1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: September 30, 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 November 1, 1995: 31,506,000 shares 2 AIRGAS, INC. FORM 10-Q September 30, 1995 INDEX PART I - FINANCIAL INFORMATION ______________________________ Consolidated Balance Sheets as of September 30, 1995 and March 31,1995.....................................................3 Consolidated Statements of Earnings for the Three Months Ended September 30, 1995 and 1994................5 Consolidated Statements of Earnings for the Six Months Ended September 30, 1995 and 1994..................6 Consolidated Statements of Cash Flows for the Six Months Ended September 30, 1995 and 1994..................7 Notes to Consolidated Financial Statements.................................8 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................12 PART II - OTHER INFORMATION ___________________________ Submission of Matters to a Vote of Security Holders.......................19 Exhibits and Reports on Form 8-K..........................................20 Signatures................................................................21 3 PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements. AIRGAS, INC. CONSOLIDATED BALANCE SHEETS (In thousands) September 30, March 31, 1995 1995 (Unaudited) _____________ ________ ASSETS Current Assets Trade receivables, less allowance for doubtful accounts of $3,647 at September 30, 1995 and $4,161 at March 31, 1995 $103,412 $ 93,423 Inventories 74,837 65,947 Prepaid expenses and other current assets 15,143 10,467 _______ _______ Total current assets 193,392 169,837 _______ _______ Plant and equipment, at cost 516,497 464,983 Less accumulated depreciation and amortization (132,312) (118,715) _______ _______ Plant and equipment, net 384,185 346,268 Other non-current assets 49,810 41,388 Goodwill, net of accumulated amortization of $17,066 at September 30, 1995 and $15,094 at March 31, 1995 109,717 88,144 _______ _______ Total assets $737,104 $645,637 ======= ======= <FN> See accompanying notes to consolidated financial statements. 4 AIRGAS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands, except per share amounts) September 30, March 31, 1995 1995 (Unaudited) ___________ ________ LIABILITIES AND STOCKHOLDERS' EQUITY ____________________________________ Current Liabilities Current portion of long-term debt $ 11,436 $ 11,780 Accounts payable, trade 39,530 43,782 Accrued expenses and other current liabilities 60,448 60,191 _______ _______ Total current liabilities 111,414 115,753 _______ _______ Long-term debt 327,397 259,970 Deferred income taxes 73,816 67,540 Other non-current liabilities 14,696 11,116 Minority interest in subsidiaries 1,427 1,606 Stockholders' equity Common stock $.01 par value, 200,000 shares authorized, 32,440 and 31,501 shares issued at September 30, 1995 and March 31, 1995, respectively 324 315 Capital in excess of par value 77,411 62,135 Retained earnings 152,429 133,640 Cumulative translation adjustment (301) (469) Treasury stock, 883 and 236 common shares at cost at September 30, 1995 and March 31, 1995, respectively (21,509) (5,969) _______ _______ Total stockholders' equity 208,354 189,652 _______ _______ Total liabilities and stockholders' equity $737,104 $ 645,637 ======= ======= <FN> 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 September 30, 1995 September 30, 1994 __________________ __________________ Net sales: Distribution $190,456 $156,925 Manufacturing 8,574 8,061 _______ _______ Total net sales 199,030 164,986 _______ _______ Costs and expenses: Cost of products sold (excluding depreciation and amortization) Distribution 93,424 77,151 Manufacturing 5,293 5,144 Selling, distribution and administrative expenses 66,997 56,624 Depreciation and amortization 11,172 8,952 _______ _______ Total costs and expenses 176,886 147,871 _______ _______ Operating income: Distribution 20,260 15,499 Manufacturing 1,884 1,616 _______ _______ 22,144 17,115 Interest expense, net (5,867) (3,921) Other income, net 155 90 Minority interest (174) (127) _______ _______ Earnings before income taxes 16,258 13,157 Income taxes 6,923 5,697 _______ _______ Net earnings $ 9,335 $ 7,460 ======= ======= Earnings per share $ .29 $ .23 ======= ======= Weighted average shares 32,676 32,989 ======= ======= <FN> See accompanying notes to consolidated financial statements. 6 AIRGAS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share amounts) Six Months Ended Six Months Ended September 30, 1995 September 30, 1994 __________________ __________________ Net sales: Distribution $376,090 $308,437 Manufacturing 17,212 16,011 _______ _______ Total net sales 393,302 324,448 _______ _______ Costs and expenses: Cost of products sold (excluding depreciation and amortization) Distribution 184,345 152,077 Manufacturing 11,029 10,268 Selling, distribution and administrative expenses 132,134 111,766 Depreciation and amortization 21,613 17,521 _______ _______ Total costs and expenses 349,121 291,632 _______ _______ Operating income: Distribution 40,739 29,766 Manufacturing 3,442 3,050 _______ _______ 44,181 32,816 Interest expense, net (11,455) (7,652) Other income, net 366 220 Minority interest (365) (253) _______ _______ Earnings before income taxes 32,727 25,131 Income taxes 13,938 10,882 _______ _______ Net earnings $ 18,789 $ 14,249 ======= ======= Earnings per share $ .58 $ .43 ======= ======= Weighted average shares 32,606 32,922 ======= ======= <FN> See accompanying notes to consolidated financial statements. 7 AIRGAS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended Six Months Ended September 30, 1995 September 30, 1994 __________________ __________________ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 18,789 $ 14,249 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 21,613 17,521 Deferred income taxes 5,924 4,897 Equity in earnings of joint venture (683) (377) Loss on sale of plant and equipment 13 48 Minority interest in earnings 365 253 Stock issued for employee benefit plan 1,603 1,230 Changes in assets and liabilities, excluding effects of business acquisitions: Trade receivables, net (1,777) (1,371) Inventories (632) (2,350) Prepaid expenses and other current assets (3,876) (612) Accounts payable, trade (8,943) (3,908) Accrued expenses and other current liabilities 1,403 (2,995) Other assets and liabilities, net (766) (4,280) _______ _______ Net cash provided by operating activities 33,033 22,305 _______ _______ CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (19,414) (18,067) Proceeds from sale of plant and equipment 1,501 1,195 Business acquisitions, net of cash acquired (35,163) (37,549) Other, net (472) 201 _______ _______ Net cash used by investing activities (53,548) (54,220) _______ _______ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 303,305 138,131 Repayment of debt (268,857) (108,857) Repurchase of treasury stock (15,540) 0 Exercise of options and warrants 2,991 818 Net overdraft (1,709) 1,270 Dividend from joint venture 293 550 _______ _______ Net cash provided by financing activities 20,483 31,912 _______ _______ EFFECTS OF DISCONTINUED ACTIVITIES, NET 32 3 _______ _______ CHANGE IN CASH $ -0- $ -0- Cash - beginning of period -0- -0- _______ _______ Cash - end of period $ -0- $ -0- ======= ======= <FN> See accompanying notes to consolidated financial statements. 8 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION _____________________ The consolidated financial statements include the accounts of Airgas, Inc. and its subsidiaries (the "Company"). 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 September 30, 1995 and March 31, 1995; the consolidated statements of earnings for the three and six months ended September 30, 1995 and 1994; and the consolidated statements of cash flows for the six months ended September 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 October 31, 1995, the Company has acquired twenty- three businesses engaged in the distribution of industrial, medical and specialty gases and welding supplies with annual sales of approximately $90 million. The aggregate purchase price, including amounts related to non- competition and confidentiality agreements, amounted to approximately $99 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. 9 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (3) INVENTORIES ___________ Inventories consist of: (In thousands) September 30, March 31, 1995 1995 ________ ________ Finished goods $74,571 $ 65,693 Raw materials 1,387 1,315 _______ _______ 75,958 67,008 Less reduction to LIFO cost ( 1,121) (1,061) _______ _______ $74,837 $ 65,947 ======= ======= (4) PLANT AND EQUIPMENT ___________________ The major classes of plant and equipment are as follows: (In thousands) September 30, March 31, 1995 1995 _____________ _________ Land and land improvements $ 18,597 $ 17,571 Building and leasehold improvements 47,627 43,714 Machinery and equipment, including cylinders 418,000 376,284 Transportation equipment 29,585 25,944 Construction in progress 2,688 1,470 _______ _______ $516,497 $464,983 ======= ======= 10 AIRGAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (Unaudited) (5) OTHER NON-CURRENT ASSETS _______________________ Other non-current assets include: (In thousands) September 30, March 31, 1995 1995 _____________ _________ Investment in a joint venture $ 1,987 $ 1,597 Noncompete agreements and other intangible assets, at cost, net of accumulated amortization of $41.6 million at September 30, 1995 and $37.4 million at March 31, 1995 38,435 31,955 Other assets 9,388 7,836 _______ _______ $ 49,810 $ 41,388 ======= ======= (6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES ______________________________________________ Accrued expenses and other current liabilities include: (In thousands) September 30, March 31, 1995 1995 _____________ _________ Cash overdraft $ 9,929 $ 11,638 Insurance payable and related reserves 6,250 6,304 Customer cylinder deposits 6,501 6,242 Other accrued expenses and current liabilities 37,768 36,007 _______ _______ $ 60,448 $ 60,191 ======= ======= 11 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. 12 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL REVIEW ________________ OVERVIEW ________ The Company's financial results for the second quarter ended September 30, 1995 reflect substantial growth compared with the same quarter in the prior year. Net sales of $199.0 million, net earnings of $9.3 million and earnings per share of $.29 represent increases over the prior period of 21%, 25% and 26%, respectively. Net sales increased during the second quarter ended September 30, 1995 over the same period in the prior year primarily due to the acquisition of industrial gas distribution companies and an increase in same-store distribution sales. Same-store sales increased 2% compared to the second quarter last year. July sales were weak due to a sluggish economy and prolonged hot, dry weather throughout most of the country. Sales rebounded during the latter half of August and September. The increase in net earnings was primarily due to an increase in gross profits from higher same-store distribution sales and an increase in gross profit margins and earnings generated by industrial gas distribution businesses acquired since July 1, 1994. After tax cash flow (net earnings plus depreciation, amortization and deferred income taxes) increased 25% to $23.6 million from $18.9 million in the second quarter last year. 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 SEPTEMBER 30, 1995 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1994 _____________________________________ Net sales increased 21% during the quarter ended September 30, 1995 compared to the same quarter in the prior year: (in thousands) 1995 1994 Increase ____ ____ __________ Distribution $190,456 $156,925 $ 33,531 Manufacturing 8,574 8,061 513 _______ _______ _______ $199,030 $164,986 $ 34,044 ======= ======= ======= For the quarter ended September 30, 1995, distribution sales increased approximately $30.6 million resulting from the acquisition of 40 industrial gas distributors since July 1, 1994 and approximately $2.9 million from same-store sales. The Company estimates that had all acquisitions during the quarter ended September 30, 1995 been consummated on July 1, 1995, distribution sales for the second quarter ended September 30, 1995 would have been approximately $3.3 million higher. The increase in same-store sales of approximately 2% is primarily the result of increased volume of gas and rental businesses. Hardgoods same-store sales were flat. The Company estimates same-store sales based on a comparison of current period sales to the prior 13 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 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 6.4% during the quarter ended September 30, 1995 compared to the same quarter in the prior year primarily as a result of an increase in the demand for carbon products and nitrous oxide. The increase in distribution gross profit of $17.3 million over 1994, is attributable to increases associated with acquisitions of $14.7 million and same-store gross profit growth of $2.6 million. The majority of the $2.6 million same-store gross profit growth came from volume growth in gas and rent revenues. Gas and rent volumes have increased due to the success of gas marketing programs, principally small bulk and specialty gases. On a same-store basis, distribution gross margins increased an estimated 0.2% compared to 1994. This increase is due to improved hardgoods gross margin from the Company's national purchasing program as well as improved gas and rent gross margins. Lower margin bulk gases have offset some margin improvements. Selling, distribution and administrative expenses as a percentage of sales decreased to 33.7% compared to 34.3% 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 29% during the quarter ended September 30, 1995 compared to the same quarter in the prior year: (in thousands) 1995 1994 Increase ____ ____ __________ Distribution $20,260 $15,499 $ 4,761 Manufacturing 1,884 1,616 268 ______ ______ ______ $22,144 $17,115 $ 5,029 ====== ====== ====== Distribution operating income as a percentage of net distribution sales increased to 10.6% during the second quarter ended September 30, 1995 compared to 9.9% in the same quarter in the prior year. 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. 14 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Manufacturing operating income increased $268 thousand compared to 1994 due to strong demand for carbon products and nitrous oxide during the second quarter ended September 30, 1995. 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 July 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. 15 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS: SIX MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 1994 __________________________ Net sales increased 21% during the six months ended September 30, 1995 compared to the same period in the prior year: (in thousands) 1995 1994 Increase ____ ____ __________ Distribution $376,090 $308,437 $ 67,653 Manufacturing 17,212 16,011 1,201 _______ _______ _______ $393,302 $324,448 $ 68,854 ======= ======= ======= For the six months ended September 30, 1995, distribution sales increased approximately $59.2 million resulting from the acquisition of 45 industrial gas distributors since April 1, 1994 and approximately $8.4 million from same-store sales. The Company estimates that had all acquisitions during the six months ended September 30, 1995 been consummated on April 1, 1995, distribution sales for the six months ended September 30, 1995 would have been approximately $12.0 million higher. The increase in same-store sales of approximately 2% is primarily the result of increased volume of hardgoods sales and increases in gas and rental business. 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 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 7.5% compared to 1994 primarily as a result of an increase in the volume of lower margin exports and increased demand for carbon products and nitrous oxide. The increase in distribution gross profit of $35.4 million over 1994, is attributable to increases associated with acquisitions of $28.6 million and same-store gross profit growth of $6.8 million. 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 0.5% for the six months ended September 30, 1995 compared to the same period in the prior year. 16 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Selling, distribution and administrative expenses as a percentage of sales decreased to 33.6% compared to 34.4% 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 35% during the six months ended September 30, 1995 compared to the same period in the prior year: (in thousands) 1995 1994 Increase ____ ____ __________ Distribution $40,739 $29,766 $10,973 Manufacturing 3,442 3,050 392 ______ ______ ______ $44,181 $32,816 $11,365 ====== ====== ====== Distribution operating income as a percentage of net distribution sales increased to 10.8% compared to 9.7% 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. Manufacturing operating income increased $392 thousand compared to 1994 due to increased demand for carbon products and nitrous oxide, lower production and delivery costs related to the calcium carbide and nitrous oxide business, partially offset by an increase in lower margin sales of carbon products. Interest expense, net, increased $3.8 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. 17 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 $33.0 million for the six months ended September 30, 1995. Depreciation and amortization represent $21.6 million of cash flow from operating activities. Deferred income taxes of $5.9 million principally resulted from temporary differences. Working capital components of cash flow increased $13.8 million as a result of an increase in accounts receivable, an increase in prepaid expenses and other current assets and a decrease in trade accounts payable, offset by an increase in accrued expenses and other current liabilities. Days-sales outstanding and days-supply of inventory levels have increased slightly from March 31, 1995 levels, principally due to fiscal 1996 acquisitions. Accounts payable decreased $8.9 million due to payments to vendors. Other current liabilities increased due to accrued interest, income taxes and insurance. Cash used by investing activities totaled $53.5 million for the six months ended September 30, 1995 which was primarily comprised of $19.4 million for capital expenditures and $35.1 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. Financing activities provided cash of $20.5 million for the six months ended September 30, 1995 with total debt outstanding increasing by $67.1 million from March 31, 1995. Debt incurred in connection with the acquisition of industrial gas distribution businesses, including seller notes and assumed notes, totalled $67.8 million. In January, 1995, the Company approved a one million share stock repurchase program. Through October 25, 1995, the Company has purchased one million shares at an aggregate cost of $24.3 million. On October 27, 1995, the Company announced an additional one million share stock repurchase program. Through November 3, 1995, the Company has purchased 170,400 shares at an aggregate cost of $4.4 million shares under this program. The purchase of shares is dependent on prevailing market conditions. The Company's primary source of borrowing is an unsecured revolving credit facility with various commercial banks. On August 10, 1995, the Company amended and increased this facility from $250 million to $375 million, and terminated a $100 million bank revolving credit facility which was established in November 1994. At September 30, 1995, the bank facility provided for borrowings up to $375 million, with sub-limits 18 Item 2. AIRGAS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) for money market loans, bankers acceptances and the issuance of letters of credit. At September 30, 1995, the Company had approximately $238 million in borrowings under the facility and approximately $45 million committed under letters of credit, resulting in availability under the facility of approximately $92 million. At September 30, 1995, the effective interest rate related to outstanding borrowings under credit lines was approximately 6.29%. 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 March 31, 1995. The swap agreements are with major financial institutions and have a total notional principal amount of $146 million at September 30, 1995. Approximately $126 million of the notional principal amount of the swap agreements require fixed interest payments based on an average effective rate of 6.97% for remaining periods ranging between 2 and 7 years. Two swap agreements require floating rates ($19.5 million notional amount at 6.0% at September 30, 1995). The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. The Company will continue to look for appropriate acquisitions and expects to fund such acquisitions, future capital expenditure requirements and commitments related to foreign investments primarily through the use of cash flow from operations, debt, common stock for certain stock acquisition candidates and other available sources. Subsequent to September 30, 1995, through October 31, 1995, the Company has acquired two industrial gas distribution businesses with an aggregate purchase price of approximately $14 million. The Company does not currently pay dividends. OTHER _____ The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" effective for fiscal years beginning after December 15, 1995. This statement provides guidance for the recognition of impaiment losses related to long-lived assets such as property, plant and equipment, and certain intangibles and related goodwill for (1) assets to be held and used and (2) assets to be disposed of. Management has not yet determined the impact of the adoption of this statement. The FASB has issued Statement of Financial Accounting Standards No. 123 - - "Accounting for Stock - Based Compensation," effective for fiscal years beginning after December 15, 1995. This statement establishes a fair value based method of accounting for stock-based compensation plans. This statement also applies to all transactions in which an entity acquires goods or services by issuing its equity instruments. Management has not yet determined the impact of the adoption of this statement. 19 AIRGAS, INC. PART II - OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On August 7, 1995, the Registrant held its Annual Meeting of Stockholders. The stockholders voted to elect three members to the Board of Directors, to approve an amendment to the Company's Certificate of Incorporation to limit the potential liability of the directors for monetary damages for certain acts or omissions, to approve an amendment to the Company's Amended and Restated 1984 Stock Option Plan, to approve the Company's Management Incentive Plan and to ratify the selection of KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year ending March 31, 1996. Elected to the Board of Directors were W. Thacher Brown (27,223,602 shares voted for election and 18,614 shares were withheld), Frank B. Foster, III (27,226,350 shares voted for election and 15,866 shares were withheld) and Peter McCausland (27,080,188 shares voted for election and 162,028 shares were withheld). In addition to the board members elected at the Annual Meeting, the following are directors whose terms in office as directors continued after the meeting; James M. Hoak, Jr., John A.H. Shober, Merril L. Stott, Erroll C. Sult, Robert E. Naylor, Jr. and Robert L. Yohe. Also at the Annual Meeting, 25,940,951 shares voted to approve the amendment to the Company's Certificate of Incorporation, with 819,905 shares voting against the amendment and 481,360 shares abstaining. Second, 21,631,072 shares voted to approve the amendment to the Company's Amended and Restated 1984 Stock Option Plan, with 5,558,923 shares voting against the amendment and 52,221 shares abstaining. Next, 22,633,240 shares voted to approve the Airgas Management Incentive Plan, with 368,035 shares voting against the proposal, 44,099 shares abstaining and 4,196,842 broker no votes. Additionally, 27,210,522 shares voted to ratify the selection of KPMG Peat Marwick LLP as independent auditors, with 17,153 shares voting against the ratification and 14,541 shares abstaining. 20 Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits ________ 3.1 Amended and Restated Certificate of Incorporation of Airgas, Inc. dated as of August 7, 1995. 4.1 Seventh Amended and Restated Loan Agreement dated August 10, 1995 between Airgas, Inc. certain banks and NationsBank of North Carolina, N.A. ($375,000,000 credit facility). 10.1 Amended and Restated 1984 Stock Option Plan (as amended effective May 22, 1995) 10.2 Amendment to the 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) (As amended through August 7, 1995) 10.3 Airgas, Inc. Management Incentive Plan 11 Calculation of earnings per share b. Reports on Form 8-K ___________________ None 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. November 7, 1995 /s/Britton H. Murdoch _________________ _______________________ Date Britton H. Murdoch Vice President and Chief Financial Officer