1 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): November 28, 1995 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 incorporation) No.) 100 Matsonford Road, Suite 550 Radnor, PA 19087 _______________________________________ (Address of principal executive offices) Registrant's telephone number, including area code: (610) 687-5253 _______________ 2 Item 5. Other Events. ____________ From April 1, 1995 through September 30, 1995, the Registrant has acquired twenty-one individually insignificant businesses. The Registrant is filing this current report on Form 8-K in order to provide audited financial statements and pro forma information for three individually insignificant business acquisitions in accordance with the requirements set forth in Regulation S-X, Rule 3-05(b)(1)(i). The Registrant applied the conditions set forth in Rule 1-02(w) to determine if the aggregate impact of the acquisitions exceeds 20% of one of the conditions set forth in the rule. The aggregate purchase price for the individually insignificant businesses, including amounts related to non-competition and confidentiality agreements, amounted to $84.4 million plus the assumption of certain liabilities. The purchase prices for the businesses were determined by arms-length negotiations. The Registrant is providing audited financial statements for three of the individually insignificant businesses described below. Effective May 1, 1995, Trinity Airgas, Inc. ("Trinity"), a 95 percent owned subsidiary of US Airgas, Inc., purchased substantially all of the assets of Trinity Welding Supply, Inc. ("TWS") for $9.5 million plus the assumption of certain liabilities. Additionally, Trinity paid an aggregate of $650 thousand to TWS's shareholders in connection with entering into non-competition and confidentiality agreements. US Airgas, Inc. is a wholly-owned subsidiary of the Registrant. Effective June 29, 1995, 1136886 Ontario Inc., a 94 percent owned Canadian subsidiary of Airgas, Inc. purchased all of the issued and outstanding stock of Red-D-Arc Limited and Red-D-Arc Leasing, and Airgas Holdings, a wholly- owned subsidiary of Airgas, Inc. purchased all of the issued and outstanding stock of Red-D-Arc Inc. (collectively referred to as "Red-D-Arc") for $8.9 million plus the assumption of certain liabilities and issuance of promissory notes to the seller. Additionally, the Company paid an aggregate of $364 thousand to a Red-D-Arc shareholder in connection with entering into a non- competition and confidentiality agreement. Effective August 1, 1995, Delta Airgas, Inc. ("Delta"), a wholly-owned subsidiary of US Airgas, Inc., purchased substantially all of the assets of Capital Welding Supply Company ("Capital") for $6.0 million plus the assumption of certain liabilities. Additionally, Delta paid an aggregate of $4.0 million to Capital's shareholders in connection with entering into non- competition and confidentiality agreements. 3 The acquisitions were financed using the Registrant's revolving credit facilities with NationsBank of North Carolina, N.A. and Canadian Imperial Bank of Commerce and by the issuance of promissory notes to the sellers and the assumption of certain liabilities. At the time of the acquisitions described above, all of the aforementioned businesses were engaged in the distribution and marketing of industrial gases and related welding equipment and supplies. The Registrant intends to continue to use the acquired assets to operate industrial gas and welding supply businesses. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits __________________________________________________________________ (a) Financial Statements 1. Audited balance sheet of Trinity Welding Supply, Inc. as of April 30, 1995 and the related consolidated statements of operations, retained earnings and cash flows for the eleven months then ended. 2. Audited combined balance sheet of Red-D-Arc Limited, Red-D-Arc Inc. and Red-D-Arc Leasing LTD ("Red-D-Arc") as of December 31, 1994 and the combined statements of income and retained earnings and cash flows for the year then ended. 3. Audited balance sheet of Capital Welding Supply Company ("Capital") as of July 31, 1995 and the related statements of income, retained earnings and cash flows for the nine months then ended. (b) Pro Forma Financial Information The tables on pages five through eleven set forth selected pro forma operating data of the Registrant for the year ended March 31, 1995 and the six months ended September 30, 1995 as if the acquisitions of TWS, Red-D-Arc and Capital, had been consummated on April 1, 1994 and April 1, 1995, respectively. (c) Exhibits. 23.1 Consent of Cawthron, Wommack & Coker, P.C. 23.2 Consent of Cipolla, Bartens & Monachino, Chartered Accountants 23.3 Consent of Bell & Company 4 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. BY: /s/Britton H. Murdoch _____________________ (Britton H. Murdoch) Vice President-Finance Chief Financial Officer DATED: November 28, 1995 5 AIRGAS, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Year Ended March 31, 1995 ____________________________________________ Trinity Welding Supply, Inc. Red-D-Arc Airgas, Inc. (Historical) (Historical) Operating Data (Historical) (Note 1) (Note 2) ________________ ____________ ____________ ____________ Net Sales $687,983 $ 7,202 $ 10,492 Cost of Products Sold (Excluding Depreciation and Amortization) 342,876 3,684 4,877 Selling, Distribution & Administrative Expenses 235,639 2,548 3,787 Depreciation & Amortization 36,868 283 858 _______ ______ ______ Total Costs & Expenses 615,383 6,515 9,522 _______ ______ ______ Operating Income 72,600 687 970 Interest Expense, Net (17,625) (168) (358) Other Income, Net 1,067 194 - Minority Interest (669) - - _______ ______ ______ Earnings Before Income Taxes 55,373 713 612 Income Taxes 23,894 - 268 _______ ______ ______ Net Earnings $ 31,479 $ 713 $ 344 ======= ====== ====== Earnings Per Share (5) $ .96 ======= Weighted Average Shares 32,762 ======= (Columns Continued On Next Page) 6 AIRGAS, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Year Ended March 31, 1995 _______________________________________________ Capital Welding Supply Company Pro Forma (Historical) Adjustments Note Pro Operating Data (Note 3) (Note 4) Ref. Forma ________________ ___________ ________ ____ ______ Net Sales $ 7,514 $ 700 a $713,891 Cost of Products Sold (Excluding Depreciation and Amortization) 4,070 203 a,b,c 355,710 Selling, Distribution & Administrative Expenses 2,759 408 a,d,e 245,141 Depreciation & Amortization 235 1,241 a,f 39,485 _______ _____ _______ Total Costs & Expenses 7,064 1,852 640,336 _______ _____ _______ Operating Income 450 (1,152) 73,555 Interest Expense, Net (72) (2,152) a (20,375) Other Income, Net 76 14 a 1,351 Minority Interest - - (669) _______ _____ _______ Earnings Before Income Taxes 454 (3,290) 53,862 Income Taxes - (812) h 23,350 _______ _____ ______ Net Earnings $ 454 $(2,478) $ 30,512 ======= ===== ====== Earnings Per Share (5) $ .93 ====== Weighted Average Shares 32,762 ====== <FN> Notes: (1) Includes audited financial data for the eleven months ended April 30, 1995 less the unaudited one month period ended April 30, 1995 combined with the unaudited two month period ended May 31, 1994. (2) Includes audited financial data for the twelve months ended December 31, 1994 less the unaudited three month period ended March 31, 1994 combined with the unaudited three month period ended March 31, 1995. (3) Includes unaudited compiled financial data for the twelve months ended March 31, 1995. (4) See pages 9 and 10 for explanation of pro forma adjustments. (5) See earnings per share calculations on page 11. 7 AIRGAS, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Six Months Ended September 30, 1995 _________________________________________________ Trinity Welding Supply, Inc. Red-D-Arc (Historical) (Historical) Operating Data Airgas, Inc. (1 Month) (3 Months) (Historical) (Note 1) (Note 2) ________________ ____________ ____________ ____________ Net Sales $393,302 $ 643 $ 3,081 Cost of Products Sold (Excluding Depreciation & Amortization) 195,374 224 1,606 Selling, Distribution & Administrative Expenses 132,134 198 955 Depreciation & Amortization 21,613 25 226 _______ ______ ______ Total Costs & Expenses 349,121 447 2,787 _______ ______ ______ Operating Income 44,181 196 294 Interest Expense, Net (11,455) (13) (126) Other Income, Net 366 9 - Minority Interest (365) - - _______ ______ ______ Earnings Before Income Taxes 32,727 192 168 Income Taxes 13,938 - 93 _______ ______ ______ Net Earnings $ 18,789 $ 192 $ 75 ======= ====== ====== Earnings Per Share (5) $ .58 ======= Weighted Average Shares 32,606 ======= <FN> (Columns Continued On Next Page) 8 AIRGAS, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Six Months Ended September 30, 1994 _______________________________________________ Capital Welding Supply Company (Historical) Pro Forma (4 Months) Adjustments Note Pro Operating Data (Note 3) (Note 4) Ref. Forma ______________ ____________ ___________ ____ _____ Net Sales $ 2,591 $ - $399,617 Cost of Products Sold (Excluding Depreciation & Amortization) 1,391 120 a,b 198,715 Selling, Distribution & Administrative Expenses 986 (7) a,d,e 134,266 Depreciation & Amortization 95 263 a,f 22,222 ______ _____ _______ Total Costs & Expenses 2,472 376 355,203 ______ _____ _______ Operating Income 119 (376) 44,414 Interest Expense, Net (10) (428) a,g (12,032) Other Income, Net 5 - 380 Minority Interest - - (365) ______ _____ _______ Earnings Before Income Taxes 114 (804) 32,397 Income Taxes - (210) h 13,821 ______ _____ _______ Net Earnings $ 114 $ (594) $ 18,576 ====== ===== ======= Earnings Per Share (5) $.57 ======= Weighted Average Shares 32,606 ======= <FN> Notes: (1) Includes unaudited financial data for the one month period ended April 30, 1995. (2) Includes unaudited financial data for the three month period ended June 30, 1995. (3) Includes unaudited financial data for the four month period ended July 31, 1995. (4) See pages 9 and 10 for explanation of pro forma adjustments. (5) See earnings per share calculations on page 11. 9 Airgas, Inc. Explanation of Pro Forma Adjustments (Dollars in Thousands) The following adjustments were made to the historical operating results of the combined business acquisitions in order to reflect unaudited pro forma results of operations of the Registrant for the year ended March 31, 1995 and the six months ended September 30, 1995 as if all of the business acquisitions had been consummated on April 1, 1994 and April 1, 1995, respectively. (a) Trinity Welding Supply, Inc. acquired an industrial gas and welding supply distributor effective March 31, 1995. Accordingly, adjustments were made to the following captions to reflect this acquisition in the historical income statement for the year ended March 31, 1995, (amounts in thousands): Increase (Decrease) ________ Sales $700 Cost of Products Sold 351 Selling, Distribution & Administrative Expenses 369 Depreciation Expense 33 ___ Operating Income (53) Interest Expense 3 Other Income 14 ___ Loss before income taxes $(42) === (b) Cost of products sold was adjusted to reflect normal book-to-physical inventory adjustments recorded at April 30, 1995 in connection with the audit of Trinity Welding Supply, Inc. As these physical inventory adjustments included the year ended March 31, 1995, cost of products sold was decreased $120 for the year ended March 31, 1995 and increased $120 for the six months ended September 30, 1995. (c) Cost of products sold was adjusted to reflect the Registrant's existing industrial gas purchasing arrangements which provide for lower unit costs on gas purchases as compared to costs previously available to the acquired businesses by $(28) for the year ended March 31, 1995. (d) Employee benefit costs were increased to reflect the Registrants' benefits structure by $334 for the year ended March 31, 1995 and $73 for the six months ended September 30, 1995. (e) In addition to the adjustments described in (a), (c) and (d), selling, distribution and administrative expenses related to the business acquisitions have been adjusted by $(295) for the year ended March 31, 1995. This adjustment includes the following: an adjustment to decrease employees salaries by $(249) to reflect the Registrant's salary structure; an adjustment to increase insurance expense $84 to reflect the Registrant's insurance rates; the increase in rents on facilities acquired of $25 and elimination of rents on certain equipment acquired of $(93), a reduction in professional fees of $(22) and a decrease in distribution expenses of $(40). 10 Selling, distribution and administrative expenses related to the business acquisitions have been adjusted by $(80) for the six months ended September 30, 1995. The adjustment includes the following: an adjustment to decrease employees salaries by $(87) to reflect Registrant's salary structure; an adjustment to reflect the Registrant's insurance rates of $14 and the increase in rents on facilities acquired of $19 and elimination of rents on certain equipment acquired of ($8), a reduction in professional fees of $(5) and an adjustment for distribution expenses of $(13). (f) Depreciation and amortization expense has been increased by $1,208, excluding the adjustment described in (a), for the year ended March 31, 1995 and increased by $263 for the six months ended September 30, 1995 to reflect purchase accounting adjustments related to the acquired fixed assets, goodwill, non-competition agreements and estimated capital improvements necessary to operate the acquired businesses. (g) The pro forma interest expense adjustment of $2,152 for the year ended March 31, 1995 and $428 for the six months ended September 30, 1995 reflects the debt incurred in financing the business acquisitions at the Registrant's effective interest rates. (h) Income tax adjustments have been based on the effective income tax rates of the acquired businesses and include a provision for income taxes for businesses which were previously taxed under Subchapter S of the Internal Revenue Code. 11 AIRGAS, INC. EARNINGS PER SHARE CALCULATIONS (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) Year Ended Six Months Ended March 31, 1995 September 30, 1995 Adjustment of Weighted Average Shares Outstanding Historical Pro Forma Historical Pro Forma ______________________________ ___________ _________ __________ _________ Shares of Common Stock Outstanding - Weighted 31,074 31,074 31,096 31,096 Net Common Stock Equivalents 1,688 1,688 1,510 1,510 ______ ______ ______ ______ Adjusted Shares Outstanding 32,762 32,762 32,606 32,606 ====== ====== ====== ====== Net Earnings $31,479 $30,512 $18,789 $18,576 ====== ====== ====== ====== Earnings Per Share $ .96 $ .93 $ .58 $ .57 ====== ====== ====== ====== <FN> Earnings per share amounts were determined using the treasury stock method. This method assumes the exercise of all outstanding options and warrants and the use of the aggregate proceeds therefrom to acquire the Registrant's outstanding common stock. Net earnings were divided by the average number of shares outstanding adjusted for the assumed exercise of the options and warrants outstanding and repurchase of common stock to calculate per share amounts. 12 TRINITY WELDING SUPPLY, INC. Financial Statements April 30, 1995 Together With Independent Auditors' Report Thereon 13 C O N T E N T S _______________ Page Independent Auditors' Report 1 Balance Sheet 2 Statement of Operations 3 Statement of Retained Earnings 4 Statement of Cash Flows 5 Notes to Financial Statements 6-9 14 INDEPENDENT AUDITORS' REPORT ____________________________ The Stockholders and Board of Directors Trinity Welding Supply, Inc. We have audited the accompanying balance sheet of Trinity Welding Supply, Inc. as of April 30, 1995, and the related statements of operations, retained earnings and cash flows for the eleven months then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trinity Welding Supply, Inc. as of April 30, 1995, and the results of its operations and its cash flows for the eleven months then ended in conformity with generally accepted accounting principles. CAWTHRON, WOMMACK & COKER, P.C. Waco, Texas June 6, 1995 15 TRINITY WELDING SUPPLY, INC. Balance Sheet April 30, 1995 ASSETS Current Assets Cash $ 135,188 Trade accounts receivable - less allowance for doubtful accounts of $ 57,962 901,127 Inventories 993,670 Prepaid expenses 11,555 _________ Total Current Assets 2,041,540 Property and Equipment, net 2,444,436 Intangible Assets, net of accumulated amortization of $ 42,618 15,448 _________ Total Assets $ 4,501,424 ========= LIABILITIES Current Liabilities Current portion of long-term debt $ 2,474,960 Trade accounts payable 447,441 Other accrued liabilities 275,037 _________ Total Current Liabilities 3,197,438 Customer Deposits 10,306 _________ Total Liabilities 3,207,744 STOCKHOLDERS' EQUITY Common stock - no par, 100,000 shares authorized, 2,000 shares issued and outstanding 500,000 Retained earnings 793,680 _________ Total Stockholders' Equity 1,293,680 _________ Total Liabilities and Stockholders' Equity $ 4,501,424 ========= The accompanying notes are an integral part of these financial statements. -2- 16 TRINITY WELDING SUPPLY, INC. Statement of Operations For the Eleven Months Ended April 30, 1995 Sales $ 6,606,131 Cost of Goods Sold 3,232,477 _________ Gross Profit 3,373,654 Operating Expenses 2,617,507 _________ Operating Income 756,147 Other Income (Expense) Miscellaneous income 185,349 Interest expense (158,288) _________ Total Other Income (Expense) 27,061 ________ Net Income $ 783,208 ======== The accompanying notes are an integral part of these financial statements. -3- 17 TRINITY WELDING SUPPLY, INC. Statement of Retained Earnings For the Eleven Months Ended April 30, 1995 Balance - beginning of period $ 304,472 Net income 783,208 Dividends (294,000) _________ Balance - end of period $ 793,680 ========= The accompanying notes are an integral part of these financial statements. -4- 18 TRINITY WELDING SUPPLY, INC. Statement of Cash Flows For the Eleven Months Ended April 30, 1995 Cash flows provided by operating activities: Net income $ 783,208 Adjustments to reconcile net income to net cash provided by operating activities Bad debt provision 25,715 Depreciation expense 260,106 Gain on sale of property and equipment (8,160) Amortization expense 10,349 Increase (decrease) in: Trade accounts receivable (45,315) Inventories (404,935) Prepaid expenses 34,803 Other assets (2,000) Increase (decrease) in: Trade accounts payable (88,105) Other accrued liabilities 70,147 Customer deposits (18,321) _______ Net cash provided by operating activities 617,492 Cash flows used for investing activities: Purchase of property and equipment (969,741) Proceeds from sale of property and equipment 14,669 _______ Net cash used for investing activities (955,072) Cash flows provided by financing activities: Proceeds from long-term debt 1,092,845 Repayment of debt (486,502) Payment of dividends (294,000) _______ Net cash provided by financing activities 312,343 Net decrease in cash (25,237) Cash at beginning of period 160,425 _______ Cash at end of period $ 135,188 ======= Supplemental disclosures: Interest paid during the period $ 155,610 The accompanying notes are an integral part of these financial statements. -5- 19 TRINITY WELDING, INC. Notes to Financial Statements 1. Nature of the Company and Significant Accounting Policies Financial Statement Presentation ________________________________ Trinity Welding Supply, Inc. (the Company) sells welding products and industrial specialty and medical gases in the north-central Texas area. The Company was incorporated in April 1991 and acquired certain assets of a welding supply company on May 31, 1991. The following is a summary of certain significant accounting policies followed in the preparation of these financial statements. Inventories ___________ Inventories are stated at the lower of cost, determined by the first-in, first-out (FIFO) method, or market. Property and Equipment ______________________ Property and equipment are recorded at cost and depreciated using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred; significant renewals and betterments are capitalized. Intangible Assets _________________ The Company incurred various organizational costs which have been capitalized and are being amortized over five years using the straight-line method. Income Taxes ____________ The Company, with the consent of its shareholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporation income taxes, the shareholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in these financial statements. Cash and Cash Equivalents _________________________ For the purpose of presentation in the statement of cash flows, cash and cash equivalents are defined as those amounts in the balance sheet caption "cash" which includes petty cash on hand and demand deposit checking accounts held at banks. -6- 20 TRINITY WELDING SUPPLY, INC. Notes to Financial Statements (Continued) 2. Inventories ___________ At April 30, 1995, inventories consisted of: Welding products $ 716,148 Gases 119,146 Cylinders 158,376 _______ Total Inventories $ 993,670 ======= 3. Property and Equipment ______________________ At April 30, 1995, property and equipment consisted of the following: Estimated Useful Life ___________ Land - $ 131,474 Building and improvements 20 years 630,795 Vehicles 3 years 274,977 Cylinders 10 years 1,612,663 Furniture and fixtures 5 to 10 years 282,529 Gas plant equipment 5 to 10 years 516,547 _________ 3,448,985 Accumulated depreciation (1,004,549) _________ Total Property and Equipment, net $ 2,444,436 ========= Depreciation charged to expense was $ 260,106 for the eleven months ended April 30, 1995. 4. Long-Term Debt ______________ The Company's long-term debt at April 30, 1995, was comprised of the following: Note to a financial institution bearing interest at prime plus .50% (9.50% at April 30, 1995), due in monthly principal installments of $ 15,271 with a balloon payment due August 10, 1995, secured by all assets of the Company and guaranteed by the stockholders $ 1,405,058 Note to a financial institution, bearing interest at prime plus .50% (9.50% at April 30, 1995), due in monthly principal installments of $ 2,500 with a balloon payment due August 10, 1995, secured by all assets of the Company and guaranteed by the stockholders 262,578 $ 750,000 line of credit with a financial institution, bearing interest at prime plus .50% (9.50% at April 30, 1995), maturing August 10, 1995, secured by all assets of the Company and guaranteed by the stockholders 234,442 -7- 21 TRINITY WELDING SUPPLY, INC. Notes to Financial Statements (Continued) 4. Long-Term Debt (Continued) _________________________ Note to a financial institution, bearing interest, at prime plus .50% (9.50% at April 30, 1995), due in monthly principal installments of $ 3,833 with a balloon payment due August 10, 1995, secured by all assets of the Company and guaranteed by the stockholders $ 80,263 Note to a financial institution, bearing interest at prime plus .50% (9.50% at April 30, 1995), due in a single principal and interest payment due August 10, 1995, unsecured 480,000 Note to a vendor, bearing interest at 8.75%, due in monthly principal and interest payments of $ 307 through May, 1999, secured by cylinders purchased 12,619 _________ 2,474,960 Less: current portion (2,474,960) _________ Long-term debt $ -0- ========= The loan agreements with the financial institution place various restrictions on the Company including, among others, certain limitations on debt, additions of property and equipment, payment of dividends, investments in other entities, compensation to stockholders, and purchase of treasury stock. In addition, the Company is required to maintain certain financial ratios and other affirmative covenants. As of April 30, 1995, the Company was not in compliance with all these ratios and covenants. The long-term debt has been classified as current in the accompanying financial statements as it is due within one year and the Company had not received a waiver from the financial institution. As described in Note 10, the Company entered into a sale agreement and was sold to Trinity Airgas, Inc., effective May 1, 1995. In connection with the agreement, the notes to the financial institution were repaid by Trinity Airgas, Inc. 5. Profit-Sharing Plan ___________________ The Company has a 401(K) profit-sharing plan for eligible employees. The plan covers all employees of the Company with one or more years of service. The Company's contribution to the plan, as determined by the Board of Directors, is discretionary but may not exceed 15% of the annual aggregate compensation paid to all participating employees. The Company made no contribution to the plan for the eleven months ended April 30, 1995. -8- 22 TRINITY WELDING SUPPLY, INC. Notes to Financial Statements (Continued) 6. Related Party Transactions __________________________ During the eleven months ended April 30, 1995, the Company purchased approximately $ 161,500 of inventory from a corporation owned by a stockholder of the Company and sold approximately $ 44,000 of inventory to the same corporation. In addition the Company made lease payments of approximately $ 75,500 to that corporation during the period for autos. At April 30, 1995, the Company owed this corporation approximately $ 160,000. 7. Leases _______ The Company is leasing various buildings under operating lease agreements. Rental payments for the eleven months ended April 30, 1995, totaled approximately $ 79,000. All current leases are from month-to-month or year-to-year. 8. Concentrations of Credit Risk _____________________________ The Company sells welding products and industrial specialty and medical gases to customers primarily in north-central Texas. The customers' ability to repay is dependent upon the area's economy. At April 30, 1995, the Company has approximately $ 32,000 deposited in financial institutions which exceeded the insurance provided by the Federal Deposit Insurance Corporation. 9. Acquisition ___________ Effective March 31, 1995, the Company purchased the assets of a company engaged in the business of packaging industrial gases and distributing and selling industrial gases and welding supplies. The purchase price for the assets was $ 600,000 plus the assumption of liabilities of approximately $ 23,500. Accordingly, these financial statement include one month operating results of the acquired company. Pro forma operating results have not been disclosed as the operating results of the acquired company are not material to the operating results of the Company. 10. Subsequent Event ________________ Subsequent to April 30, 1995, the Company entered into an agreement to sell the operating assets of the Company to Trinity Airgas, Inc. a Delaware corporation and majority-owned subsidiary of U.S. Airgas, Inc., a Delaware corporation. -9- 23 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 CIPOLLA, BARTENS & MONACHINO 24 To the Shareholders of Red-D-Arc Limited Red-D-Arc Inc. Red-D-Arc Leasing Ltd. Grimsby, Ontario AUDITORS' REPORT We have audited the combined balance sheet of Red-D-Arc Limited, Red-D-Arc Inc. and Red-D-Arc Leasing Ltd. as at December 31, 1994 and the combined statements of income and retained earnings and changes in financial position for the year then ended. These combined financial statements are the responsibility of the companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these combined financial statements present fairly, in all material respects, the combined financial position of the companies as at December 31, 1994 and the results of their operations and the changes in their financial position for the year then ended in accordance with generally accepted accounting principles. Hamilton, Ontario CIPOLLA, BARTENS & MONACHINO July 25, 1995 Chartered Accountants - 1 - 25 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. COMBINED BALANCE SHEET DECEMBER 31, 1994 (In Canadian Dollars) ASSETS Current assets: Cash $ 41,621 Accounts receivable 2,568,081 Inventory of welding machine components and supplies 1,836,800 Prepaid expenses and deposits 168,433 __________ Total current assets 4,614,935 Due from related entities (note 2) 239,338 Property, equipment and leasehold improvements (note 3) 11,971,533 Cash surrender value of life insurance 69,789 Organization costs 2,089 __________ $16,897,684 ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank indebtedness (note 4) $ 1,047,912 Accounts payable and accrued liabilities 1,785,155 Income taxes payable 39,987 Loans from employees 23,101 Current portion of long-term debt (note 5) 1,333,037 __________ Total current liabilities 4,229,192 Long-term debt (note 5) 4,262,250 Due to shareholders (note 6) 61,941 Deferred income taxes 2,596,579 __________ Contingent liability (note 10) 11,149,962 __________ Shareholders' equity: Stated capital (note 7) 132,782 Retained earnings 5,614,940 __________ 5,747,722 $ 16,897,684 ========== On behalf of the Board: _____________________________Director _____________________________Director - 2 - CIPOLLA, BARTENS & MONACHINO 26 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS YEAR ENDED DECEMBER 31, 1994 (In Canadian Dollars) Revenues: Lease and rental income $ 7,366,098 Machine and service sales and other income 5,886,207 __________ 13,252,305 Cost and Expenses: __________ Cost of products sold (excluding depreciation and amortization) 5,831,826 Selling, distribution and administrative expenses 4,017,451 Depreciation and amortization 1,169,121 Bad debt expense (note 8) 1,016,686 __________ Total costs and expenses 12,035,084 __________ Operating income 1,217,221 Interest expense 443,646 _________ Income before income taxes 773,575 Income taxes (note 12) 321,210 _________ Net income for the year $ 452,365 ========= - 3 - CIPOLLA, BARTENS & MONACHINO 27 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. COMBINED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1994 (In Canadian Dollars) Cash flows from Operating activities: Net income for the year $ 452,365 Add (deduct) items not reqiring an outlay of cash: 1,169,121 Depreciation and amortization 207,679 Deferred income taxes Gain on disposal of property, equipment and leasehold improvements (1,030,511) Cash surrender value of life insurance (21,358) Net change in non-cash, current items 155,662 _________ 932,958 _________ Cash flows from Financing activities: Increase in amounts due from related entities (308,391) Assumption of long-term debt 463,545 Repayment of long-term debt (662,868) Decrease in amounts due to shareholders (121,662) Issue of common shares 8,400 ________ (620,976) Cash flows from Investing activities: Purchase of property, equipment and leasehold improvements 3,731,460) Proceeds from disposal of property, equipment and leasehold improvements 3,418,308 _________ (313,152) _________ Decrease in cash for the year (1,170) Cash, beginning of year 42,791 _________ Cash, end of year $ 41,621 ========= - 4 - CIPOLLA, BARTENS & MONACHINO 28 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. COMBINED STATEMENT OF SHAREHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1994 (In Canadian Dollars) Shares of Special Common Stock Shares No Stated Common $10 Stated Special Retained Value Stock Value Shares Earnings __________ ______ ________ _______ ________ Balance, beginning of year 11,904 $ 84,882 3,950 $ 39,500 $ 5,162,575 Net income for the year - - - - 452,365 Shares issued in connection with employees' stock option plan 84 8,400 - - - ______ ______ _____ ______ _________ Balance, end of year 11,988 $ 93,282 3,950 $ 39,500 $ 5,614,940 ====== ====== ===== ====== ========= - 5 - CIPOLLA, BARTENS & MONACHINO 29 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (In Canadian Dollars) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (a) Basis of presentation: These statements which are expressed in Canadian dollars, represent the combined operating activities and cash flows of Red-D-Arc Limited, Red-D-Arc Inc. and Red-D-Arc Leasing Ltd. All significant intercompany balances and transactions have been eliminated on combination. (b) Foreign currency translation: Assets and liabilities in currencies other than Canadian dollars have been translated into Canadian dollars at the rate of exchange prevailing at the balance sheet date. Revenue and expenses have been translated at an average rate for the period. Translation gains or losses are included in the statement of income. (c) Inventory: Inventory is stated at the lower of cost and net realizable value, with cost being determined principally on a first-in, first-out basis. (d) Depreciation and amortization: Property and equipment are stated at cost; depreciation and amortization is provided over their estimated useful lives on a declining balance basis, leasehold improvements are amortized on a straight-line basis. (e) Income taxes: The provision for income taxes includes foreign taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. (f) Organization costs: Expenses that were incurred with respect to the organization of Red-D-Arc Inc. are being amortized on a straight-line basis over five years. (g) Concentration of credit risk: Financial instruments which potentially subject the companies to concentrations of credit risk consist principally of trade receivable. - 6 - CIPOLLA, BARTENS & MONACHINO 30 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (In Canadian Dollars) 2. DUE FROM RELATED ENTITIES: The amounts due from related entities bear interest at rates closely approximating market rates at their date of issuance. The amounts have no set terms of repayment. 3. PROPERTY AND EQUIPMENT: Accumulated Depreciation and Net Book Cost Amortization Value ____ ________________ ________ Land $ 434,404 - 434,404 Buildings 1,306,431 370,899 935,532 Leasehold improvements 209,785 47,374 162,411 Office equipment 299,682 234,537 65,145 Shop equipment 362,030 222,563 139,467 Welding units 14,570,672 4,827,553 9,743,119 Automotive 1,067,355 682,345 385,010 Computer 330,921 224,476 106,445 __________ _________ __________ $ 18,581,280 6,609,747 11,971,533 ========== ========= ========== Depreciation and amortization of property and equipment charged to operations amounted to $1,169,121. 4. BANK INDEBTEDNESS: Revolving line of credit $ 890,000 Cash overdraft 157,912 _________ $ 1,047,912 ========= The bank revolving line of credit bears interest at bank prime plus 1%. This loan, together with the loans classified as long-term debt, are secured by a general assignment of accounts receivable, a general security agreement, a demand debenture of $1,000,000 containing a first floating charge on all assets, a first fixed charge on specified land and building and a fixed debenture of $2,000,000 on specified land and buildings. The cash overdraft is attributable to the float of the outstanding cheques. - 7 - CIPOLLA, BARTENS & MONACHINO 31 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (In Canadian Dollars) 5. LONG-TERM DEBT: Prime plus 1.5% bank term loan, repayable $50,000 principal plus interest monthly, secured by Grimsby property $ 1,853,950 Prime plus 1.5% bank term loan, repayable $8,621 principal plus interest monthly, maturing on August 31, 1997 835,609 Prime plus 1.5% bank term loan, repayable $16,667 principal plus interest monthly, maturing in March 1997 449,999 Prime plus .75% bank term loan, repayable $6,007 principal plus interest monthly, maturing in August 1999 334,145 Prime plus 1.5% bank term loan, repayable $21,000 principal plus interest monthly until September 1995, then increasing to $36,000 principal plus interest monthly, maturing in January 1999 1,620,000 9% mortgage payable, repayable $2,160 principal and interest monthly, maturing on June 15, 1997, secured by land and building 230,551 6.25% loan, repayable $791 principal and interest monthly, maturing in August 1996, secured by the vehicle 14,982 10.9% loan, repayable $559 principal and interest monthly, maturing in May 1996, secured by the vehicle 8,798 8.5% loan, repayable $657 principal and interest monthly, maturing in November 1997, secured by the vehicle 13,928 13.98% loan, repayable $558 principal and interest monthly, maturing in October 1997, secured by the vehicle 15,667 - 8 - CIPOLLA, BARTENS & MONACHINO 32 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (In Canadian Dollars) 5. LONG-TERM DEBT: (cont'd) 11.25% loan, repayable $520 principal and interest monthly, maturing in October 1997, secured by the vehicle 15,120 Prime plus 1% bank loan, repayable $4,625 principal plus interest monthly, maturing in September 1997, secured by equipment 152,625 Prime plus 1% bank loan, repayable $833 principal plus interest monthly, maturing in January 1995, secured by equipment 20,833 Prime plus 0.25% bank loan, repayable $1,389 principal plus interest monthly, maturing in May 1995, secured by equipment 6,941 Prime plus 1% bank loan, repayable $973 principal plus interest monthly, maturing in October 1995, secured by equipment 9,702 Other loans 12,437 5,595,287 Less current portion due within one year 1,333,037 $ 4,262,250 The approximate principal repayments required over the next five years are as follows: 1995 $ 1,333,037 1996 1,434,880 1997 1,460,296 1998 596,353 1999 99,632 Thereafter 671,089 $ 5,595,287 The fair value of long-term debt as of December 31, 1994 was approximately $5.6 million. - 9 - CIPOLLA, BARTENS & MONACHINO 33 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (n Canadian Dollars) 6. DUE TO SHAREHOLDERS: This amount is represented by demand loans bearing interest up to bank prime rate plus 2%. It is not anticipated that these amounts will be repaid within the next fiscal year. 7. STATED CAPITAL: Red-D-Arc Limited: Issued and outstanding: 3,700 special shares $ 37,000 10,948 common shares 91,840 _______ 128,840 _______ The company is authorized to issue 40,000 common shares and up to 38,200 non-voting, preference shares, redeemable at $10 per share. The holders of the preference shares are entitled to non-cumulative dividends at 2% below the previous year-end bank rate. During the year 84 common shares were issued for a cash consideration of $8,400. Red-D-Arc Inc.: Issued and outstanding: 1,000 common shares 1,402 _____ The company is authorized to issue 2,500 common shares. Red-D-Arc Leasing Ltd.: Issued and outstanding: 250 special shares 2,500 40 common shares 40 _____ 2,540 _____ - 10 - CIPOLLA, BARTENS & MONACHINO 34 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (In Canadian Dollars) 7. STATED CAPITAL: (cont'd) The company is authorized to issue 10,000 common shares and up to 9,000 voting special shares, redeemable at $10 per share. The holders of the special shares are entitled to cumulative dividends at 8% of the redeemable amount. There are dividends in arrears of $3,200 on the special shares. $ 132,782 Stock options: ======== An agreement entered into by Red-D-Arc Limited on December 30, 1988 allows for certain key employees to purchase common shares up to a 10% equity interest. At December 31, 1994, 252 shares were available for purchase at $100 per share. 8. BAD DEBT EXPENSE: This amount represents unrecoverable receivables from a former customer that was extended significant credit. The write-off covers amounts that were substantially recorded as revenues in 1994 by Red-D-Arc Inc. 9. COMMITMENTS: The company leases certain distribution facilities under long-term leases having varying terms and renewal options. Future minimum rental commitments exclusive of real estate taxes, insurance and other expenses payable under the terms of the leases are approximately as follows for the next five years: 1995 $ 336,352 1996 366,845 1997 366,845 1998 366,845 1999 321,485 Thereafter 3,392,051 - 11 - CIPOLLA, BARTENS & MONACHINO 35 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (In Canadian Dollars) 10. CONTINGENT LIABILITY: Red-D-Arc Limited has guaranteed a commercial note with the Pikeville National Bank & Trust Company in the amount of $366,379 US made to a party related to the majority shareholder. 11. PENSION PLAN: Red-D-Arc Limited has a defined contribution plan covering substantially all full-time employees. Under the terms of the plan, the company makes matching contributions up to two percent of participant's wage. In addition, the company also contributes to private registered retirement savings plans of some employees. During 1994, the current service costs of the defined contribution retirement plan were $23,499. The costs of the private retirement plans to the company in 1994 were $39,843. Neither plan has any past service obligation requirements. 12. INCOME TAXES: Pre-tax earnings were derived from the following sources: Canada $ 749,130 United States 24,445 _______ $ 773,575 ======= Income tax expense consists of: Current: Canadian Federal $ 7,547 Provinces of Canada 86,884 U.S. Federal 15,200 State 3,900 _______ 113,531 ======= - 12 - CIPOLLA, BARTENS & MONACHINO 36 RED-D-ARC LIMITED RED-D-ARC INC. RED-D-ARC LEASING LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 (In Canadian Dollars) 12. INCOME TAXES: (cont'd) Deferred: Canadian Federal $ 121,179 Provinces of Canada 86,500 _______ 207,679 _______ $ 321,210 ======= Significant differences between taxes computed at the U.S. federal statutory rate and the provision for income taxes were: Taxes at U.S. federal statutory rate 35.0% Increase (decrease) in income taxes resulting from: U.S. State income taxes .1% Canadian federal and provincial income taxes rates in excess of U.S. federal rate 8.5% Reduction in Canadian taxes due to business loss carry- forward and research and development tax credits (2.1)% ____ 41.5% ==== Deferred tax assets and liabilities: At December 31, 1994 there were no significant cumulative temporary differences that give rise to deferred tax assets. The deferred income tax liability is the result of Red-D-Arc Limited claiming depreciation for income tax purposes in excess of amounts recorded in the financial statement. - 13 - CIPOLLA, BARTENS & MONACHINO 37 CAPITAL WELDING SUPPLY COMPANY FINANCIAL STATEMENTS with Independent Auditors' Report JULY 31, 1995 LITTLE ROCK, ARKANSAS 38 TABLE OF CONTENTS Independent Auditors' Report 1 Balance Sheet 2 Statement of Income 3 Statement of Retained Earnings 4 Statement of Cash Flows 5 Notes to the Financial Statements 8-14 39 Independent Auditors' Report To the Board of Directors of Capital Welding Supply Company We have audited the accompanying balance sheet of Capital Welding Supply Company (an S-Corporation) as of July 31, 1995, and the related statements of income, retained earnings, and cash flows for the nine months then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Welding Supply Company as of July 31, 1995, and the results of its operations and its cash flows for the nine months then ended in conformity with generally accepted accounting principles. BELL & COMPANY October 19, 1995 -1- 40 Capital Welding Supply Company Balance Sheet July 31, 1995 Assets Current assets Cash $ 342,218 Trade receivables, less allowance for doubtful accounts of $35,000 778,877 Inventories 837,147 Notes receivable from related party - current portion 12,231 Prepaid expenses and other current assets 177 Total current assets 1,970,650 Plant and equipment Plant and equipment, at cost 5,113,095 Less accumulated depreciation (2,257,532) Plant and equipment, net 2,855,563 Other non-current assets Notes receivable from related party, less current portion 140,936 Other 52,615 Total other non-current assets 193,551 _________ Total Assets $5,019,764 ========= -2- 41 Liabilities and Stockholders' Equity Current liabilities Current portion of long-term debt $461,016 Accounts payable, trade 317,389 Accrued expenses and other current liabilities 106,176 Total current liabilities 884,581 Long-term debt, less current portion 370,114 Stockholders' equity Common stock, no par value; 1,000 shares authorized, issued and outstanding 10,000 Paid-in capital 73,889 Retained earnings 3,681,180 Total stockholders' equity 3,765,069 _________ Total Liabilities and Stockholders' Equity $5,019,764 ========= -3- 42 Capital Welding Supply Company Statement of Income For the Nine Months Ended July 31, 1995 Sales $5,809,207 Costs and expenses Cost of products sold 3,060,887 Selling, distribution and administrative expenses 2,172,380 Depreciation expense 204,405 Total costs and expenses 5,437,672 Operating income 371,535 Other income and expenses Interest expense (58,729) Other income, net 44,960 Total other income and expenses (13,769) _______ Net income $357,766 ======= See accompanying notes -4- 43 Capital Welding Supply Company Statement of Retained Earnings For the Nine Months Ended July 31, 1995 Balance, November 1, 1994 $3,437,414 Net income 357,766 Dividends paid (114,000) _________ Balance, July 31, 1995 $3,681,180 ========= See accompanying notes -5- 44 Capital Welding Supply Company Statement of Cash Flows For the Nine Months Ended July 31, 1995 Cash flows from operating activities Net income $357,766 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 204,405 Gain on sale of equipment (628) (Increase) in accounts receivable (3,888) Decrease in inventories 86,714 (Increase) in other current assets (74) (Increase) in other assets (9,753) (Decrease) in accounts payable (79,420) Increase in accrued expenses 32,467 Net cash provided by operating activities 587,589 Cash flows from investing activities Collection of notes receivable 8,588 Proceeds from sale of equipment 15,699 Purchases of property and equipment (241,089) Net cash used by investing activities (216,802) Cash flows from financing activities Proceeds from long-term borrowings 128,683 Principal payments on long-term debt (278,240) Dividends paid (114,000) Net cash used by financing activities (263,557) Net increase in cash 107,230 Cash - beginning of period 234,988 _______ Cash - end of period $342,218 ======= See accompanying notes -6- 45 Supplementary Disclosures of Cash Flows Information Cash paid during the year for interest $ 58,729 ======= See accompanying notes -7- 46 Capital Welding Supply Company Notes to Financial Statements July 31, 1995 1. Summary of Significant Accounting Policies a. Description of Operations - Capital Welding Supply Company is a multi-state distribution company that sells welding and medical supplies to the public. The company has four locations: Little Rock, Batesville, and Pine Bluff, Arkansas, and Greenville, Mississippi. b. Cash and Cash Equivalents - For purposes of the statement of cash flows, the company considers all highly liquid cash investments with original maturities of 3 months or less to be cash equivalents. c. Inventories - Inventories are stated at the lower of cost or market value by the first-in, first-out (FIFO) method. Inventories consist primarily of industrial gases, welding supplies and equipment. d. Plant and Equipment - Plant and equipment are stated at cost. Depreciation is provided using the straight-line and declining balance methods for financial statement purposes over the useful lives of the related assets. e. Income Taxes - The company, with the consent of its shareholders, has elected under the Internal Revenue Code and applicable state codes to be an "S Corporation". In lieu of corporation income taxes, the company's shareholders are taxed on their proportionate share of the company's taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements. 2. Notes Receivable Notes receivable consists of the following: 7.5% note receivable from a related corporation, payable in monthly installments of $1,246, including interest, through August, 2004, secured by certain real estate $ 98,305 -8- 47 Capital Welding Supply Company Notes to Financial Statements July 31, 1995 2. Notes Receivable (continued) 7.5% note receivable from a related corporation, payable in monthly installments of $696, including interest, through August 2004, secured by certain real estate $ 54,862 _______ Total notes receivable 153,167 Less amounts due within one year (12,231) ______ Notes receivable, less current portion $140,936 ======= 3. Plant and Equipment Plant and equipment by major categories are as follows: Estimated Category Useful Lives Amount ________ ____________ ______ Land $111,541 Buildings 50 years 209,947 Furniture & fixtures 10 years 45,367 Cylinders 25 years 3,316,200 Equipment 5 years 192,948 Vehicles 5 years 1,237,092 $5,113,095 ========= 4. Long-term Debt Long-term debt consists of the following: 8.25% note payable to Norris Industries in monthly installments of $1,422, including interest, secured by cylinders $ 1,299 -9- 48 Capital Welding Supply Company Notes to Financial Statements July 31, 1995 4. Long-term Debt (continued) 8.75% note payable to Norris Industries in monthly installments of $1,407, including interest, secured by cylinders $ 31,252 8.75% note payable to Norris Industries in monthly installments of $890, including interest, secured by cylinders and equipment 30,219 Note payable to Taylor Wharton, payable in aggregate monthly installments of $928, including interest, secured by cylinders 33,930 6% note payable to a life insurance company for loan against value of policy 4,000 8.25% note payable to Norris Industries in monthly installments of $1,365, including interest, secured by cylinders 27,255 10% note payable to Norris Industries in monthly installments of $1,380, including interest, secured by cylinders 37,445 8.25% note payable to Norris Industries in monthly installments of $1,245, including interest, secured by cylinders 11,726 8.25% note payable to Norris Industries in monthly installments of $1,264, including interest, secured by cylinders 5,871 8.25% note payable to Norris Industries in monthly installments of $1,271, including interest, secured by cylinders 13,069 -10- 49 Capital Welding Supply Company Notes to Financial Statements July 31, 1995 4 Long-term Debt (continued) 7.5% note payable to a bank in monthly installments of $694, including interest, secured by equipment $ 20,057 11.25% note payable to a finance company in monthly installments of $1,093, including interest, secured by cylinders 1,697 12.25% note payable to a finance company in monthly installments of $1,145, including interest, secured by cylinders 4,672 10% note payable to a bank in monthly installments of interest only, due May 1, 1996, secured by equipment 225,000 8% note payable to a bank in monthly installments of $4,565, including interest, secured by equipment 134,658 7.5% note payable to a bank in monthly installments of $2,125, including interest, secured by a trailer 81,471 9.75% note payable to Norris Industries in monthly installments of $750, including interest, secured by cylinders 6,275 10.25% note payable to Coyne Cylinder Co. in monthly installments of $849, including interest, secured by cylinders 5,513 -11- 50 Capital Welding Supply Company Notes to Financial Statements July 31, 1995 4 Long-term Debt (continued) 9.25% note payable to Coyne Cylinder Co. in monthly installments of $1,462, including interest, secured by cylinders $ 15,529 10.8% note payable to a finance company in monthly installments of $444, including interest, secured by cylinders 2,278 7% note payable to a stockholder in monthly installments of $2,000, including interest, unsecured 118,479 9% note payable to Norwest Equipment Finance in monthly installments of $1,370, including interest, secured by cylinders 19,435 Total long-term debt 831,130 Less current maturities (461,016) Long-term debt, less current maturities $ 370,114 ======== Annual aggregate maturities of long-term debt are as follows: 1996 $444,796 1997 145,155 1998 97,625 1999 25,075 $712,651 -12- 51 Capital Welding Supply Company Notes to Financial Statements July 31, 1995 5. Commitments and Related Party Transactions The company leases its facilities and certain equipment and fixtures from Ray Properties, Inc., a company with substantial common ownership The amount paid to Ray Properties, Inc. pursuant to those operating lease agreements for the nine months ended July 31, 1995 was $110,250. Future minimum lease payments under those lease agreements are as follows: Year Ending July 31: 1996 $103,250 1997 54,000 The company is contingently liable as guarantor on certain debt of Ray Properties, Inc. totaling approximately $28,639 at July 31, 1995. 6. Equipment Leases The company leases substantially all of its rolling stock from Ryder Truck Rental, Inc. under non-cancelable operating leases. At July 31, 1995, future minimum rental commitments under those leases were as follows: Year ending July 31: 1996 $ 60,954 1997 74,013 1998 67,993 1999 32,684 Thereafter 48,248 _______ $283,892 ======= -13- 52 Capital Welding Supply Company Notes to Financial Statements July 31, 1995 6. Subsequent Events During August 1995, the company's stockholders agreed to sell the assets of the company to a national organization for an amount in excess of book value -14-