-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SEoEFO9CacAJ+1BNgOo+dvvQaeUuaoXewFvNU9JN49odvavX3ABBRT5rIdjYK28A hn+Rpg2EQ/KFDyv4GHRiwQ== 0000804212-98-000025.txt : 19980814 0000804212-98-000025.hdr.sgml : 19980814 ACCESSION NUMBER: 0000804212-98-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: SEC FILE NUMBER: 001-09344 FILM NUMBER: 98684339 BUSINESS ADDRESS: STREET 1: 259 RADNOR-CHESETER ROAD STREET 2: SUITE 100 CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6106875253 MAIL ADDRESS: STREET 1: 259 RADNOR-CHESTER ROAD STREET 2: SUITE 100 CITY: RADNOR STATE: PA ZIP: 19087 10-Q 1 FORM 10-Q 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 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 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. AIRGAS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts)
June 30, 1998 March 31, (Unaudited) 1998 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.
4 AIRGAS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollars in thousands, except per share amounts)
Three Months Ended Three Months Ended June 30, 1998 June 30, 1997 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.
5 AIRGAS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands) Three Months Ended Three Months Ended June 30, 1998 June 30, 1997 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.
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. 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: (In thousands)
June 30, March 31, 1998 1998 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
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: (In thousands)
June 30, March 31, 1998 1998 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
(7) OTHER NON-CURRENT ASSETS Other non-current assets include: (In thousands)
June 30, March 31, 1998 1998 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
9 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) (8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities include: (In thousands)
June 30, March 31, 1998 1998 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.
(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 10 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited)
(In thousands of dollars) Accumulated Capital in Other Common Excess of Retained Comprehensive Treasury Comprehensive Stock Par Value Earnings Loss Stock Income 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.
(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. 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. 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. 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. (in thousands)
1998 1997 Increase 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
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. 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: (in thousands)
1998 1997 Increase 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
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%. 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. (in thousands)
Increase 1998 1997 (Decrease) 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)
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. 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. 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. 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. 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. 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. 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 EX-4 2 EX-4.1 - AMENDMENT NO. 1 TO CREDIT AGREEMENT 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. 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. 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. 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.] 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] 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] 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] 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] EX-9 SUNTRUST BANK, ATLANTA By_____________________________ Title____________________________ By_____________________________ Title____________________________ THE SUMITOMO BANK, LIMITED By_____________________________ Title____________________________ WACHOVIA BANK, N.A. By_____________________________ Title____________________________ [Signatures Continued] 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____________________________ EX-11 3 EXHIBIT 11 EXHIBIT 11 AIRGAS, INC. EARNINGS PER SHARE CALCULATIONS
Three Months Ended June 30, 1998 1997 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
EX-27 4 ART. 5 FDS FOR 1ST QUARTER 10-Q ENDED JUNE 30, 1998
5 1000 3-MOS MAR-31-1999 JUN-30-1998 0 0 200,225 5,297 163,688 381,535 935,272 247,959 1,664,366 208,410 855,016 715 0 0 439,523 1,664,366 400,773 400,773 215,496 367,344 0 0 14,806 19,499 8,224 11,275 0 0 0 11,275 .16 .16
EX-27 5 ART. 5 AMENDED FDS FOR 1ST QUARTER ENDED JUNE 30, 1997
5 1000 3-MOS MAR-31-1998 JUN-30-1997 0 0 164,452 4,629 135,802 330,351 803,743 195,191 1,413,956 171,849 722,164 697 0 0 370,820 1,413,956 331,412 331,412 174,754 297,912 0 0 12,108 21,441 9,215 12,226 0 0 0 12,226 .18 .18
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