0000804212-95-000014.txt : 19950809 0000804212-95-000014.hdr.sgml : 19950809 ACCESSION NUMBER: 0000804212-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950808 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRGAS INC CENTRAL INDEX KEY: 0000804212 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CHEMICALS & ALLIED PRODUCTS [5160] IRS NUMBER: 560732648 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09344 FILM NUMBER: 95559695 BUSINESS ADDRESS: STREET 1: 100 MATSONFORD RD STE 550 STREET 2: 5 RADNOR CORPORATE CENTER CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 2156875253 MAIL ADDRESS: STREET 1: 5 RADNOR CORPORATE CENTER, STE 550 STREET 2: 100 MATSONFORD ROAD CITY: RADNOR STATE: PA ZIP: 19087 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: June 30, 1995 _____________________________ Commission file number: 1-9344 _____________________________ AIRGAS, INC. ______________________________________________________________________________ (Exact name of Registrant as specified in its charter) Delaware 56-0732648 _______________________________ __________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5 Radnor Corporate Center, Suite 550 100 Matsonford Road Radnor, PA 19087-4579 _______________________________________ ________________ (Address of principal executive offices) (ZIP code) (610) 687-5253 __________________________________________________ (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ ______ Common Stock outstanding at August 1, 1995: 31,159,000 shares 2 AIRGAS, INC. FORM 10-Q June 30, 1995 INDEX PART I - FINANCIAL INFORMATION ______________________________ Consolidated Balance Sheets as of June 30, 1995 and March 31, 1995....................................................3 Consolidated Statements of Earnings for the Three Months Ended June 30, 1995 and 1994.....................5 Consolidated Statements of Cash Flows for the Three Months Ended June 30, 1995 and 1994.....................6 Notes to Consolidated Financial Statements.................................7 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................11 PART II - OTHER INFORMATION ___________________________ Exhibits and Reports on Form 8-K..........................................15 Signatures................................................................16 3 PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements. AIRGAS, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, March 31, 1995 1995 (Unaudited) _____________ ________ ASSETS Current Assets Trade receivables, less allowances for doubtful accounts of $3,867 at June 30, 1995 and $4,161 at March 31, 1995 $ 97,174 $ 93,423 Inventories 72,350 65,947 Prepaid expenses and other current assets 11,947 10,467 _______ _______ Total current assets 181,471 169,837 _______ _______ Plant and Equipment, at cost 492,585 464,983 Less accumulated depreciation and amortization (125,466) (118,715) _______ _______ Plant and equipment, net 367,119 346,268 Other Non-current Assets 43,135 41,388 Goodwill, net of accumulated amortization of $16,038 at June 30, 1995 and $15,094 at March 31, 1995 102,699 88,144 _______ _______ Total assets $694,424 $645,637 ======= ======= See accompanying notes to consolidated financial statements.
4 AIRGAS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands, except per share amounts)
June 30, March 31, 1995 1995 (Unaudited) ___________ ________ LIABILITIES AND STOCKHOLDERS' EQUITY ____________________________________ Current Liabilities Current portion of long-term debt $ 11,108 $ 11,780 Accounts payable, trade 41,107 43,782 Accrued expenses and other current liabilities 58,183 60,191 _______ _______ Total current liabilities 110,398 115,753 _______ _______ Long-Term Debt 309,398 259,970 Deferred Income Taxes 70,347 67,540 Other Non-current Liabilities 13,390 11,116 Minority Interest in Subsidiaries 1,938 1,606 Stockholders' Equity Common stock $.01 par value, 200,000 shares authorized, 31,922 and 31,501 shares issued at June 30, 1995 and March 31, 1995, respectively 319 315 Capital in Excess of Par Value 67,461 62,135 Retained earnings 143,094 133,640 Cumulative Translation Adjustment (412) (469) Treasury Stock, 883 and 236 common shares at cost at June 30, 1995 and March 31, 1995, respectively (21,509) (5,969) _______ _______ Total stockholders' equity 188,953 189,652 _______ _______ Total liabilities and stockholders' equity $694,424 $ 645,637 ======= ======= See accompanying notes to consolidated financial statements.
5 AIRGAS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share amounts)
Three Months Ended Three Months Ended June 30, 1995 June 30, 1994 __________________ __________________ Net sales: Distribution $185,634 $151,512 Manufacturing 8,638 7,950 _______ _______ Total net sales 194,272 159,462 _______ _______ Costs and expenses: Cost of products sold (excluding depreciation and amortization) Distribution 90,921 74,926 Manufacturing 5,736 5,124 Selling, distribution and administrative expenses 65,137 55,142 Depreciation and amortization 10,441 8,569 _______ _______ Total costs and expenses 172,235 143,761 _______ _______ Operating income: Distribution 20,479 14,267 Manufacturing 1,558 1,434 _______ _______ 22,037 15,701 Interest expense, net (5,588) (3,731) Other income, net 211 130 Minority interest (191) (126) _______ _______ Earnings before income taxes 16,469 11,974 Income taxes 7,015 5,185 _______ _______ Net earnings $ 9,454 $ 6,789 ======= ======= Primary and fully diluted Earnings per share $ .29 $ .21 ======= ======= Weighted average shares 32,576 32,819 ======= ======= See accompanying notes to consolidated financial statements.
6 AIRGAS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended Three Months Ended June 30, 1995 June 30, 1994 __________________ __________________ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 9,454 $ 6,789 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 10,441 8,569 Deferred income taxes 2,806 2,377 Equity in earnings of joint venture (297) (161) Loss on sale of plant and equipment 0 7 Minority interest in earnings 191 126 Stock issued for employee benefit plan 790 599 Changes in assets and liabilities, excluding effects of business acquisitions: Trade receivables, net 1,534 (730) Inventories (1,773) (1,242) Prepaid expenses and other current assets (1,153) (313) Accounts payable, trade (5,919) (3,176) Accrued expenses and other current liabilities (1,363) (1,941) Other assets and liabilities, net 598 (1,540) _______ _______ Net cash provided by operating activities 15,309 9,364 _______ _______ CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (8,592) (8,981) Proceeds from sale of plant and equipment 379 543 Business acquisitions, net of cash acquired (13,094) (7,340) Other, net 198 96 _______ _______ Net cash used by investing activities (21,109) (15,682) _______ _______ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 81,336 30,765 Repayment of debt (60,000) (25,307) Repurchase of treasury stock (15,540) 0 Exercise of options and warrants 1,674 481 Net overdraft (1,685) 439 _______ _______ Net cash provided by financing activities 5,785 6,378 _______ _______ EFFECTS OF DISCONTINUED ACTIVITIES, NET 15 (60) _______ _______ CHANGE IN CASH $ -0- $ -0- Cash - beginning of period -0- -0- _______ _______ Cash - end of period $ -0- $ -0- ======= ======= See accompanying notes to consolidated financial statements.
7 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION _____________________ The consolidated financial statements include the accounts of Airgas, Inc. and its subsidiaries (the "Company"). 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, 1995. 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, 1995 and March 31, 1995; the consolidated statements of earnings for the three months ended June 30, 1995 and 1994; and the consolidated statements of cash flows for the three months ended June 30, 1995 and 1994. The interim operating results are not necessarily indicative of the results to be expected for an entire year. (2) ACQUISITIONS ____________ From April 1, 1995 to June 30, 1995, the Company has acquired thirteen businesses engaged in the distribution of industrial, medical and specialty gases and welding supplies with annual sales of approximately $40 million. The aggregate purchase price, including amounts related to non-competition and confidentiality agreements, amounted to approximately $50 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. Subsequent to June 30, 1995, the Company has acquired industrial gas distribution businesses with an aggregate purchase price of approximately $20 million. 8 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (3) INVENTORIES ___________ Inventories consist of: (In thousands)
June 30, March 31, 1995 1995 ________ ________ Finished goods $72,275 $ 65,693 Raw materials 1,166 1,315 _______ _______ 73,441 67,008 Less reduction to LIFO cost ( 1,091) (1,061) _______ _______ $72,350 $ 65,947 ======= =======
(4) PLANT AND EQUIPMENT ___________________ The major classes of plant and equipment are as follows: (In thousands)
June 30 March 31, 1995 1995 _____________ _________ Land and land improvements $ 18,127 $ 17,571 Building and leasehold improvements 46,457 43,714 Machinery and equipment, including cylinders 399,311 376,284 Transportation equipment 27,209 25,944 Construction in progress 1,481 1,470 _______ _______ $492,585 $464,983 ======= =======
9 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (5) OTHER NON-CURRENT ASSETS _______________________ Other non-current assets include: (In thousands)
June 30 March 31, 1995 1995 _____________ _________ Investment in a joint venture $ 1,601 $ 1,597 Noncompete agreements and other intangible assets, at cost, net of accumulated amortization of $39.4 million at June 30, 1995 and $37.4 million at March 31, 1995 33,490 31,955 Other assets 8,044 7,836 _______ _______ $ 43,135 $ 41,388 ======= =======
(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES ______________________________________________ Accrued expenses and other current liabilities include: (In thousands)
June 30, March 31, 1995 1995 _____________ _________ Cash overdraft $ 9,953 $ 11,638 Insurance payable and related reserves 6,341 6,304 Customer cylinder deposits 6,285 6,242 Other accrued expenses and current liabilities 35,604 36,007 _______ _______ $ 58,183 $ 60,191 ======= =======
10 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (7) EARNINGS PER SHARE __________________ Earnings per share amounts were determined using the treasury stock method. (8) COMMITMENTS AND CONTINGENCIES _____________________________ The Company is involved in various legal proceedings which have arisen in the ordinary course of its business and have not been finally adjudicated. These actions, when ultimately concluded and determined will not, in the opinion of management, have a material adverse effect upon the Company's financial condition, results of operations or liquidity. 11 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL REVIEW ________________ OVERVIEW ________ The Company's financial results for the quarter ended June 30, 1995 reflect substantial growth compared with the first quarter last year. Net sales of $194.3 million, net earnings of $9.5 million and earnings per share of $.29 represent increases over the prior period of 22%, 39% and 38%, respectively. Net sales increased during the first quarter ended June 30, 1995 over the same period in the prior year primarily due to an increase in same-store distribution sales and the acquisition of industrial gas distribution companies. The increase in net earnings was primarily due to an increase in gross profits from higher same-store distribution sales, an increase in gross profit margins and earnings generated by industrial gas distribution businesses acquired since April 1, 1994. After tax cash flow (net earnings plus depreciation, amortization and deferred income taxes) increased 28% to $22.7 million from $17.7 million in 1994. After tax cash flow is an important measurement of the Company's ability to repay debt through operations and provides the Company with the ability to pursue investment alternatives such as acquisitions and the repurchase of Company stock. RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1994 __________________________ Net sales increased 22% in 1995 compared to 1994: (in thousands)
1995 1994 Increase ____ ____ __________ Distribution $185,634 $151,512 $ 34,122 Manufacturing 8,638 7,950 688 _______ _______ _______ $194,272 $159,462 $ 34,810 ======= ======= =======
In 1995, distribution sales increased approximately $28.6 million resulting from the acquisition of 34 industrial gas distributors since April 1, 1994 and approximately $5.5 million from same-store sales. The Company estimates that had all acquisitions during the quarter ended June 30, 1995 been consummated on April 1, 1995, distribution sales for 1995 would have been approximately $1 million higher. The increase in same-store sales of approximately 3% is primarily the result of increased volume of hardgoods sales and increases in gas and rental businesses. 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 12 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) for new and existing products and to increase prices. The Company believes that sales of lower margin hardgoods are adversely impacted during a recession, and conversely, are typically the fastest to rebound during an economic recovery. Sales for the Company's manufacturing operations increased 8.6% compared to 1994 primarily as a result of an increase in the volume of lower margin exports. The increase in distribution gross profit of $18.1 million over 1994, is attributable to increases associated with acquisitions of $13.9 million and same-store gross profit growth of $4.2 million. Approximately 30% of the $4.2 million same-store gross profit growth came from margin improvement and 70% from volume increases. The same-store gross profit growth is attributable to increased hardgoods volumes combined with improved gross margins resulting from the Company's national purchasing arrangements, success of gas marketing programs and improved gas and rental gross margins due to price increases to customers. On a same-store basis, distribution gross margins increased an estimated .8% compared to 1994. Selling, distribution and administrative expenses as a percentage of sales decreased to 33.5% compared to 34.6% in 1994. The decrease is a result of acquisition consolidation efforts and from controlling certain operating costs, such as business insurance costs through improved claims management and reduced incident rates. Through improved management efforts, the Company has also reduced its bad debt expense. Also, certain operating costs, such as occupancy costs, are relatively fixed and did not increase proportionately with the increase in same-store sales. Partially offsetting these improvements were normal salary increases and slightly higher distribution costs. Operating income increased 40% in 1995 compared to 1994: (in thousands)
1995 1994 Increase ____ ____ __________ Distribution $20,479 $14,267 $ 6,212 Manufacturing 1,558 1,434 124 ______ ______ ______ $22,037 $15,701 $ 6,336 ====== ====== ======
Distribution operating income as a percentage of net distribution sales increased to 11% compared to 9.4% in 1994. The improvement in distribution operating income in 1995 was a result of the increase in gross profits from higher same-store sales, improved gross profit margins and operating income provided by acquisitions. 13 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Manufacturing operating income increased $124 thousand compared to 1994 due to lower production and delivery costs related to calcium carbide and nitrous oxide business, partially offset by an increase in lower margin sales of carbon products. Interest expense, net, increased $1.9 million compared to 1994 primarily as a result of the increase in average outstanding debt associated with the acquisition of industrial gas distributors since April 1, 1994, interest costs associated with the repurchase of treasury stock and slightly higher interest rates. As discussed in "Liquidity and Capital Resources" below, the Company has hedged floating interest rates under certain borrowings with interest rate swap agreements. Income tax expense represented 42.6% of pre-tax earnings in 1995 compared to 43.3% in 1994. The decrease in the effective income tax rate is primarily due to an increase in pre-tax earnings relative to non-deductible goodwill and other basis differences. 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 $15.3 million in 1995. Depreciation and amortization represent $10.4 million of cash flow from operating activities. Deferred income taxes of $2.8 million principally resulted from temporary differences. Working capital components of cash flow increased $8.7 million as a result of a decrease in accounts receivable offset by an increase in inventory levels to meet increased hardgoods sales volumes and a decrease in trade accounts payable and accrued expenses and other liabilities. Days-sales outstanding and days-supply of inventory levels are comparable to March 31, 1995 levels. Accounts payable decreased $5.9 million due to payments to vendors. Other current liabilities decreased as a result of payouts related to employee profit sharing plans and year-end bonuses offset by an increase in accrued interest, income taxes and insurance. Cash used by investing activities totaled $21.1 million in 1995 which was primarily comprised of $8.6 million for capital expenditures and $13.1 million related to acquisitions. The Company's use of cash for capital expenditures was partially attributable to the continued assimilation of certain prior period acquisitions which required the Company to make capital expenditures in areas such as combining cylinder fill plants, improving truck fleets and purchasing cylinders in order to return cylinders rented from third parties. Additionally, capital expenditures include the purchase of cylinders and bulk tanks necessary to facilitate gas sales growth. The Company estimates that its maintenance capital expenditures are approximately 2% of net sales. The Company considers the replacement of existing capital assets to be maintenance capital expenditures. 14 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Financing activities provided cash of $5.8 million in 1995 with total debt outstanding increasing by $48.8 million from March 31, 1995. Debt incurred in connection with the acquisition of industrial gas distribution businesses, including seller notes and assumed notes, totalled $40.5 million. The Company has approved a one million share stock repurchase program. Through June 30, 1995, the Company has purchased 883,000 shares at an aggregate cost of $21.5 million. The purchase of additional shares is dependent on prevailing market conditions. One of the Company's primary sources of borrowings is an unsecured revolving credit facility with various commercial banks. At June 30, 1995, the facility provided for borrowings up to $250 million, with sub-limits for money market loans, bankers acceptances and the issuance of letters of credit. At June 30, 1995, the Company had approximately $141 million in borrowings under the facility and approximately $38 million committed under letters of credit, resulting in availability under the facility of approximately $71 million. The facility provides for quarterly interest payments payable currently with equal quarterly principal payments beginning in September 1996 and continuing through June 2001. The Company also has a $100 million unsecured revolving credit facility with various commercial banks to provide additional availability for the Company's ongoing acquisition and investment programs. The facility currently bears interest at the Libor rate plus an applicable margin and matures on July 1, 1996. On June 30, 1995, the Company had approximately $75 million in borrowings under the facility resulting in availability under the facility of approximately $25 million. The Company intends to terminate its $100 million facility in conjunction with an anticipated increase in the Company's $250 million revolving credit facility in August, 1995, which will have terms and conditions similar to its existing $250 million facility. At June 30, 1995, the effective interest rate related to outstanding borrowings under credit lines was approximately 6.5%. The Company's loan agreements contain restrictive covenants which include the maintenance of a minimum equity level, maintenance of certain financial ratios and restrictions on additional borrowings and the level of dividend payments. In managing interest rate exposure, principally under the Company's floating rate revolving credit facilities, the Company has entered into thirteen interest rate swap agreements during the period from June, 1992 through June 30, 1995. The swap agreements are with major financial institutions and have a total notional principal amount of $142 million at June 30, 1995. Approximately $123 million of the notional principal amount of the swap agreements require fixed interest payments based on an average effective rate of 7.3% for remaining periods ranging between 2 and 7 years. Two swap agreements require floating rates ($19.5 million notional amount at 6.5% at June 30, 1995). The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. 15 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 through cash flow from operations and with debt and other available sources. Subsequent to June 30, 1995, the Company has acquired industrial gas distribution businesses with an aggregate purchase price of approximately $20 million. The Company does not currently pay dividends. 16 AIRGAS, INC. PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits ________ 11. Calculation of earnings per share. b. Reports on Form 8-K ___________________ None. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. August 7, 1995 /s/ Britton H. Murdoch ______________ _______________________ Date Britton H. Murdoch Vice President and Chief Financial Officer EX-11 2 EXHIBIT 11 18 EXHIBIT 11 AIRGAS, INC. EARNINGS PER SHARE CALCULATIONS
Three Months Ended June 30, 1995 1994 ____ ____ Adjustment of Weighted Average Shares Outstanding: Shares of common stock outstanding - weighted 30,945,000 31,121,000 Net common stock equivalents 1,631,000 1,698,000 __________ __________ Adjusted shares outstanding 32,576,000 32,819,000 ========== ========== Net earnings $ 9,454,000 $ 6,789,000 ========== ========== Primary and fully diluted Earnings Per Share $ .29 $ .21 ========== ==========
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. EX-27 3 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1000 3-MOS MAR-31-1996 JUN-30-1995 0 0 97,174 3,867 72,350 181,471 492,585 125,466 694,424 110,398 0 319 0 0 188,634 694,424 194,272 194,272 96,657 96,657 0 0 5,588 16,469 7,015 9,454 0 0 0 9,454 .29 .29