Airgas Inc. (ARG, Financial) filed Quarterly Report for the period ended 2009-06-30.
Airgas Inc. through its subsidiaries is the largest U.S. distributor of industrial medical and specialty gases and hardgoods such as welding equipment and supplies. Airgas is also the third-largest U.S. distributor of safety products the largest U.S. producer of nitrous oxide and dry ice the largest liquid carbon dioxide producer in the Southeast and a leading distributor of process chemicals refrigerants and ammonia products. More than eleven thousand employees work in about nine hundred locations including branches retail stores gas fill plants specialty gas labs production facilities and distribution centers. Airgas also distributes its products and services through eBusiness catalog and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base. Airgas Inc. has a market cap of $3.66 billion; its shares were traded at around $44.76 with a P/E ratio of 15.1 and P/S ratio of 0.9. The dividend yield of Airgas Inc. stocks is 1.6%. Airgas Inc. had an annual average earning growth of 10.7% over the past 10 years. GuruFocus rated Airgas Inc. the business predictability rank of 2-star.
Net cash used by financing activities totaled $81 million, principally reflecting the net repayment of $75 million of debt. During the prior year quarter, the Company issued $400 million in fixed rate senior subordinated notes and used the net proceeds to pay down approximately $400 million of its floating rate revolving credit line. Lower proceeds from stock options also contributed to the increase in cash used in financing activities. The Company also paid dividends of $15 million, or $0.18 per share, in the current quarter, as compared to $10 million, or $0.12 per share, in the prior year quarter.
The Company maintains a senior credit facility (the Credit Facility) with a syndicate of lenders. At June 30, 2009, the Credit Facility permitted the Company to borrow up to $991 million under a U.S. dollar revolving credit line, up to $75 million (U.S. dollar equivalent) under the multi-currency revolving credit line, and up to C$40 million (U.S. $34.4 million) under a Canadian dollar revolving credit line. The Credit Facility also contains a term loan provision through which the Company borrowed $600 million with scheduled repayment terms. The term loans are repayable in quarterly installments of $22.5 million through June 30, 2010. The quarterly installments then increase to $71.2 million from September 30, 2010 to June 30, 2011. Principal payments due over the next twelve months on the term loans are classified as Long-term debt in the Companys Consolidated Balance Sheets based on the Companys ability and intention to refinance the payments with borrowings under its long-term revolving credit facilities. As principal amounts under the term loans are repaid, no additional borrowing capacity is created under the term loan provision. The Credit Facility will mature on July 25, 2011.
As of June 30, 2009, the Company had approximately $1.1 billion of borrowings under the Credit Facility: $696 million under the U.S. dollar revolver, $375 million under the term loans, $31 million (in U.S. dollars) under the multi-currency revolver and C$15 million (U.S. $13 million) under the Canadian dollar revolver. The Company also had outstanding letters of credit of $42 million issued under the Credit Facility. The U.S. dollar revolver borrowings and the term loans bear interest at LIBOR plus 62.5 basis points. The multi-currency revolver bears interest based on a spread of 62.5 basis points over the Euro currency rate applicable to each foreign currency borrowing. The Canadian dollar borrowings bear interest at the Canadian Bankers Acceptance Rate plus 62.5 basis points. As of June 30, 2009, the average effective interest rates on the U.S. dollar revolver, the term loans, the multi-currency revolver and the Canadian dollar revolver were 1.04%, 1.22%, 1.41% and 1.12%, respectively. In July, the Companys credit ratings were upgraded resulting in a lowering of the interest rate spreads on the borrowings above to 50 basis points effective July 31, 2009.
The Company participates in a securitization agreement (the Agreement) with three commercial banks to which it sells qualifying trade receivables on a revolving basis. The maximum amount of the facility is $345 million. The size of the facility was reduced from $360 million to $345 million in March 2009, due to the elimination of a $15 million subordinated funding tranche, which was previously part of the facility. The Agreement expires in March 2010. The Company expects continued availability under the Agreement until it expires in March 2010 and under similar agreements thereafter. Given the contraction of the securitized asset market in the current credit environment, the Company is evaluating the current arrangement with the banks and will evaluate this and other financing alternatives in fiscal 2010. Based on the characteristics of its receivable pool, the Company believes that trade receivable securitization will continue to be an attractive source of funds. In the event such source of funding was unavailable or reduced, the Company believes that it would be able to secure an alternative source of funds. During the three months ended June 30, 2009, the Company sold approximately $875 million of trade receivables and remitted to bank conduits, pursuant to a servicing agreement, approximately $891 million in collections on those receivables. The amount of receivables sold under the Agreement was $295 million at June 30, 2009 and $311 million at March 31, 2009. The Agreement contains customary events of termination, including standard cross default provisions with respect to outstanding debt.
The Company manages its exposure to changes in market interest rates. The Companys involvement with derivative instruments is limited to highly effective fixed interest swap agreements used to manage well-defined interest risk exposures. During the three months ended June 30, 2009, three fixed interest rate swap agreements with a notional amount of $77 million matured. At June 30, 2009, the Company had 15 fixed interest rate swap agreements outstanding with a notional amount of $550 million. These swaps effectively convert $550 million of variable interest rate debt associated with the Companys Credit Facility to fixed rate debt. At June 30, 2009, these swap agreements required the Company to make fixed interest payments based on a weighted average effective rate of 4.16% and receive variable interest payments from the counterparties based on a weighted average variable rate of 2.02%. The remaining terms of these swap agreements range from 1 to 18 months, with $300 million of fixed rate swap agreements maturing in July and August 2009. For the three months ended June 30, 2009, the fair value of the liability for the fixed interest rate swap agreements decreased and the Company recorded a corresponding adjustment to Accumulated other comprehensive income (loss) of $4.5 million, or $2.9 million after tax. In the prior year quarter, the fair value of the liability for the fixed interest rate swap agreements decreased and the Company recorded a corresponding adjustment to Accumulated other comprehensive income (loss) of $11.8 million, or $7.7 million after tax.
Read the The complete ReportARG is in the portfolios of Ron Baron of Baron Funds, Richard Aster Jr of Meridian Fund, George Soros of Soros Fund Management LLC.
Airgas Inc. through its subsidiaries is the largest U.S. distributor of industrial medical and specialty gases and hardgoods such as welding equipment and supplies. Airgas is also the third-largest U.S. distributor of safety products the largest U.S. producer of nitrous oxide and dry ice the largest liquid carbon dioxide producer in the Southeast and a leading distributor of process chemicals refrigerants and ammonia products. More than eleven thousand employees work in about nine hundred locations including branches retail stores gas fill plants specialty gas labs production facilities and distribution centers. Airgas also distributes its products and services through eBusiness catalog and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base. Airgas Inc. has a market cap of $3.66 billion; its shares were traded at around $44.76 with a P/E ratio of 15.1 and P/S ratio of 0.9. The dividend yield of Airgas Inc. stocks is 1.6%. Airgas Inc. had an annual average earning growth of 10.7% over the past 10 years. GuruFocus rated Airgas Inc. the business predictability rank of 2-star.
Highlight of Business Operations:
Net cash provided by operating activities was $162 million for the three months ended June 30, 2009 compared to $129 million in the comparable prior year period. The increase in cash provided by operating activities was primarily driven by lower working capital requirements. Exclusive of the cash used by the trade receivables securitization agreement, working capital provided $43 million of cash in the current period versus the use of $25 million of cash during the prior year period. Lower trade receivables and inventory levels in response to declining sales were the primary drivers of the improvement. The trade receivables securitization used cash of $16 million during the current quarter, reflecting the lower level of trade receivables. Net earnings adjusted for non-cash and non-operating items provided cash of $137 million versus $154 million in the prior year quarter.Net cash used by financing activities totaled $81 million, principally reflecting the net repayment of $75 million of debt. During the prior year quarter, the Company issued $400 million in fixed rate senior subordinated notes and used the net proceeds to pay down approximately $400 million of its floating rate revolving credit line. Lower proceeds from stock options also contributed to the increase in cash used in financing activities. The Company also paid dividends of $15 million, or $0.18 per share, in the current quarter, as compared to $10 million, or $0.12 per share, in the prior year quarter.
The Company maintains a senior credit facility (the Credit Facility) with a syndicate of lenders. At June 30, 2009, the Credit Facility permitted the Company to borrow up to $991 million under a U.S. dollar revolving credit line, up to $75 million (U.S. dollar equivalent) under the multi-currency revolving credit line, and up to C$40 million (U.S. $34.4 million) under a Canadian dollar revolving credit line. The Credit Facility also contains a term loan provision through which the Company borrowed $600 million with scheduled repayment terms. The term loans are repayable in quarterly installments of $22.5 million through June 30, 2010. The quarterly installments then increase to $71.2 million from September 30, 2010 to June 30, 2011. Principal payments due over the next twelve months on the term loans are classified as Long-term debt in the Companys Consolidated Balance Sheets based on the Companys ability and intention to refinance the payments with borrowings under its long-term revolving credit facilities. As principal amounts under the term loans are repaid, no additional borrowing capacity is created under the term loan provision. The Credit Facility will mature on July 25, 2011.
As of June 30, 2009, the Company had approximately $1.1 billion of borrowings under the Credit Facility: $696 million under the U.S. dollar revolver, $375 million under the term loans, $31 million (in U.S. dollars) under the multi-currency revolver and C$15 million (U.S. $13 million) under the Canadian dollar revolver. The Company also had outstanding letters of credit of $42 million issued under the Credit Facility. The U.S. dollar revolver borrowings and the term loans bear interest at LIBOR plus 62.5 basis points. The multi-currency revolver bears interest based on a spread of 62.5 basis points over the Euro currency rate applicable to each foreign currency borrowing. The Canadian dollar borrowings bear interest at the Canadian Bankers Acceptance Rate plus 62.5 basis points. As of June 30, 2009, the average effective interest rates on the U.S. dollar revolver, the term loans, the multi-currency revolver and the Canadian dollar revolver were 1.04%, 1.22%, 1.41% and 1.12%, respectively. In July, the Companys credit ratings were upgraded resulting in a lowering of the interest rate spreads on the borrowings above to 50 basis points effective July 31, 2009.
The Company participates in a securitization agreement (the Agreement) with three commercial banks to which it sells qualifying trade receivables on a revolving basis. The maximum amount of the facility is $345 million. The size of the facility was reduced from $360 million to $345 million in March 2009, due to the elimination of a $15 million subordinated funding tranche, which was previously part of the facility. The Agreement expires in March 2010. The Company expects continued availability under the Agreement until it expires in March 2010 and under similar agreements thereafter. Given the contraction of the securitized asset market in the current credit environment, the Company is evaluating the current arrangement with the banks and will evaluate this and other financing alternatives in fiscal 2010. Based on the characteristics of its receivable pool, the Company believes that trade receivable securitization will continue to be an attractive source of funds. In the event such source of funding was unavailable or reduced, the Company believes that it would be able to secure an alternative source of funds. During the three months ended June 30, 2009, the Company sold approximately $875 million of trade receivables and remitted to bank conduits, pursuant to a servicing agreement, approximately $891 million in collections on those receivables. The amount of receivables sold under the Agreement was $295 million at June 30, 2009 and $311 million at March 31, 2009. The Agreement contains customary events of termination, including standard cross default provisions with respect to outstanding debt.
The Company manages its exposure to changes in market interest rates. The Companys involvement with derivative instruments is limited to highly effective fixed interest swap agreements used to manage well-defined interest risk exposures. During the three months ended June 30, 2009, three fixed interest rate swap agreements with a notional amount of $77 million matured. At June 30, 2009, the Company had 15 fixed interest rate swap agreements outstanding with a notional amount of $550 million. These swaps effectively convert $550 million of variable interest rate debt associated with the Companys Credit Facility to fixed rate debt. At June 30, 2009, these swap agreements required the Company to make fixed interest payments based on a weighted average effective rate of 4.16% and receive variable interest payments from the counterparties based on a weighted average variable rate of 2.02%. The remaining terms of these swap agreements range from 1 to 18 months, with $300 million of fixed rate swap agreements maturing in July and August 2009. For the three months ended June 30, 2009, the fair value of the liability for the fixed interest rate swap agreements decreased and the Company recorded a corresponding adjustment to Accumulated other comprehensive income (loss) of $4.5 million, or $2.9 million after tax. In the prior year quarter, the fair value of the liability for the fixed interest rate swap agreements decreased and the Company recorded a corresponding adjustment to Accumulated other comprehensive income (loss) of $11.8 million, or $7.7 million after tax.
Read the The complete ReportARG is in the portfolios of Ron Baron of Baron Funds, Richard Aster Jr of Meridian Fund, George Soros of Soros Fund Management LLC.
