<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1998
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 North Radnor-Chester Road, Suite 100
Radnor, PA 19087-5283
(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 Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Common Stock outstanding at August 4, 1998: 71,363,129 shares
<PAGE> 2
AIRGAS, INC.
FORM 10-Q
June 30, 1998
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as of June 30, 1998
and March 31, 1998...............................................3
Consolidated Statements of Earnings
for the Three Months Ended June 30, 1998 and 1997 (Unaudited)....4
Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 1998 and 1997 (Unaudited)....5
Notes to Consolidated Financial Statements...........................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..........................................20
Item 6. Exhibits and Reports on Form 8-K............................21
SIGNATURES ..........................................................22
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
AIRGAS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<CAPTION>
June 30,
1998 March 31,
(Unaudited) 1998
<S> <C> <C>
ASSETS
Current Assets
Trade receivables, less allowances for
doubtful accounts of $5,297 at June 30,
1998 and $5,676 at March 31, 1998 $ 194,928 $ 186,342
Inventories 163,688 154,937
Prepaid expenses and other current assets 22,919 25,555
Total current assets 381,535 366,834
Plant and equipment, at cost 935,272 923,635
Less accumulated depreciation and amortization (247,959) (236,331)
Plant and equipment, net 687,313 687,304
Goodwill, net of accumulated amortization of
$45,176 at June 30, 1998 and $42,147 at
March 31, 1998 420,804 410,753
Other non-current assets 174,714 176,583
Total assets $1,664,366 $1,641,474
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 8,898 $ 12,150
Accounts payable, trade 85,413 84,602
Accrued expenses and other current liabilities 114,099 128,806
Total current liabilities 208,410 225,558
Long-term debt 855,016 830,845
Deferred income taxes 126,254 121,356
Other non-current liabilities 34,448 36,842
Stockholders' Equity
Preferred stock, no par value, 20,000 shares
authorized, no shares issued or outstanding
in 1998 -- --
Common stock, par value $.01 per share, 200,000
shares authorized, 71,486 and 71,357 shares
issued at June 30, 1998 and March 31, 1998,
respectively 715 714
Capital in excess of par value 193,699 192,358
Retained earnings 248,441 237,166
Accumulated other comprehensive loss (764) (779)
Treasury stock, 126 and 176 common shares at
cost at June 30, 1998 and March 31, 1998,
respectively (1,853) (2,586)
Total stockholders' equity 440,238 426,873
Total liabilities and stockholders' equity $1,664,366 $1,641,474
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE> AIRGAS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
Net sales:
Distribution $ 291,962 $ 271,269
Direct Industrial 68,591 36,845
Manufacturing 40,220 23,298
Total net sales 400,773 331,412
Costs and expenses:
Cost of products sold (excluding depreciation,
depletion and amortization)
Distribution 146,677 137,463
Direct Industrial 50,674 26,005
Manufacturing 18,145 11,286
Selling, distribution and administrative expenses 131,251 105,343
Depreciation, depletion and amortization 21,597 17,815
Special charge (1,000) -
Total costs and expenses 367,344 297,912
Operating income:
Distribution 27,656 28,694
Direct Industrial 884 1,104
Manufacturing 3,889 3,702
Special charge 1,000 -
Total operating income 33,429 33,500
Interest expense, net (14,806) (12,108)
Other income, net 188 473
Equity in earnings (loss) of unconsolidated
affiliates 754 (115)
Minority interest (66) (309)
Earnings before income taxes 19,499 21,441
Income tax expense 8,224 9,215
Net earnings $ 11,275 $ 12,226
Basic earnings per share $ .16 $ .18
Diluted earnings per share $ .16 $ .18
Weighted average shares outstanding:
Basic 70,300 66,800
Diluted 72,100 69,200
Comprehensive income $ 11,290 $ 12,225
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
<TABLE> AIRGAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(Dollars in thousands)
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 11,275 $ 12,226
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, depletion and amortization 21,597 17,815
Deferred income taxes 2,714 2,304
Equity in earnings of unconsolidated affiliates (1,078) (251)
Gain on sales of plant and equipment (45) (137)
Minority interest in earnings 66 309
Stock issued for employee benefit plan expense 1,602 1,412
Changes in assets and liabilities, excluding effects of business
acquisitions and divestitures:
Trade receivables, net (9,419) (5,287)
Inventories (9,587) (3,145)
Prepaid expenses and other current assets 2,773 2,736
Accounts payable, trade 1,195 (12,001)
Accrued expenses and other current liabilities 2,504 130
Other assets and liabilities, net (2,904) (1,270)
Net cash provided by operating activities 20,693 14,841
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (21,648) (25,968)
Proceeds from sale of plant and equipment 427 497
Proceeds from divestitures 10,463 --
Business acquisitions, net of cash acquired (17,644) (38,229)
Business acquisitions, holdback settlements (86) (2,393)
Investment in unconsolidated affiliates -- (7,395)
Dividends from unconsolidated affiliates 1,003 661
Other, net 369 (210)
Net cash used by investing activities (27,116) (73,037)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 90,159 117,992
Repayment of debt (70,239) (41,101)
Repurchase of treasury stock, net -- (18,363)
Exercise of options and warrants 278 1,461
Net overdraft (13,775) (1,793)
Net cash provided by financing activities 6,423 58,196
CASH INCREASE (DECREASE) $ 0 $ 0
Cash - Beginning of period 0 0
Cash - end of period $ 0 $ 0
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6 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 over the Company's share of their
net assets at the acquisition date 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. 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, 1998.
The financial statements reflect, in the opinion of management, all
adjustments (normal recurring adjustments) necessary to present fairly the
Company's consolidated balance sheets at June 30, 1998 and March 31, 1998;
the consolidated statements of earnings for the three months ended June 30,
1998 and 1997; and the consolidated statements of cash flows for the three
months ended June 30, 1998 and 1997. 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.
(2) ACQUISITIONS AND DIVESTITURES
From April 1, 1998 to June 30, 1998, the Company acquired four
distributors of industrial gas and related equipment (Distribution segment)
with aggregate annual sales of approximately $13 million and a manufacturer
and distributor of dry ice (Manufacturing segment) with annual sales of
approximately $9 million. The aggregate purchase price, including amounts
related to non-competition and confidentiality agreements, amounted to
approximately $22 million. Acquisitions have been recorded using the
purchase method of accounting, and, accordingly, results of their
operations have been included in the Company's consolidated financial
statements since the effective dates of the respective acquisitions.
The Company divested two non-strategic businesses during the quarter ended
June 30, 1998. The consideration for the sales of the businesses included
the assumption of certain liabilities and cash proceeds of approximately
$10.5 million. The businesses had combined annual net sales in fiscal 1998
of approximately $17 million.
(3) SPECIAL CHARGES
In the fourth quarter of fiscal 1998, the Company recorded special charges
which included amounts totaling $11 million related to the pending
divestiture of non-strategic businesses, facility exit costs and severance.
The Company estimated that facility exit costs and severance would require
a use of cash of approximately $4.2 million. Through June 30, 1998, the
Company has paid approximately $1.2 million ($600,000 paid in the June 1998
quarter). At June 30, 1998, after the aforementioned cash payments and the
divestiture of two non-strategic businesses, the Repositioning accruals
total $6.9 million.
<PAGE> 7
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(4) EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net earnings by the
average number of shares of the Company's Common Stock outstanding during
the period. Diluted earnings per share is calculated by adjusting the
average common shares outstanding for the dilutive effect of common stock
equivalents related to stock options and contingently issuable shares.
The table below reconciles basic weighted average common shares
outstanding to diluted weighted average common shares outstanding for the
periods ended June 30, 1998 and 1997:
June 30,
(In thousands) 1998 1997
Weighted average common shares outstanding:
Basic............................ 70,300 66,800
Stock options........................ 1,800 2,400
Diluted............................ 72,100 69,200
(5) INVENTORIES
Inventories consist of:
<TABLE>
(In thousands)
<CAPTION>
June 30, March 31,
1998 1998
<S> <C> <C>
Finished goods $161,880 $154,003
Raw materials 3,315 2,380
165,195 156,383
Less reduction to LIFO cost (1,507) (1,446)
$163,688 $154,937
</TABLE>
<PAGE> 8
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(6) PLANT AND EQUIPMENT
The major classes of plant and equipment, at cost, are as follows:
<TABLE>
(In thousands)
<CAPTION> June 30, March 31,
1998 1998
<S> <C> <C>
Land and land improvements $ 26,169 $ 26,050
Building and leasehold improvements 89,210 88,130
Cylinders 404,690 404,198
Machinery and equipment, including bulk tanks 305,643 300,599
Computers and furniture and fixtures 54,907 52,051
Transportation equipment 49,324 48,720
Construction in progress 5,329 3,887
$ 935,272 $ 923,635
</TABLE>
(7) OTHER NON-CURRENT ASSETS
Other non-current assets include:
<TABLE>
(In thousands)
<CAPTION> June 30, March 31,
1998 1998
<S> <C> <C>
Investment in unconsolidated affiliates $ 98,626 $ 98,522
Non-compete agreements and other intangible
assets, at cost, net of accumulated
amortization of $76.7 million at
June 30, 1998 and $73.2 million at
March 31, 1998 60,967 63,205
Other assets 15,121 14,856
$174,714 $176,583
</TABLE>
<PAGE> 9
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities include:
<TABLE>
(In thousands)
<CAPTION> June 30, March 31,
1998 1998
<S> <C> <C>
Cash overdraft $ 17,846 $ 31,621
Repositioning accruals 6,879 10,429
Accrued interest 14,103 8,918
Insurance payable and related reserves 8,307 7,248
Customer cylinder deposits 8,655 8,668
Other accrued expenses and current liabilities 58,309 61,922
$114,099 $128,806
The cash overdraft is attributable to the float of the Company's outstanding checks.
</TABLE>
(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, 1998 71,357 176
Common stock issuance (a) 129 --
Reissuance of treasury stock (b) -- (50)
Balance-June 30, 1998 71,486 126
<PAGE> 10
AIRGAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
<TABLE>
<CAPTION>
(In thousands of dollars)
Accumulated
Capital in Other
Common Excess of Retained Comprehensive Treasury Comprehensive
Stock Par Value Earnings Loss Stock Income
<S> <C> <C> <C> <C> <C> <C>
Balance--April 1, 1998 $714 $192,358 $237,166 $(779) $(2,586) $ --
Net earnings -- -- 11,275 -- -- 11,275
Common stock issuance (a) 1 1,601 -- -- -- --
Foreign currency translation
adjustments -- -- -- 15 -- 15
Reissuance of treasury stock (b) -- (510) -- -- 733 --
Tax benefit from stock option
exercises -- 250 -- -- -- --
Balance-June 30,1998 $715 $193,699 $248,441 $(764) $(1,853) $11,290
(a) Related to the issuance of common stock for the Company's Employee Stock Purchase Plan.
(b) Reissued in connection with stock option exercises.
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
(a) Litigation
In July 1996, Praxair, Inc. ("Praxair") filed suit against the Company in
the Circuit Court of Mobile County, Alabama. The complaint alleged tortious
interference with business or contractual relations with respect to Praxair's
Right of First Refusal contract with the majority shareholders of 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. In June 1998, Praxair filed a
motion to dismiss its own action in Alabama and commenced another action in
the Superior Court of Mecklenburg County, North Carolina, alleging substantially
the same tortious interference by the Company. The North Carolina action also
alleges breach of contract against National Welders and certain shareholders of
National Welders and unfair trade practices and conspiracy against all the
defendants. In the North Carolina action Praxair seeks compensatory damages
in excess of $10,000, punitive damages and other unspecified relief. The Company
believes that Praxair's North Carolina claims are also without merit and intends
to defend vigorously against such claims.
<PAGE> 11
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.
The Company is involved in various legal and regulatory proceedings
which have arisen in the ordinary course of its business and have not been
finally adjudicated. These actions, when ultimately concluded and
determined, will not, in the opinion of management, have a material adverse
effect upon the Company's consolidated financial position, results of
operations or liquidity.
(b) Insurance Coverage
The Company has established insurance programs to cover workers'
compensation, business automobile, general and products liability. These
programs have self-insured retentions of $500,000 per occurrence for
workers' compensation, general and products liability, and business
automobile liability. Losses are accrued based upon the Company's
estimates of the aggregate liability for claims incurred, claims incurred
but not reported and based on Company experience. The Company does not
deem its self-insured retention exposure to be material.
<PAGE> 12
Item 2.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL REVIEW
OVERVIEW
Net sales increased 21% to approximately $401 million from $331
million in the first quarter last year. Net earnings were $11.3 million or
$.16 per diluted share, compared to $12.2 or $.18 per diluted share, a year
ago. Net earnings were adversely impacted by higher operating expenses as
the Company implements its "Repositioning Airgas for Growth" restructuring
plan (the "Repositioning Plan"). The Company initiated its Repositioning
Plan during the fourth quarter ended March 31, 1998, which is more fully
described in the Company's Form 10-K for the year ended March 31, 1998.
Repositioning Plan expenses were approximately $3.6 million or
approximately $.03 per diluted share in the first quarter ended June 30,
1998. These costs include computer conversion costs, personnel costs and
facility-related costs. The Company recorded special charges in the fourth
quarter of fiscal 1998 which included amounts totaling $11 million related
to the pending divestiture of non-strategic businesses, facility exit costs
and severance. The Company estimated that facility exit costs and
severance would require a use of cash of approximately $4.2 million.
Through June 30, 1998, the Company has paid approximately $1.2 million
($600,000 paid in the June 1998 quarter). At June 30, 1998, after the
aforementioned cash payments and the divestiture of two non-strategic
businesses, the Repositioning accruals total $6.9 million.
The Company is proceeding with the consolidation of its operations
infrastructure by conducting business through 22 business units, the
conversion of information systems to two legacy systems and implementation
of a single national computer center and single communications system and
the build-out of two distribution centers in Southern California and
Georgia. The Company also divested two non-strategic businesses during the
quarter ended June 30, 1998. The consideration for the sales of the
businesses included the assumption of certain liabilities and cash proceeds
of approximately $10.5 million. The businesses had combined annual net
sales in fiscal 1998 of approximately $17 million. In connection with
these divestitures, net earnings includes a special charge reversal of
approximately $1 million, or $.01 per diluted share, related to excess
reserves associated with the divestitures.
From April 1, 1998 to June 30, 1998, the Company acquired four
distributors of industrial gas and related equipment (Distribution segment)
with aggregate annual sales of approximately $13 million and a manufacturer
and distributor of dry ice (Manufacturing segment) with annual sales of
approximately $9 million.
<PAGE> 13
AIRGAS, INC.
MANAGMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 1997
INCOME STATEMENT COMMENTARY
Net sales increased 21% during the quarter ended June 30, 1998
compared to the same quarter in the prior year. Certain reclassifications
have been made to the June 30, 1997 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.
<TABLE>
(in thousands)
<CAPTION>
1998 1997 Increase
<S> <C> <C> <C>
Distribution $291,962 $271,269 $ 20,693
Direct Industrial 68,591 36,845 31,746
Manufacturing 40,220 23,298 16,922
$400,773 $331,412 $ 69,361
</TABLE>
Distribution sales include three primary product groups: gases,
hardgoods and rent. For the quarter ended June 30, 1998, Distribution sales
increased approximately $15.3 million resulting from the acquisition of 23
distributors since April 1, 1997 and approximately $5.4 million from
same-store sales growth. The increase in Distribution same-store sales of
2% was more heavily weighted towards gas/rental revenue. Gas and rent same-
store sales increased 3% and were helped by gas sales from the Company's
two air separation plants. During the quarter there was slowing in certain
geographical areas and industries with larger customers tending to order
less than in prior quarters. In the South and parts of the West Coast,
unseasonably warm weather combined with drought conditions impacted
agricultural-related businesses. Low oil prices also slowed off-shore and
inland activity. In the Northwest, unusually wet weather was a negative
factor. The Company attributes the decline in same-store sales growth rate
from 4% in fiscal 1998 to 2% in the June 1998 quarter to these factors as
well as the indirect effects of the Repositioning and a decline in real GDP
growth in the quarter.
The Company estimates same-store sales based on a comparison of
current period sales to the prior period's sales, adjusted for
acquisitions. Future same-store sales growth is dependent on the economy
and the Company's ability to expand markets for new and existing products
and to increase prices. The Company continues to focus on internal sales
growth through the addition of new gas products and product-line
extensions, including certain specialty gases, carbon dioxide, refrigerant
gases in returnable containers, the expansion of rental welders and tool
and safety hardgoods items.
<PAGE> 14
AIRGAS, INC.
MANAGMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Airgas Direct Industrial ("ADI") sales include safety products and
equipment, metalworking tools and supplies and other Maintenance, Repair
and Operations ("MRO") hardgoods items. ADI's sales increased approximately
$26.8 million resulting from the acquisition of two distributors since
April 1, 1997 and approximately $4.9 million from same-store sales. The
internal sales growth rate for ADI during the quarter ended June 30, 1998
was approximately 8% and resulted primarily from increased sales of safety-
related products, partially offset by lower tool sales resulting from
effects of warehouse consolidation issues. Sales to the Distribution
segment in the quarters ended June 30, 1998 and 1997 totaled approximately
$1.1 million and $856 thousand, respectively, and are eliminated in
consolidation.
The Manufacturing segment's sales primarily include six product
groups: carbon dioxide, dry ice, specialty gases, nitrous oxide, carbon
products and calcium carbide. Sales increased approximately $16.9 million
primarily from carbon dioxide and dry ice acquisitions completed since
April 1, 1997. The Company estimates that carbon dioxide and dry ice sales
volumes increased approximately 5% during the quarter ended June 30, 1998;
however, lower pricing partially offset volume growth. Pricing was lower
as a result of increased production exceeding growth in demand. Growth in
nitrous oxide products was largely offset by a decline in carbon products
due to a softness in demand. Manufacturing sales to the Distribution
segment during the quarters ended June 30, 1998 and 1997 totaled
approximately $5.9 million and $3.7 million, respectively, and are
eliminated in consolidation.
Gross profits increased 18% during the quarter ended June 30, 1998,
compared to the same quarter in the prior year:
<TABLE>
(in thousands)
<CAPTION>
1998 1997 Increase
<S> <C> <C> <C>
Distribution $145,285 $133,806 $ 11,479
Direct Industrial 17,917 10,840 7,077
Manufacturing 22,075 12,012 10,063
$185,277 $156,658 $ 28,619
</TABLE>
The increase in Distribution gross profits of approximately $11.5
million resulted from acquisitions which contributed approximately $7.7
million and from same-store gross profit growth of 2.8% or approximately
$3.8 million. Same-store gross profit growth resulted from modest sales
volume growth in all three product groups. Same-store gross margin was
up slightly compared to the prior year.
The increase in ADI gross profits of approximately $7.1 million
resulted from acquisitions which contributed approximately $5.8 million and
from same-store gross profit growth of $1.3 million or 11.7%. Same-store
gross profit growth resulted primarily from sales volume growth of safety
related products. Same-store gross margins were essentially flat compared
to the prior year. ADI's gross margin of 26% for the quarter ended June
30, 1998 was down from 29.4% compared to the same quarter in the prior year
due to acquisitions which had an average gross margin of approximately 22%.
<PAGE> 15
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The increase in Manufacturing gross profits of approximately $10.1
million resulted primarily from acquisitions of carbon dioxide and dry ice
businesses. The Manufacturing gross margin increased from 51.6% to 54.9%
primarily as a result of the Company's international operations.
Selling, distribution and administrative expenses ("operating
expenses") consist primarily of personnel and related costs, distribution
and warehouse costs, occupancy expenses and other selling and general
administrative expenses. Operating expenses increased approximately $25.9
million in the quarter ended June 30, 1998, compared to the same quarter in
the prior year primarily as a result of acquisitions and higher costs
associated with the Company's Repositioning Plan. Repositioning-related
operating expenses totaled approximately $3.6 million in the quarter ended
June 30, 1998, of which the Company estimates approximately 50% represent
costs that will continue in future periods. These costs included computer
conversion costs, relocation and other personnel costs and facility-related
costs. As a percentage of net sales, operating expenses increased 10 basis
points to 32.7%.
Depreciation, depletion and amortization ("depreciation and
amortization") totaled approximately $21.6 million and increased
approximately $3.8 million compared to the same quarter last year primarily
as a result of acquisitions. Depreciation and amortization as a percentage
of net sales remained consistent at 5.4% for the quarter ended June 30,
1998 compared to the prior year. For the Distribution, ADI and
Manufacturing segments, depreciation and amortization relative to net sales
was 5.7%, 2.7% and 7.6%, respectively, for the quarter ended June 30,
1998.
Operating income, excluding the special charge ($1 million reversal of
excess reserves associated with the divestiture of two non-strategic
businesses), decreased 3.2% for the quarter ended June 30, 1998 compared to
the same period last year. The Company believes that operating margins
will continue to be impacted by higher operating costs resulting from the
Repositioning Plan.
<TABLE>
(in thousands)
<CAPTION>
Increase
1998 1997 (Decrease)
<S> <C> <C> <C>
Distribution $27,656 $28,694 $ (1,038)
Direct Industrial 884 1,104 (220)
Manufacturing 3,889 3,702 187
$32,429 $33,500 $ (1,071)
</TABLE>
<PAGE> 16
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The Distribution segment's operating income margin decreased 110
basis points to 9.5% for the quarter ended June 30, 1998 compared to same
quarter in the prior year. The decrease resulted primarily from
acquisitions which had estimated operating margins ranging from 6% to 8%
and from higher operating costs and expenses associated with the Company's
Repositioning Plan.
The operating income margin for ADI decreased 170 basis points to 1.3%
for the quarter ended June 30, 1998 compared with the same quarter last
year. Higher same-store sales and gross profits were offset by planned
repositioning expenses associated with new distribution facilities in
Southern California and Georgia, and computer conversion expenses.
The Manufacturing segment's operating margin decreased from 15.9% to
9.7% primarily as a result of lower margins associated with carbon dioxide
and dry ice acquisitions. Additionally, operating margins were impacted by
higher expenses related to international operations and a decline in carbon
operating profits.
Interest expense, net, totaled $14.8 million and increased $2.7
million compared to the same quarter last year. The increase in interest
expense was primarily attributable to an increase in debt associated with
completing 23 acquisitions since April 1, 1997. As discussed in "Liquidity
and Capital Resources" below, the Company has hedged floating interest
rates under certain borrowings with interest rate swap agreements.
Equity in earnings of unconsolidated affiliates of $754 thousand
increased $869 thousand compared to the prior year as a result of an
increase in earnings from the Company's carbon dioxide joint venture which
was acquired in connection with the June 1997 acquisition of Carbonic
Industries Corporation and improved earnings of National Welders Supply.
The effective income tax rate of 42.2% declined slightly compared to
the prior year as a result of permanent differences which were less
relative to pre-tax earnings.
Net earnings for the quarter ended June 30, 1998 were $11.3 million,
or $.16 per diluted share, compared to $12.3 million, or $.18 per diluted
share for the quarter ended June 30, 1997. Net earnings, excluding the
special charge reversal, net of tax, were $10.7 million, or $.15 per
diluted share in the quarter ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has primarily financed its operations, capital
expenditures, stock repurchases, and acquisitions with borrowings and funds
provided by operating activities.
Cash flows from operating activities totaled $20.7 million for the
quarter ended June 30, 1998. Depreciation, depletion and amortization
represented $21.6 million of cash flows from operating activities. Cash
flows from working capital components decreased $12.5 million primarily as
a result of an increase in accounts receivable associated with higher same
store-sales and an increase in inventory levels to meet increased sales
volumes, partially offset by increases in accounts payable, accrued expenses
and other current liabilities. Days' sales outstanding and distribution
hardgoods days' supply of inventory levels are comparable to March 31, 1998
levels.
<PAGE> 17
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
After-tax cash flow before the special charge (net earnings plus
depreciation, depletion and amortization and deferred income taxes),
increased 8% to $34.9 million compared to $32.3 million for the same
quarter last year.
Cash used by investing activities totaled $27.1 million for the quarter
ended June 30, 1998. Activities which used cash during the quarter were
primarily comprised of capital expenditures of $21.6 million and
acquisitions totaling $17.6 million. Cash was provided primarily by the
divestiture of two non-strategic businesses of $10.5 million and by
dividends from joint ventures of $1 million.
The Company's use of cash for capital expenditures during the quarter
ended June 30, 1998 was attributable to the purchase of cylinders, bulk
tanks and machinery and equipment and computer-related costs. The addition
of the cylinders, bulk tanks and machinery and equipment necessary to
facilitate sales growth totaled approximately $12.9 million or 60% of total
capital expenditures for the quarter ended June 30, 1998. Capitalized
computer costs related to the Company's Repositioning Plan were $3.4
million or 16% of total capital expenditures. The Company estimates its
maintenance capital expenditures to be approximately 1.5% of net sales.
The Company considers the replacement of existing capital assets to be
maintenance capital expenditures.
Financing activities provided cash of $6.4 million for the quarter
ended June 30, 1998, with total debt outstanding increasing by $20.9
million from March 31, 1998, offset by a decrease in the net overdraft of
$13.8 million. Funds provided by financing activities were used primarily
for acquisitions.
The Company has unsecured revolving credit facilities totaling US$725
million and C$100 million (US$68 million). The Company may borrow under
these facilities until the maturity date of December 5, 2002. The
agreement contains covenants which include the maintenance of certain
financial ratios, restrictions on additional borrowings and limitations on
dividends. At June 30, 1998, the Company had borrowings under the
agreement of US$517 million, C$41 million (US$28 million), had commitments
under letters of credit supported by the agreement of US$77 million, and,
based on restrictions related to cash flow to funded debt coverage, had
total additional borrowing capacity under the agreement of approximately
US$113 million. At June 30, 1998, the effective interest rate on
borrowings under the credit line was approximately 6.11% (U.S. borrowings)
and 5.43% (Canadian borrowings).
The Company has a shelf registration which provides for the issuance
of its securities with an aggregate public offering price of up to
approximately $370 million. At June 30, 1998, the Company had the following
long-term debt outstanding under medium-term notes issued under the shelf
registration: $100 million of unsecured notes due September 2006 bearing
interest at a fixed price 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.
<PAGE> 18
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
In managing interest rate exposure, principally under the Company's
floating rate revolving credit facilities, the Company has entered into 25
interest rate swap agreements during the period from June 1992 through
March 31, 1998. The swap agreements are with major financial institutions
and aggregate $497 million in notional principal amount at June 30, 1998.
Approximately $253 million of the notional principal amount of the swap
agreements requires fixed interest payments based on an average effective
rate of 6.63% for remaining periods ranging between 1 and 8 years. Eight
swap agreements require floating rates ($244 million notional amount at
5.60% at June 30, 1998). Under the terms of seven of the swap agreements,
the Company has elected to receive the discounted value of the counter-
party's interest payments up-front. At June 30, 1998, approximately $13.0
million of such payments were included in other non-current liabilities.
The Company continually monitors its positions and the credit ratings of
its counter-parties, and does not anticipate non-performance by the counter-
parties.
The Company will continue to look for appropriate acquisitions and expects
to fund such acquisitions, future capital expenditure requirements and
costs related to its Repositioning Plan primarily through the use of cash
flow from operations, debt, common stock for certain acquisition
candidates, funds from the divestiture of certain businesses and other
available sources. The Company believes that its sources of financing are
adequate for its anticipated needs and that it could arrange additional
sources of financing for any unanticipated requirement. The cost and terms
of any future financing arrangement depend on the market conditions and the
Company's financial position at that time.
Subsequent to June 30, 1998, the Company acquired two distribution
businesses with annual sales of approximately $12 million for an aggregate
purchase price of approximately $15 million.
The Board of Directors has authorized the repurchase of up to 4,600,000
shares of Company Common Stock from time-to-time to offset share issuances
for stock options, the Company's Employee Stock Purchase Plan and
acquisitions. The remaining shares authorized for repurchase under the
existing program totaled approximately 1.6 million shares at June 30, 1998.
There were no common stock repurchases in the quarter ended June 30, 1998.
Subsequent to June 30, 1998, the Company repurchased approximately 220
thousand shares of Company Common Stock for total consideration of
approximately $2.9 million.
The Company is aware of the issues associated with the Year 2000
problem. The "Year 2000" problem relates to whether computer systems will
properly recognize date sensitive information beginning in the year 2000.
Potential computer failures arising from years beginning with "20" rather
than "19" are a known risk. The Company is addressing this risk through
its project to integrate and standardize its information systems prior to
the Year 2000. As a result of this information system standardization and
other system modifications currently underway, the Company believes that
the Year 2000 problem relating to its financial systems will not pose
significant problems for the Company's information and operations systems
so modified and converted. However, if such modifications and conversions
are not completed timely, the Year 2000 problem may have a material impact
on the operations of the Company. The Company is also conducting a
comprehensive review of its other information and operations systems to
identify the systems that may not function properly in the Year 2000 and
thereafter, and is taking appropriate corrective action where necessary.
Additionally, the Company is identifying and contacting suppliers and other
critical business partners to determine if entities with which the Company
transacts business have effective year 2000 plans in place and to assess
the potential impact of the Year 2000 issue on the Company's operations.
<PAGE> 19 AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The Company does not currently pay dividends.
OTHER
New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standard
("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 adopted SFAS No. 130 in the quarter ended June 30,
1998, as required. The financial statements as of June 30, 1997 have been
restated to conform to the current presentation. Adoption of this
accounting standard did not impact earnings, financial condition or
liquidity.
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 SFAS No. 131
in fiscal 1999, as required. Adoption of this accounting standard will not
impact earnings, financial condition or liquidity.
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities." This
statement requires that costs of start-up activities, including
organization costs, be expensed as incurred. The statement is effective
for fiscal years beginning after December 15, 1998. The adoption of this
standard will not materially impact earnings, financial condition or
liquidity of the Company.
In June 1998, the FASB unanimously approved for issuance SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 standardizes the accounting for derivative instruments, including
derivative instruments embedded in other contracts, by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. The statement is
effective for fiscal years beginning after June 15, 1999. Management has
not yet determined the impact that the adoption of this statement may have
on earnings, financial condition or liquidity of the Company.
<PAGE> 20
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Forward-looking Statements
This report contains statements that are forward-looking, as that term is
defined by Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in rules, regulations and releases.
Airgas intends that such forward-looking statements be subject to the safe
harbors created thereby. All forward-looking statements are based on
current expectations regarding important risk factors, and the making of
such statements should not be regarded as a representation by Airgas or any
other person that the results expressed therein will be achieved.
Important factors that could cause actual results to differ materially from
those contained in any forward-looking statement include, but are not
limited to underlying market conditions, continued growth in same-store
sales, costs and potential disruptive effects of the repositioning, the
success of the Repositioning Plan, implementation and standardization of
information systems, including problems relating to Year 2000 matters, the
success and timing of intended divestitures, the effects of competition
from independent distributors and vertically integrated gas producers on
products and pricing, growth and acceptance of new product lines through
the Company's sales and marketing programs, changes in product prices from
gas producers and name-brand manufacturers and suppliers of hardgoods,
uncertainties regarding accidents or litigation which may arise in the
ordinary course of business and the effects of, and changes in the economy,
monetary and fiscal policies, laws and regulations, inflation and monetary
fluctuations and fluctuations in interest rates, both on a national and
international basis. The Company does not undertake to update any forward-
looking statement made herein or that may be made from time to time by or
behalf of the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In July 1996, Praxair, Inc. ("Praxair") filed suit against the Company in
the Circuit Court of Mobile County, Alabama. The complaint alleged
tortious interference with business or contractual relations with respect
to Praxair's Right of First Refusal contract with the majority shareholders
of 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. In
June 1998, Praxair filed a motion to dismiss its own action in Alabama and
commenced another action in the Superior Court of Mecklenburg County, North
Carolina, alleging substantially the same tortious interference by the
Company. The North Carolina action also alleges breach of contract against
National Welders and certain shareholders of National Welders and unfair
trade practices and conspiracy against all the defendants. In the North
Carolina action Praxair seeks compensatory damages in excess of $10,000,
punitive damages and other unspecified relief. The Company believes that
Praxair's North Carolina claims are also 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.
<PAGE> 21
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The Company is involved in various legal and regulatory proceedings
which have arisen in the ordinary course of its business and have not been
finally adjudicated. These actions, when ultimately concluded and
determined, will not, in the opinion of management, have a material adverse
effect upon the Company's consolidated financial position, results of
operations or liquidity.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following exhibits are being filed as part of this Form 10-Q Report:
Exhibit No. Description
4.1 Amendment No. 1 to Credit Agreement dated as of
April 13, 1998 among Airgas, Inc., Airgas Canada,
Inc., Red-D-Arc Limited and Airgas Ontario, Inc.,
Nationsbank, N.A. as U.S. agent and Canadian
Imperial Bank of Commerce as Canadian Agent.
11 Calculation of earnings per share
27 Financial Data Schedules as of June 30, 1998 and
June 30, 1997
b. Reports on Form 8-K
On April 27, 1998, the Company filed a Form 8-K pursuant to Item 5,
commenting on its earnings outlook for the fourth quarter ended March 31,
1998, and on the impact of a special charge related to its Repositioning
Plan.
On May 15, 1998, the Company filed a Form 8-K pursuant to Item 5,
reporting its earnings for the fourth quarter and year ended March 31,
1998.
On May 26, 1998, the Company filed a Form 8-K pursuant to Item 5,
announcing the appointment of Scott M. Melman as Vice President and Chief
Financial Officer.
<PAGE> 22
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.
Airgas, Inc.
(Registrant)
Date August 12, 1998 /s/ Scott M. Melman
Scott M. Melman
Vice President and
Chief Financial Officer
<PAGE> EX-1
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Amendment No. 1"),
dated as of April 13, 1998, is entered into by and among AIRGAS, INC.
("Airgas"), AIRGAS CANADA INC., RED-D-ARC LIMITED and AIRGAS ONTARIO INC.
(each a "Canadian Borrower", and collectively with Airgas, the
"Borrowers"), the U.S. Lenders and the Canadian Lenders (collectively, the
"Lenders"), NATIONSBANK, N.A. (the "U.S. Agent") and CANADIAN IMPERIAL BANK
OF COMMERCE (the "Canadian Agent", collectively with the U.S. Agent, the
"Agents").
RECITALS
WHEREAS, the Borrowers, the Lenders and the Agents are party to that
certain Credit Agreement dated as of December 5, 1997 (the "Existing Credit
Agreement");
WHEREAS, the parties hereto have agreed to amend the Existing Credit
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein
or the context otherwise requires, the following terms used in this
Amendment No. 1, including its preamble and recitals, have the following
meanings:
"Amended Credit Agreement" means the Existing Credit
Agreement as amended hereby.
"Amendment No. 1 Effective Date" is defined in Subpart 3.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendment No. 1,
including its preamble and recitals, have the meanings provided in the
Amended Credit Agreement.
<PAGE> EX-2
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 1
Effective Date, the Existing Credit Agreement is hereby amended in
accordance with this Part II. Except as so amended, the Existing Credit
Agreement and all other Credit Documents shall continue in full force and
effect.
SUBPART 2.1. Amendment to Section 1.1. The following definitions
appearing in Section 1.1 of the Existing Credit Agreement are amended in
their entireties to read as follows:
"Consolidated Net Income" means, for any period, the sum of (i)
the sum, without duplication, of net income (excluding extraordinary
items) after taxes for such period of the Consolidated Parties, plus
(ii) on and after such time, if ever, as National Welders is required
to be consolidated with Airgas in accordance with GAAP and to the
extent not included in the amount determined pursuant to clause (i)
above, net income (excluding extraordinary items) after taxes for such
period of National Welders, plus (iii) to the extent not included in
the amount determined pursuant to clause (i) above, net income
(excluding extraordinary items) after taxes for such period of any
Person which became a direct or indirect Subsidiary of Airgas as the
result of a Material Acquisition during such period, all as determined
in accordance with GAAP, but excluding (a) the effect of (1) the non-
recurring pre-tax charge of approximately $26 million to be taken by
Airgas in the fourth fiscal quarter of 1997 in connection with the
alleged fraudulent breach of contract by a third-party supplier to
Airgas and (2) any recoveries by Airgas or any of its Subsidiaries
relating to the breach of contract referred in clause (1) above, (b)
the effect of the non-recurring pre-tax, non-cash charge of
approximately $5 million to be taken by Airgas in the fourth fiscal
quarter of 1997 relating to the writedown by Airgas of certain
machinery and equipment, goodwill and other intangible assets of
Airgas Breathing Air Systems, Inc. and Red-D-Arc Limited and (c) the
effect of charges related to restructuring and repositioning made or
to be made for the fiscal year ending March 31, 1998 not to exceed
$25,000,000.
SUBPART 2.2. Amendment to Section 9.1. Subsection (i)(ii) of
Section 9.1 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
**********************
(i) Ownership.
**********************
(ii) Airgas shall fail to own, directly or indirectly,
all of the Voting Stock of each of the Canadian Borrowers
which Airgas owned as of the Closing Date other than with
respect to any Canadian Borrower as of the Closing Date
which ceases to be a Canadian Borrower pursuant to Section
11.16.
<PAGE> EX-3
SUBPART 2.3. New Section 11.16. The following new Section 11.16 is
added to the Existing Credit Agreement immediately following existing
Section 11.15 thereof:
11.16 Removal of a Canadian Borrower.
Airgas may at any time request that any Canadian Borrower
hereunder cease to be a Canadian Borrower by delivering to the
Canadian Agent (which shall promptly deliver counterparts thereof to
each Canadian Lender) a written notice to such effect. Such Canadian
Borrower shall cease to be a Canadian Borrower hereunder on the later
to occur of (i) the date the Canadian Agent receives such request, and
(ii) the date such Canadian Borrower has paid all of the Canadian
Borrowers' Obligations owing by such Canadian Borrower, and such
Canadian Borrower shall not be an applicant under any outstanding
Canadian Letter of Credit.
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. Amendment No. 1 Effective Date. This Amendment No. 1
shall be and become effective as of the date hereof (the "Amendment No. 1
Effective Date") when all of the conditions set forth in this Subpart 3.1
shall have been satisfied, and thereafter this Amendment No. 1 shall be
known, and may be referred to, as "Amendment No. 1".
SUBPART 3.1.1. Execution of Counterparts of Amendment. The U.S. Agent
shall have received executed counterparts (or other evidence of execution,
including facsimile signatures, satisfactory to the U.S. Agent) of this
Amendment No. 1, which collectively shall have been duly executed on behalf
of each of the Borrowers, the Required Lenders and the Agents.
SUBPART 3.1.2. Other Documents. The U.S. Agent shall have received
such other documents as the U.S. Agent, any Lender or counsel to the U.S.
Agent may reasonably request.
PART V
MISCELLANEOUS
SUBPART 4.1. Cross-References. References in this Amendment No. 1
to any Part or Subpart are, unless otherwise specified, to such Part or
Subpart of this Amendment No. 1.
SUBPART 4.2. Instrument Pursuant to Existing Credit Agreement. This
Amendment No. 1 is a Credit Document executed pursuant to the Existing
Credit Agreement and shall (unless otherwise expressly indicated therein)
be construed, administered and applied in accordance with the terms and
provisions of the Existing Credit Agreement.
SUBPART 4.3. References in Other Credit Documents. At such time as
this Amendment No. 1 shall become effective pursuant to the terms of
Subpart 3.1, all references in the Credit Documents to the "Credit
Agreement" shall be deemed to refer to the Amended Credit Agreement.
<PAGE> EX-4
SUBPART 4.4. Representations and Warranties. Each Credit Party
hereby represents and warrants that (i) each Credit Party that is party to
this Amendment No. 1: (a) has the requisite corporate power and authority
to execute, deliver and perform this Amendment No. 1, as applicable and (b)
is duly authorized to, and has been authorized by all necessary corporate
action, to execute, deliver and perform this Amendment No. 1, (ii) the
representations and warranties contained in Section 6 of the Existing
Credit Agreement are, subject to the limitations set forth therein, true
and correct in all material respects on and as of the date hereof as though
made on and as of such date (except for those which expressly relate to an
earlier date) and (iii) after giving effect to this Amendment No. 1, no
Default or Event of Default exists under the Existing Credit Agreement on
and as of the date hereof.
SUBPART 4.5. No Other Changes. Except as expressly modified and
amended in this Amendment No. 1, all the terms, provisions and conditions
of the Credit Documents shall remain unchanged.
SUBPART 4.6. Counterparts. This Amendment No. 1 may be executed by
the parties hereto in several counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but one and
the same agreement.
SUBPART 4.7. Entirety. This Amendment No. 1, the Amended Credit
Agreement and the other Credit Documents embody the entire agreement
between the parties and supersede all prior agreements and understandings,
if any, relating to the subject matter hereof. These Credit Documents
represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties.
SUBPART 4.8. Governing Law. THIS AMENDMENT NO. 1 AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
SUBPART 4.9. Successors and Assigns. This Amendment No. 1 shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
[Remainder of page intentionally left blank.]
<PAGE> EX-5
This Amendment No. 1 is executed as of the day and year first written
above.
CREDIT PARTIES:
AIRGAS, INC.
By____________________________
Thomas C. Deas, Jr.
Vice President/Finance
AIRGAS CANADA INC.,
By____________________________
Jeffrey P. Cornwell
Vice President/Finance
RED-D-ARC LIMITED
By____________________________
Jeffrey P. Cornwell
Vice President/Finance
AIRGAS ONTARIO INC.
By____________________________
Jeffrey P. Cornwell
Vice President/Finance
[Signatures Continued]
<PAGE> EX-6
U.S. LENDERS:
NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as U.S. Agent
By_____________________________
Title____________________________
THE BANK OF NEW YORK
By_____________________________
Title____________________________
FIRST UNION NATIONAL BANK
By_____________________________
Title____________________________
CORESTATES BANK, N.A.
By_____________________________
Title____________________________
BANK OF AMERICA NT&SA
By_____________________________
Title____________________________
[Signatures Continued]
<PAGE> EX-7
THE FIRST NATIONAL BANK OF CHICAGO
By_____________________________
Title____________________________
CIBC INC.
By_____________________________
Title____________________________
PNC BANK, NATIONAL ASSOCIATION
By_____________________________
Title____________________________
FLEET BANK N.A.
By_____________________________
Title____________________________
THE SANWA BANK, LIMITED
NEW YORK BRANCH
By_____________________________
Title____________________________
[Signatures Continued]
<PAGE> EX-8
SOCIETE GENERALE
By_____________________________
Title____________________________
THE BANK OF NOVA SCOTIA
By_____________________________
Title____________________________
BANK AUSTRIA AKTIENGESELLSCHAFT
By_____________________________
Title____________________________
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By_____________________________
Title____________________________
THE FUJI BANK, LIMITED
By_____________________________
Title____________________________
MELLON BANK, N.A.
By_____________________________
Title____________________________
[Signatures Continued]
<PAGE> EX-9
SUNTRUST BANK, ATLANTA
By_____________________________
Title____________________________
By_____________________________
Title____________________________
THE SUMITOMO BANK, LIMITED
By_____________________________
Title____________________________
WACHOVIA BANK, N.A.
By_____________________________
Title____________________________
[Signatures Continued]
<PAGE> EX-10
CANADIAN LENDERS:
CANADIAN IMPERIAL BANK OF COMMERCE,
individually in its capacity as a Lender and in its
capacity
as Canadian Agent
By_____________________________
Title____________________________
BANK OF AMERICA CANADA
By_____________________________
Title____________________________
FIRST CHICAGO NBD BANK, CANADA
By_____________________________
Title____________________________
THE BANK OF NOVA SCOTIA
By_____________________________
Title____________________________
MELLON BANK CANADA
By_____________________________
Title____________________________
<TABLE>
EXHIBIT 11
AIRGAS, INC.
EARNINGS PER SHARE CALCULATIONS
<CAPTION>
Three Months Ended
June 30,
1998 1997
<S> <C> <C>
Weighted Average Shares Outstanding:
Basic shares outstanding 70,300,000 66,800,000
Net common stock equivalents 1,800,000 2,400,000
Diluted shares outstanding 72,100,000 69,200,000
Net earnings $11,275,000 $12,226,000
Basic earnings per share $ .16 $ .18
Diluted earnings per share $ .16 $ .18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 200,225
<ALLOWANCES> 5,297
<INVENTORY> 163,688
<CURRENT-ASSETS> 381,535
<PP&E> 935,272
<DEPRECIATION> 247,959
<TOTAL-ASSETS> 1,664,366
<CURRENT-LIABILITIES> 208,410
<BONDS> 855,016
<COMMON> 715
0
0
<OTHER-SE> 439,523
<TOTAL-LIABILITY-AND-EQUITY> 1,664,366
<SALES> 400,773
<TOTAL-REVENUES> 400,773
<CGS> 215,496
<TOTAL-COSTS> 367,344
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,806
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