-----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, DacWHqJil4EyCswRVXLkYf8c/bRmmDt3K5jHStL4Z490ZnKEGWKiJso+1KutG7fp xKP0uO37dLNoYwD5vedbkg== 0000804212-04-000027.txt : 20040506 0000804212-04-000027.hdr.sgml : 20040506 20040506093346 ACCESSION NUMBER: 0000804212-04-000027 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040505 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRGAS INC CENTRAL INDEX KEY: 0000804212 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 560732648 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09344 FILM NUMBER: 04783363 BUSINESS ADDRESS: STREET 1: 259 N. RADNOR-CHESTER ROAD STREET 2: SUITE 100 CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6106875253 MAIL ADDRESS: STREET 1: 259 N. RADNOR-CHESTER ROAD STREET 2: SUITE 100 CITY: RADNOR STATE: PA ZIP: 19087 8-K 1 form8-k.txt FORM 8-K - ITEMS 7, 12 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): May 5, 2004 AIRGAS, INC. ______________________________________________________ (Exact name of registrant as specified in its charter) Delaware 1-9344 56-0732648 _______________ _______________________ ____________________ (State or other (Commission File Number) (I.R.S. Employer jurisdiction of Identification No.) incorporation) 259 North Radnor-Chester Road, Suite 100 Radnor, PA 19087-5283 _________________________________________ (Address of principal executive offices) Registrant's telephone number, including area code: (610) 687-5253 _______________ Item 12. Disclosure of Results of Operations and Financial Condition ___________________________________________________________ On May 5, 2004, Airgas, Inc. (the "Company") reported its earnings for its fourth quarter and fiscal year ended March 31, 2004, as described in the press release attached as Exhibit 99.1 and incorporated herein by reference. The information contained in this Form 8-K report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference in any filing under the Securities Exchange Act of 1933, as amended, except as expressly set forth by specific reference in such a filing. Non-GAAP Measures: _________________ The press release attached as Exhibit 99.1 contains certain financial measures that are not defined under generally accepted accounting principles (GAAP). Free Cash Flow is a non-GAAP measure that provides investors meaningful insight into the Company's ability to generate cash from continuing operations, which can be used at management's discretion for acquisitions, the repayment of debt or to support other investing and financing activities. The Company uses the non-GAAP measure Adjusted Debt to provide investors with a more accurate and meaningful measure of the change in the Company's obligation to repay debt by adjusting for the non-recourse debt of the National Welders joint venture, non-cash interest rate hedging and funds received or repaid under the trade receivables securitization program. The Company's intent is to provide non-GAAP financial information to enhance investors' understanding of the Company's consolidated financial statements and should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits __________________________________________________________________ (a) None (b) None (c) Exhibits. 99.1 - Press Release dated May 5, 2004 Signatures __________ Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AIRGAS, INC. (Registrant) BY: /s/ Robert M. McLaughlin ------------------------------- Robert M. McLaughlin Vice President & Controller DATED: May 5, 2004 EX-99 2 exh99-1.txt EXHIBIT 99.1 - EARNINGS PRESS RELEASE 5-5-04 Exhibit 99.1 - ------------ Airgas, Inc. 259 N. Radnor Chester Road Suite 100 Radnor, PA 19087-5283 www.airgas.com AIRGAS News Release - -------------------------------------------------------------------------- Investor Contact: Media Contact: - ----------------- -------------- Melissa Nigro (610) 902-6206 James Ely (610) 902-6010 melissa.nigro@airgas.com jim.ely@airgas.com FOR RELEASE: IMMEDIATELY AIRGAS REPORTS FOURTH QUARTER EPS GROWTH OF 16% RADNOR, PA - May 5, 2004 -- Airgas, Inc., (NYSE: ARG) today reported strong sales, operating profit and earnings growth for its fourth quarter ended March 31, 2004. Net earnings for the quarter were $21.7 million, or $0.29 per diluted share, compared to $18.2 million, or $0.25 per diluted share, in the same period a year ago. Fourth quarter sales increased 18% to $522.1 million reflecting the consolidation of National Welders Supply Company - the Airgas joint venture affiliate - as well as acquisitions and same-store sales growth. Excluding National Welders, sales grew 9%. Total same-store sales were up 6% compared to the same quarter a year ago, reflecting significant improvement in manufacturing and other industrial segments. Same-store sales in the Distribution segment were up 6%, driven by gains of 9% in hardgoods and 2% in gas and rent. "Our sales momentum accelerated in the fourth quarter, including a very strong March for both gases and hardgoods," said Airgas Chairman and Chief Executive Officer Peter McCausland. "Although sales growth was led by our lower-margin hardgoods products, the recovery in our business is unfolding as expected and the gases strength in March is very encouraging." Net earnings for the year ended March 31, 2004 were $1.07 per diluted share compared to prior year results of $0.94 per diluted share. The results for the year ended March 31, 2004 include a non-recurring after- tax gain of $1.7 million, or $0.02 per diluted share, at National Welders Supply Company, and an after-tax $480 thousand special charge recovery related to a revised estimate on prior years' restructuring charges. Also included in the year ended March 31, 2004 are insurance-related losses of $2.8 million ($1.7 million after tax), or $0.02 per diluted share, for previously announced incidents at two of the Company's facilities. The year ended March 31, 2003 included charges of $2.9 million ($2.2 million after tax), or $0.03 per diluted share, primarily related to a special charge for the integration of the Air Products U.S. packaged gas acquisition ($2.7 million). "We grew fiscal 2004 earnings per share by 10%, excluding the impact of special charges and recoveries, even though our markets didn't recover until late in the year," added McCausland. "I'm delighted to see the momentum, but most importantly, our results validate a strong and stable business model that can weather a tough economy." McCausland continued, "I'm excited about our growth opportunities ahead. During the last several years, we have built a tremendous infrastructure and product offering. With that behind us, we are now focused on growing our business, branch by branch, with those core customers who use gases, welding and safety products. We also plan to continue growing our medical business through Airgas Puritan Medical divisions in every regional company. Finally, we look forward to successfully completing our largest acquisition ever as we welcome the customers and associates from BOC's U.S. packaged gas business at the end of July. We expect to earn $1.21 to $1.27 per share in fiscal 2005, including up to $0.02 per share accretion from the BOC acquisition." Free Cash Flow for the year ended March 31, 2004 was $106 million compared to $104 million in the prior year. The Company reduced adjusted debt by $60 million during the fiscal year. The definition of free cash flow, a reconciliation to the attached Consolidated Statement of Cash Flows, the definition of adjusted debt and a reconciliation to the balance sheet are attached. The Company will conduct an earnings teleconference on Thursday, May 6, 2004, beginning at 11:00 a.m. Eastern Time. Access the teleconference by calling (800) 810-0924. This press release, slides to be presented during the Company's teleconference and information about how to access a live and on-demand webcast of the teleconference are available in the `Investor Info' section on the Company's Internet site www.airgas.com. The telephone replay will be accessible for one week starting May 6th at 1 p.m. Eastern Time by calling (888) 203-1112 and entering passcode 293214. ABOUT AIRGAS, INC. Airgas, Inc. is the largest U.S. distributor of industrial, medical and specialty gases, welding, safety and related products. Its integrated network of nearly 800 locations includes branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also distributes its products and services through eBusiness, catalog and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base. For more information, please visit www.airgas.com. FORWARD-LOOKING STATEMENTS -------------------------- This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. These statements include, but are not limited to, statements regarding: the gases strength in March being encouraging; a focus on growing the business branch by branch; growing the medical business through Airgas Puritan Medical divisions; successfully completing the acquisition of BOC's U.S. packaged gas business and welcoming the customers and associates; the range of expected earnings per share for fiscal year 2005; and the expected accretion from the BOC acquisition. The Company 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 should not be regarded as a representation by the Company 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: the success of the Company's ability to grow sales and market share; the closing of the Company's acquisition of the majority of BOC's U.S. packaged gas business; the successful integration of the BOC acquisition; the cost of integrating the BOC business into the Company's operations; an economic downturn; increased industry competition; adverse changes in customer buying patterns; significant fluctuations in interest rates; political and economic uncertainties associated with current world events; and other factors described in the Company's reports, including Form 10-K dated March 31, 2003 and Form 10-Q reports dated June 30, 2003, September 30, 2003 and December 31, 2003, filed by the Company with the Securities and Exchange Commission. Consolidated statements of earnings, consolidated condensed balance sheets, consolidated statements of cash flows, and a reconciliation of non-GAAP financial measures follow.
AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except per share data) (Unaudited) Three Months Ended Year Ended March 31, March 31, 2004 2003 2004 2003 ---- ---- ---- ---- Net sales $522,091 $442,904 $1,895,468 $1,786,964 -------- -------- ---------- ---------- Costs and expenses: Cost of products sold (excl.deprec.) 253,587 209,756 908,681 850,316 Selling, distribution and administrative expenses 198,736 174,789 731,827 698,228 Depreciation 23,318 17,774 82,567 73,482 Amortization 1,154 1,427 5,389 6,362 Special charges (recoveries) (a) (776) -- (776) 2,694 -------- -------- ---------- ---------- Total costs and expenses 476,019 403,746 1,727,688 1,631,082 -------- -------- ---------- ---------- Operating income 46,072 39,158 167,780 155,882 Interest expense, net (11,367) (10,249) (42,357) (46,375) Discount on securitization of trade receivables (c) (797) (772) (3,264) (3,326) Other income (expense), net 824 (54) 625 (645) Equity in earnings of unconsolidated affiliates (b) 232 741 5,213 3,768 Minority interest (291) -- (291) -- -------- -------- ---------- ---------- Earnings before income tax expense 34,673 28,824 127,706 109,304 Income tax expense 13,013 10,659 47,514 41,199 -------- -------- ---------- ---------- Net earnings $ 21,660 $ 18,165 $ 80,192 $ 68,105 ======== ======== ========== ========== Basic earnings per share $ .29 $ .26 $ 1.10 $ .97 Diluted earnings per share $ .29 $ .25 $ 1.07 $ .94 Weighted average shares outstanding: Basic 73,600 71,100 72,800 70,500 Diluted 75,700 73,000 74,700 72,300 See attached notes.
AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in thousands) March 31, March 31, 2004 2003 ---- ---- ASSETS Trade accounts receivable, net (c) $ 107,013 $ 71,346 Inventories, net 170,300 151,405 Deferred income tax asset, net 21,054 17,688 Prepaids and other current assets 28,463 30,143 ---------- ---------- TOTAL CURRENT ASSETS 326,830 270,582 Property, plant and equipment, net (d) 1,033,926 869,492 Goodwill 504,207 437,709 Other intangible assets, net 19,733 19,832 Investments in unconsolidated affiliates (e) 6,292 65,957 Other non-current assets 40,091 36,671 ---------- ---------- TOTAL ASSETS $1,931,079 $1,700,243 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, trade $ 114,303 $ 85,375 Accrued expenses and other current liabilities 122,026 121,292 Current portion of long-term debt 6,140 2,229 ---------- ---------- TOTAL CURRENT LIABILITIES 242,469 208,896 ---------- ---------- Long-term debt (c)(d) 682,698 658,031 Deferred income taxes 257,031 209,140 Other non-current liabilities (d) 20,789 27,243 Minority interest in subsidiary (e) 36,191 -- Stockholders' equity 691,901 596,933 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,931,079 $1,700,243 ========== ========== See attached notes.
AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year Ended Year Ended March 31, 2004 March 31, 2003 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 80,192 $ 68,105 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 82,567 73,482 Amortization 5,389 6,362 Deferred income taxes 23,172 8,655 Equity in earnings of unconsolidated affiliates (5,213) (3,768) Loss on divestitures -- 241 Gain on sales of plant and equipment (837) (257) Minority interest in earnings 291 -- Stock issued for employee stock purchase plan 6,889 8,951 Changes in assets and liabilities, excluding effects of business acquisitions, divestitures and the consolidation of the National Welders joint venture: Securitization of trade receivables 3,700 24,900 Trade receivables, net (15,901) (8,316) Inventories, net (5,586) 4,675 Prepaid expenses and other current assets 10,146 17,718 Accounts payable, trade 20,845 2,884 Accrued expenses and other current liabilities 4,687 (8,021) Other assets 1,179 2,068 Other liabilities (2,425) (3,280) -------- -------- Net cash provided by operating activities 209,095 194,399 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (93,749) (67,969) Proceeds from sales of plant and equipment 5,347 4,260 Proceeds from divestitures -- 3,167 Business acquisitions, holdbacks and other settlements of acquisition related liabilities (34,907) (27,216) Dividends and fees from unconsolidated affiliates 2,147 2,507 Other, net (1,369) (1,719) -------- -------- Net cash used in investing activities (122,531) (86,970) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 414,297 248,961 Repayment of debt (485,004) (367,356) Financing costs (2,737) -- Minority interest (291) -- Exercise of stock options 13,130 9,847 Dividends paid to stockholders (11,801) -- Cash overdraft (14,158) 1,119 -------- -------- Net cash used in financing activities (86,564) (107,429) -------- -------- Change in cash Cash - Beginning of period $ -- $ -- Cash - End of period -- -- -------- -------- $ -- $ -- ======== ======== See attached notes.
Notes: (a) Special charges of $2.7 million ($1.7 million after tax) for the year ended March 31, 2003 consist of a first quarter restructuring charge related to the integration of the business acquired from Air Products in the fourth quarter of fiscal 2002 and costs related to the consolidation of certain of the Company's procurement functions. The special charges include facility exit costs associated with the closure of certain Airgas (the "Company") facilities and severance. Special charge recoveries of $776 thousand ($480 thousand after tax) for the quarter and year ended March 31, 2004 consist of the reversal of the excess portion of prior years' restructuring charges. The special charge recoveries represent a change in estimate related to facility exit costs. (b) Equity in the earnings of unconsolidated affiliates for the year ended March 31, 2004 reflects a $1.7 million non-recurring after-tax gain. (c) The Company participates in a securitization agreement with two commercial banks to sell up to $175 million of qualified trade receivables. Net proceeds from the securitization were used to reduce borrowings under the Company's revolving credit facilities. The amount of outstanding receivables under the agreement was $162.6 million and $158.9 million at March 31, 2004 and March 31, 2003, respectively. (d) Since October 1999, the Company has leased certain real estate and equipment from a grantor trust (the "Trust") under a sale- leaseback arrangement. The Trust was not consolidated for financial reporting purposes. Effective July 1, 2003, the Company elected to early adopt Financial Accounting Standards Board Interpretation No. 46 ("FIN 46") with respect to the Trust, which required the consolidation of the Trust. The consolidation of the Trust resulted in the Company recording assets of $29 million and debt of $42 million, while eliminating a deferred gain of $13 million that was previously carried on the balance sheet as a long- term liability. Consolidation of the Trust was a non-cash transaction. (e) Since June 1996, the Company has participated in a joint venture with National Welders Supply Company, Inc. ("NWS"), a producer and dis- tributor of industrial gases based in Charlotte, North Carolina. Ownership interests in the joint venture consist of voting common stock and voting, redeemable preferred stock. The Company owns 100% of the joint venture's common stock, which represents a 50% voting interest. The Company does not hold a majority voting interest in the joint venture and, therefore, historically has used the equity method to account for its interest in the joint venture. The Company has determined that NWS meets the definition of a "Variable Interest Entity" under FIN 46R (FIN 46 as revised in December 2003) and that the Company is the primary beneficiary of the joint venture. Therefore, effective December 31, 2003, the Company elected to adopt FIN 46R, as it applies to the joint venture, and consolidated NWS. The consolidation had the effect of eliminating the Company's $62 million investment in NWS and recording the joint venture's assets, liabilities and a corresponding minority interest liability. The summarized balance sheet impact of the consolidation of NWS at March 31, 2004 is reflected in the table below. Beginning January 1, 2004, NWS' operating results were no longer reflected as "Equity in Earnings of Unconsolidated Affiliates." Rather, the operating results were reflected broadly across the income statement with minority interest expense representing the after-tax portion of the operating results applicable to the preferred stockholders. (e) Continued. Summarized Impact of the Consolidation of NWS at March 31, 2004 Current Assets $ 29,922 Non-Current Assets 109,750 ------- Total Assets 139,672 ======= Current Liabilities 21,217 Non-Current Liabilities 82,929 Minority Interest 36,191 Common Stockholder's Equity (665) ------- Total Liabilities and Stockholder's Equity $139,672 ======= (f) Business segment information Beginning with the Company's fiscal fourth quarter, the operating results of NWS were reported broadly across the income statement contributing $39.2 million to sales and $3.4 million to operating income. For the purpose of disclosing operating results by business segment, the Company renamed its Gas Operations segment as "All Other Operations" and disclosed the operating results of NWS with the results of the companies previously reported under that segment. Prior to the adoption of FIN 46R, the operating results of NWS were reported as a single line item, below operating income, entitled "equity in earnings of unconsolidated affiliates." The companies reporting their results under the All Other Operations segment consist of producers and distributors, principally of dry ice, carbon dioxide, nitrous oxide and specialty gases. The operating results of the Company's two air separation plants and its five most significant specialty gas labs are also reported under this segment. The operating results of these businesses are not material enough to meet the thresholds to be reported as individual business segments. NWS also has significant production capabilities with three air separation plants, two acetylene plants and a specialty gas lab. Although Airgas is the primary beneficiary of the NWS joint venture, the absence of a controlling voting interest, the significant production capabilities of NWS, the fact that the obligations of NWS are non- recourse to the Company and that the cash flows of NWS are not available to the Company, lead to the conclusion that NWS does not meet the criteria to be aggregated with the companies in the Distribution segment. Furthermore, NWS is not material enough to meet the thresholds to be reported as an individual business segment. Therefore, the results of NWS have been reflected in the All Other Operations segment as disclosed below:
(f) Business segment information (continued) (Unaudited) (Unaudited) Three Months Ended Three Months Ended March 31, 2004 March 31, 2003 -------------- -------------- (In thousands) Dist. All Elim Combined Dist. All Elim Combined ---- --- ---- -------- ----- --- ---- -------- Other Other ----- ----- Ops. Ops. ---- ---- Gas and rent $226,515 $70,094 $(10,526) $286,083 $216,798 $40,990 $(9,619) $248,169 Hardgoods 221,266 15,703 (961) 236,008 193,235 1,500 -- 194,735 -------- ------- --------- -------- -------- ------- -------- -------- Total net sales 447,781 85,797 (11,487) 522,091 410,033 42,490 (9,619) 442,904 Cost of products sold, excl. deprec.expense 225,960 39,114 (11,487) 253,587 198,973 20,402 (9,619) 209,756 Selling, distribution and administrative expenses 165,602 33,134 198,736 159,197 15,592 174,789 Deprec. & amort. expense 18,856 5,616 24,472 16,216 2,985 19,201 Special charges (recoveries) (776) -- (776) -- -- -- -------- ------- -------- -------- ------- -------- Operating income 38,139 7,933 46,072 35,647 3,511 39,158 -------- ------- -------- -------- ------- --------
Year Ended Year Ended March 31, 2004 March 31, 2003 -------------- -------------- (In thousands) Dist. All Elim Combined Dist. All Elim Combined ----- --- ---- -------- ----- --- ---- -------- Other Other ----- ----- Ops. Ops. ---- ---- Gas and rent $882,585 $216,166 $(39,944) $1,058,807 $ 863,975 $178,622 $(37,067) $1,005,530 Hardgoods 819,886 19,760 (2,985) 836,661 778,101 5,227 (1,894) 781,434 --------- -------- --------- ---------- --------- -------- --------- ---------- Total net sales 1,702,471 235,926 (42,929) 1,895,468 1,642,076 183,849 (38,961) 1,786,964 Cost of products sold, excl. deprec.expense 845,440 106,170 (42,929) 908,681 806,320 82,957 (38,961) 850,316 Selling, distribution and administrative expenses 648,919 82,908 731,827 634,580 63,648 698,228 Deprec. & amort. expense 72,439 15,517 87,956 67,948 11,896 79,844 Special charges (recoveries) (776) -- (776) 2,694 -- 2,694 --------- -------- ---------- --------- -------- ---------- Operating income 136,449 31,331 167,780 130,534 25,348 155,882 --------- -------- ---------- --------- -------- ----------
Reconciliation of Non-GAAP Financial Measures (Unaudited) - ---------------------------------------------------------
Free Cash Flow: --------------- Reconciliation of net cash provided by operating activities per the Consolidated Statement of Cash Flows to Free Cash Flow: Year Ended Year Ended (Amounts in thousands) March 31, 2004 March 31, 2003 -------------- -------------- Net cash provided by operating activities $209,095 $194,399 Less net cash provided by operating activities of NWS (1) (9,831) -- Plus: Dividends and fees paid by unconsolidated affiliates 2,147 2,507 Management fees paid by NWS (1) 249 -- Less: Cash provided by the securitization of trade receivables (3,700) (24,900) Capital expenditures (93,749) (67,969) Add back capital expenditures of NWS (1) 2,265 -- -------- -------- Free Cash Flow $106,476 $104,037 ======== ========
(1) National Welders Supply Co. ("NWS") is a corporate joint venture meeting the definition of a variable interest entity and for which the Company is the primary beneficiary as described under FIN 46R. NWS was consolidated effective December 31, 2003 when the Company prospectively adopted FIN 46R as required by the interpretation. Prior to January 1, 2004, the Company reported the results of NWS below operating income in "Equity in Earnings of Unconsolidated Affiliates." The liabilities of NWS are non-recourse to the Company. Likewise, the cash flows in excess of the management fee paid by NWS are not available to the Company. Accordingly, the cash flows of NWS have been excluded from the Company's non-GAAP liquidity measures. The Company believes Free Cash Flow provides investors meaningful insight into the Company's ability to generate cash from continuing operations, which can be used at management's discretion for acquisitions, the repayment of debt or to support other investing and financing activities. Reduction of Adjusted Debt: --------------------------- Reconciliation of the change in debt per the Balance Sheet to the decrease in debt adjusted for the non-recourse debt of NWS, off- balance sheet financing and non-cash interest rate hedging ("adjusted debt"):
(Amounts in thousands) Change in Adjusted March 31, 2004 March 31, 2003 Debt -------------- -------------- ------------------ Debt $688,838 $660,260 $ 28,578 Adjustments to Debt: Securitization of trade receivables 162,600 158,900 3,700 Lease obligation with a Trust(1) -- 42,097 (42,097) Consolidation of National Welders(2) (53,823) -- (53,823) Interest rate swap agreements (13,832) (17,681) 3,849 --------- --------- --------- Adjusted Debt $783,783 $843,576 $(59,793) ========= ========= =========
(1) As a result of the consolidation of the Trust as disclosed in note (d), the lease obligation with the Trust has been classified as debt at March 31, 2004. (2) As a result of the December 31, 2003 consolidation of National Welders as disclosed in notes (e) and (f), debt associated with National Welders, which is non-recourse to Airgas, has been excluded from adjusted debt. The Company uses Adjusted Debt to provide investors with a more accurate and meaningful measure of the change in the Company's obligation to repay debt by adjusting for the non-recourse debt of NWS, non-cash interest rate hedging and funds received (or repaid) under the trade receivables securitization program. -----END PRIVACY-ENHANCED MESSAGE-----