<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: September 30, 1997
_____________________________
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
Radnor, PA 19087-5240
_______________________________________ ________________
(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 November 1, 1997: 70,978,802 shares
<PAGE> 2
AIRGAS, INC.
FORM 10-Q
September 30, 1997
INDEX
PART I - FINANCIAL INFORMATION
______________________________
Consolidated Balance Sheets as of September 30, 1997
and March 31, 1997....................................................3
Consolidated Statements of Earnings
for the Three Months Ended September 30, 1997 and 1996................5
Consolidated Statements of Earnings
for the Six Months Ended September 30, 1997 and 1996..................6
Consolidated Statements of Cash Flows
for the Six Months Ended September 30, 1997 and 1996..................7
Notes to Consolidated Financial Statements.................................8
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................14
PART II - OTHER INFORMATION
___________________________
Legal Proceedings.........................................................26
Submission of Matters to a Vote of Security Holders.......................27
Exhibits and Reports on Form 8-K..........................................27
Signatures................................................................28
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, March 31,
1997 1997
(Unaudited)
_____________ ________
ASSETS
____________________________________________
Current Assets
Trade receivables, less allowances for
doubtful accounts of $4,882 at September 30,
1997 and $4,443 at March 31, 1997 $175,360 $151,053
Inventories 146,109 129,372
Prepaid expenses and other current assets 39,406 31,574
_________ _________
Total current assets 360,875 311,999
_________ _________
Plant and Equipment, at cost 839,188 736,083
Less accumulated depreciation and amortization (204,679) (183,922)
_________ _________
Plant and equipment, net 634,509 552,161
Other Non-current Assets, net 148,023 132,257
Goodwill, net of accumulated amortization of
$34,455 at September 30, 1997 and $29,503
at March 31, 1997 347,087 294,614
_________ _________
Total assets $1,490,494 $1,291,031
========= =========
See accompanying notes to consolidated financial statements.
<PAGE> 4
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except per share amounts)
September 30, March 31,
1997 1997
(Unaudited)
___________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current Liabilities
Current portion of long-term debt $ 26,348 $ 25,158
Accounts payable, trade 73,071 74,329
Accrued expenses and other current liabilities 91,030 87,663
_________ _________
Total current liabilities 190,449 187,150
_________ _________
Long-Term Debt 743,718 629,931
Deferred Income Taxes 126,653 104,266
Other Non-current Liabilities 29,569 29,565
Minority Interest in Subsidiaries 4,079 3,462
Stockholders' Equity
Common stock $.01 par value, 200,000 shares
authorized, 69,750 and 68,762
shares issued at September 30, 1997 and
March 31, 1997, respectively 698 688
Capital in excess of par value 167,040 155,543
Retained earnings 230,527 196,626
Cumulative translation adjustment (567) (468)
Treasury stock, 100 and 800 common shares at
cost at September 30, 1997 and March 31, 1997 (1,672) (15,732)
_________ _________
Total stockholders' equity 396,026 336,657
_________ _________
Total liabilities and stockholders' equity $1,490,494 $1,291,031
========= =========
See accompanying notes to consolidated financial statements.
<PAGE> 5 AIRGAS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
__________________ __________________
Net sales:
Distribution $268,168 $244,701
Direct Industrial 61,216 20,437
Manufacturing 30,972 13,574
_______ _______
Total net sales 360,356 278,712
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation,
depletion and amortization)
Distribution 135,011 121,490
Direct Industrial 44,966 15,537
Manufacturing 14,404 8,110
Selling, distribution and
administrative expenses 114,199 89,544
Depreciation, depletion and
amortization 18,776 15,023
Recovery of refrigerant losses (14,500) -
_______ _______
Total costs and expenses 312,856 249,704
_______ _______
Operating income:
Distribution 27,182 26,133
Direct Industrial 1,343 638
Manufacturing 4,475 2,237
Recovery of refrigerant losses 14,500 -
_______ _______
47,500 29,008
Interest expense, net (13,670) (9,753)
Other income, net 1,573 70
Equity in earnings of unconsolidated
affiliates 434 114
Minority interest (309) (152)
_______ _______
Earnings before income taxes 35,528 19,287
Income tax expense 13,853 7,977
_______ _______
Net earnings $ 21,675 $ 11,310
======= =======
Earnings per share $ .31 $ .17
======= =======
Weighted average common and
common equivalent shares 70,950 67,660
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 6 AIRGAS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
Six Months Ended Six Months Ended
September 30, 1997 September 30, 1996
__________________ __________________
Net sales:
Distribution $539,437 $487,755
Direct Industrial 98,061 36,889
Manufacturing 54,270 28,166
_______ _______
Total net sales 691,768 552,810
_______ _______
Costs and expenses:
Cost of products sold
(excluding depreciation,
depletion and amortization)
Distribution 272,474 245,305
Direct Industrial 70,971 28,969
Manufacturing 25,690 17,215
Selling, distribution and
administrative expenses 219,542 175,731
Depreciation, depletion and amortization 36,591 29,261
Recovery of refrigerant losses (14,500) -
_______ _______
Total costs and expenses 610,768 496,481
_______ _______
Operating income:
Distribution 55,876 50,888
Industrial Distribution 2,448 1,014
Manufacturing 8,176 4,427
Recovery of refrigerant losses 14,500 -
_______ _______
81,000 56,329
Interest expense, net (25,778) (18,034)
Other income, net 2,046 351
Equity in earnings of unconsolidated
affiliates 319 114
Minority interest (618) (381)
_______ _______
Earnings before income taxes 56,969 38,379
Income taxes 23,068 15,919
_______ _______
Net earnings $ 33,901 $ 22,460
======= =======
Earnings per share $ .48 $ .33
======= =======
Weighted average common and
common equivalent shares 70,100 67,350
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 7 AIRGAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Six Months Ended Six Months Ended
September 30, 1997 September 30, 1996
__________________ __________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 33,901 $ 22,460
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation, depletion and amortization 36,591 29,261
Deferred income taxes 11,374 4,776
Equity in earnings of unconsolidated
affiliates (1,061) (749)
(Gain) loss on sale of plant and equipment (25) 101
Gain on divestiture of non-core business (1,452) -
Minority interest in earnings 618 381
Stock issued for employee benefit plan
expense 2,945 2,353
Changes in assets and liabilities,
excluding effects of business
acquisitions:
Trade receivables, net (7,081) (2,681)
Inventories (3,626) (20,458)
Prepaid expenses and other
current assets (5,400) (2,912)
Accounts payable, trade (14,266) (6,649)
Accrued expenses and other current
liabilities 391 1,777
Other assets and liabilities, net 1,488 (6,001)
_______ _______
Net cash provided by operating activities 54,397 21,659
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (65,419) (31,101)
Proceeds from sale of plant and
equipment 1,245 1,313
Proceeds from divestiture of non-core business 4,000 -
Business acquisitions, net of cash acquired (67,599) (87,969)
Business acquisitions-hold back settlements (3,174) (4,379)
Investment in unconsolidated affiliates (9,147) (33,849)
Dividends from unconsolidated affiliates 870 413
Other, net 364 (2,378)
_______ _______
Net cash used by investing activities (138,860) (157,950)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 224,593 667,681
Repayment of debt (124,674) (528,546)
Financing costs (8) (1,667)
Repurchase of treasury stock (18,363) -
Exercise of options and warrants 2,427 2,444
Net overdraft 488 (3,621)
_______ _______
Net cash provided by financing activities 84,463 136,291
_______ _______
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
excess of the cost of these affiliates is being amortized over 40 years.
Intercompany accounts and transactions are eliminated in consolidation.
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, 1997.
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 September 30, 1997 and March 31,
1997; the consolidated statements of earnings for the three and six months
ended September 30, 1997 and 1996; and the consolidated statements of cash
flows for the six months ended September 30, 1997 and 1996. The interim
operating results are not necessarily indicative of the results to be expected
for an entire year.
Certain reclassifications have been made to previously issued financial
statements to conform to the current presentation. Four businesses with
annual sales of approximately $40 million which were previously reported with
the Distribution segment are now reported with the Manufacturing segment.
(2) ACQUISITIONS
____________
From April 1, 1997 to September 30, 1997, the Company acquired ten
industrial gas distributors with aggregate annual sales of approximately $15
million, two industrial products distributors with annual sales of
approximately $106 million, and three carbon dioxide distributors with annual
sales of approximately $60 million. The aggregate purchase price, including
amounts related to non-competition and confidentiality agreements, amounted to
approximately $149 million and includes real estate acquired of approximately
$6 million. Included in the aggregate purchase price is the reissuance of
approximately 1.8 million treasury shares which were reissued in connection
with the acquisition of Carbonic Industries Corporation ("CIC"). Acquisitions
have been recorded using the purchase method of accounting, and, accordingly,
results of their operations have been included in the Company's consolidated
financial statements since the effective dates of the respective acquisitions.
Subsequent to September 30, 1997, the Company acquired six industrial
gas distributors with annual sales of approximately $45 million, and one
carbon dioxide distributor with annual sales of approximately $15 million.
<PAGE> 9
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(3) NON-RECURRING GAINS
___________________
On December 23, 1996, the Company announced it was the victim of a
fraudulent breach of contract by a third-party supplier of refrigerant gas.
In connection with the fraud, the Company recorded a non-recurring pre-tax
charge during the fourth quarter of fiscal 1997 of $26.4 million
(approximately $17 million after-tax) for product losses and costs associated
with the Company's investigation into the fraud. The Distribution subsidiary
which reported the special charge in fiscal 1997 is reported with the
Manufacturing segment in fiscal 1998. On July 28, 1997, the Company reported
that it had negotiated a comprehensive settlement with all the defendants in
this litigation. The terms of the settlement were approved by the bankruptcy
court on September 5, 1997. As a result of the recovery, the Company recorded
a non-recurring pre-tax gain during the second quarter of 14.5 million
(approximately $9.4 million after- tax). The recovery of $14.5 million
represents cash received of $18.2 million, a receivable of $1.5 million
expected to be collected in the third quarter, offset by additional costs and
expenses incurred year-to-date, estimated future out-of-pocket costs and other
reserves which totalled $5.2 million. The Company continues to pursue
additional recoveries in connection with the liquidation of a bankrupt
business and through coverage under insurance policies. (See Note 10 for
further discussion of legal proceedings with respect to the refrigerant fraud
litigation).
The Company also recorded a pre-tax gain, included in other income, in
the second quarter of approximately $1.5 million (approximately $980 after-
tax) related to the sale of a non-core business.
(4) EARNINGS PER SHARE
__________________
Earnings per share amounts were determined using the treasury
stock method.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 establishes new
standards for computing and presenting earnings per share, effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. All prior periods will be restated to reflect the
new Basic and Diluted earnings per share amounts. The Company's Basic
earnings per share is essentially net income divided by the weighted shares
outstanding, and the Diluted earnings per share is not expected to be
materially different than currently reported earnings per share amounts. The
Company will adopt SFAS No. 128 in the fourth quarter of fiscal 1998.
<PAGE> 10
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(5) INVENTORIES
___________
Inventories consist of:
(In thousands)
September 30, March 31,
1997 1997
___________ ________
Finished goods $144,651 $127,765
Raw materials 2,909 2,979
_______ _______
147,560 130,744
Less reduction to LIFO cost ( 1,451) (1,372)
_______ _______
$146,109 $129,372
======= =======
(6) PLANT AND EQUIPMENT
___________________
The major classes of plant and equipment are as follows:
(In thousands)
September 30 March 31,
1997 1997
_____________ _________
Land and land improvements $ 22,779 $ 21,676
Building and leasehold improvements 76,187 66,659
Cylinders 376,585 365,253
Machinery and equipment, including
bulk tanks 288,961 241,275
Transportation equipment 43,269 39,264
Construction in progress 31,407 1,956
_______ _______
$839,188 $736,083
======= =======
<PAGE> 11
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(7) OTHER NON-CURRENT ASSETS
_______________________
Other non-current assets include:
(In thousands)
September 30, March 31,
1997 1997
_____________ _________
Investment in unconsolidated
affiliates $ 83,468 $ 64,992
Noncompete agreements and other
intangible assets, at cost, net
of accumulated amortization of
$66.3 million at September 30, 1997
and $59.8 million at March 31, 1997 53,961 54,794
Other assets 10,594 12,471
_______ _______
$148,023 $132,257
======= =======
(8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
______________________________________________
Accrued expenses and other current liabilities include:
(In thousands)
September 30, March 31,
1997 1997
_____________ _________
Cash overdraft $ 15,234 $ 14,746
Accrued Interest 7,172 5,425
Insurance payable and related
reserves 6,646 5,224
Customer cylinder deposits 8,874 8,185
Other accrued expenses and current
liabilities 53,104 54,083
_______ _______
$ 91,030 $ 87,663
======= =======
<PAGE> 12
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(9) STOCKHOLDERS' EQUITY
____________________
Changes in stockholders' equity were as follows:
(In thousands of shares)
Shares of Common Treasury
Stock $.01 Par Value Stock
____________________ _________
Balance--April 1, 1997 68,762 800
Common stock issuance (a) 988
Purchase of treasury stock 1,154
Reissuance of treasury stock (b) (1,854)
______ ______
Balance--September 30, 1997 69,750 100
====== ======
(In thousands of dollars)
Capital in Cumulative
Common Excess of Retained Translation Treasury
Stock Par Value Earnings Adjustment Stock
______ ___________ _________ ___________ ________
Balance--April 1, 1997 $688 $155,543 $196,626 $(468) $(15,732)
Net earnings -- -- 33,901 -- --
Common stock issuance (a) 10 11,497 -- -- --
Translation adjustments -- -- -- (99) --
Purchase of treasury
stock -- -- -- -- (17,049)
Reissuance of treasury
stock (b) -- -- -- -- 31,109
____ _______ _______ ____ ______
Balance--September 30,1997 $698 $167,040 $230,527 $(567) $ (1,672)
==== ======= ======= ==== ======
(a) Related to the issuance of common stock for stock option exercises,
(525 thousand shares) acquisitions (259 thousand shares) and the
Company's Employee Stock Purchase Plan (204 thousand shares).
(b) Reissued in connection with the acquisition of CIC.
(10) COMMITMENTS AND CONTINGENCIES
_____________________________
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 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. On February 24, 1997,
the court entered an order denying the Company's motion to dismiss for forum
non conveniens. The Company believes that Praxair's claims are without merit
and intends to defend vigorously against such claims.
<PAGE> 13
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
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 to acquire CBI without the Company's
participation. 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 compensatory 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. Thereafter, Praxair filed a motion for judgement on the pleadings.
On July 31, 1997, the court entered an order denying that motion.
On December 23, 1996, the Company reported that it had been a victim of a
fraudulent breach of contract by a supplier. On February 12, 1997, the
Company filed a lawsuit in the United States District Court for the Southern
District of Georgia under the Federal RICO and Georgia RICO statutes against
Discount Auto Parts, Inc. ("Discount"), an employee of Discount, and certain
other businesses 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 alleged that the racketeering activity of the defendants caused
damages to the Company in an amount not less than $20 million. On July 28,
1997 the Company reported that it had negotiated a comprehensive settlement
with all of the defendants in the litigation described above. The terms of
the settlement were approved by the bankruptcy court on September 5, 1997. As
a result of the recovery, the Company recorded a non-recurring pre-tax gain
during the second quarter of $14.5 million (approximately $9.4 million after-
tax). The Company continues to pursue additional recoveries in connection
with the liquidation of a bankrupt business, and through coverage under
insurance policies. (See Note 3 for further discussion of the non-recurring
gain recorded for the partial recovery of refrigerant losses).
The Company is involved in other various legal proceedings which have
arisen in the ordinary course of its business and have not been finally
adjudicated. These actions, when ultimately concluded and determined, will
not, in the opinion of management, have a material adverse effect upon the
Company's financial condition, results of operations or liquidity.
<PAGE>
<PAGE> 14
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 second quarter ended September
30, 1997 reflect continued growth compared with the second quarter last year.
Net sales increased 29% to $360.4 million from $278.7 million in the second
quarter last year. After-tax cash flow (net earnings plus depreciation,
depletion, amortization and deferred taxes), before non-recurring gains on the
sale of a non-core business and a partial recovery of refrigerant losses,
increased by 13% to a record $32.4 million, or $.46 per share, compared to
$28.7 million, or $.42 per share for the same quarter last year. Including a
$1.5 million ($980 thousand after-tax) gain on the sale of a non-core
business, and a $14.5 million ($9.4 million after-tax) gain from the partial
recovery of refrigerant losses, net earnings for the second quarter were $21.7
million, or $.31 per share. Net earnings (before non-recurring gains) were
$11.3 million, or $.16 per share, compared to $11.3 million, or $.17 per share
a year ago, principally the result of flat August 1997 sales in the
Distribution segment. The Company believes that the UPS strike had a direct
adverse effect on its distribution businesses resulting in reduced shipments
to customers and increased distribution expenses, as well as indirect effects,
including slowdowns in customers' businesses.
Growth in the industrial gas distribution business was assisted by the
acquisition of ten industrial gas distributors from April 1, 1997 to September
30, 1997, with annual sales of approximately $15 million. Subsequent to
September 30, 1997, the Company completed the acquisition of six industrial
gas distributors with annual sales of approximately $45 million. Internal
growth and expansion of existing product lines resulted in same-store sales
growth of 5.0% and same-store gross profit growth of 4.7% compared to the same
period in the prior year.
Since April 1, 1997, Airgas Direct Industrial ("ADI") has acquired two
key industrial products distributors: (1) Kendeco Industrial Supply, an
"engineered-systems integrator" for the cutting tools and abrasives market
with annual sales of approximately $15 million, and (2) Lyons Safety, Inc., a
national marketer of safety and personal protection systems with annual sales
of approximately $90 million. These two acquisitions strengthen ADI's
position through the expansion of two key product lines ( safety products and
metalworking tools) in the largest geographical market for industrial
supplies, and through additional marketing and service capabilities to large
customers. In addition, ADI realized same-store sales and same-store gross
profit growth of approximately 15%, respectively, compared to the same period
in the prior year.
The Manufacturing segment's expansion into carbon dioxide continued,
with the acquisition of four carbon dioxide distributors since April 1, 1997,
with aggregate annual sales of approximately $74 million, including Carbonic
Reserves.
With these acquisitions, the Company's combined annual sales of carbon
dioxide and dry ice products total in excess of $100 million. These
acquisitions, combined with other businesses acquired in fiscal 1997 enhance
the Company's ability to supply carbon dioxide and dry ice products through
its distribution network.
<PAGE> 15
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The fraudulent breach of contract by a third-party supplier of
refrigerant gas was reported by the Company on December 23, 1996. On
February 12, 1997, the Company disclosed it had filed a lawsuit in the United
Stated District Court against Discount Auto Part, Inc. ("Discount"), an
employee of Discount, and certain other businesses and individual defendants
engaged in racketeering activity involving the fraudulent sale of smuggled and
counterfeit R-12 refrigerant gas. The Company's complaint alleged that the
racketeering activity of the defendants caused damages to the Company in an
amount not less than $20 million. In connection with the fraud, the Company
recorded a non-recurring pre-tax charge during the fourth quarter of fiscal
1997 of $26.4 million (approximately $17 million after-tax) for product losses
and costs associated with the Company's investigation into the fraud. On July
28, 1997, the Company reported that it had negotiated a comprehensive
settlement with all defendants in the litigation described above. The terms
of the settlement were approved by the bankruptcy court on September 5, 1997.
As a result of the recovery, the Company recorded a non-recurring gain in the
second quarter of $14.5 million (approximately $9.4 million after-tax). The
recovery of $14.5 million represents cash received of $18.2 million, a
receivable of $1.5 million expected to be collected in the third quarter,
offset by additional costs and expenses incurred year-to-date, estimated
future out-of-pocket costs and other reserves which totalled $5.2 million.
The Company continues to pursue additional recoveries in connection with the
liquidation of a bankrupt business, and through coverage under insurance
policies.
<PAGE>
<PAGE> 16
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS: THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1996
_____________________________________
Net sales increased 29% during the quarter ended September 30, 1997
compared to the same quarter in the prior year:
(in thousands)
1997 1996 Increase
____ ____ __________
Distribution $268,168 $244,701 $ 23,467
Direct Industrial 61,216 20,437 40,779
Manufacturing 30,972 13,574 17,398
_______ _______ _______
$360,356 $278,712 $ 81,644
======= ======= =======
For the quarter ended September 30, 1997, Distribution sales increased
approximately $10 million resulting from the acquisition of 20 distributors
since July 1, 1996 and approximately $13 million from same-store sales.
Although August sales were flat, largely the result of the UPS strike, sales
for the remainder of the quarter reflected solid growth. The increase in
same-store Distribution sales of 5% were more heavily weighted towards lower
margin hardgoods with internal growth primarily attributable to higher sales
volumes. Within the Distribution segment, the Western region of the United
States realized continued growth in hardgoods and gases with same-store sales
growth of approximately 8%. The Upper Midwest and Northeast regions increased
same-store sales approximately 2% and also improved sequentially. The
Southern region reflected a more widespread slowdown in August 1997. In the
Southern region, the prior period also included the benefit of non-recurring
specialty and refrigerant gas sales. The Company continues to focus on
internal sales growth through the development of new gas products and product-
line extensions, including specialty gases, small bulk gases, carbon dioxide,
replacement refrigerants in returnable containers, expansion of rental welder
fleets and increased hardgoods business through ADI.
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.
ADI's sales include welding, metalworking, safety and other Maintenance,
Repair and Operations ("MRO") hardgoods. The internal sales growth rate for
ADI was approximately 15% during the second quarter of 1998. Despite the
nationwide UPS strike, ADI still achieved strong growth by arranging alternate
carriers, although at a higher distribution expense, enabling the Company to
continue shipments to its customers. In addition, ADI has completed two
acquisitions in fiscal 1998 to expand product lines, geographic coverage and
enhance marketing and service capabilities. Sales to the Distribution segment
totaled approximately $803 thousand.
<PAGE> 17
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Manufacturing segment's sales increased $17.4 million during the
second quarter primarily as a result of recent acquisitions, which amounted to
approximately $16.8 million. Strong sales of calcium carbide and nitrous
oxide were offset slightly by lower shipments of certain carbon products to
one customer. Four businesses with annual sales of approximately $40 million
which were previously reported with the Distribution segment are now reported
with the Manufacturing segment. Sales to the Distribution segment totaled
approximately $2.8 million.
The increase in Distribution gross profits of approximately $9.9 million
over the same quarter in the prior year resulted from acquisitions which
contributed approximately $4.0 million and from same-store gross profit growth
of 4.7% or approximately $5.9 million. Same-store gross profit growth
resulted primarily from sales volume growth. On a same-store basis, the
Distribution gross margin was 49.7% which decreased slightly compared to the
same period in the prior year as a result of a shift in sales mix more towards
lower margin hardgoods. Hardgoods accounted for 52% of total sales compared to
50.4% in the same period last year. Acquired companies had a low proportion
of gas sales at 15%. Additionally, the prior quarter included the benefit of
non-recurring specialty and refrigerant gas sales. Finally, bulk tank rent
related to small bulk installations, and an increased base of rental welding
equipment and the return of third party rented cylinders continued to help
improve same-store gross profits.
For the quarter, ADI's gross margin of 26.5% compared favorably to the
same quarter last year as a result of the September 1, 1996 acquisition of
Rutland Tool & Supply Company ("Rutland"), which has a gross margin of
approximately 40%. Same-store gross profit growth of approximately $2.1
million resulted from sales volume growth.
For the quarter, the Manufacturing gross margin of 53.5% compared
favorably to the same quarter last year as a result of acquisitions.
Selling, distribution, and administrative expenses ("SG&A") increased
$24.6 million compared to the same quarter last year primarily due to
acquisitions. SG&A expenses as a percentage of sales decreased 40 basis
points to 31.7% compared to the same period in the prior quarter primarily as
a result of ADI acquisitions which have a lower expense-to-sales ratio than
the Distribution and Manufacturing segments. The improvement in SG&A expenses
relative to sales was somewhat offset by higher-than-expected medical
insurance costs, increased distribution expense resulting from the UPS strike,
costs associated with the start-up operations in Eastern Canada, and planned
increases in corporate operating expenses. Subject to future acquisitions,
the Company believes that as it continues to integrate acquisitions and
complete start-up and expansion activities, SG&A expenses relative to net
sales should improve. The Company anticipates additional operating costs
resulting from the integration and standardization of information systems
during fiscal years 1998, 1999 and 2000. As a result of the standardization
of information systems, the Company believes Year 2000 issues will be
mitigated.
Depreciation, depletion and amortization increased $3.7 million compared
to the same period in the prior quarter due to acquisitions and from increased
capital expenditures.
<PAGE> 18
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Excluding a non-recurring gain of $14.5 million, operating income
increased 14% in 1997 compared to 1996:
(in thousands)
1997 1996 Increase
____ ____ __________
Distribution $27,182 $26,133 $ 1,049
Direct Industrial 1,343 638 705
Manufacturing 4,475 2,237 2,238
______ ______ ______
$33,000 $29,008 $ 3,992
====== ====== ======
The Distribution segment's operating margin decreased 60 basis points to
10.1% compared with the same period in the prior year. The decrease resulted
primarily from the slowdown in the month of August combined with higher
operating costs and expenses. Subject to the effects of future acquisitions
and the Company's ability to increase sales and expand gross margins, the
Company continues to focus on improving its operating margin by implementing
selective price increases, reducing costs by leveraging its national
purchasing power and continuing to integrate acquisitions.
The operating income margin for ADI decreased 90 basis points to 2.2%
compared with the same quarter last year. The decrease resulted partially
from higher distribution costs attributable to the UPS strike and higher
operating costs. The Company believes that ADI's operating income margin will
continue to be impacted by expansion costs related to information systems, and
infrastructure and facility enhancements. ADI is establishing a new
distribution center in Southern California which will consolidate four other
ADI warehouses. The Company expects the distribution center to be fully
operational in January 1998.
The Manufacturing segment's operating income increased $2.2 million
compared to the same quarter last year primarily as a result of acquisitions.
During the second quarter ended September 30, 1997, the Company recorded
a non-recurring pre-tax gain of approximately $14.5 million (approximately
$9.4 million after-tax). See Note 3 and 10 to the Company's consolidated
financial statements for further discussion of the non-recurring gain.
Interest expense, net, increased $3.9 million compared to the same
quarter last year primarily as a result of the increase in average outstanding
debt associated with the acquisition of businesses acquired since July 1,
1996, the joint venture investment in National Welders, interest costs on debt
associated with the refrigerant fraud and the repurchase of the Company's
common stock.
Income tax expense, excluding the non-recurring gains, represented 42.4%
of pre-tax earnings in 1998 compared to 41.4% in 1997. The increase in the
effective income tax rate was primarily a result of non-deductible goodwill
from recent acquisitions.
<PAGE> 19
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS: SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE SIX
MONTHS ENDED SEPTEMBER 30, 1996
________________________________
Net sales increased 25% during the six months ended September 30, 1997
compared to the prior year:
(in thousands)
1997 1996 Increase
____ ____ __________
Distribution $539,437 $487,755 $ 51,682
Direct Industrial 98,061 36,889 61,172
Manufacturing 54,270 28,166 26,104
_______ _______ _______
$691,768 $552,810 $138,958
======= ======= =======
For the six months ended September 30, 1997, Distribution sales
increased approximately $28 million resulting from the acquisition of 29
distributors since April 1, 1996 and approximately $24 million from same-store
sales. The increase in same-store Distribution sales of 4.7% was a result of
growth in all three product groups: gases, hardgoods and rent. The internal
growth was primarily attributable to higher sales volume. Although August
1997 sales were essentially flat, largely the result of the UPS strike, sales
for the remainder of the six-month period reflected solid growth. The Company
continues to focus on internal sales growth through the development of new gas
products and product-line extensions, including specialty gases, small bulk
gases, carbon dioxide, replacement refrigerants in returnable containers,
expansion of rental welder fleets and increased hardgoods business through
ADI. 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.
ADI's sales include welding, metalworking, safety and other MRO
hardgoods. The internal sales growth rate for ADI was approximately 14.2% for
the six months ended September 30, 1997. Despite the nationwide UPS strike in
the second quarter, ADI still achieved strong growth by arranging alternate
carriers, although at a higher distribution expense, enabling the Company to
continue shipments to its customers. Sales to the Distribution segment
totaled approximately $1.6 million.
The Manufacturing segment's sales increased $26.1 million during the six
months ended September 30, 1997, primarily as a result of acquisitions.
Strong sales of calcium carbide and nitrous oxide were offset slightly by
lower shipments of certain carbon products to one customer. Four businesses
with annual sales of approximately $40 million which were previously reported
with the Distribution segment are now reported with the Manufacturing segment.
Sales to the Distribution segment totaled approximately $6.7 million.
<PAGE> 20
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The increase in Distribution gross profits of approximately $24.5
million compared to the prior period resulted from acquisitions which
contributed approximately $11.6 million and from same-store gross profit
growth of 5.1% or approximately $12.9 million. Same-store gross profit growth
resulted primarily from sales volume growth of $12.0 million. On a same-store
basis, the Distribution gross margin was 49.5% which decreased slightly
compared to the same period in the prior year, primarily as a result of a
shift in sales mix more towards lower margin hardgoods. Hardgoods accounted
for 51.8% of total sales compared to 51.1% in the prior period. This decrease
was offset by favorable gas pricing and gas programs such as small bulk and
specialty gases, along with higher sales volumes and margins on hardgoods
combined with higher hardgoods rebates. Finally, bulk tank rent related to
small bulk installations, and an increased base of rental welding equipment
and the return of third party rented cylinders continued to help improve same-
store gross profits.
For the six months ended September 30, 1997, ADI's gross margin of 27.6%
compared favorably to the prior year as a result of the September 1, 1996
acquisition of Rutland, which has a historical gross margin of approximately
40%. Same-store gross profit of approximately $3.3 million resulted primarily
from sales volume growth.
For the six months ended September 30, 1997, the Manufacturing gross
margin of 52.7% compared favorably to the prior period as a result of
acquisitions.
Selling, distribution, and administrative expenses ("SG&A") increased
$43.8 million compared to the same period last year primarily due to
acquisitions. SG&A expenses as a percentage of sales decreased slightly to
31.7% compared to the same period in the prior year, primarily as a result of
ADI acquisitions which have a lower expense-to-sales ratio than the
Distribution and Manufacturing segments. The improvement in SG&A expenses
relative to sales was somewhat offset by higher operating costs associated
with the start-up of new Distribution branches in Eastern Canada, planned
expenses related to the expansion of ADI, costs associated with integration
and consolidation of certain Distribution acquisitions, legal expenses related
to successfully defending a lawsuit, higher-than-expected medical insurance
costs, increased distribution expense resulting from the UPS strike, and
planned increases in corporate operating expenses. Subject to future
acquisitions, the Company believes that as it continues to integrate
acquisitions and complete start-up and expansion activities, SG&A expenses
relative to net sales should improve. The Company anticipates additional
operating costs resulting from the integration and standardization of
information systems during fiscal years 1998, 1999 and 2000. As a result of
the standardization of information systems, the Company believes Year 2000
issues will be mitigated.
Depreciation, depletion and amortization increased $7.3 million compared
to the same period in the prior year due to acquisitions and from increased
capital expenditures.
<PAGE> 21
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Excluding a non-recurring gain of $14.5 million, operating income
increased 18.1% in 1997 compared to 1996:
(in thousands)
1997 1996 Increase
____ ____ __________
Distribution $55,876 $50,888 $ 4,988
Direct Industrial 2,448 1,014 1,434
Manufacturing 8,176 4,427 3,749
______ ______ ______
$66,500 $56,329 $10,171
====== ====== ======
The Distribution segment's operating margin was essentially flat at 10.6%
compared with last year. The increase during the first quarter from higher
same-store gross profits was offset by the slowdown in August combined with
higher operating expenses. Subject to the effects of future acquisitions and
the Company's ability to increase sales and expand margins, the Company
continues to focus on improving its operating margin by implementing selective
price increases, reducing costs by leveraging its national purchasing power
and continuing to integrate acquisitions.
For the six months ended September 30, 1997, the operating income margin
for ADI decreased 20 basis points to 2.5% compared with last year. The
decrease resulted partially from higher distribution costs attributable to the
UPS strike and higher operating costs. The Company believes that ADI's
operating income margin will continue to be impacted by expansion costs
related to information systems, and infrastructure and facility enhancements.
ADI is establishing a new distribution center in Southern California which
will consolidate four other ADI warehouses. The Company expects the
distribution center to be operational in January 1998.
The Manufacturing segment's operating income increased $3.7 million
compared to last year primarily as a result of acquisitions.
Interest expense, net, increased $7.7 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, 1996
the joint venture investment in National Welders, interest costs and debt
associated with the refrigerant fraud, and the repurchase of the Company's
common stock. 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, excluding non-recurring gains, represented 42.7% of
pre-tax earnings in the six months ended September 30, 1997 compared to 41.5%
in the prior year. The increase in the effective income tax rate was primarily
a result of non-deductible goodwill from recent acquisitions.
<PAGE> 22
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
The Company has 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 $54.4 million ($39.9
million excluding the non-recurring gain from partial recovery of refrigerant
losses) for the six months ended September 30, 1997. Depreciation, depletion
and amortization represent $36.6 million of cash flows from operating
activities. Deferred income taxes of $11.4 million resulted from temporary
differences. Cash flows from working capital components decreased $30 million
as a result of a decrease in accounts payable due to the timing of invoice
payments, an increase in accounts receivable associated with higher same-store
sales, and an increase in inventory levels to meet increased sales volumes.
Days-sales outstanding are comparable to the March 31, 1997 levels and
distribution hardgoods days' supply of inventory has improved approximately
15% since March 31, 1997.
Cash used by investing activities totaled $138.9 million which was
primarily comprised of $65.4 million for capital expenditures, and $79.9
million related to acquisitions and investments in unconsolidated affiliates.
The Company's use of cash for capital expenditures was attributable to
the construction of two air separation plants, the continued assimilation of
acquisitions which require expenditures for combining cylinder fill plants,
improving truck fleets, purchasing cylinders in order to return cylinders
rented from third parties and the purchase of cylinders and bulk tanks
necessary to facilitate gas sales growth. The Company has entered into long-
term supply contracts with two customers which require the construction of two
air separation plants which are scheduled to begin production late in calendar
1997. Through September 30, 1997, the Company incurred capital expenditures
of approximately $29.8 million related to the construction of air separation
plant construction and expects additional capital expenditures of
approximately $7 to $10 million to complete plant construction. For the six
months ended September 30, 1997, approximately $24.8 million of capital
expenditures were for the purchase of cylinders, bulk tanks and machinery and
equipment. The Company estimates that its maintenance capital expenditures
are approximately 2% of net sales. The Company considers the replacement of
existing capital assets to be maintenance capital expenditures.
Financing activities provided cash of $84.5 million with total debt
outstanding increasing by $115 million from March 31, 1997. Funds from
financing activities were used primarily for acquisitions, capital
expenditures and the repurchase of Airgas common stock.
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 September 30, 1997, the Company had approximately $396
million in borrowings under the facility and approximately $72 million
committed under letters of credit, resulting in unused availability under the
facility of approximately $32 million.
<PAGE> 23
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
On June 30, 1997, the Company entered into an additional $125 million
unsecured revolving credit facility with a commercial bank which matures on
November 1, 1998. The terms and conditions of this facility are also similar
to the Company's existing $500 million facility. At September 30, 1997, the
Company had no borrowings outstanding under the facility. The Company intends
to terminate its $125 million facility in conjunction with an anticipated
increase in the Company's $500 million revolving credit facility in December
1997, which will have terms and conditions similar to its existing $500
million facility.
In fiscal 1997, the Company commenced a medium-term note program which
provides for the issuance of its securities with an aggregate public offering
price of up to $450 million. During fiscal 1997, 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%; and $75 million of unsecured notes due March 2004 at a fixed
rate of 7.14%. The proceeds from the medium-term note issuances were used to
repay bank debt.
The Company has a Canadian credit facility totalling C$50 million (US$36
million) with various commercial banks which matures on November 14, 1998. At
September 30, 1997, the Company had approximately C$44 million (US$32 million)
in borrowings outstanding under the facility, resulting in unused availability
under the facility of approximately C$6 million (US$4 million). On July 8,
1997, the Company entered into an additional C$15 million (US$11 million)
unsecured revolving credit facility with a commercial bank which matures on
January 8, 1999. At September 30, 1997, the Company had approximately C$13
million (US$9 million) in borrowings outstanding under the facility resulting
in unused availability under the facility of approximately C$2 million
(US$2 million). The Company intends to terminate its C$50 million and C$15
million facilities in conjunction with an anticipated increase in the
Company's $500 million revolving credit facility in December 1997.
The Company also has unsecured line of credit agreements with various
commercial banks. At September 30, 1997, these agreements totaled $50
million, under which the Company had no borrowings outstanding.
At September 30, 1997, the effective interest rate related to
outstanding borrowings under all credit lines was approximately 6.07%. The
Company's loan agreements contain covenants which include the maintenance of a
minimum equity level, maintenance of certain financial ratios, restrictions on
additional borrowings and limitations on dividends.
In managing interest rate exposure, principally under the Company's
floating rate revolving credit facilities, the Company has entered into
23 interest rate swap agreements during the period from June 1992
through September 30, 1997. The swap agreements are with major financial
institutions and aggregate $403 million in notional principal amount at
September 30, 1997. Approximately $253 million of the notional principal
amount of the swap agreements require fixed interest payments based on an
average effective rate of 6.63% for remaining periods ranging between 1 and 8
years. Six swap agreements require floating rates ($149.5 million notional
amount at 5.72% at September 30, 1997). 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 September 30, 1997,
approximately $16.5 million of such payments were included in other
liabilities. The Company continually monitors its positions and the credit
<PAGE> 24
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
ratings of its counterparties, and does not anticipate nonperformance by the
counterparties.
The Company will continue to look for appropriate acquisitions and
expects to fund such acquisitions, future capital expenditure requirements and
commitments related to foreign investments primarily through the use of cash
flow from operations, debt, common stock for certain acquisition candidates
and other available sources. Subsequent to September 30, 1997, the Company
acquired six industrial gas distributors with annual sales of $45 million and
one carbon dioxide distributor with annual sales of approximately $15 million.
As the Company integrates and standardizes information systems during fiscal
1998, 1999 and 2000, the Company expects to enter into obligations and
purchase certain capital equipment aggregating an estimated $15 to $20
million. As a result of standardizing information systems, the Company
believes Year 2000 issues will be mitigated.
In October 1997, the Airgas Board of Directors approved the repurchase
of up to an additional 2,000,000 shares of common stock from time-to-time to
offset share issuances for stock options, the Employee Stock Purchase Plan,
and acquisitions. Together with previously granted authority, this increases
the total repurchase program to a potential 2,646,000 shares. Through
September 30, 1997, the Company repurchased 1,154,000 shares under previous
repurchase programs. Approximately 1.8 million shares were reissued in
connection with the acquisition of Carbonic Industries Corporation.
The Company does not currently pay dividends.
OTHER
_____
New Accounting Pronouncements
In the first quarter of fiscal 1998, the Company adopted 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.
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. The adoption of this statement had
no material impact on earnings, financial condition or liquidity of the
Company.
In the first quarter of fiscal 1998, the Company adopted Statement of
Position 96-1 (SOP), 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 beginning after
December 15, 1996. The adoption of this statement did not have a material
impact on earnings, financial condition or liquidity of the Company.
<PAGE> 25
Item 2. AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement No. 128 "Earnings Per Share" (SFAS No. 128). SFAS No. 128
establishes new standards for computing and presenting earnings per share,
effective for financial statements issued for periods ending after December
15, 1997, including interim periods. All prior periods will be restated to
reflect the new Basic and Diluted earnings per share amounts. The Company's
Basic earnings per share is essentially net income divided by the weighted
shares outstanding, and the Diluted earnings per share is not expected to be
materially different than currently reported earnings per share amounts. The
Company will adopt SFAS No. 128 in the fourth quarter of fiscal 1998.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence
as other financial statements. The Company plans to adopt this accounting
standard in the first quarter of fiscal 1999, as required. The adoption of
this standard will not impact earnings, financial condition, or liquidity, but
will require the Company to classify items of other comprehensive income in a
financial statement and display the accumulated balance of other comprehensive
income separately in the equity section of the balance sheet.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement establishes
standards for reporting information about operating segments in annual
financial statements and requires selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company will adopt this accounting
standard in the first quarter of fiscal 1999, as required. The adoption of
this standard will not impact 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;
continued availability of financing to provide additional sources of funding
for future acquisitions; capital expenditure requirements and foreign
investments; the effects of competition from independent distributors and
vertically integrated gas producers on products and pricing and 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 additional 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.
<PAGE> 26
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. On February 24,
1997, the court entered an order denying the Company's motion to dismiss
for forum non conveniens. 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 to acquire CBI without the Company's participation. 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 compensatory 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. Thereafter, Praxair filed a motion for
judgement on the pleadings. On July 31, 1997, the Court entered an order
denying that motion.
The fraudulent breach of contract by a third-party supplier of
refrigerant gas was reported by the Company on December 23, 1996. On
February 12, 1997, the Company filed a lawsuit in the United States
District Court for the Southern District of Georgia under the Federal
RICO and Georgia RICO statutes 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
alleged that the racketeering activity of the defendants caused damages
to the Company in an amount not less than $20 million. In connection
with fraud, the Company recorded a non-recurring pre-tax charge during
the fourth quarter of fiscal 1997 of $26.4 million (approximately $17
million after-tax) for product losses and costs associated with the
Company's investigation into the fraud. On July 28, l997 the Company
reported that it had negotiated a comprehensive settlement with all of
the defendants in the litigation described above. The terms of the
settlement were approved by the bankruptcy court on September 5, 1997.
As a result of the recovery, the Company recorded a non-recurring pre-tax
gain during the second quarter of $14.5 million (approximately $9.4
million after-tax). The Company continues to pursue additional
recoveries in connection with the liquidation of a bankrupt business, and
through coverage under insurance policies.
<PAGE> 27
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 4, 1997, the Registrant held its Annual Meeting of
Stockholders. The stockholders voted to elect three members to the Board
of Directors, voted upon a proposal to approve the 1997 Stock Option
Plan, voted upon a proposal to approve the 1997 Directors' Stock Option
Plan and voted on a proposal to ratify the selection of KPMG Peat Marwick
LLP as the Company's independent auditors for the fiscal year ending
March 31, 1998.
Elected to the Board of Directors were Robert E. Naylor, Jr. (58,297,598
shares voted for election and 1,283,679 shares withheld), Robert L. Yohe
(58,288,879 shares voted for election and 1,292,398 shares withheld) and
Rajiv L. Gupta (58,308,509 shares voted for election and 1,272,768 shares
were withheld). In addition to the board members elected at the Annual
Meeting, the following are directors whose terms in office as directors
continued after the meeting: W. Thacher Brown, Frank B. Foster III,
Peter McCausland, John A.H. Shober, Merril L. Stott and Argeris N.
Karabelas.
Also at the Annual Meeting, 43,289,198 shares voted to approve the 1997
Stock Option Plan, with 8,706,146 shares voted withheld/against and
172,287 shares abstaining. Second, 45,168,953 shares voted to approve
the 1997 Directors' Stock Option Plan, with 6,787,459 shares voted
withheld/against and 211,219 shares abstaining. Finally, 58,827,492
shares voted to ratify the selection of KPMG Peat Marwick LLP as
independent auditors, with 60,190 voted withheld/against and 693,595
shares abstaining.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
________
10.1. 1997 Stock Option Plan
10.2. 1997 Directors' Stock Option Plan
11. Calculation of earnings per share.
27. Financial Data schedule
b. Reports on Form 8-K
___________________
On July 28, 1997, the Company filed a Form 8-K pursuant to Item 5,
announcing the Company had reached a comprehensive settlement with all
defendants in the refrigerant gas litigation.
On August 11, 1997, the Company filed a Form 8-K pursuant to Item 5,
announcing its financial performance for the first quarter ended
June 30, 1997.
<PAGE>
<PAGE> 28
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.
November 12, 1997 /s/ Thomas C. Deas, Jr.
_________________ _______________________
Date Thomas C. Deas, Jr.
Vice President &
Chief Financial Officer
<PAGE>
<PAGE> EX-1
AIRGAS, INC.
1997 STOCK OPTION PLAN
(Effective May 15, 1997)
1. Purpose. AIRGAS, INC. (the "Company") hereby adopts the Airgas,
Inc. 1997 Stock Option Plan effective May 15, 1997 (the "Plan") as an
additional incentive to eligible employees and eligible independent
contractors (as determined under Section 3) to enter into or remain in the
employ or service of the Company or any Affiliate (as defined below) and to
devote themselves to the Company's success by providing them with an
opportunity to acquire or increase their proprietary interest in the Company
through receipt of (a) rights (the "Options") to purchase the Company's Common
Stock, par value $0.01 per share (the "Common Stock") or (b) Common Stock
subject to conditions of forfeiture (the "Restricted Stock Awards"). Each
Option granted under the Plan shall specify whether or not it is intended
to be an incentive stock option ("ISO") within the meaning of section 422(b)
of the Internal Revenue Code of 1986, as amended (the "Code") or a
nonstatutory stock option ("NSO") for federal income tax purposes. For
purposes of the Plan, the term "Affiliate" shall mean a corporation which is a
parent corporation or a subsidiary corporation with respect to the Company
within the meaning of section 424(e) or (f) of the Code.
2. Administration.
(a) Committee. The Plan shall be administered by the Nominating
and Compensation Committee designated by the Company's Board of Directors (the
"Committee") which shall consist of at least two persons, each of whom is a
"non-employee director" as defined under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act"), and an "outside director" as
defined under section 162(m) of the Code (the "Non-Employee Director"). If
any Committee member does not qualify as a Non-Employee Director, then such
member shall not participate in any way with respect to Committee action
under the Plan and shall not be treated as a member of the Committee for
purposes of the Plan.
(b) Meetings. The Committee shall hold meetings at such times and
places as it may determine. Acts approved at a meeting by a majority of the
directors who are members of the Committee and present at a meeting at which
there is a quorum or acts approved in writing by the unanimous consent
of the directors who are members of the Committee (not counting any director
who is an employee for either purpose) shall be the valid acts of the
Committee.
(c) Grants. The Committee shall from time to time at its
discretion direct the Company to grant Options or Restricted Stock Awards
pursuant to the terms of the Plan. Subject to the express provisions of the
Plan, the Committee shall have plenary authority to determine the persons to
whom and the times at which Options or Restricted Stock Awards shall be
granted, the number of shares of Common Stock to be granted under an Option or
Restricted Stock Award and the price and other terms and conditions thereof,
including a specification with respect to whether or not an Option is intended
to be an ISO. In making such determinations the Committee may take into
account the nature of the person's services and responsibilities, the person's
present and potential contribution to the Company's success and such other
factors as it may deem relevant. The Committee's interpretation of any
provision of the Plan or of any Option or Restricted Stock Award granted under
it shall be final, binding and conclusive.
<PAGE> EX-2
(d) Exculpation. Each Committee member shall be acting in the
capacity of a director of the Company for the purpose of Article VI of the
Company's Certificate of Incorporation in connection with the administration
of the Plan or the granting of Options or Restricted Stock Awards under the
Plan.
(e) Indemnification. Each Committee member shall be entitled to
indemnification by the Company in accordance with the provisions and
limitations of Article VII of the Company's Bylaws, as the same may be amended
from time to time, in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Options or Restricted Stock Awards under the Plan in which he may be involved
by reason of his being or having been a Committee member, whether or not he
continues to be a Committee member at the time of the action, suit or
proceeding.
3. Eligibility. All persons the Company or its Affiliates employ as
employees or retain as independent contractors (other than directors who are
not employees) who, in the Committee's judgment, hold positions of
responsibility or whose performance can have a significant or material effect
on the Company's long-term success or achievement of specific objectives shall
be eligible to participate (the "Participants"). The Committee, in its sole
discretion, shall determine whether an individual qualifies as a Participant.
Subject to the Plan's terms and restrictions, a Participant may receive more
than one Option or Restricted Stock Award; provided, however, a Participant
may not receive Options and Restricted Stock Awards in any one calendar year
for more than an aggregate of 1,000,000 Shares. A Participant who is
an independent contractor may not receive an Option which is intended to be an
ISO.
4. Available Shares. The aggregate maximum number of shares of the
Common Stock for which the Committee may issue Options or Restricted Stock
Awards under the Plan is 8,000,000 shares, adjusted as provided in Section 9
(the "Plan Shares" or "Shares"); provided, however, the Committee may
not issue more than 1,000,000 Shares as Restricted Stock Awards in the
aggregate, and Restricted Stock Awards under this Plan and the Company's 1997
Directors' Stock Option Plan in any calendar year may not exceed 0.5% of the
shares of Common Stock issued and outstanding on any date of grant. Plan
Shares shall be issued from authorized and unissued Common Stock or Common
Stock held in or hereafter acquired for the Company's treasury. If any
outstanding Option or Restricted Stock Award granted under the Plan expires,
lapses or is terminated for any reason, the Plan Shares allocable to the
unexercised portion of such Option or forfeited portion of such Restricted
Stock Award may again be the subject of grant pursuant to the Plan.
5. Term of Plan. The Plan is effective as of May 15, 1997, the date on
which it was adopted by the Company's Board of Directors. No Option or
Restricted Stock Award granted under the Plan shall be exercisable or
nonforfeitable unless the Plan is approved by vote of a majority of the
outstanding voting stock of the Company on or before May 15, 1998. No Option
or Restricted Stock Award may be granted under the Plan after May 15, 2007.
6. Terms and Conditions of Options. Options granted pursuant to the
Plan shall be evidenced by written documents (the "Option Documents") in such
form or forms as the Committee shall from time to time approve. Option
Documents shall comply with and be subject to the terms and conditions set
forth below and such other terms and conditions which the Committee shall from
time to time specify with respect to a particular Option or Options provided
<PAGE> EX-3
they are not inconsistent with the terms of the Plan. The applicable terms
need not be uniform between or among Options.
(a) Number of Shares. Each Option Document shall state the number
of Shares to which it pertains.
(b) Option Price. Each Option Document shall state the price at
which Shares under Option may be purchased (the "Option Price"), which shall
be at least 100% of the Common Stock's closing price on the New York Stock
Exchange (or such other exchange as the Committee selects) on the date the
Option is granted; provided, however, if an ISO is granted to a Participant
who then owns, directly or by attribution under section 424(d) of the Code,
shares possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or an Affiliate, then the Option Price for
such ISO shall be at least 110% of the Common Stock's closing price on the
date the Option is granted.
(c) Exercisability.
(i) General Rule. Unless the Committee provides otherwise in
an Option Document, each Option granted under the Plan shall be exercisable in
cumulative equal installments of 25% of the Shares under Option on each of the
first four anniversaries of the date of grant provided the Participant remains
an employee of the Company or an Affiliate on such date(s). Further, if a
Participant terminates employment due to death, disability, or retirement (as
defined below) prior to the date an Option is 100% exercisable, the
installment which would become exercisable on the next anniversary shall
become exercisable. For the purposes of this Plan, a Participant's employment
will be deemed to terminate due to "retirement" if, on his termination date,
the Participant is at least age 65 or the sum of the Participant's age
and completed years of employment with the Company or an Affiliate measured
from his date of hire is at least 75. Except to the limited extent provided
in the preceding sentence, the portion of an Option which is exercisable shall
be fixed on the Participant's employment termination date. No Option shall be
exercisable after its term expires pursuant to subsection 6(e), 6(f) or 6(g).
(ii) Change in Control. If a Change in Control of the Company
(as defined below) occurs, then all Options which both were not exercisable
and have not terminated as of the date of such "Change in Control" shall as of
such date become immediately exercisable except to the extent the Participant
waives such accelerated right to exercise. A "Change in Control" shall be
deemed to have taken place upon the date when (A) as a result of a tender
offer, stock purchase, other stock acquisition, merger, consolidation,
recapitalization, reverse split, sale or transfer of any asset or other
transaction any person or group (as such terms are used in and under Section
13(d) of the Exchange Act) other than the Company, any Affiliate, or any
employee benefit plan of the Company or an Affiliate, shall become the
beneficial owner (as defined in Rule 13-d under the Exchange Act) directly or
indirectly of securities of the Company representing more than 20% of the
combined voting power of the Company's then outstanding securities; providing,
however, that this provision shall not apply to Peter McCausland
("McCausland"), unless and until McCausland, together with all affiliates and
associates, becomes the beneficial owner of 30% or more of the combined voting
power of the Company's then outstanding securities; (B) stockholders approve
the consummation of any merger of the Company or any sale or other disposition
of all or substantially all of its assets, if the Company's stockholders
immediately before such transaction own, immediately after consummation of
<PAGE> EX-4
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of the
surviving or acquiring corporation; or (C) a change in the majority of the
individuals who constitute the Company's Board of Directors occurs during
any period of two years for any reason without the approval of at least a
majority of directors in office at the beginning of such period.
(d) Medium of Payment. A Participant shall pay for Shares under
Option (i) in cash, (ii) by certified check payable to the order of the
Company, (iii) in shares of the Common Stock held by the Participant for at
least six months as of the exercise date, (iv) by a combination of the
foregoing, (v) by delivery to the Company of a properly executed notice of
exercise together with irrevocable instructions to a broker to deliver to the
Company promptly the amount of the proceeds of the sale of all or a portion
of the Shares or of a loan from the broker to the Participant necessary to pay
the aggregate exercise price payable for the purchased Shares plus all
applicable federal, state and local income and employment taxes required to be
withheld by the Company by reason of such exercise or (vi) by such other mode
of payment as the Committee may approve. If payment is made in whole or in
part in shares of the Common Stock, then the Participant shall deliver to the
Company certificates registered in the name of such Participant representing
shares of Common Stock owned by such Participant, free of all liens, claims
and encumbrances of every kind and having a fair market value on the date of
delivery that is not greater than the Option Price of the Shares with respect
to which such Option is to be exercised, accompanied by stock powers duly
endorsed in blank by the Participant. Notwithstanding the foregoing, the
Committee may impose such limitations and prohibitions on the use of shares of
the Common Stock to exercise an Option as it deems appropriate.
(e) Termination of ISOs. Unless the Committee provides otherwise
in an Option Document, an ISO shall not be exercisable after the first to
occur of the following:
(i) Term Expiration. Expiration of the term specified in the
Option Document, which shall not exceed ten years from the date of grant or
five years from the date of grant if the Participant on the date of grant
owns, directly or by attribution under section 424(d) of the Code, shares
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of an Affiliate;
(ii) Employment Termination. Expiration of 90 days from the
date the Participant's employment with the Company or its Affiliates
terminates unless any of subsection 6(e)(iii) - 6(e)(vi) applies;
(iii) Retirement. Expiration of 90 days from the date the
Participant's employment with the Company or its Affiliates terminates due to
"retirement";
(iv) Disability. Expiration of one year from the date the
Participant's employment with the Company or its Affiliates terminates if the
Participant terminates due to disability (within the meaning of section
22(e)(3) of the Code);
(v) Death. Expiration of the Option term if the Participant's
employment terminates due to death; or
(vi) Forfeiture. The date on which forfeiture occurs under
subsection 6(g).
<PAGE> EX-5
(f) Termination of NSOs. Unless the Committee provides otherwise
in an Option Document, an NSO shall not be exercisable after the first to
occur of the following:
(i) Term Expiration. Expiration of the term specified in the
option Document, which shall not exceed ten years from the date of grant;
(ii) Employment Termination Before Death, Disability or
Retirement. Expiration of 90 days from the date the Participant's employment
with the Company or its Affiliates terminates for reasons other than death,
disability (within the meaning of section 22(e)(3) of the Code) or
"retirement"; or
(iii) Forfeiture. The date on which forfeiture occurs
under subsection 6(g).
(g) Forfeiture. An Option shall terminate immediately upon a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Participant, that the Participant has
engaged in any sort of disloyalty to the Company or an Affiliate,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his employment or service or has
disclosed trade secrets or confidential information of the Company or an
Affiliate or engaged in competition with the Company or an Affiliate. In such
event, in addition to immediate termination of the Option, the Participant,
upon a determination by the Committee, shall automatically forfeit all Shares
for which the Company has not yet delivered the share certificates upon the
Company's refund of the Option Price.
(h) Transfers. Generally, a Participant may not transfer any
Option granted under the Plan, except that (i) during his lifetime, a
Participant may transfer an NSO to a spouse or a lineal ascendant
or descendant or a trust for the benefit of such a person or persons or a
partnership in which such persons are the only partners, provided the
Participant receives no consideration for any such transfer and (ii) at the
Participant's death, a Participant may transfer an Option by will or by the
laws of descent and distribution. If a transfer occurs under this subsection,
the transferred Option shall remain subject to all Plan provisions. A
transferee shall be required to furnish proof satisfactory to the Committee of
the transfer to him by gift or by will or laws of descent and distribution.
(i) Limits on ISOs. Each ISO shall provide that to the extent the
aggregate fair market value of Plan Shares with respect to which a Participant
may exercise an ISO for the first time during any calendar year under any
Company plan exceeds $100,000, then such Option shall be treated as an NSO
rather than as an ISO.
(j) Other Provisions. The Option Documents shall contain such
other provisions including, without limitation, additional restrictions upon
the exercise of the Option or additional limitations upon the term of the
Option, as the Committee shall deem advisable.
(k) Amendment. The Committee shall have the right to amend Option
Documents issued to a Participant subject to the Participant's consent.
<PAGE> EX-6
7. Method of Option Exercise.
(a) Notice. No Option shall be deemed to have been exercised prior
to the Company's receipt of written notice of such exercise and of payment in
full of the Option Price for the Shares to be purchased. Each such notice
shall specify the number of Shares to be purchased.
(b) Securities Laws. Each notice of exercise shall (unless the
Shares are covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Act")), contain the Participant's
acknowledgment in form and substance satisfactory to the Company that (i) such
Option Shares are being purchased for investment and not for distribution or
resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (ii) the Participant has been advised and understands
that (A) the Option Shares may not be registered under the Act and may be
"restricted securities" within the meaning of Rule 144 under the Act and may
be subject to restrictions on transfer and (B) the Company is under no
obligation to register the Option Shares under the Act or to take any action
which would make available to the Participant any exemption from such
registration, and (iii) such Option Shares may not be transferred without
compliance with all applicable federal and state securities laws.
Notwithstanding the foregoing, should the Company be advised by counsel that
issuance of Shares should be delayed pending (iv) registration under federal
or state securities laws or (v) the receipt of an opinion that an appropriate
exemption therefrom is available, the Company may defer exercise of any Option
granted hereunder until either such event in (iv) or (v) has occurred.
(c) Brokerage Account. Each notice of exercise may instruct the
Company, in such form as the Committee shall prescribe, to deliver Shares upon
Option exercise to any registered broker or dealer which the Company approves
in lieu of delivery to the Participant.
8. Terms and Conditions of Restricted Stock Awards. Restricted Stock
Awards made pursuant to the Plan shall be evidenced by written documents (the
"Award Documents") in such form or forms as the Committee shall from time to
time approve.
(a) Number of Shares. Subject to Section 4, each Award Document
shall state the number of Shares to which it pertains.
(b) Restrictions and Limitations. Each grant shall be subject to
such restrictions as the Committee may impose. The applicable restrictions
may lapse separately or in combination at such time or times, or in such
installments, as the Committee may deem appropriate. In addition, the
Committee may impose limits on the Participant's right to vote Shares or
receive dividends or distributions on Shares under a Restricted Stock Award
until such Shares become nonforfeitable. Each Award Document shall provide
that the Participant shall forfeit all forfeitable Shares upon a finding by
the Committee that the Participant has engaged in conduct which violates
subsection 6(g) and that all forfeitable Shares shall become nonforfeitable
upon the occurrence of a Change in Control (as defined in subsection
6(c)(ii)).
<PAGE> EX-7
(c) Legend. Any certificate issued in respect of a Restricted
Stock Award shall be registered in the Participant's name and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable under the Plan and Award Document to the covered Shares. In
addition, until such time as all restrictions applicable to the Shares lapse,
the Committee may provide for the certificate to be held in escrow by an
escrow agent which the Committee selects and the Company compensates.
(d) Forfeiture.
(i) General Rule. If a Participant terminates employment
during any restriction period under circumstances which result in a forfeiture
of Shares covered by the Restricted Stock Award or any event occurs or fails
to occur which results in a forfeiture, the restricted Shares shall revert to
the Company. Notwithstanding the foregoing, the Committee may waive any
restriction applicable to any Restricted Stock Award whenever the Committee
determines that such waiver is in the Company's best interests.
(ii) Forfeiture for Cause. A Participant shall forfeit all
forfeitable Shares covered by a Restricted Stock Award immediately upon a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Participant, that the Participant has
engaged in any sort of disloyalty to the Company or an Affiliate, including,
without limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his employment or service or has disclosed
trade secrets or confidential information of the Company or an Affiliate or
engaged in competition with the Company or an Affiliate.
(e) Transfers. Generally, a Participant may not transfer, assign,
alienate, sell, encumber, or pledge Shares under a Restricted Stock Award
until they are nonforfeitable and any purported transfer, assignment,
alienation, sale, encumbrance or pledge shall be void and unenforceable.
Notwithstanding the foregoing, (i) a Participant may transfer forfeitable
Shares under a Restricted Stock Award to a spouse or a lineal ascendant or
descendant or a trust for the benefit of such a person or persons or a
partnership in which such persons are the only partners, provided the
Participant receives no consideration for any such transfer and (ii) at the
Participant's death, a Participant may transfer forfeitable Shares under a
Restricted Stock Award by will or by the laws of descent and distribution. If
a permitted transfer occurs under this subsection, the transferred Shares
shall remain subject to all Plan provisions and all applicable conditions and
restrictions under the Award Document. A transferee shall be required to
furnish proof satisfactory to the Committee of the transfer to him by gift or
by will or laws of descent and distribution.
(f) Securities Laws. Upon the advice of counsel, the Committee may
require a Participant to take or defer any action with respect to Shares
covered under a Restricted Stock Award which counsel determines is necessary
to comply with federal or state securities laws.
9. Adjustments on Changes in Common Stock. The aggregate number of
shares and class of shares as to which Options or Restricted Stock Awards may
be granted hereunder, the number of Shares covered by each outstanding Option
and the Option Price thereof and each Restricted Stock Award shall be
appropriately adjusted in the event of a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision
<PAGE> EX-8
or consolidation of the Common Stock and/or other outstanding equity security
or a recapitalization or other capital adjustment (not including the issuance
of Common Stock upon the conversion of other securities of the Company which
are convertible into Common Stock) affecting the Common Stock which
is effected without receipt of consideration by the Company. The Committee
shall have authority to determine the adjustments to be made under this
Section and any such determination by the Committee shall be final, binding
and conclusive; provided, however, that no adjustment shall be made which
causes an ISO to lose its status as such without the consent of the
Participant.
10. Amendment of the Plan. The Board of Directors of the Company may
amend the Plan from time to time in such manner as it may deem advisable or
terminate the Plan in full. Nevertheless, the Board of Directors of the
Company may not, without obtaining approval by vote of a majority of the
outstanding voting stock of the Company within twelve months before or after
such action, change the class of individuals eligible to receive grants under
the Plan or increase the maximum number of shares of Common Stock as to which
Options or Restricted Stock Awards may be granted, except as provided in
Section 9 hereof.
11. Continued Employment. The grant of an Option or a Restricted Stock
Award pursuant to the Plan shall not be construed to imply or to constitute
evidence of any agreement, express or implied, on the part of the Company or
any Affiliate to retain the Participant in the employ of the Company or an
Affiliate or as a member of the Company's or an Affiliate's Board of Directors
or in any other capacity.
12. Withholding of Taxes.
(a) General Rule. As a condition for the receipt of an Option or
Restricted Stock Award, the Participant agrees that the Company (or the
Affiliate employing him) may deduct from wages or other amounts payable to him
or that he will pay over to the Company any amount necessary to satisfy
any federal, state and/or local withholding tax requirements and that the
Company shall have the right to take whatever action it deems necessary to
protect its interests with respect to tax liabilities resulting from
any act or event in connection with the Plan.
(b) Payment in Shares. The Participant may elect that the Company
satisfy any applicable minimum federal, state and/or local withholding tax
requirement by retaining Shares the Company would otherwise transfer to him
upon his exercise of an Option or satisfaction of all vesting conditions under
a Restricted Stock Award which have a fair market value equal to such
withholding requirement. Notwithstanding the foregoing, the Committee may
impose such limitations and prohibitions on the use of shares of the Common
Stock to satisfy withholding tax requirements as it deems appropriate.
13. Rules of Interpretation. Regardless of the number and gender
specifically used, words used in the Plan shall be deemed and construed to
include any other number (singular or plural) and any other gender (masculine,
feminine or neuter) as the context indicates is appropriate. Section headings
are for convenience only; they form no part of the Plan.
<PAGE>
<PAGE>
<PAGE> EX-9
AIRGAS, INC.
1997 DIRECTORS' STOCK OPTION PLAN
(Effective May 15, 1997)
1. Purpose. AIRGAS, INC. (the "Company") hereby adopts the Airgas,
Inc. 1997 Directors' Stock Option Plan effective May 15, 1997 (the "Plan") as
an additional incentive to non-employee members of the Company's Board of
Directors to commence or continue service and to devote themselves to the
Company's success by providing them with an opportunity to acquire or increase
their proprietary interest in the Company through receipt of (a) rights (the
"Options") to purchase the Company's Common Stock, par value $0.01 per share
(the "Common Stock") or (b) Common Stock subject to conditions of forfeiture
(the "Restricted Stock Awards").
2. Administration.
(a) Committee. The Plan shall be administered by the Nominating
and Compensation Committee designated by the Company's Board of Directors (the
"Committee") which shall consist of at least two persons, each of whom is a
"non-employee director" as defined under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act") (the "Non-Employee Director"). If
any Committee member does not qualify as a Non-Employee Director, then such
member shall not participate in any way with respect to Committee action under
the Plan and shall not be treated as a member of the Committee for purposes of
the Plan.
(b) Meetings. The Committee shall hold meetings at such times and
places as it may determine. Acts approved at a meeting by a majority of the
directors who are members of the Committee and present at a meeting at which
there is a quorum, or acts approved in writing by the unanimous consent of the
directors who are members of the Committee (not counting any director who
is an employee for either purpose) shall be the valid acts of the Committee.
(c) Grants. The Committee shall from time to time at its
discretion direct the Company to grant Options or Restricted Stock Awards
pursuant to the terms of the Plan. Subject to the express provisions of the
Plan, the Committee shall have plenary authority to determine the persons to
whom and the times at which Options or Restricted Stock Awards shall be
granted, the number of shares of Common Stock to be granted under an Option or
Restricted Stock Award and the price and other terms and conditions thereof.
In making such determinations the Committee may take into account the nature
of the person's services and responsibilities, the person's present and
potential contribution to the Company's success and such other factors as it
may deem relevant. The Committee's interpretation of any provision of the
Plan or of any Option or Restricted Stock Award granted under it shall be
final, binding and conclusive.
(d) Exculpation. Each Committee member shall be acting in the
capacity of a director of the Company for the purpose of Article VI of the
Company's Certificate of Incorporation in connection with the administration
of the Plan or the granting of Options or Restricted Stock Awards under the
Plan.
(e) Indemnification. Each Committee member shall be entitled to
indemnification by the Company in accordance with the provisions and
limitations of Article VII of the Company's Bylaws, as the same may be amended
from time to time, in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Options or Restricted Stock Awards under the Plan in which he may be involved
by reason of his being or having been a Committee member, whether or not he
continues to be a Committee member at the time of the action, suit or
proceeding.
<PAGE> EX-10
3. Eligibility. Each member of the Company's Board of Directors who is
not an employee of the Company or an entity of which the Company owns,
directly or indirectly, at least 50% of the value or voting rights of the
outstanding equity securities shall be eligible to participate (the
"Participants"). The Committee, in its sole discretion, shall determine
whether an individual qualifies as a Participant. A Participant may receive
more than one Option or Restricted Stock Award, but only on the terms and
subject to the restrictions of the Plan.
4. Available Shares. The aggregate maximum number of shares of the
Common Stock for which the Committee may issue Options or Restricted Stock
Awards under the Plan is 500,000 shares, adjusted as provided in Section 9
(the "Plan Shares" or "Shares"); provided, however, the Committee may not
issue more than 100,000 Shares as Restricted Stock Awards in the aggregate,
and Restricted Stock Awards under this Plan and the Company's 1997 Stock
Option Plan in any calendar year may not exceed 0.5% of the shares of Common
Stock issued and outstanding on any date of grant. Plan Shares shall be
issued from authorized and unissued Common Stock or Common Stock held in or
hereafter acquired for the Company's treasury. If any outstanding Option or
Restricted Stock Award granted under the Plan expires, lapses or is terminated
for any reason, the Plan Shares allocable to the unexercised portion of such
Option or forfeited portion of such Restricted Stock Award may again be the
subject of grant pursuant to the Plan.
5. Term of Plan. The Plan is effective as of May 15, 1997, the date on
which it was adopted by the Company's Board of Directors. No Option or
Restricted Stock Award granted under the Plan shall be exercisable or
nonforfeitable unless the Plan is approved by vote of a majority of the
outstanding voting stock of the Company on or before May 15, 1998. No Option
or Restricted Stock Award may be granted under the Plan after May 15, 2007.
6. Terms and Conditions of Options. Options granted pursuant to the
Plan shall be evidenced by written documents (the "Option Documents") in such
form or forms as the Committee shall from time to time approve. Option
Documents shall comply with and be subject to the terms and conditions set
forth below and such other terms and conditions which the Committee shall from
time to time specify with respect to a particular Option or Options provided
they are not inconsistent with the terms of the Plan. The applicable terms
need not be uniform between or among Options.
(a) Number of Shares. Each Option Document shall state the number
of Shares to which it pertains.
(b) Option Price. Each Option Document shall state the price at
which Shares under Option may be purchased (the "Option Price"), which shall
be at least 100% of the Common Stock's closing price on the New York Stock
Exchange (or such other exchange as the Committee selects) on the date the
Option is granted.
(c) Exercisability.
(i) General Rule. Unless the Committee provides otherwise in
an Option Document and contingent upon the Plan's approval under Section 5,
each Option granted under the Plan shall be exercisable in full on the date of
grant. No Option shall be exercisable after its term expires pursuant to
subsection 6(e) or 6(f).
(ii) Change in Control. If a Change in Control of the Company
(as defined below) occurs, then all Options which both were not exercisable
and have not terminated as of the date of such "Change in Control" shall as of
such date become immediately exercisable except to the extent the Participant
<PAGE> EX-11
waives such accelerated right to exercise. A "Change in Control" shall be
deemed to have taken place upon the date when (A) as a result of a tender
offer, stock purchase, other stock acquisition, merger, consolidation,
recapitalization, reverse split, sale or transfer of any asset or other
transaction any person or group (as such terms are used in and under Section
13(d) of the Exchange Act) other than the Company, any Affiliate, or any
employee benefit plan of the Company or an Affiliate, shall become the
beneficial owner (as defined in Rule 13-d under the Exchange Act) directly or
indirectly of securities of the Company representing more than 20% of the
combined voting power of the Company's then outstanding securities; providing,
however, that this provision shall not apply to Peter McCausland
("McCausland"), unless and until McCausland, together with all affiliates and
associates, becomes the beneficial owner of 30% or more of the combined voting
power of the Company's then outstanding securities; (B) stockholders approve
the consummation of any merger of the Company or any sale or other disposition
of all or substantially all of its assets, if the Company's stockholders
immediately before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and other rights to
acquire equity securities) possessing less than 50% of the voting power of the
surviving or acquiring corporation; or (C) a change in the majority of the
individuals who constitute the Company's Board of Directors occurs during any
period of two years for any reason without the approval of at least a majority
of directors in office at the beginning of such period.
(d) Medium of Payment. A Participant shall pay for Shares under
Option (i) in cash, (ii) by certified check payable to the order of the
Company, (iii) in shares of the Common Stock held by the Participant for at
least six months as of the exercise date, (iv) by a combination of the
foregoing, (v) by delivery to the Company of a properly executed notice of
exercise together with irrevocable instructions to a broker to deliver to the
Company promptly the amount of the proceeds of the sale of all or a portion of
the Shares or of a loan from the broker to the Participant necessary to pay
the aggregate exercise price payable for the purchased Shares plus all
applicable federal, state and local income and employment taxes required to be
withheld by the Company by reason of such exercise or (vi) by such other mode
of payment as the Committee may approve. If payment is made in whole or in
part in shares of the Common Stock, then the Participant shall deliver to the
Company certificates registered in the name of such Participant representing
shares of Common Stock owned by such Participant, free of all liens, claims
and encumbrances of every kind and having a fair market value on the date of
delivery that is not greater than the Option Price of the Shares with respect
to which such Option is to be exercised, accompanied by stock powers duly
endorsed in blank by the Participant. Notwithstanding the foregoing,
the Committee may impose such limitations and prohibitions on the use of
shares of the Common Stock to exercise an Option as it deems appropriate.
(e) Termination of Options. Unless the Committee provides
otherwise in an Option Document, an Option shall not be exercisable after the
first to occur of the following:
(i) Term Expiration. Expiration of the term specified in the
Option Document, which shall not exceed ten years from the date of grant;
(ii) Death. Expiration of one year from the date the
Participant's service as a member of the Company's Board of Directors
terminates due to death; or
(iii) Forfeiture. The date on which forfeiture occurs
under subsection 6(f).
<PAGE> EX-12
(f) Forfeiture. An Option shall terminate immediately upon a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Participant, that the Participant has
engaged in any sort of disloyalty to the Company, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his service or has disclosed trade secrets or
confidential information of the Company. In such event, in addition to
immediate termination of the Option, the Participant, upon a determination by
the Committee, shall automatically forfeit all Shares for which the Company
has not yet delivered the share certificates upon the Company's refund of the
Option Price.
(g) Transfers. Generally, a Participant may not transfer any
Option granted under the Plan, except that (i) during his lifetime, a
Participant may transfer an Option to a spouse or a lineal ascendant or
descendant or a trust for the benefit of such a person or persons or a
partnership in which such persons are the only partners, provided the
Participant receives no consideration for any such transfer and (ii) at the
Participant's death, a Participant may transfer an Option by will or by the
laws of descent and distribution. If a transfer occurs under this subsection,
the transferred Option shall remain subject to all Plan provisions. A
transferee shall be required to furnish proof satisfactory to the Committee of
the transfer to him by gift or by will or laws of descent and distribution.
(h) Other Provisions. The Option Documents shall contain such
other provisions including, without limitation, additional restrictions upon
the exercise of the Option or additional limitations upon the term of the
Option, as the Committee shall deem advisable.
(i) Amendment. The Committee shall have the right to amend Option
Documents issued to a Participant subject to the Participant's consent.
7. Method of Option Exercise.
(a) Notice. No Option shall be deemed to have been exercised prior
to the Company's receipt of written notice of such exercise and of payment in
full of the Option Price for the Shares to be purchased. Each such notice
shall specify the number of Shares to be purchased.
(b) Securities Laws. Each notice of exercise shall (unless the
Shares are covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Act")), contain the Participant's
acknowledgment in form and substance satisfactory to the Company that (i) such
Option Shares are being purchased for investment and not for distribution or
resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (ii) the Participant has been advised and understands
that (A) the Option Shares may not be registered under the Act and may be
"restricted securities" within the meaning of Rule 144 under the Act and may
be subject to restrictions on transfer and (B) the Company is under no
obligation to register the Option Shares under the Act or to take any action
which would make available to the Participant any exemption from such
registration, and (iii) such Option Shares may not be transferred without
compliance with all applicable federal and state securities laws.
Notwithstanding the foregoing, should the Company be advised by counsel that
issuance of Shares should be delayed pending (iv) registration under federal
or state securities laws or (v) the receipt of an opinion that an appropriate
exemption therefrom is available, the Company may defer exercise of any Option
granted hereunder until either such event in (iv) or (v) has occurred.
<PAGE> EX-13
(c) Brokerage Account. Each notice of exercise may instruct the
Company, in such form as the Committee shall prescribe, to deliver Shares upon
Option exercise to any registered broker or dealer which the Company approves
in lieu of delivery to the Participant.
8. Terms and Conditions of Restricted Stock Awards. Restricted Stock
Awards made pursuant to the Plan shall be evidenced by written documents (the
"Award Documents") in such form or forms as the Committee shall from time to
time approve.
(a) Number of Shares. Subject to Section 4, each Award Document
shall state the number of Shares to which it pertains.
(b) Restrictions and Limitations. Each grant shall be subject to
such restrictions as the Committee may impose. The applicable restrictions
may lapse separately or in combination at such time or times, or in such
installments, as the Committee may deem appropriate. In addition, the
Committee may impose limits on the Participant's right to vote Shares or
receive dividends or distributions on Shares under a Restricted Stock Award
until such Shares become nonforfeitable. Each Award Document shall provide
that the Participant shall forfeit all forfeitable Shares upon a finding by
the Committee that the Participant has engaged in conduct which violates
subsection 6(f) and that all forfeitable Shares shall become nonforfeitable
upon the occurrence of a Change in Control (as defined in subsection
6(c)(ii)).
(c) Legend. Any certificate issued in respect of a Restricted
Stock Award shall be registered in the Participant's name and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable under the Plan and Award Document to the covered Shares. In
addition, until such time as all restrictions applicable to the Shares lapse,
the Committee may provide for the certificate to be held in escrow by an
escrow agent which the Committee selects and the Company compensates.
(d) Forfeiture.
(i) General Rule. If a Participant terminates service during
any restriction period under circumstances which result in a forfeiture of
Shares covered by the Restricted Stock Award or any event occurs or fails to
occur which results in a forfeiture, the restricted Shares shall revert to the
Company. Notwithstanding the foregoing, the Committee may waive any
restriction applicable to any Restricted Stock Award whenever the Committee
determines that such waiver is in the Company's best interests.
(ii) Forfeiture for Cause. A Participant shall forfeit all
forfeitable Shares covered by a Restricted Stock Award immediately upon a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Participant, that the Participant has
engaged in any sort of disloyalty to the Company or an Affiliate, including,
without limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his employment or service or has disclosed
trade secrets or confidential information of the Company or an Affiliate or
engaged in competition with the Company or an Affiliate.
(e) Transfers. Generally, a Participant may not transfer, assign,
alienate, sell, encumber, or pledge Shares under a Restricted Stock Award
until they are nonforfeitable and any purported transfer, assignment,
alienation, sale, encumbrance or pledge shall be void and unenforceable.
Notwithstanding the foregoing, (i) a Participant may transfer forfeitable
Shares under a Restricted Stock Award to a spouse or a lineal ascendant or
descendant or a trust for the benefit of such a person or persons or a
partnership in which such persons are the only partners, provided the
<PAGE> EX-14
Participant receives no consideration for any such transfer and (ii) at the
Participant's death, a Participant may transfer forfeitable Shares under a
Restricted Stock Award by will or by the laws of descent and distribution.
If a permitted transfer occurs under this subsection, the transferred Shares
shall remain subject to all Plan provisions and all applicable conditions and
restrictions under the Award Document. A transferee shall be required to
furnish proof satisfactory to the Committee of the transfer to him by gift or
by will or laws of descent and distribution.
(f) Securities Laws. Upon the advice of counsel, the Committee may
require a Participant to take or defer any action with respect to Shares
covered under a Restricted Stock Award which counsel determines is necessary
to comply with federal or state securities laws.
9. Adjustments on Changes in Common Stock. The aggregate number of
shares and class of shares as to which Options or Restricted Stock Awards may
be granted hereunder, the number of Shares covered by each outstanding Option
and the Option Price thereof and each Restricted Stock Award shall be
appropriately adjusted in the event of a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision or
consolidation of the Common Stock and/or other outstanding equity security or
a recapitalization or other capital adjustment (not including the issuance of
Common Stock upon the conversion of other securities of the Company which are
convertible into Common Stock) affecting the Common Stock which is effected
without receipt of consideration by the Company. The Committee shall have
authority to determine the adjustments to be made under this Section and any
such determination by the Committee shall be final, binding and conclusive.
10. Amendment of the Plan. The Board of Directors of the Company may
amend the Plan from time to time in such manner as it may deem advisable or
terminate the Plan in full. Nevertheless, the Board of Directors of the
Company may not, without obtaining approval by vote of a majority of the
outstanding voting stock of the Company within twelve months after such
action, increase the maximum number of shares of Common Stock as to which
Options or Restricted Stock Awards may be granted, except as provided in
Section 9 hereof.
11. Continued Service. The grant of an Option or a Restricted Stock
Award pursuant to the Plan shall not be construed to imply or to constitute
evidence of any agreement, express or implied, on the part of the Company to
retain the Participant as a member of the Company's Board of Directors or
in any other capacity.
12. Withholding of Taxes.
(a) General Rule. As a condition for the receipt of an Option or
Restricted Stock Award, the Participant agrees that the Company (or the
Affiliate employing him) may deduct from fees or other amounts payable to him
or that he will pay over to the Company any amount necessary to satisfy
any federal, state and/or local withholding tax requirements and that the
Company shall have the right to take whatever action it deems necessary to
protect its interests with respect to tax liabilities resulting
from any act or event in connection with the Plan.
(b) Payment in Shares. The Participant may elect that the Company
satisfy any applicable minimum federal, state and/or local withholding tax
requirement by retaining Shares the Company would otherwise transfer to him
upon his exercise of an Option or satisfaction of all vesting conditions under
a Restricted Stock Award which have a fair market value equal to such
withholding requirement. Notwithstanding the foregoing, the Committee may
<PAGE> EX-15
impose such limitations and prohibitions on the use of shares of the Common
Stock to satisfy withholding tax requirements as it deems appropriate.
13. Rules of Interpretation. Regardless of the number and gender
specifically used, words used in the Plan shall be deemed and construed to
include any other number (singular or plural) and any other gender (masculine,
feminine or neuter) as the context indicates is appropriate. Section headings
are for convenience only; they form no part of the Plan.
<PAGE>
<PAGE>
<PAGE> EX-16
EXHIBIT 11
AIRGAS, INC.
EARNINGS PER SHARE CALCULATIONS
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
____ ____ ____ ____
Adjustment of Weighted Average
Shares Outstanding:
Shares of common stock
outstanding - weighted 68,530,000 65,490,000 67,675,000 64,700,000
Net common stock equivalents 2,420,000 2,170,000 2,425,000 2,650,000
__________ __________ __________ __________
Adjusted shares outstanding 70,950,000 67,660,000 70,100,000 67,350,000
========== ========== ========== ==========
Net earnings $21,675,000 $11,310,000 33,901,000 22,460,000
========== ========== ========== ==========
Earnings per share $ .31 $ .17 $ .48 $ .33
========== ========= ========== =========
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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 175,360
<ALLOWANCES> 4,882
<INVENTORY> 146,109
<CURRENT-ASSETS> 360,875
<PP&E> 839,188
<DEPRECIATION> 204,679
<TOTAL-ASSETS> 1,490,494
<CURRENT-LIABILITIES> 190,449
<BONDS> 743,718
<COMMON> 698
0
0
<OTHER-SE> 395,328
<TOTAL-LIABILITY-AND-EQUITY> 1,490,494
<SALES> 691,768
<TOTAL-REVENUES> 691,768
<CGS> 369,135
<TOTAL-COSTS> 369,135
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,778
<INCOME-PRETAX> 56,969
<INCOME-TAX> 23,068
<INCOME-CONTINUING> 33,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,901
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
<PAGE>
</TABLE>
