Airgas Reports Fourth Quarter EPS Growth of 16%.Business Editors RADNOR Radnor may refer to:
Airgas Airgas, Inc. (NYSE: ARG), headquartered in Radnor Township, Pennsylvania, through its subsidiaries, is the largest U.S. distributor of industrial, medical and specialty gases (delivered in packaged or cylinder form), and hardgoods (welding, safety and related products). , Inc., (NYSE NYSE See: New York Stock Exchange :ARG See argument. arg - argument ) today reported strong sales, operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. and earnings growth for its fourth quarter ended March 31, 2004. Net earnings for the quarter were $21.7 million, or $0.29 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $18.2 million, or $0.25 per diluted share, in the same period a year ago. Fourth quarter sales increased 18% to $522.1 million reflecting the consolidation of National Welders Supply Company - the Airgas joint venture affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. - as well as acquisitions and same-store sales Same-store sales is a business term which refers to the revenue generated by one of a retail chain's specific outlets during a certain period of time (often a fiscal quarter or a particular shopping season), compared to an identical period in the past, usually in the previous year. growth. Excluding National Welders, sales grew 9%. Total same-store sales were up 6% compared to the same quarter a year ago, reflecting significant improvement in manufacturing and other industrial segments. Same-store sales in the Distribution segment were up 6%, driven by gains of 9% in hardgoods and 2% in gas and rent. "Our sales momentum accelerated in the fourth quarter, including a very strong March for both gases and hardgoods," said Airgas Chairman and Chief Executive Officer Peter McCausland. "Although sales growth was led by our lower-margin hardgoods products, the recovery in our business is unfolding as expected and the gases strength in March is very encouraging." Net earnings for the year ended March 31, 2004 were $1.07 per diluted share compared to prior year results of $0.94 per diluted share. The results for the year ended March 31, 2004 include a non-recurring after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. gain of $1.7 million, or $0.02 per diluted share, at National Welders Supply Company, and an after-tax $480 thousand special charge recovery related to a revised estimate Revised estimate The third estimate of GDP released about three months after the measurement period. on prior years' restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . Also included in the year ended March 31, 2004 are insurance-related losses of $2.8 million ($1.7 million after tax), or $0.02 per diluted share, for previously announced incidents at two of the Company's facilities. The year ended March 31, 2003 included charges of $2.9 million ($2.2 million after tax), or $0.03 per diluted share, primarily related to a special charge for the integration of the Air Products U.S. packaged gas acquisition ($2.7 million). "We grew fiscal 2004 earnings per share by 10%, excluding the impact of special charges and recoveries, even though our markets didn't did·n't Contraction of did not. didn't did not didn't do recover until late in the year," added McCausland. "I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in delighted to see the momentum, but most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , our results validate To prove something to be sound or logical. Also to certify conformance to a standard. Contrast with "verify," which means to prove something to be correct. For example, data entry validity checking determines whether the data make sense (numbers fall within a range, numeric data a strong and stable business model that can weather a tough economy." McCausland continued, "I'm excited about our growth opportunities ahead. During the last several years, we have built a tremendous infrastructure and product offering. With that behind us, we are now focused on growing our business, branch by branch, with those core customers who use gases, welding welding, process for joining separate pieces of metal in a continuous metallic bond. Cold-pressure welding is accomplished by the application of high pressure at room temperature; forge welding (forging) is done by means of hammering, with the addition of heat. and safety products. We also plan to continue growing our medical business through Airgas Puritan Medical divisions in every regional company. Finally, we look forward to successfully completing our largest acquisition ever as we welcome the customers and associates from BOC's U.S. packaged gas business at the end of July July: see month. . We expect to earn $1.21 to $1.27 per share in fiscal 2005, including up to $0.02 per share accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the from the BOC (Bell Operating Company) One of 22 companies that was formerly part of AT&T and later organized into seven regional companies. See RBOC. acquisition." Free Cash Flow for the year ended March 31, 2004 was $106 million compared to $104 million in the prior year. The Company reduced adjusted debt by $60 million during the fiscal year. The definition of free cash flow, a reconciliation to the attached Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statement of Cash Flows, the definition of adjusted debt and a reconciliation to the balance sheet are attached. The Company will conduct an earnings teleconference on Thursday Thursday: see week. , May 6, 2004, beginning at 11:00 a.m. Eastern Time. Access the teleconference by calling (800) 810-0924. This press release, slides to be presented during the Company's teleconference and information about how to access a live and on-demand On-Demand refers to a service or feature which addresses the user's need for instant gratification and immediacy of use. In most cases the value proposition for an on-demand service is wrapped up in the fact that the user or consumer of the service avoids a significant up-front webcast of the teleconference are available in the 'Investor Info' section on the Company's Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the site www.airgas.com. The telephone replay will be accessible for one week starting May 6th at 1 p.m. Eastern Time by calling (888) 203-1112 and entering passcode 293214. About Airgas, Inc. Airgas, Inc. is the largest U.S. distributor of industrial, medical and specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. gases, welding, safety and related products. Its integrated network A network that supports both data and voice and/or different networking protocols. See converged network and new public network. of nearly 800 locations includes branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also distributes its products and services through eBusiness See e-business. , catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. and telesales telesales Noun the selling of a commodity or service by telephone telesales npl → televentas fpl telesales npl → channels. Its national scale and strong local presence offer a competitive edge to its diversified diversified (di·verˑ·s customer base. For more information, please visit www.airgas.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. These statements include, but are not limited to, statements regarding: the gases strength in March being encouraging; a focus on growing the business branch by branch; growing the medical business through Airgas Puritan Medical divisions; successfully completing the acquisition of BOC's U.S. packaged gas business and welcoming the customers and associates; the range of expected earnings per share for fiscal year 2005; and the expected accretion from the BOC acquisition. The Company intends that such forward-looking statements be subject to the safe harbors Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. created thereby. All forward-looking statements are based on current expectations regarding important risk factors and should not be regarded as a representation by the Company or any other person that the results expressed therein will be achieved. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include: the success of the Company's ability to grow sales and market share; the closing of the Company's acquisition of the majority of BOC's U.S. packaged gas business; the successful integration of the BOC acquisition; the cost of integrating the BOC business into the Company's operations; an economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. ; increased industry competition; adverse changes in customer buying patterns; significant fluctuations in interest rates; political and economic uncertainties associated with current world events; and other factors described in the Company's reports, including Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. dated March 31, 2003 and Form 10-Q Form 10-Q See 10-Q. reports dated June June: see month. 30, 2003, September September: see month. 30, 2003 and December December: see month. 31, 2003, filed by the Company with the Securities and Exchange Commission. Consolidated statements of earnings, consolidated condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. balance sheets, consolidated statements of cash flows, and a reconciliation of non-GAAP financial measures follow.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
March 31, March 31,
2004 2003 2004 2003
--------- --------- ----------- -----------
Net sales $522,091 $442,904 $1,895,468 $1,786,964
--------- --------- ----------- -----------
Costs and expenses:
Cost of products sold
(excl. deprec.) 253,587 209,756 908,681 850,316
Selling, distribution
and administrative
expenses 198,736 174,789 731,827 698,228
Depreciation 23,318 17,774 82,567 73,482
Amortization 1,154 1,427 5,389 6,362
Special charges
(recoveries) (a) (776) -- (776) 2,694
--------- --------- ----------- -----------
Total costs and
expenses 476,019 403,746 1,727,688 1,631,082
--------- --------- ----------- -----------
Operating income 46,072 39,158 167,780 155,882
Interest expense, net (11,367) (10,249) (42,357) (46,375)
Discount on securitization
of trade receivables (c) (797) (772) (3,264) (3,326)
Other income (expense),
net 824 (54) 625 (645)
Equity in earnings of
unconsolidated
affiliates (b) 232 741 5,213 3,768
Minority interest (291) -- (291) --
--------- --------- ----------- -----------
Earnings before income tax
expense 34,673 28,824 127,706 109,304
Income tax expense 13,013 10,659 47,514 41,199
--------- --------- ----------- -----------
Net earnings $ 21,660 $ 18,165 $ 80,192 $ 68,105
========= ========= =========== ===========
Basic earnings per share $ .29 $ .26 $ 1.10 $ .97
Diluted earnings per share $ .29 $ .25 $ 1.07 $ .94
Weighted average shares
outstanding:
Basic 73,600 71,100 72,800 70,500
Diluted 75,700 73,000 74,700 72,300
See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
March 31, March 31,
2004 2003
----------- -----------
ASSETS
Trade accounts receivable, net (c) $ 107,013 $ 71,346
Inventories, net 170,300 151,405
Deferred income tax asset, net 21,054 17,688
Prepaids and other current assets 28,463 30,143
----------- -----------
TOTAL CURRENT ASSETS 326,830 270,582
Property, plant and equipment, net (d) 1,033,926 869,492
Goodwill 504,207 437,709
Other intangible assets, net 19,733 19,832
Investments in unconsolidated affiliates (e) 6,292 65,957
Other non-current assets 40,091 36,671
----------- -----------
TOTAL ASSETS $1,931,079 $1,700,243
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, trade $ 114,303 $ 85,375
Accrued expenses and other current liabilities 122,026 121,292
Current portion of long-term debt 6,140 2,229
----------- -----------
TOTAL CURRENT LIABILITIES 242,469 208,896
Long-term debt (c)(d) 682,698 658,031
Deferred income taxes 257,031 209,140
Other non-current liabilities (d) 20,789 27,243
Minority interest in subsidiary (e) 36,191 --
Stockholders' equity 691,901 596,933
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,931,079 $1,700,243
=========== ===========
See attached notes.
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended Year Ended
March 31, March 31,
2004 2003
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 80,192 $ 68,105
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 82,567 73,482
Amortization 5,389 6,362
Deferred income taxes 23,172 8,655
Equity in earnings of unconsolidated
affiliates (5,213) (3,768)
Loss on divestitures -- 241
Gain on sales of plant and equipment (837) (257)
Minority interest in earnings 291 --
Stock issued for employee stock purchase plan 6,889 8,951
Changes in assets and liabilities, excluding
effects of business acquisitions, divestitures
and the consolidation of the National Welders
joint venture:
Securitization of trade receivables 3,700 24,900
Trade receivables, net (15,901) (8,316)
Inventories, net (5,586) 4,675
Prepaid expenses and other current assets 10,146 17,718
Accounts payable, trade 20,845 2,884
Accrued expenses and other current
liabilities 4,687 (8,021)
Other assets 1,179 2,068
Other liabilities (2,425) (3,280)
---------- ----------
Net cash provided by operating activities 209,095 194,399
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (93,749) (67,969)
Proceeds from sales of plant and equipment 5,347 4,260
Proceeds from divestitures -- 3,167
Business acquisitions, holdbacks and other
settlements of acquisition related
liabilities (34,907) (27,216)
Dividends and fees from unconsolidated
affiliates 2,147 2,507
Other, net (1,369) (1,719)
---------- ----------
Net cash used in investing activities (122,531) (86,970)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 414,297 248,961
Repayment of debt (485,004) (367,356)
Financing costs (2,737) --
Minority interest (291) --
Exercise of stock options 13,130 9,847
Dividends paid to stockholders (11,801) --
Cash overdraft (14,158) 1,119
---------- ----------
Net cash used in financing activities (86,564) (107,429)
---------- ----------
Change in cash
Cash - Beginning of period $ -- $ --
Cash - End of period -- --
---------- ----------
$ -- $ --
========== ==========
See attached notes.
Notes:
(a) Special charges of $2.7 million ($1.7 million after tax) for
the year ended March 31, 2003 consist of a first quarter
restructuring charge related to the integration of the business
acquired from Air Products in the fourth quarter of fiscal 2002
and costs related to the consolidation of certain of the Company's
procurement functions. The special charges include facility exit
costs associated with the closure of certain Airgas (the
"Company") facilities and severance.
Special charge recoveries of $776 thousand ($480 thousand after
tax) for the quarter and year ended March 31, 2004 consist of the
reversal of the excess portion of prior years' restructuring
charges. The special charge recoveries represent a change in
estimate related to facility exit costs.
(b) Equity in the earnings of unconsolidated affiliates for the
year ended March 31, 2004 reflects a $1.7 million non-recurring
after-tax gain.
(c) The Company participates in a securitization agreement with
two commercial banks to sell up to $175 million of qualified trade
receivables. Net proceeds from the securitization were used to
reduce borrowings under the Company's revolving credit facilities.
The amount of outstanding receivables under the agreement was
$162.6 million and $158.9 million at March 31, 2004 and March 31,
2003, respectively.
(d) Since October 1999, the Company has leased certain real estate
and equipment from a grantor trust (the "Trust") under a
sale-leaseback arrangement. The Trust was not consolidated for
financial reporting purposes. Effective July 1, 2003, the Company
elected to early adopt Financial Accounting Standards Board
Interpretation No. 46 ("FIN 46") with respect to the Trust, which
required the consolidation of the Trust. The consolidation of the
Trust resulted in the Company recording assets of $29 million and
debt of $42 million, while eliminating a deferred gain of $13
million that was previously carried on the balance sheet as a
long-term liability. Consolidation of the Trust was a non-cash
transaction.
(e) Since June 1996, the Company has participated in a joint
venture with National Welders Supply Company, Inc. ("NWS"),
a producer and distributor of industrial gases based in Charlotte,
North Carolina. Ownership interests in the joint venture consist
of voting common stock and voting, redeemable preferred stock.
The Company owns 100% of the joint venture's common stock, which
represents a 50% voting interest. The Company does not hold a
majority voting interest in the joint venture and, therefore,
historically has used the equity method to account for its
interest in the joint venture.
The Company has determined that NWS meets the definition of a
"Variable Interest Entity" under FIN 46R (FIN 46 as revised in
December 2003) and that the Company is the primary beneficiary of
the joint venture. Therefore, effective December 31, 2003, the
Company elected to adopt FIN 46R, as it applies to the joint
venture, and consolidated NWS. The consolidation had the effect of
eliminating the Company's $62 million investment in NWS and
recording the joint venture's assets, liabilities and a
corresponding minority interest liability. The summarized balance
sheet impact of the consolidation of NWS at March 31, 2004 is
reflected in the table below. Beginning January 1, 2004, NWS'
operating results were no longer reflected as "Equity in Earnings
of Unconsolidated Affiliates." Rather, the operating results were
reflected broadly across the income statement with minority
interest expense representing the after-tax portion of the
operating results applicable to the preferred stockholders.
Summarized Impact of the Consolidation of NWS at March 31, 2004
Current Assets $ 29,922
Non-Current Assets 109,750
-------------
Total Assets 139,672
=============
Current Liabilities 21,217
Non-Current Liabilities 82,929
Minority Interest 36,191
Common Stockholder's Equity (665)
-------------
Total Liabilities and
Stockholder's Equity $ 139,672
=============
(f) Business segment information
Beginning with the Company's fiscal fourth quarter, the operating
results of NWS were reported broadly across the income statement
contributing $39.2 million to sales and $3.4 million to operating
income. For the purpose of disclosing operating results by
business segment, the Company renamed its Gas Operations segment
as "All Other Operations" and disclosed the operating results of
NWS with the results of the companies previously reported under
that segment. Prior to the adoption of FIN 46R, the operating
results of NWS were reported as a single line item, below
operating income, entitled "equity in earnings of unconsolidated
affiliates."
The companies reporting their results under the All Other
Operations segment consist of producers and distributors,
principally of dry ice, carbon dioxide, nitrous oxide and
specialty gases. The operating results of the Company's two air
separation plants and its five most significant specialty gas labs
are also reported under this segment. The operating results of
these businesses are not material enough to meet the thresholds to
be reported as individual business segments. NWS also has
significant production capabilities with three air separation
plants, two acetylene plants and a specialty gas lab. Although
Airgas is the primary beneficiary of the NWS joint venture, the
absence of a controlling voting interest, the significant
production capabilities of NWS, the fact that the obligations of
NWS are non-recourse to the Company and that the cash flows of NWS
are not available to the Company, lead to the conclusion that NWS
does not meet the criteria to be aggregated with the companies in
the Distribution segment. Furthermore, NWS is not material enough
to meet the thresholds to be reported as an individual business
segment. Therefore, the results of NWS have been reflected in the
All Other Operations segment as disclosed below:
(Unaudited)
Three Months Ended
March 31, 2004
--------------------------------------
(In thousands) Dist. All Elim Combined
Other
Ops.
--------- -------- --------- ---------
Gas and rent $226,515 $70,094 $(10,526) $286,083
Hardgoods 221,266 15,703 (961) 236,008
--------- -------- --------- ---------
Total net sales 447,781 85,797 (11,487) 522,091
Cost of products
sold, excl.
deprec. expense 225,960 39,114 (11,487) 253,587
Selling,
distribution and
administrative
expenses 165,602 33,134 198,736
Deprec. & amort.
expense 18,856 5,616 24,472
Special charges
(recoveries) (776) -- (776)
--------- -------- ---------
Operating income 38,139 7,933 46,072
--------- -------- ---------
(Unaudited)
Three Months Ended
March 31, 2003
------------------------------------
(In thousands) Dist. All Elim Combined
Other
Ops.
--------- -------- -------- --------
Gas and rent $216,798 $40,990 $(9,619) $248,169
Hardgoods 193,235 1,500 -- 194,735
--------- -------- -------- --------
Total net sales 410,033 42,490 (9,619) 442,904
Cost of products
sold, excl.
deprec. expense 198,973 20,402 (9,619) 209,756
Selling,
distribution and
administrative
expenses 159,197 15,592 174,789
Deprec. & amort.
expense 16,216 2,985 19,201
Special charges
(recoveries) -- -- --
--------- -------- --------
Operating income 35,647 3,511 39,158
--------- -------- --------
Year Ended
March 31, 2004
-----------------------------------------
(In thousands) Dist. All Elim Combined
Other
Ops.
---------- --------- --------- ----------
Gas and rent $882,585 $216,166 $(39,944) $1,058,807
Hardgoods 819,886 19,760 (2,985) 836,661
---------- --------- --------- ----------
Total net sales 1,702,471 235,926 (42,929) 1,895,468
Cost of products
sold, excl.
deprec. expense 845,440 106,170 (42,929) 908,681
Selling,
distribution and
administrative
expenses 648,919 82,908 731,827
Deprec. & amort.
expense 72,439 15,517 87,956
Special charges
(recoveries) (776) -- (776)
---------- --------- ----------
Operating income 136,449 31,331 167,780
---------- --------- ----------
Year Ended
March 31, 2003
-----------------------------------------
(In thousands) Dist. All Elim Combined
Other
Ops.
---------- --------- --------- ----------
Gas and rent $863,975 $178,622 $(37,067) $1,005,530
Hardgoods 778,101 5,227 (1,894) 781,434
---------- --------- --------- ----------
Total net sales 1,642,076 183,849 (38,961) 1,786,964
Cost of products
sold, excl.
deprec. expense 806,320 82,957 (38,961) 850,316
Selling,
distribution and
administrative
expenses 634,580 63,648 698,228
Deprec. & amort.
expense 67,948 11,896 79,844
Special charges
(recoveries) 2,694 -- 2,694
---------- --------- ----------
Operating income 130,534 25,348 155,882
---------- --------- ----------
Reconciliation of Non-GAAP Financial Measures (Unaudited)
---------------------------------------------------------
Free Cash Flow:
---------------
Reconciliation of net cash provided by operating activities per
the Consolidated Statement of Cash Flows to Free Cash Flow:
Year Year
(Amounts in thousands) Ended Ended
March 31, March 31,
2004 2003
--------- ---------
Net cash provided by operating activities $209,095 $194,399
Less net cash provided by operating activities of
NWS (1) (9,831) --
Plus:
Dividends and fees paid by unconsolidated
affiliates 2,147 2,507
Management fees paid by NWS (1) 249 --
Less:
Cash provided by the securitization of
trade receivables (3,700) (24,900)
Capital expenditures (93,749) (67,969)
Add back capital expenditures of NWS (1) 2,265 --
-------- --------
Free Cash Flow $106,476 $104,037
======== ========
(1) National Welders Supply Co. ("NWS") is a corporate joint
venture meeting the definition of a variable interest entity
and for which the Company is the primary beneficiary as
described under FIN 46R. NWS was consolidated effective
December 31, 2003 when the Company prospectively adopted FIN
46R as required by the interpretation. Prior to January 1,
2004, the Company reported the results of NWS below operating
income in "Equity in Earnings of Unconsolidated Affiliates."
The liabilities of NWS are non-recourse to the Company.
Likewise, the cash flows in excess of the management fee paid
by NWS are not available to the Company. Accordingly, the cash
flows of NWS have been excluded from the Company's non-GAAP
liquidity measures.
The Company believes Free Cash Flow provides investors meaningful
insight into the Company's ability to generate cash from
continuing operations, which can be used at management's
discretion for acquisitions, the repayment of debt or to support
other investing and financing activities.
Reduction of Adjusted Debt:
---------------------------
Reconciliation of the change in debt per the Balance Sheet to the
decrease in debt adjusted for the non-recourse debt of NWS,
off-balance sheet financing and non-cash interest rate hedging
("adjusted debt"):
Change in
(Amounts in thousands) March 31, March 31, Adjusted
2004 2003 Debt
--------- --------- ---------
Debt $688,838 $660,260 $28,578
Adjustments to Debt:
Securitization of trade receivables 162,600 158,900 3,700
Lease obligation with a Trust (1) -- 42,097 (42,097)
Consolidation of National Welders (2) (53,823) -- (53,823)
Interest rate swap agreements (13,832) (17,681) 3,849
--------- --------- ---------
Adjusted Debt $783,783 $843,576 $(59,793)
========= ========= =========
(1) As a result of the consolidation of the Trust as disclosed in note
(d), the lease obligation with the Trust has been classified as debt
at March 31, 2004.
(2) As a result of the December 31, 2003 consolidation of National
Welders as disclosed in notes (e) and (f), debt associated with
National Welders, which is non-recourse to Airgas, has been excluded
from adjusted debt.
The Company uses Adjusted Debt to provide investors with a more
accurate and meaningful measure of the change in the Company's
obligation to repay debt by adjusting for the non-recourse debt of
NWS, non-cash interest rate hedging and funds received (or repaid)
under the trade receivables securitization program.
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