<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: December 31, 1996
_____________________________
Commission file number: 1-9344
_____________________________
AIRGAS, INC.
______________________________________________________________________________
(Exact name of Registrant as specified in its charter)
Delaware 56-0732648
_______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
259 Radnor-Chester Road, Suite 100
P.O. Box 6675
Radnor, PA 19087-8675
_______________________________________ ________________
(Address of principal executive offices) (ZIP code)
(610) 687-5253
__________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
______ ______
Common Stock outstanding at February 1, 1997: 68,436,970 shares
<PAGE> 2
AIRGAS, INC.
FORM 10-Q
December 31, 1996
INDEX
PART I - FINANCIAL INFORMATION
______________________________
Consolidated Balance Sheets as of December 31, 1996
and March 31, 1996....................................................3
Consolidated Statements of Earnings
for the Three Months Ended December 31, 1996 and 1995.................5
Consolidated Statements of Earnings
for the Nine Months Ended December 31, 1996 and 1995..................6
Consolidated Statements of Cash Flows
for the Nine Months Ended December 31, 1996 and 1995..................7
Notes to Consolidated Financial Statements.................................8
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................13
PART II - OTHER INFORMATION
___________________________
Legal Proceedings.........................................................23
Changes in Securities.....................................................24
Exhibits and Reports on Form 8-K..........................................24
Signatures................................................................26
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31, March 31,
1996 1996
(Unaudited)
_____________ ________
<S> <C> <C>
ASSETS
____________________________________________
Current Assets
Trade receivables, less allowances for
doubtful accounts of $4,578 at December 31,
1996 and $3,396 at March 31, 1996 $ 144,907 $120,811
Inventories 132,060 86,162
Prepaid expenses and other current assets 45,825 11,601
_________ _______
Total current assets 322,792 218,574
_________ _______
Plant and Equipment, at cost 712,492 586,328
Less accumulated depreciation and amortization (176,208) (147,451)
_________ _______
Plant and equipment, net 536,284 438,877
Other Non-current Assets 132,951 60,948
Goodwill, net of accumulated amortization of
$24,956 at December 31, 1996 and $19,552
at March 31, 1996 293,654 165,243
_________ _______
Total assets $1,285,681 $883,642
========= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE>
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except per share amounts)
<CAPTION>
December 31, March 31,
1996 1996
(Unaudited)
___________ ________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current Liabilities
Current portion of long-term debt $ 18,974 $ 12,179
Accounts payable, trade 56,613 52,528
Accrued expenses and other current liabilities 89,571 72,279
_________ _______
Total current liabilities 165,158 136,986
_________ _______
Long-Term Debt 631,094 385,832
Deferred Income Taxes 95,453 88,400
Other Non-current Liabilities 32,892 34,490
Minority Interest in Subsidiaries 3,147 1,725
Stockholders' Equity
Common stock $.01 par value, 200,000 shares
authorized, 68,485 and 66,314
shares issued at December 31, 1996 and
March 31, 1996, respectively 687 663
Capital in excess of par value 151,170 91,512
Retained earnings 206,780 173,360
Cumulative translation adjustment (384) (410)
Treasury stock, 15 and 2,355 common shares
at cost at December 31, 1996 and
March 31, 1996, respectively (316) (28,916)
_________ _______
Total stockholders' equity 357,937 236,209
_________ _______
Total liabilities and stockholders' equity $1,285,681 $ 883,642
========= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
<TABLE>
AIRGAS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1996 December 31, 1995
__________________ __________________
<S> <C> <C>
Net sales:
Distribution $256,719 $199,066
Direct Industrial 29,556 -
Manufacturing 10,928 9,483
_______ _______
Total net sales 297,203 208,549
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation,
depletion and amortization)
Distribution 128,545 97,504
Direct Industrial 20,481 -
Manufacturing 7,267 6,343
Selling, distribution and
administrative expenses 94,991 69,812
Depreciation, depletion and
amortization 16,540 11,906
_______ _______
Total costs and expenses 267,824 185,565
_______ _______
Operating income:
Distribution 26,373 21,303
Direct Industrial 990 -
Manufacturing 2,016 1,681
_______ _______
29,379 22,984
Interest expense, net (10,385) (6,305)
Other income, net 213 290
Equity in earnings (loss) of
unconsolidated affiliates (106) -
Minority interest (177) (127)
_______ _______
Earnings before income taxes 18,924 16,842
Income taxes 7,964 7,025
_______ _______
Net earnings $ 10,960 $ 9,817
======= =======
Earnings per share $ .16 $ .15
======= =======
Weighted average common and
common equivalent shares 70,200 66,200
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
<TABLE>
AIRGAS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Nine Months Ended Nine Months Ended
December 31, 1996 December 31, 1995
__________________ __________________
<S> <C> <C>
Net sales:
Distribution $753,998 $575,156
Direct Industrial 66,445 -
Manufacturing 29,570 26,695
_______ _______
Total net sales 850,013 601,851
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation,
depletion and amortization)
Distribution 378,888 281,849
Direct Industrial 49,450 -
Manufacturing 19,444 17,372
Selling, distribution and
administrative expenses 270,722 201,946
Depreciation, depletion and
amortization 45,801 33,519
_______ _______
Total costs and expenses 764,305 534,686
_______ _______
Operating income:
Gas Distribution 77,895 62,042
Direct Industrial 2,172 -
Manufacturing 5,641 5,123
_______ _______
85,708 67,165
Interest expense, net (28,419) (17,760)
Other income, net 564 656
Equity in earnings of
unconsolidated affiliates 8 -
Minority interest (558) (492)
_______ _______
Earnings before income taxes 57,303 49,569
Income taxes 23,883 20,963
_______ _______
Net earnings $ 33,420 $ 28,606
======= =======
Earnings per share $ .49 $ .43
======= =======
Weighted average common and
common equivalent shares 68,200 65,800
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 7
AIRGAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended Nine Months Ended
December 31, 1996 December 31, 1995
__________________ __________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 33,420 $ 28,606
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation, depletion and amortization 45,801 33,519
Deferred income taxes 7,165 8,874
Equity in earnings of unconsolidated
affiliates (988) (1,036)
(Gain) Loss on sale of plant and equipment 214 (202)
Minority interest in earnings 558 492
Stock issued for employee benefit plan 3,720 2,459
Changes in assets and liabilities,
excluding effects of business
acquisitions:
Trade receivables, net (854) (418)
Inventories (15,877) (2,291)
Prepaid expenses and other
current assets (29,567) (3,710)
Accounts payable, trade (5,805) (9,727)
Accrued expenses and other current
liabilities 10,872 3,091
Other assets and liabilities, net (10,196) (1,505)
_______ _______
Net cash provided by operating activities 38,463 58,152
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (48,080) (28,680)
Proceeds from sale of plant and
equipment 1,585 2,871
Business acquisitions, net of cash acquired(169,096) (48,681)
Investment in unconsolidated affiliates (34,196) -
Dividends from joint venture 1,055 652
Other, net (2,085) (366)
_______ _______
Net cash used by investing activities (250,817) (74,204)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 801,048 443,106
Repayment of debt (588,333) (406,857)
Financing costs (1,793) (75)
Repurchase of treasury stock (316) (22,947)
Exercise of options and warrants 2,846 3,490
Net overdraft (1,098) (665)
_______ _______
Net cash provided by financing
activities 212,354 16,052
_______ _______
CHANGE IN CASH $ 0 $ 0
Cash - beginning of period 0 0
_______ _______
Cash - end of period $ 0 $ 0
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 8
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
_____________________
The consolidated financial statements include the accounts of Airgas,
Inc. and its subsidiaries (the "Company"). Unconsolidated affiliates are
accounted for on the equity method and generally consist of 20 - 50% owned
operations where control does not exist or is considered temporary.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to interim
financial statements. These statements do not include all disclosures
required for annual financial statements. These financial statements should
be read in conjunction with the more complete disclosures contained in the
Company's audited consolidated financial statements for the year ended March
31, 1996.
The financial statements reflect, in the opinion of management, all
adjustments (normal recurring adjustments) necessary to present fairly the
Company's consolidated balance sheets at December 31, 1996 and March 31, 1996;
the consolidated statements of earnings for the three and nine months ended
December 31, 1996 and 1995; and the consolidated statements of cash flows for
the nine months ended December 31, 1996 and 1995. The interim operating
results are not necessarily indicative of the results to be expected for an
entire year.
(2) ACQUISITIONS
____________
From April 1, 1996 to December 31, 1996, the Company acquired twenty
businesses engaged in the distribution of industrial, medical and specialty
gases and welding supplies and two distributors of safety and industrial tools
and supplies, with aggregate annual sales of approximately $220 million. The
aggregate purchase price, including amounts related to non-competition and
confidentiality agreements, amounted to approximately $292 million and
includes cash and real estate acquired of $1.7 million and $4.8 million,
respectively. Included in the aggregate purchase price is the issuance of
approximately 3.4 million shares of the Company's common stock, (which
includes approximately 2.4 million shares which were issued out of treasury
stock), issued in connection with the September 1996 acquisition of Rutland
Tool & Supply Co., Inc. ("Rutland"). Acquisitions have been recorded using
the purchase method of accounting, and, accordingly, results of their
operations have been included in the Company's consolidated financial
statements since the effective dates of the respective acquisitions.
On October 29, 1996, the Company announced that it signed a letter of
intent to acquire Carbonic Industries Corporation ("Carbonic Industries"). In
the proposed transaction, Carbonic Industries will be merged into a newly-
formed subsidiary of the Company in exchange for a combination of the
Company's common stock and cash, and is expected to close during April 1997.
<PAGE> 9
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(3) INVENTORIES
___________
Inventories consist of:
<TABLE>
(In thousands)
<CAPTION>
December 31, March 31,
1996 1996
___________ ________
<S> <C> <C>
Finished goods $132,423 $ 85,626
Raw materials 1,176 1,879
_______ _______
133,599 87,505
Less reduction to LIFO cost ( 1,539) (1,343)
_______ _______
$132,060 $ 86,162
======= =======
</TABLE>
(4) PLANT AND EQUIPMENT
___________________
The major classes of plant and equipment are as follows:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1996 1996
_____________ _________
<S> <C> <C>
Land and land improvements $ 21,830 $ 20,066
Building and leasehold improvements 64,663 58,153
Machinery and equipment, including
cylinders 583,942 472,868
Transportation equipment 39,369 33,724
Construction in progress 2,688 1,517
_______ _______
$712,492 $586,328
======= =======
</TABLE>
<PAGE> 10
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(5) OTHER NON-CURRENT ASSETS
_______________________
Other non-current assets include:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1996 1996
_____________ _________
<S> <C> <C>
Investment in unconsolidated
affiliates $ 63,560 $ 9,332
Noncompete agreements and other
intangible assets, at cost, net
of accumulated amortization of
$55.7 million at December 31, 1996
and $46.7 million at March 31, 1996 56,877 47,530
Other assets 12,514 4,086
_______ _______
$132,951 $ 60,948
======= =======
Investment in unconsolidated affiliates at December 31, 1996 includes the
Company's investment of approximately $47.6 million in cash and notes related
to the June 28, 1996 purchase of 45% of the voting capital stock of National
Welders Supply Company, Inc. As of December 31, 1996, the investment in
unconsolidated affiliates includes goodwill of approximately $30 million which
is being amortized into income over 40 years.
</TABLE>
(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
______________________________________________
Accrued expenses and other current liabilities include:
<TABLE>
(In thousands)
<CAPTION> December 31, March 31,
1996 1996
_____________ _________
<S> <C> <C>
Cash overdraft $ 14,608 $ 15,706
Insurance payable and related
reserves 6,202 5,297
Customer cylinder deposits 8,353 7,058
Other accrued expenses and current
liabilities 60,408 44,218
_______ _______
$ 89,571 $ 72,279
======= =======
</TABLE>
<PAGE> 11 AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(7) INDEBTEDNESS
____________
On August 8, 1996, the Company commenced a medium-term note program
pursuant to a registration statement filed with the Securities and Exchange
Commission on July 15, 1996, which provides for the issuance of its securities
with an aggregate public offering price of up to $450 million. In September
1996, the Company issued the following long-term debt under the medium term
note program: (a) $100 million of unsecured notes due September 2006 bearing
interest at a fixed rate of 7.75%; and (b) $50 million of unsecured notes due
September 2001 bearing interest at a fixed rate of 7.15%. The proceeds from
the medium term note issuances were used to repay bank debt. In connection
with the issuance of the notes, the Company entered into three reverse
interest rate swap agreements.
(8) EARNINGS PER SHARE
__________________
Earnings per share amounts were determined using the treasury
stock method. This method assumes the exercise of all dilutive outstanding
options and warrants and the use of the aggregate proceeds therefrom to
acquire the Company's outstanding common stock.
(9) COMMITMENTS AND CONTINGENCIES
_____________________________
The Company is involved in various legal proceedings which have arisen in
the ordinary course of its business and have not been finally adjudicated.
These actions, when ultimately concluded and determined, will not, in the
opinion of management, have a material adverse effect upon the Company's
financial condition, results of operations or liquidity.
On July 26, 1996, Praxair, Inc. ("Praxair") filed suit against the
Company in the Circuit Court of Mobile County, Alabama. The complaint alleges
tortious interference with business or contractual relations with respect to
Praxair's Right of First Refusal contract with National Welders Supply
Company, Inc. ("National Welders") by the Company in connection with the
Company's formation of a joint venture with the majority shareholders of
National Welders. Praxair is seeking compensatory damages in excess of $100
million and punitive damages. The Company believes that Praxair's claims are
without merit and intends to defend vigorously against such claims.
(10) FRAUDULENT BREACH OF CONTRACT
_______________________________________
On December 23, 1996, the Company announced that it was the victim of a
fraudulent breach of contract by a third party supplier related to purchases
of refrigerant R-12. Immediately upon discovering the fraud, the Company
launched an intense effort to recover funds paid to the supplier and/or
recover product.
Based on limited information currently available, the Company is unable
to quantify the probable amount of the loss or recovery which may be
associated with the fraud. The Company believes the maximum pre-tax loss,
including associated costs of the investigation and before considering any
recoveries, will not exceed $23 million, however, the minimum estimate is
immaterial. At December 31, 1996, prepaid expenses and other current assets
<PAGE> 12
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
include $23.7 million of costs associated with the fraud. The Company
believes there will be recoveries of assets related to the fraud, including
cash in bank accounts frozen under restraining orders, recovery of product
paid for and not delivered, net assets of the refrigerant supplier which
breached the contract and insurance proceeds under the Company's and the
refrigerant supplier's policies. The aggregate recovery amount, and the timing
of recording various portions thereof, is subject to change, even in the near
term, as additional assets are identified, additional claims are asserted or
the market value of restrained assets fluctuates. The Company will continue
to vigorously pursue all possible sources of recovery. The Company
anticipates that it will record a charge to earnings during the fourth quarter
ending March 31, 1997, pending a full investigation of the facts and
information pertaining to the loss and potential remedies.
On February 12, 1997, the Company filed a lawsuit in the United States
District Court for the Southern District of Georgia against Discount Auto
Parts, Inc. ("Discount"), an employee of Discount, and certain other business
and individual defendants, alleging that Discount and the other defendants
engaged in racketeering activity involving the fraudulent sale of smuggled and
counterfeit R-12 refrigerant gas. The Company's complaint alleges that the
racketeering activity of the defendants caused damages to The Company in an
amount not less than $20 million. The complaint seeks treble damages under
the Federal RICO and Georgia RICO statutes, as well as monetary damages under
other counts alleging fraud, conspiracy and related wrongful conduct. The
incident described above on December 23, 1996 was part of the racketeering
activity alleged in the lawsuit filed.
<PAGE>
<PAGE> 13
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL REVIEW
________________
OVERVIEW
________
The Company's financial results for the quarter ended December 31, 1996
reflect growth compared with the third quarter last year. Net sales of $297.2
million, net earnings of $11.0 million and earnings per share of $.16
represent increases over the prior period of 43%, 12% and 7%,respectively.
Net sales increased during the quarter compared to the prior period primarily
as a result of the acquisition of 39 distribution companies since October 1,
1995 and an increase in same-store distribution sales of approximately 4%.
The increase in net earnings was primarily due to an increase in gross profits
from higher same-store distribution sales.
Offsetting the Company's earnings growth in the third quarter was
dilution associated with recent distribution acquisitions start-up, costs of
new distribution branches, the Company's 45% joint venture investment in
National Welders Supply, Inc. ("National Welders"), and the start-up of Airgas
Direct Industrial ("ADI"). Together, these activities negatively impacted
earnings by approximately $.03 per share in the third quarter. Net earnings
were also negatively impacted by a sluggish industrial economy, compounded by
the mid-week timing of the Christmas and New Year's holidays, along with
severe weather in the Northwest and South-Central United States. Same-store
sales growth slowed to 1% during the month of December as a result of
significantly lower sales levels during the last two weeks of the month.
The Company's growth strategy through acquisitions continued through the
third quarter. During the quarter, the Company acquired three industrial gas
distributors with annual sales of $26 million. During the current fiscal
year, the Company has acquired industrial gas distributors with annual sales
of approximately $90 million. In addition, the Company formed a new segment,
ADI, through two acquisitions, IPCO Safety Products Company ("IPCO") and
Rutland Tool & Supply Co., Inc. ("Rutland"), which have aggregate annual sales
of approximately $120 million.
On October 29, 1996, the Company announced that it had signed a letter of
intent to acquire Carbonic Industries Corporation ("Carbonic Industries"), the
fourth largest producer of carbon dioxide in the United States, in a merger
scheduled for completion during April 1997. Carbonic Industries will be
merged into a newly-formed subsidiary of the Company in exchange for a
combination of the Company's common stock and cash. In December 1996, the
Company acquired Shell Land & Energy Company's interest in unitized leases
producing carbon dioxide, including Shell's 183 mile pipeline (the "Jackson
Dome" properties).
The Company intends to continue to grow through acquisitions while
exploring ways to leverage its broad geographic presence by selling additional
products and services to existing customers through its network of more than
570 distribution locations in 41 states, Canada and Mexico. Recent product
line additions have included returnable containers, specialty gases and
additional hardgoods (such as industrial supplies, safety products and
coatings). The Company believes the selective addition of complementary
products will enable it to better serve its diverse, expanding customer base.
<PAGE> 14
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
After tax cash flow (net earnings plus depreciation, amortization and
deferred income taxes) increased 21% to the record level of $29.9 million
compared to $24.7 million in the same quarter in the prior year. After tax
cash flow per share increased by 16% to $.43 from $.37 for the same quarter
last year. After tax cash flow is an important measurement of the Company's
ability to repay debt through operations and provides the Company with the
ability to pursue investment alternatives such as acquisitions and the
repurchase of Company stock.
In a separate matter, as announced on December 23, 1996, the Company was
the victim of a fraudulent breach of contract by a third party supplier
related to purchases of refrigerant R-12. Immediately upon discovering the
fraud, the Company launched an intense effort to recover funds paid to the
supplier and/or recover product.
Based on limited information currently available, the Company is unable
to quantify the probable amount of the loss or recovery which may be
associated with the fraud. The Company believes the maximum pre-tax loss,
including associated costs of the investigation and before considering any
recoveries, will not exceed $23 million, however, the minimum estimate is
immaterial. At December 31, 1996, prepaid and other current assets includes
$23.7 million of costs associated with the fraud. The Company believes there
will be recoveries of assets related to the fraud, including cash in bank
accounts frozen under restraining orders, recovery of product paid for and not
delivered, net assets of the refrigerant supplier which breached the contract
and insurance proceeds under the Company's and the refrigerant supplier's
policies. The aggregate recovery amount, and the timing of recording various
portions thereof, is subject to change, even in the near term, as additional
assets are identified, additional claims are asserted or the market value of
restrained assets fluctuates. The Company will continue to vigorously pursue
all possible sources of recovery. The Company anticipates that it will record
a charge to earnings during the fourth quarter ending March 31, 1997, pending
a full investigation of the facts and information pertaining to the loss and
potential remedies. On February 12, 1997, the Company filed a complaint
seeking damages with respect to such loss. See Part II, Item 1. Legal
Proceedings.
<PAGE> 15
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THE
THREE MONTHS ENDED DECEMBER 31, 1995
____________________________________
Net sales increased 43% during the quarter ended December 31, 1996
compared to the same quarter in the prior year:
<TABLE>
(in thousands)
<CAPTION> 1996 1995 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $256,719 $199,066 $ 57,653
Direct Industrial 29,556 - 29,556
Manufacturing 10,928 9,483 1,445
_______ _______ _______
$297,203 $208,549 $ 88,654
======= ======= =======
</TABLE>
For the quarter ended December 31, 1996, Distribution sales increased
approximately $47 million resulting from the acquisition of 39 distributors
since October 1, 1995 and approximately $11 million from same-store sales
growth. The increase in same-store Distribution sales of approximately 4% was
a result of growth in all three product groups: gases, hardgoods and rent. The
growth was attributable to selective price increases, the Company's gas sales
initiatives related to small bulk and specialty gases, and continued growth in
rental income. Hardgoods growth was strong during the month of October, but
essentially flat during the balance of the quarter. Same-store sales growth
was partially offset by lower sales in certain markets as a result of the
consolidation and integration of recent acquisitions. The Company believes
its same-store sales growth is slightly understated since it does not reflect
the Company's decision to cease unprofitable sales to certain customers and
other sales lost during acquisition consolidation and integration activity.
The Company estimates same-store sales based on a comparison of current period
sales to the prior period's sales, adjusted for acquisitions. Future
same-store sales growth is dependent on the economy and the Company's ability
to expand markets for new and existing products and to increase prices.
Management believes the Company's broad customer base and geographic diversity
help to reduce the adverse effects of an economic downturn on the Company.
Sales related to the Company's ADI segment increased approximately 13%
during the quarter ended December 31, 1996 compared to historical sales
results of the prior year.
Sales for the Company's Manufacturing segment increased 15% during the
quarter ended December 31, 1996 as a result of the acquisition of the Jackson
Dome properties and an increase in sales of composite electrode paste, offset
by slightly lower sales of nitrous oxide.
The increase in Distribution gross profits of approximately $27 million
compared to the prior period resulted from acquisitions which contributed
approximately $22 million and from same-store gross profit growth of
approximately $5 million. The same-store gross profit growth is attributable
<PAGE> 16
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
to expansion of gross margins through selective price increases and better
buying through national purchasing programs combined with increased sales of
lower margin hardgoods, increased sales of gases related to the Company's
small bulk and specialty gases programs and growth in cylinder and other
equipment rental income. Compared to the prior year, the Company's
Distribution gross margin of 49.9% is down 110 basis points primarily due to
industrial gas distribution acquisitions which have an average gross margin of
approximately 45%.
Selling, distribution and administrative expenses as a percentage of
gross profits remained unchanged at 67% compared to the prior year. Operating
costs associated with the consolidation and integration of acquisitions,
start-up of new distribution branches and start-up of ADI have been partially
offset by lower business insurance costs as a result of improved loss
experience rates and claims management and an insurance rebate. Until such
acquisitions and start-up activity is completed, the Company expects that it
will continue to incur additional operating expenses.
Operating income increased 28% during the quarter ended December 31,
1996 compared to the same quarter in 1995:
<TABLE>
(in thousands)
<CAPTION> Increase
1996 1995 (Decrease)
____ ____ __________
<S> <C> <C> <C>
Distribution $26,373 $21,303 $ 5,070
Direct Industrial 990 - 990
Manufacturing 2,016 1,681 335
______ ______ ______
$29,379 $22,984 $ 6,395
====== ====== ======
</TABLE>
The Distribution operating income margin decreased 40 basis points to
10.3% compared to the same quarter last year. The decrease was primarily the
result of recent industrial gas distribution acquisitions which have operating
margins averaging around 8%. Subject to the effects of future acquisitions and
the economy, the Company believes that its distribution operating margin
should improve as acquisitions are integrated.
The operating income margin related to the ADI segment was 3.3%. The
Company believes that its ADI operating income margin will improve as sales
programs are developed and implemented and upon the realization of cost
savings related to more efficient warehousing and shipping.
Manufacturing operating income increased $335 thousand compared to the
same quarter last year primarily as a result of the acquisition of the Jackson
Dome properties and increased electrode paste sales.
<PAGE> 17
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Interest expense, net, increased $4.1 million compared to the prior year
primarily as a result of the increase in average outstanding debt associated
with the acquisition of distribution businesses acquired since October 1,
1995, interest costs associated with the Company's investment in National
Welders Supply and debt incurred to finance refrigerant purchases during the
third quarter, offset by slightly lower interest rates. As discussed in
"Liquidity and Capital Resources" below, the Company has hedged floating
interest rates under certain borrowings with interest rate swap agreements.
Income tax expense represented 42.1% of pre-tax earnings in the current
quarter compared to 41.7% in the prior year. The increase in the effective
rate is due to non-deductible goodwill from recent acquisitions.
RESULTS OF OPERATIONS: NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THE
NINE MONTHS ENDED DECEMBER 31, 1995
____________________________________
Net sales increased 41% during the nine months ended December 31, 1996
compared to the prior year:
<TABLE>
(in thousands)
<CAPTION> 1996 1995 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $753,998 $575,156 $178,842
Direct Industrial 66,445 - 66,445
Manufacturing 29,570 26,695 2,875
_______ _______ _______
$850,013 $601,851 $248,162
======= ======= =======
</TABLE>
For the nine months ended December 31, 1996, Distribution sales
increased approximately $150 million resulting from the acquisition of 58
distributors since April 1, 1995 and approximately $29 million from same-store
sales growth. The Company estimates that had all acquisitions during the nine
months ended December 31, 1996 been consummated on April 1, 1996, Distribution
sales for 1996 would have been approximately $27 million higher. The increase
in same-store Distribution sales of approximately 4% was a result of growth in
all three product groups: gases, hardgoods and rent. The growth was
attributable to strong sales of lower margin hardgoods combined with selective
price increases, the Company's gas sales initiatives related to small bulk and
specialty gases, and continued growth in rental income. The Company believes
its same-store sales growth is slightly understated since it does not reflect
the Company's decision to cease unprofitable sales to certain customers and
other sales lost during acquisition consolidation and integration activity.
The Company estimates same-store sales based on a comparison of current period
sales to the prior period's sales, adjusted for acquisitions. Future
same-store sales growth is dependent on the economy and the Company's ability
to expand markets for new and existing products and to increase prices.
Management believes the Company's broad customer base and geographic diversity
help to reduce the adverse effects of an economic downturn on the Company.
<PAGE> 18
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Sales related to the Company's ADI segment increased approximately 14%
during the nine months ended December 31, 1996 compared to historical sales
results of the prior year.
Sales for the Company's Manufacturing segment increased 11% during the
nine months ended December 31, 1996 as a result of the acquisition of the
Jackson Dome properties, increased sales of composite electrode paste and
export sales of calcined coal.
The increase in Distribution gross profit of approximately $82 million
compared to the prior period resulted from acquisitions which contributed
approximately $67 million and from same-store gross profit growth of
approximately $15 million. The same-store gross profit growth is attributable
to expansion of gross margins through selective price increases and better
buying through national purchasing programs combined with increased sales of
lower margin hardgoods, increased sales of gases related to the Company's
small bulk and specialty gases programs and growth in cylinder and other
equipment rental income. Compared to the prior year, the Company's
distribution gross margin of 49.7% is down 130 basis points primarily due to
industrial gas distribution acquisitions which have an average gross margin of
approximately 45%, and sales of lower margin hardgoods.
Selling, distribution and administrative expenses as a percentage of
gross profits remained unchanged at 67% compared to the prior year. Operating
costs associated with the consolidation and integration of acquisitions,
start-up of new distribution branches and start-up of ADI have been partially
offset by lower business insurance costs as a result of improved loss
experience rates and claims management and an insurance rebate. Until such
acquisitions and start-up activity is completed, the Company expects that it
will continue to incur additional operating expenses.
Operating income increased 28% during the nine months ended December 31,
1996 compared to the prior year:
<TABLE>
(in thousands)
<CAPTION>
1996 1995 Increase
____ ____ __________
<S> <C> <C> <C>
Distribution $77,895 $62,042 $15,853
Direct Industrial 2,172 - 2,172
Manufacturing 5,641 5,123 518
______ ______ ______
$85,708 $67,165 $18,543
====== ====== ======
</TABLE>
<PAGE> 19
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Distribution operating income margin decreased 50 basis points to
10.3% compared to the same period in the prior year. The decrease was
primarily the result of recent industrial gas distribution acquisitions which
have operating margins averaging around 8%. Subject to the effects of future
acquisitions and the economy, the Company believes that its distribution
operating income margin should improve as acquisitions are integrated.
The operating income margin related to the ADI segment was 3.3%. The
Company believes that its ADI operating income margin will improve as sales
programs are developed and implemented and upon the realization of the cost
savings related to more efficient warehousing and shipping.
Manufacturing operating income increased $518 thousand compared to the
prior year primarily as a result of the acquisition of the Jackson Dome
properties, a strong demand for carbon products offset by a shift in sales
more towards lower margin exports of calcined coal versus domestic coal sales
and slightly lower nitrous oxide sales.
Interest expense, net, increased $10.7 million compared to the prior
year primarily as a result of the increase in average outstanding debt
associated with the acquisition of distribution businesses acquired since
April 1, 1995 and interest costs associated with the Company's investment in
National Welders Supply, offset by slightly lower interest rates. As
discussed in "Liquidity and Capital Resources" below, the Company has hedged
floating interest rates under certain borrowings with interest rate swap
agreements.
Income tax expense represented 41.7% of pre-tax earnings in the nine
months ended December 31, 1996 compared to 42.3% in the prior year. The
decrease in the effective income tax rate was a result of state tax planning
strategies which were implemented late in fiscal 1996, offset by an increase
in the effective rate for non-deductible goodwill from recent acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
The Company has primarily financed its operations, capital expenditures,
stock repurchases, and acquisitions with borrowings, the issuance of common
stock and funds provided by operating activities.
Cash flows from operating activities totaled $38.5 million for the nine
months ended December 31, 1996. Depreciation, depletion and amortization
represented $45.8 million of cash flows from operating activities. Working
capital components of cash flow increased $41.2 million as a result of an
increase in accounts receivable associated with higher same-store sales, an
increase in inventory levels to meet increased hardgoods and gas sales volumes
and an increase in prepaid expenses and other current assets. Prepaid
expenses and other current assets include $23.7 million of costs associated
with the fraudulent breach of contract related to refrigerant R-12 purchases.
The increase in other assets and liabilities, net, primarily relates to
amounts paid in connection with securing product supply agreements.
Days-sales outstanding and distribution hardgoods days supply of inventory
improved slightly compared to March 31, 1996 levels. Total inventories have
increased primarily as a result of an increase in distribution inventories of
$6.5 million to support sales growth, and gases of $10 million associated with
specialty gas sales initiatives.
<PAGE> 20
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Cash used by investing activities totaled $250.8 million which was
primarily comprised of $48.1 million for capital expenditures, $169.1 million
related to acquisitions and $34.2 million related to the Company's investment
in unconsolidated affiliates ($27.9 related to the joint venture with National
Welders and $6.3 million related to foreign investments).
The Company's use of cash for capital expenditures was attributable to
the continued assimilation of certain acquisitions requiring capital
expenditures for combining cylinder fill plants, improving truck fleets and
purchasing cylinders in order to return cylinders which were rented from third
parties. Additionally, capital expenditures include the purchase of cylinders
and bulk tanks necessary to facilitate gas sales growth. The Company
estimates that its maintenance capital expenditures are approximately 2% of
net sales. The Company considers the replacement of existing capital assets
to be maintenance capital expenditures.
The Company has recently undertaken initiatives to further develop its
industrial gas customer base to selectively include customers which require
large volume supplies of gases, such as nitrogen. For these customers, the
Company plans to enter into long-term supply contracts in conjunction with
air separation plants which will be built near the customer's facility or
facilities. The Company has entered into agreements with two customers which
requires the construction of two air separation plants which will begin
production during fiscal 1998. Upon completion, as lessee, the Company
intends to lease the plants under long-term operating leases.
Financing activities provided cash of $212.4 million with total debt
outstanding increasing by $252.1 million from March 31, 1996. Funds borrowed
in connection with the acquisition of distribution businesses and the
Company's investment in National Welders and other foreign investments,
totalled $203.3 million.
The Company's primary source of borrowing is a $500 million unsecured
revolving credit facility with various commercial banks which matures on
September 30, 2001. At December 31, 1996, the Company had approximately $357
million in borrowings under the facility and approximately $84 million
committed under letters of credit, resulting in unused availability under the
facility of approximately $59 million.
On August 8, 1996, the Company commenced a medium term note program
pursuant to a registration statement filed with the Securities and Exchange
Commission on July 15, 1996, which provides for the issuance of its securities
with an aggregate public offering price of up to $450 million. In September
1996, the Company issued the following long-term debt under the medium term
note program: $100 million of unsecured notes due September 2006 bearing
interest at a fixed rate of 7.75%; $50 million of unsecured notes due
September 2001 bearing interest at a fixed rate of 7.15%. The proceeds from
the medium term note issuances were used to repay bank debt.
<PAGE> 21
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company has a CDN $50 million Canadian credit facility ($37 million
U.S.) with various commercial banks which matures on November 14, 1998. At
December 31, 1996, the Company had approximately CDN $42 million ($31 million
U.S.) in borrowings outstanding under the facility, resulting in unused
availability under the facility of approximately CDN $8 million ($6 million
U.S.).
The Company also has unsecured line of credit agreements with various
commercial banks. At December 31, 1996, these agreements totaled $50 million,
under which the Company had no borrowings outstanding.
At December 31, 1996, the effective interest rate related to outstanding
borrowings under all credit lines was approximately 6.04%. The Company's loan
agreements contain covenants which include the maintenance of a minimum equity
level and maintenance of certain financial ratios.
In managing interest rate exposure, principally under the Company's
floating rate revolving credit facilities, the Company has entered into
21 interest rate swap agreements during the period from June 1992
through December 31, 1996. The swap agreements are with major financial
institutions and aggregate $324 million in notional principal amount at
December 31, 1996. Approximately $205 million of the notional principal
amount of the swap agreements require fixed interest payments based on an
average effective rate of 6.53% for remaining periods ranging between 1 and 8
years. Five swap agreements require floating rates ($119.5 million notional
amount at 5.75% at December 31, 1996). Under the terms of seven of the swap
agreements, the Company has elected to receive the discounted value of the
counterparty's interest payments upfront. At December 31, 1996, approximately
$19.7 million of such payments were included in other liabilities. The
Company continually monitors its positions and the credit ratings of its
counterparties, and does not anticipate nonperformance by the counterparties.
The Company will continue to look for appropriate acquisitions and
expects to fund such acquisitions, future capital expenditure requirements and
commitments related to foreign investments primarily through the use of cash
flow from operations, debt, common stock for certain acquisition candidates
and other available sources. In connection with the acquisition of Rutland,
the Company issued approximately 3.4 million shares of the Company's common
stock, including approximately 2.4 million treasury shares.
On October 29, 1996, the Company announced that it signed a letter of
intent to acquire Carbonic Industries Corporation ("Carbonic Industries"). In
the proposed transaction, Carbonic Industries will be merged into a newly-
formed subsidiary of the Company in exchange for a combination of the
Company's common stock and cash, and is expected to close during April 1997.
Pursuant to a 4,000,000 share repurchase program which was announced in
fiscal 1996, the Company purchased 15,000 shares of Common Stock during the
quarter. Subsequent to December 31, 1996, the Company repurchased an
additional 125,000 shares, leaving a total of 1,500,000 shares available under
the repurchase program. The Company's treasury shares will be used to fund
acquisitions and employee benefit programs and will be acquired in open market
transactions, from time-to-time, depending on market conditions.
The Company does not currently pay dividends.
<PAGE> 22
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OTHER
_____
New Accounting Pronouncements
In the first quarter of fiscal 1997, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of." The statement requires the recognition of an impairment
loss for an asset held for use when the estimate of undiscounted future cash
flows expected to be generated by the asset is less than its carrying amount.
Measurement of the impairment loss is based on fair value of the asset.
Management believes that the adoption of this statement did not have a
material impact on earnings, financial condition or liquidity of the Company.
The Company accounts for stock options according to the provisions of
Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued
to Employees." In October 1995, the Financial Accounting Standards Board
issued SFAS Statement No. 123, "Accounting for Stock-Based Compensation." The
new standard defines a fair value method of accounting for stock options and
similar equity instruments. Companies may elect to continue to use existing
accounting rules or adopt the fair value method for expense recognition.
Companies that elect to continue to use existing accounting rules are required
to provide pro-forma disclosures of net income and earnings per share assuming
the fair value method was adopted. The Company has elected to continue to use
existing accounting rules. Accordingly, the Company will present the required
pro-forma disclosure provisions for its fiscal year ending March 31, 1997. As
the Company will continue to account for stock-based compensation using the
intrinsic value method, this statement will not have a material impact on
earnings, financial condition or liquidity of the Company.
In June 1996, the Financial Accounting Standards Board issued SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". This statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a financial-
components approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial assets,
an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial-
components approach focuses on the assets and liabilities that exist after the
transfer. If a transfer does not meet the criteria for a sale, the transfer
is accounted for as a secured borrowing with pledge of collateral. This
statement is effective for transfer and servicing of financial assets and
extinguishments of liabilities for fiscal years beginning after December 15,
1996 and is to be applied prospectively. Management believes that the
adoption of this statement will not have a material impact on earnings,
financial condition or liquidity of the Company.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 96-1, which prescribes generally accepted
accounting principles for environmental remediation liabilities. This SOP
more specifically identifies future, long-term monitoring and administration
expenditures as remediation liabilities that need to be accrued on the balance
sheet as an existing obligation. This SOP is effective for fiscal years
<PAGE> 23
beginning after December 15, 1996. Management believes that the adoption of
this statement will not have a material impact on earnings, financial
condition or liquidity of the Company.
Forward-looking Statements
This report contains forward-looking statements. In connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, there are certain important factors that could cause the Company's
actual results to differ materially from those included in such forward-
looking statements. Some of the important factors which could cause actual
results to differ materially from those projected include, but are not limited
to: the Company's ability to continue to identify, complete and integrate
strategic acquisitions to enter new markets and expand existing business
(including Carbonic Industries); continued availability of financing to
provide additional sources of funding for future acquisitions; the Company's
ability to consolidate and integrate new acquisitions, capital expenditure
requirements and foreign investments; the effects of competition from
independent distributors and vertically integrated gas producers on products
and pricing, growth and acceptance of new product lines through the Company's
sales and marketing programs; changes in product prices from gas producers and
name-brand manufacturers and suppliers of hardgoods; uncertainties regarding
accidents or litigation which may arise in the ordinary course of business;
the Company's ability to recover assets in connection with the fraudulent
breach of contract related to refrigerant R-12 purchases; and the effects of,
and changes in the economy, monetary and fiscal policies, laws and
regulations, inflation and monetary fluctuations and fluctuations in interest
rates, both on a national and international basis. The Company does not
undertake to update any forward-looking statement made herein or that may be
made from time to time by or on behalf of the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 26, 1996, Praxair, Inc. ("Praxair") filed suit against the
Company in the Circuit Court of Mobile County, Alabama. The complaint
alleges tortious interference with business or contractual relations with
respect to Praxair's Right of First Refusal contract with the majority
shareholders of National Welders Supply Company, Inc. ("National
Welders") by the Company in connection with the Company's formation of a
joint venture with National Welders. Praxair is seeking compensatory
damages in excess of $100 million and punitive damages. The Company
believes that Praxair's claims are without merit and intends to defend
vigorously against such claims.
On September 9, 1996, the Company filed suit against Praxair in the Court
of Common Pleas of Philadelphia County, Pennsylvania. The complaint
alleges breach of contract, fraud, conversion and misappropriation of
trade secrets with respect to an agreement between Praxair and the
Company, pursuant to which Praxair induced the Company to provide Praxair
valuable information and conclusions developed by the Company concerning
CBI Industries, Inc. ("CBI") in exchange for Praxair's promise not
acquire CBI without Airgas. The Company has alleged that it became
entitled, pursuant to such agreement, to acquire certain of CBI's assets
having a value in excess of $800 million. The Company is seeking
substantial compensatory damages and punitive damages. On January 2,
1997, the Court entered an order overruling Praxair's preliminary
objections to the Company's complaint and ordering Praxair to file an
answer to the complaint. Praxair has since filed an answer and asserted
various defenses.
<PAGE> 24
On February 12, 1997, the Company filed a lawsuit in the United States
District Court for the Southern District of Georgia against Discount Auto
Parts, Inc. ("Discount"), an employee of Discount, and certain other business
and individual defendants, alleging that Discount and the other defendants
engaged in racketeering activity involving the fraudulent sale of smuggled and
counterfeit R-12 refrigerant gas. The Company's complaint alleges that the
racketeering activity of the defendants caused damages to the Company in an
amount not less than $20 million. The complaint seeks treble damages under
the Federal RICO and Georgia RICO statutes, as well as monetary damages under
other counts alleging fraud, conspiracy and related wrongful conduct.
On December 23, 1996, Airgas reported it had been a victim of a
fraudulent breach of contract by a supplier. That incident was part of the
racketeering activity alleged in the lawsuit filed.
Item 2. Changes in Securities
On December 31, 1996, 76,556 shares (the "Shares") of Airgas, Inc.
common stock, par value $0.01 per share were issued by the Company to
certain minority stockholders of the Company's operating subsidiaries.
The Shares were issued by the Company upon the exchange of shares in the
Company's operating subsidiaries acquired by such persons pursuant to
exchange rights agreements (the "Exchange Rights Agreements"). Under the
agreements, the stockholders have the right to exchange their shares in
the subsidiaries on certain dates designated by the Board of Directors of
the Company.
The Board of Directors designated December 31, 1996 as such an exchange
date on which certain of the stockholders could elect to exchange their
shares for shares of the Company's Common Stock.
The number of shares of the Company's Common Stock issued in exchange for
shares of the subsidiaries was determined based on a valuation of the
subsidiary shares, as reviewed by an independent appraiser, and the
market price of the Company's Common Stock as of June 30, 1996, the
valuation date.
There was no public offering in the above issuances, and such issuances
were exempt from the registration requirements of the Securities Act of
1933, as amended, by reason of Section 4 (2) thereof. The securities
were acquired for investment and not with a view to the distribution
thereof and were issued to five officers of the Company or its
subsidiaries who had access to information respecting the Company and its
business.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
________
11. Calculation of earnings per share.
b. Reports on Form 8-K
___________________
On October 17, 1996, the Company filed a current report on Form 8-K
which provided under Item 5, audited financial statements and pro forma
information for Randall-Graw Company, Inc., Welders Supply Company,
Inc., and Rutland Tool & Supply Company, Inc., three individually
insignificant business acquisitions in accordance with Regulation S-X,
Rule 3-05 (b)(2)(i).
<PAGE> 25
On October 24, 1996, the Company filed a current report on Form 8-K
pursuant to Item 5 and Item 7, reporting its earnings for the second
quarter ended September 30, 1996.
On December 5, 1996, the Company filed a current report on Form 8-K
pursuant to Item 5, undertaking to meet the requirements of Rule 416(b)
under the Securities Act of 1933 and Regulation S-K, Item 512(a)
regarding its Registration Statements Nos. 33-48388, 33-57893,
33-61301, 33-63201, 33-64633 and 33-64058. Under Rule 416(b), if
additional securities are issued as a result of a stock split prior to
completion of the distribution of the securities covered by a
registration statement, the additional securities are covered by the
registration statement, provided that the registration statement is
amended. The Company's Common Stock split 2-for-1 on April 15, 1996.
On December 23, 1996, the Company filed a current report on Form 8-K
pursuant to Item 5, reporting that the Company was the victim of a
fraudulent breach of contract by a third-party supplier of certain gas
products.
<PAGE>
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
February 13, 1997 /s/ Jeffrey P. Cornwell
_________________ _______________________
Date Jeffrey P. Cornwell
Vice President Finance and
Corporate Controller
<PAGE>
<PAGE> 27
<TABLE>
EXHIBIT 11
AIRGAS, INC.
EARNINGS PER SHARE CALCULATIONS
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Adjustment of Weighted Average
Shares Outstanding:
Shares of common stock
outstanding - weighted 68,260,000 63,245,000 66,000,000 62,540,000
Add: Net common stock
equivalents 2,850,000 2,955,000 2,800,000 3,260,000
Less: Airgas shares held by
National Welders Supply -
weighted (910,000) -- (600,000) --
__________ __________ __________ __________
Adjusted shares outstanding 70,200,000 66,200,000 68,200,000 65,800,000
========== ========== ========== ==========
Net earnings $10,960,000 $ 9,817,000 33,420,000 28,606,000
========== ========== ========== ==========
Earnings per share $ .16 $ .15 $ .49 $ .43
========== ========= ========== =========
</TABLE>
Earnings per share amounts were determined using the treasury stock method.
This method assumes the exercise of all dilutive outstanding options and
warrants and the use of the aggregate proceeds therefrom to acquire the
Company's outstanding common stock. Net earnings were divided by the weighted
average number of shares outstanding adjusted for the assumed exercise of the
options and warrants outstanding and repurchase of common stock to calculate
per share amounts.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 144,907
<ALLOWANCES> 4,578
<INVENTORY> 132,060
<CURRENT-ASSETS> 322,792
<PP&E> 712,492
<DEPRECIATION> 176,208
<TOTAL-ASSETS> 1,285,681
<CURRENT-LIABILITIES> 165,158
<BONDS> 631,094
<COMMON> 687
0
0
<OTHER-SE> 357,250
<TOTAL-LIABILITY-AND-EQUITY> 1,285,681
<SALES> 850,013
<TOTAL-REVENUES> 850,013
<CGS> 447,782
<TOTAL-COSTS> 447,782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,419
<INCOME-PRETAX> 57,303
<INCOME-TAX> 23,883
<INCOME-CONTINUING> 33,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,420
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
<PAGE>
</TABLE>
