net, consists of:
Net loss on disposal of fixed assets ...................... $ (39,384)
Discounts earned .......................................... 39,573
Other income .............................................. 2,800
______
Total other income, net ................................... $ 2,989
======
Page 11
<PAGE> 63
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - LEASES
The Company leases vehicles, computer and telephone equipment under leases
expiring in various years through 1999. Rent expense included in selling,
distribution and administrative expenses for 1995 is $142,174. Minimum future
lease payments under non-cancelable operating leases for each of the next
years until expiration are as follows:
Year ended Amount
1996 ............................................ $ 113,955
1997 ............................................ 40,190
1998 ............................................ 16,065
1999 ............................................ 10,802
_______
Total minimum future lease payments ............. $ 181,012
=======
The Company rented cylinders on a month to month basis throughout the year.
Total cylinder rent included in cost of products sold for 1995 is $74,037.
NOTE 14 - BENEFIT PLANS
The Company has a defined contribution 401(k) plan covering substantially all
employees not covered under union plans. Under the terms of the plan, the
Company makes matching contributions of 50% of the participants' contributions
up to 3% of the participants' wages. Total expense under the plan for 1995
was $51,402.
The Company participates in 4 multi-employer pension plans which provide
defined benefits to 20 union employees in Missouri, Illinois and Kentucky.
Contributions are made to the plans in accordance with negotiated labor
contracts. Except as noted in Note 15, the Company has not taken any action
to terminate or withdrawal from these plans. Total expense under these plans
for 1995 was $71,029, exclusive of the withdrawal liability described in Note
15.
NOTE 15 - CONTINGENCIES
Substantially all of the Company's facilities are subject to federal, state
and local regulations relating to the discharge of materials into the
environment. Compliance with these provisions has not had, nor does the
Company expect such compliance to have, any material effect upon the capital
expenditures, net earnings, financial condition or competitive position of the
Company. Management believes that its current practices and procedures for
the control of such wastes comply with applicable federal, state and local
requirements.
Page 12
<PAGE> 64
ACETYLENE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - CONTINGENCIES - (continued)
The Company could be identified as a potentially responsible party by the
United States Environmental Protection Agency ("USEPA") as owners of land
known as the Bonifield Bros. Superfund Site. Environmental cleanup at the
site has been completed, and the Company has received notification from the
USEPA that it has recommended that the Department of Justice provide the
Company with a covenant not to sue for any civil liability it has with regard
to this site for reimbursement of cleanup costs. Department of Justice
approval has not yet been obtained.
In addition, the Company has incurred liability for a partial withdrawal of
certain employees from the Central States Southeast And Southwest Areas
Pension Fund, as Teamster employees of the Company at the West Frankfort,
Illinois plant voted to decertify the union as their bargaining
representative. The exact liability cannot be computed until 1997 pursuant to
ERISA Section 4206. Pension fund trustees estimate the incurred liability to
be $59,661. The Company has included this liability in accrued expenses and
other current liabilities at December 31, 1995.
NOTE 16 - SUBSEQUENT EVENT
In January, 1996, the stockholders of the Company entered into an agreement to
sell 100% of the Company's stock to Gateway Airgas, Inc., a Delaware
corporation and subsidiary of US Airgas, Inc., a wholly-owned subsidiary of
Airgas, Inc., a Delaware corporation. The ownership change may substantially
limit the availability of certain income tax credits described in Note 8.
Page 13
<PAGE> 65
WELDERS EQUIPMENT COMPANY, INC. AND SUBSIDIARY
Consolidated Financial Statements
September 30, 1995
With Independent Auditors' Report Thereon
<PAGE>
<PAGE> 66
Independent Auditors' Report
The Board of Directors
Welders Equipment Company, Inc.:
We have audited the accompanying consolidated balance sheet of Welders
Equipment Company, Inc. and subsidiary as of September 30, 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Welders
Equipment Company, Inc. and subsidiary as of September 30, 1995 and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
March 14, 1996
<PAGE>
<PAGE> 67
WELDERS EQUIPMENT COMPANY, INC. AND SUBSIDIARY
Consolidated Balance Sheet
September 30, 1995
Assets
Current assets:
Cash and cash equivalents $3,202,113
Certificate of deposit 100,000
Trade accounts and notes receivable, less
allowance for doubtful accounts of $32,000 2,929,820
Inventories 2,228,430
Prepaid expenses 79,792
Deferred income taxes (note 6) 25,000
_________
Total current assets 8,565,155
Net property, plant and equipment (notes 2 and 4) 5,103,336
Long-term notes receivable 125,636
Noncompete agreements, net of accumulated
amortization of $165,917 89,083
Cash surrender value of life insurance, net
of loans of $1,656,845 49,394
Deposits and other 209,644
__________
$14,142,248
==========
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable 1,245,399
Accrued expenses 496,270
Note payable to bank (note 3) 195,000
Bonuses payable 189,845
Dividends payable 136,000
Note payable (note 4) 130,526
Cylinder deposits (note 8) 92,996
Current installments of deferred revenue 90,000
Income taxes payable (note 6) 30,015
_________
Total current liabilities 2,606,051
Deferred revenue, excluding current installments 160,000
Deferred income taxes (note 6) 112,000
_________
Total liabilities 2,878,051
_________
Minority interest 2,958
_________
Stockholders' equity (note 9):
Common stock, $75 par value. Authorized,
issued and outstanding 10,000 shares 750,000
Additional paid-in capital 19,000
Retained earnings 10,492,239
__________
Total stockholders' equity 11,261,239
__________
Contingencies and commitments (notes 5 and 7)
$14,142,248
==========
See accompanying notes to consolidated financial statements.
<PAGE> 68
WELDERS EQUIPMENT COMPANY, INC. AND SUBSIDIARY
Consolidated Statement of Income
Year ended September 30, 1995
Sales $ 23,000,911
Cost of sales 13,107,050
__________
Gross profit 9,893,861
Operating expenses (note 5) 7,983,880
_________
1,909,981
_________
Other income (deductions):
Interest income 126,072
Interest expense (136,811)
Other 48,794
_________
38,055
_________
Income before income taxes and minority
interest 1,948,036
_________
Income tax expense (note 6):
Current 53,000
Deferred 26,000
_________
79,000
_________
Income before minority interest 1,869,036
Minority interest 392
_________
Net income $ 1,869,428
=========<PAGE>
<PAGE> 69
WELDERS EQUIPMENT COMPANY, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Year ended September 30, 1995
Additional Total
Common paid-in Retained stockholders
stock capital earnings equity
______ _________ _________ _____________
Balances at
September 30, 1994 $ 750,000 19,000 9,770,311 10,539,311
Net income - - 1,869,428 1,869,428
Dividends declared - - (1,147,500) (1,147,500)
________ ______ __________ __________
Balances at
September 30, 1995 $ 750,000 19,000 10,492,239 11,261,239
======== ====== ========== ==========
<PAGE>
<PAGE> 70 WELDERS EQUIPMENT COMPANY, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
Year ended September 30, 1995
Cash flows from operating activities:
Net income $1,869,428
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property,
plant and equipment 577,583
Allowance for doubtful accounts 30,000
Other amortization 51,000
Deferred income taxes 26,000
Increase in cash surrender value of life
insurance (35,666)
Minority interest in loss of subsidiary (392)
Changes in assets and liabilities:
Trade accounts and notes receivable (243,242)
Inventories (391,772)
Prepaid expenses (15,712)
Deposits and other (9,274)
Trade accounts payable (140,006)
Accrued expenses (366,515)
Bonuses payable 46,195
Cylinder deposits 4,279
Deferred revenue (13,000)
Income taxes payable (16,891)
_________
Net cash provided by operating
activities 1,372,015
_________
Cash flows from investing activities:
Capital expenditures (796,071)
Life insurance premiums paid (6,632)
_________
Net cash used in investing activities (802,703)
________
Cash flows from financing activities:
Proceeds from issuance of loans on cash surrender
value of life insurance 23,631
Proceeds from issuance of notes payable to bank 195,000
Minority interest 3,350
Principal payments on note payable (25,409)
Dividends paid (1,196,500)
___________
Net cash used by financing activities (999,928)
__________
Net decrease in cash and cash equivalents (430,616)
Cash and cash equivalents at beginning of year 3,632,729
_________
Cash and cash equivalents at end of year $3,202,113
=========
Supplemental disclosures of cash flow information:
Interest paid $ 136,811
=========
State income taxes paid $ 70,174
=========
Supplemental schedule of non-cash financing
transactions:
Life insurance premium financed with loans $ 157,973
========
<PAGE> 71
WELDERS EQUIPMENT COMPANY, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 1995
(1) Summary of Significant Accounting Policies and Practices
(a)Description of Business
Welders Equipment Company, Inc. (Company) is a distributor of welding
equipment, supplies and related gases. Most of the Company's customers
are located in South Texas. The Company is not dependent on a single
supplier or a few suppliers.
(b) Principles of Consolidation
The consolidated financial statements include the financial statements
of Welders Equipment Company, Inc. and its 79% owned subsidiary. The
remaining 21% is owned by a shareholder of the Company. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) Cash Equivalents
Cash equivalents at September 30, 1995 consist of $3,000,000 invested in
mutual funds. For the purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(d) Inventories
Inventories consist principally of finished goods and are stated at the
lower of cost or market. Cost is determined using the first-in,
first-out method for all inventories.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the following estimated
useful lives:
Buildings and leasehold improvements 40 years
Machinery and equipment 3 to 10 years
Furniture and fixtures 5 to 10 years
Vehicles 3 to 15 years
Maintenance and repairs are charged to expense as incurred.
Expenditures for improvements are capitalized.
(f)Non-Compete Agreements
The Company secured three noncompete agreements in connection with the
acquisition of three branch operations. These costs are amortized
straight-line over the terms of the respective agreements.
<PAGE> 72
(g) Deferred Revenue
Deferred revenue represents the portion of long-term operating lease
payments received in advance from customers. Lease revenue is
recognized straight-line over the period of the respective lease.
(h) Income Taxes
Management of the Company elected Subchapter S Corporation federal
income tax status in 1987. Under the Subchapter S provisions, the
Company does not pay federal corporate income taxes on its taxable
income. Instead, the stockholders are liable for such taxes.
The Company is subject to the Texas franchise tax which is based, in
part, on taxable income. The Company accounts for income taxes under
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." State income tax expense is computed
based on the Texas statutory tax rate of 4.5% applied to taxable income
for Texas state tax purposes, less the portion of the Texas franchise
tax based on capital.
(i) Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation and other sources are recorded when it is probable that a
liability has been incurred and the amount of the assessment can be
reasonably estimated.
(j) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(k) Disclosures about Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, trade accounts and
notes receivable, and trade accounts payable and notes payable
approximate their respective fair value because of the short-term
maturity of those instruments.
(2) Property, Plant and Equipment
Property, plant and equipment consists of the following at September 30,
1995:
Land $ 91,367
Buildings and leasehold improvements 2,506,038
Machinery and equipment 4,856,977
Vehicles 1,041,993
Furniture and fixtures 811,578
_________
9,307,953
Less accumulated depreciation and amortization 4,204,617
_________
$5,103,336
=========
<PAGE> 73
(3) Note Payable to Bank
Note payable to bank at September 30, 1995 consists of an unsecured line
of credit established at a bank by the Company's subsidiary under which
the subsidiary may borrow at the bank's prime rate (9.25% at September
30, 1995) up to $300,000. The line of credit expires on August 16, 1996.
At September 30, 1995, there was $195,000 outstanding under the line of
credit.
(4) Note Payable
The note payable at September 30, 1995 is due to a corporation in monthly
installments of $3,018, including principal and interest at 7.83%. The
note is due in March 1996 and is secured by certain machinery and
equipment.
(5) Leases
The Company leases facilities and equipment from stockholders under
various lease agreements. Total rent expense associated with these leases
was approximately $885,000 for the year ended September 30, 1995. Minimum
lease payments under these leases over the next five years will be
approximately $885,000 annually.
(6) Income Taxes
Income tax expense differed from the amounts computed by applying the
Texas statutory tax rate of 4.5% to income before income taxes and
minority interest as a result of the following:
Computed "expected" tax expense $ 87,662
Reduction in income taxes resulting from:
Interest income not subject to income tax (4,404)
Increase in cash surrender value of life
insurance not subject to income tax (2,286)
Other, net (1,972)
________
$ 79,000
========
<PAGE> 74
(6) Income Taxes, continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at September
30, 1995 are presented below:
Deferred tax assets:
Trade accounts receivable, principally
due to allowance for doubtful accounts $ 1,440
Inventories, principally due to allowance
for obsolescence 1,935
Other assets, principally due to differences
in amortization 1,103
Accrued expenses deducted for financial reporting
purpose 7,875
Deferred revenue, accrued for financial reporting
purposes 11,250
Other, net 1,397
_______
Total gross deferred tax assets 25,000
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation (114,280)
Other, net 2,280
_______
Total gross deferred liabilities (112,000)
_______
Net deferred tax liability $ (87,000)
=======
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon taxes paid in prior periods which could
be recovered through the carryback provision of the tax law or the generation
of future taxable income during the periods in which those temporary
differences become deductible. Management considers the carryback
availability, projected future taxable income and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred tax
assets are deductible, management believes it is more likely than not that the
Company will realize the benefits of these deductible differences at September
30, 1995.
(7) Retirement Plans
Effective October 1, 1991, the Company established a qualified 401(k) plan
for its employees. Eligible employees may contribute up to 6% of their
compensation with the Company matching 75% of the employee's first 3%
contribution and 25% of the employee's second 3% contribution. The Company's
matching contributions were $78,980 for the year ended September 30, 1995.
The Company also maintains a discretionary, non-contributory
profit-sharing plan covering all employees meeting certain age and length of
service requirements.
Contributions to the plan were $71,020 for the year ended September 30,
1995.
<PAGE> 75
(8) Business and Credit Concentrations
Most of the Company's customers are located in South Texas. No single
customer accounted for more than five percent of the Company's sales in 1995.
At September 30, 1995, the Company had two customers with accounts receivable
balances greater than $100,000 which in the aggregate, represented 8% of trade
accounts receivable.
The Company holds deposits on certain gas cylinders leased to customers.
Such deposits are refunded upon return of the cylinders.
(9) Subsequent Event
Effective February 1, 1996, Airgas, Inc. acquired for cash substantially
all of the Company's assets and 100% of its subsidiary's common stock.
<PAGE>
<PAGE>
<PAGE> 76
The Board of Directors
Airgas, Inc.
We consent to the inclusion of our report dated January 10, 1996, with respect
to the balance sheet of Langdon Oxygen Company as of September 30, 1995, and
the related statements of income, retained earnings and cash flows for the
nine months then ended, which report appears in the Form 8-K of Airgas, Inc.
dated April 5, 1996.
BELL & COMPANY
Texarkana, Texas
April 5, 1996
<PAGE>
<PAGE>
<PAGE> 77
The Board of Directors
Airgas, Inc.
We consent to the inclusion of our report dated December 7, 1995, with respect
to the balance sheet of Kennedy Welding Supply Corporation, Inc. as of October
31, 1995, and the related statements of operations, stockholders' equity, and
cash flows for the ten months then ended, which report appears in the Form 8-K
of Airgas, Inc. dated April 5, 1996.
CAWTHRON, WOMMACK & COKER, P.C.
Waco, Texas
April 5, 1996
<PAGE>
<PAGE>
<PAGE> 78
The Board of Directors
Airgas, Inc.
We consent to the inclusion of our report dated February 12, 1996, with
respect to the consolidated balance sheet of IaTech Sales Co. and subsidiary
as of December 31, 1995, and the consolidated statements of earnings,
stockholders' equity and cash flows for the year then ended, which report
appears in the Form 8-K of Airgas, Inc. dated April 5, 1996.
CORNWELL & CO., P.C.
Fort Dodge, Iowa
April 5, 1996
<PAGE>
<PAGE>
<PAGE> 79
The Board of Directors
Airgas, Inc.
We consent to the inclusion of our report dated February 13, 1996, with
respect to the consolidated balance sheet of Acetylene Gas Company as of
December 31, 1995, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended, which report
appears in the Form 8-K of Airgas, Inc. dated April 5, 1996.
CURRY, LENHARDT & COMPANY, LLP
St. Louis, Missouri
April 5, 1996
<PAGE>
<PAGE>
<PAGE> 80
The Board of Directors
Airgas, Inc.
We consent to the inclusion of our report dated March 14, 1996, with respect
to the consolidated balance sheet of Welders Equipment Company, Inc. and
subsidiary as of December 31, 1995, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for the year then ended, which
report appears in the Form 8-K of Airgas, Inc. dated April 5, 1996.
KPMG PEAT MARWICK LLP
San Antonio, Texas
April 5, 1996<PAGE>
