Airgas Reports Fiscal Third Quarter Earnings

  Airgas Reports Fiscal Third Quarter Earnings

  *Third quarter diluted EPS of $1.05, up 13% over prior year, and adjusted
    diluted EPS* of $1.04, up 7% over prior year
  *Third quarter organic sales up 4% over prior year; Distribution segment
    organic sales up 2% over prior year
  *Third quarter operating margin of 12.2%, up 80 basis points over prior
    year, and adjusted operating margin* of 12.1%, up 30 basis points over
    prior year
  *Year-to-date free cash flow* of $219 million, up 25% over prior year
  *Return on capital* of 12.4%, up 10 basis points over prior year
  *Revised fiscal year 2013 diluted EPS guidance to $4.40 to $4.46 from $4.42
    to $4.57; revised fiscal year 2013 adjusted diluted EPS* guidance to $4.40
    to $4.46 from $4.45 to $4.60

Business Wire

RADNOR, Pa. -- January 24, 2013

Airgas, Inc. (NYSE: ARG), one of the nation’s leading suppliers of industrial,
medical, and specialty gases, and related products, today reported sales and
earnings growth for its third quarter ended December 31, 2012, which reflected
the impact of continued economic uncertainty and moderation in business
conditions on its diversified customer base. Results for the quarter also
reflected the realization of SAP-related benefits as planned, tempered by
slightly higher than anticipated implementation costs.

Third quarter earnings per diluted share were $1.05, an increase of 13% over
prior year earnings per diluted share of $0.93. Excluding a net $0.01 benefit
from certain lower-than-expected restructuring costs, adjusted earnings per
diluted share* were $1.04, an increase of 7% over prior year adjusted earnings
per diluted share* of $0.97. Results included SAP implementation costs and
depreciation expense, net of benefits realized, of $0.03 per diluted share in
the current year quarter compared to $0.10 of expense in the prior year
quarter.

                                                                   
                                              Third Quarter
                                              FY2013     FY2012      % Change
Earnings per diluted share (GAAP)             $ 1.05      $ 0.93      13   %
Restructuring and other special charges         (0.01 )     0.02
(benefits), net
Costs (benefits) related to unsolicited         -           (0.01 )
takeover attempt
Multi-employer pension plan withdrawal         -         0.03     
charges
Adjusted earnings per diluted share           $ 1.04     $ 0.97     7    %
(non-GAAP)
                                                                      

“Moderating activity levels in our industrial customer base throughout the
quarter were further exacerbated in late December by uncertainty around the
fiscal cliff and by the timing of the holidays during the work week,” said
Airgas Executive Chairman Peter McCausland. “We’re pleased to be on target for
our SAP benefits, which contributed to the Distribution segment’s 200 basis
point year-over-year expansion in gross margin and 30 basis point
year-over-year expansion in operating margin on very modest sales growth.
Although implementation costs were slightly higher than anticipated during the
quarter, we demonstrated the ability to achieve the SAP benefits, and that
reinforces that this program will create substantial shareholder value.
Acquisition activity was another bright spot in the quarter, as we added seven
businesses with aggregate annual revenues of $75 million. Though we remain
appropriately cautious about near-term business conditions, we’re very
optimistic about the long-term prospects for the U.S. manufacturing and energy
industries, as well as non-residential construction, and our ability to
leverage our unique value proposition and unrivaled platform to drive growth.
Some of the most challenging aspects of the SAP implementation are behind us,
we’re building momentum, and we’re ready to capitalize on any improvement in
the U.S. economy.”

“The SAP implementation is on-schedule, with only one region remaining to
convert to the new system,” said Airgas Chief Executive Officer Michael L.
Molinini. “To ensure the long-term success of this initiative, we expect to
incur slightly higher than anticipated SAP-related expenses in our fourth
quarter and to continue to incur some SAP-related costs during the first half
of fiscal 2014 for post-conversion support and training. Our expectation that
we will achieve our projected $75 to $125 million in run-rate operating income
benefits by the end of calendar 2013, however, remains unchanged. These SAP
milestones and the growth initiatives we presented at our analyst meeting in
December, which support our fiscal 2016 financial goals, all make for a bright
future for this company.”

Third quarter sales were $1.21 billion, an increase of 5% over the prior year.
Organic sales in the quarter were up 4% over the prior year, with gas and rent
up 6% and hardgoods down 1%. Organic sales in the Distribution business
segment were up 2% over the prior year, with gas and rent up 5% and hardgoods
down 1%.

Operating margin was 12.2% for the third quarter and included 90 basis points
of impact from SAP implementation costs and depreciation expense. Prior year
operating margin was 11.4% and included 110 basis points of impact from SAP
implementation costs and depreciation expense. Adjusted operating margin* was
12.1% and 11.8% in the current and prior year quarters, respectively.

Return on capital* was 12.4% for the twelve months ended December 31, 2012, an
increase of 10 basis points over the prior year.

Year-to-date free cash flow* through the third quarter was $219 million, an
increase of 25% over the prior year, and adjusted cash from operations* was
$451 million, an increase of 8% over the prior year. During the third quarter,
the Company repurchased 2.47 million shares on the open market for $222
million, reflecting an average price of $89.93 per share. The impact of share
repurchases on weighted average diluted shares outstanding was largely offset
by stock option exercises in the quarter.

Since the beginning of its fiscal year, the Company has acquired fifteen
businesses with aggregate annual revenues of more than $94 million.

Guidance

The Company expects earnings per diluted share for the fourth quarter of
fiscal 2013 to increase 4% to 10% from $1.12 in the prior year to $1.17 to
$1.23. The Company expects adjusted earnings per diluted share* for the fourth
quarter of fiscal 2013 to increase 6% to 12% from $1.11 in the prior year to
$1.18 to $1.24. Guidance for both earnings per diluted share and adjusted
earnings per diluted share* reflects an estimated year-over-year decline of
$0.04 from the impact of one less selling day in the fiscal 2013 fourth
quarter, an estimated year-over-year decline of $0.01 from the impact of lower
sales due to helium supply constraints, and an estimated year-over-year
decline of $0.02 due to a higher tax rate, as well as approximately $0.04 to
$0.06 of expected SAP-related benefits, net of implementation costs and
depreciation expense, compared to $0.09 of expense in the prior year. Guidance
does not reflect the impact from potential share repurchases in the fourth
quarter under the Company’s current share repurchase authorization.

For fiscal 2013, the Company expects earnings per diluted share to increase
10% to 12% from $4.00 in the prior year to $4.40 to $4.46. The Company expects
adjusted earnings per diluted share* to increase 7% to 9% from $4.11 in the
prior year to $4.40 to $4.46. Guidance for both earnings per diluted share and
adjusted earnings per diluted share* reflects an estimated year-over-year
decline of $0.07 from the impact of two less selling days in fiscal 2013, an
estimated year-over-year decline of $0.07 from the impact of lower sales due
to helium supply constraints, and an estimated year-over-year decline of $0.02
due to a higher tax rate, as well as approximately $0.16 to $0.18 of SAP
implementation costs and depreciation expense, net of expected benefits,
compared to $0.34 of SAP implementation costs and depreciation expense in the
prior year. Guidance does not reflect the impact from potential share
repurchases in the fourth quarter under the Company’s current share repurchase
authorization.

Fiscal 2013 adjusted earnings per diluted share* guidance excludes the
following restructuring and other special charges and net benefits: a $0.05
charge in the first quarter; a $0.02 charge in the second quarter; a $0.01 net
benefit in the third quarter; and an expected charge of $0.01 in the fourth
quarter (resulting in an expected net charge of $0.07 for the full year).
Fiscal 2013 guidance also excludes a $0.07 gain on the sale of businesses in
the first quarter. Special gains and charges and net benefits in fiscal 2012
were a net total charge of $0.11.

The Company will conduct an earnings teleconference at 10:00 a.m. Eastern Time
on Thursday, January 24. The teleconference will be available by calling (888)
228-5281 (U.S./Canada) or (913) 312-1507 (International). The presentation
materials (this press release, slides to be presented during the Company’s
teleconference and information about how to access a live and on demand
webcast of the teleconference) are available in the “Investor Information”
section of the Company’s website at www.airgas.com. A webcast of the
teleconference will be available live and on demand through February 22 at
http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference
will be available through February 1. To listen, call (888) 203-1112
(U.S./Canada) or (719) 457-0820 (International) and enter passcode 6472077.

Note that the Company has changed its reference to sales adjusted for the
impact of acquisitions and divestitures from “same-store sales” to “organic
sales.” Growth rates presented in prior periods and the underlying calculation
have not been materially affected by this change.

* See attached reconciliations and computations of non-GAAP adjusted earnings
per diluted share, adjusted operating margin, adjusted cash from operations,
adjusted capital expenditures, free cash flow, and return on capital.

About Airgas, Inc.

Airgas, Inc. (NYSE: ARG), through its subsidiaries, is one of the nation’s
leading suppliers of industrial, medical and specialty gases, and hardgoods,
such as welding equipment and related products. Airgas is a leading U.S.
producer of atmospheric gases with 16 air separation plants, a leading
producer of carbon dioxide, dry ice, and nitrous oxide, one of the largest
U.S. suppliers of safety products, and a leading U.S. supplier of
refrigerants, ammonia products, and process chemicals. More than 15,000
employees work in approximately 1,100 locations, including branches, retail
stores, gas fill plants, specialty gas labs, production facilities and
distribution centers. Airgas also markets its products and services through
eBusiness, catalog and telesales channels. Its national scale and strong local
presence offer a competitive edge to its diversified customer base. For more
information, please visit www.airgas.com.

This press release contains statements that are forward looking, as that term
is defined by the Private Securities Litigation Reform Act of 1995 or by the
SEC in its rules, regulations and releases. These statements include, but are
not limited to: expectations related to the fourth quarter of fiscal 2013,
including earnings per diluted share of $1.17 to $1.23, adjusted earnings per
diluted share of $1.18 to $1.24, a year-over-year decline of $0.04 from the
impact of one less selling day in the fourth quarter of fiscal 2013, a
year-over-year decline of $0.01 per diluted share from the impact of lower
sales due to helium supply constraints, a decline of $0.02 due to a higher tax
rate, as well as $0.04 to $0.06 per diluted share of SAP-related benefits, net
of implementation costs and depreciation expense, and $0.01 per diluted share
of restructuring and other special charges; expectations related to fiscal
year 2013, including earnings per diluted share and adjusted earnings per
diluted share of $4.40 to $4.46, a year-over-year decline of $0.07 from the
impact of two less selling days in fiscal 2013, a year-over-year decline of
$0.07 per diluted share from the impact of lower sales due to helium supply
constraints, a decline of $0.02 due to a higher tax rate, approximately $0.16
to $0.18 per diluted share of SAP implementation costs and depreciation
expense, net of expected benefits, and a net $0.07 per diluted share of
restructuring and other special charges; expectations regarding future SAP
implementation costs, our realization of economic benefits from our SAP
implementation, shareholder value creation, and the completion of the SAP
implementation and related distractions; and our outlook for future earnings
growth, the near-term business environment, and our long-term prospects.
Forward-looking statements also include any statement that is not based on
historical fact, including statements containing the words "believes," "may,"
"plans," "will," "could," "should," "estimates," "continues," "anticipates,"
"intends," "expects," and similar expressions. We intend that such
forward-looking statements be subject to the safe harbors created thereby. All
forward-looking statements are based on current expectations regarding
important risk factors and should not be regarded as a representation by us or
any other person that the results expressed therein will be achieved. Airgas
assumes no obligation to revise or update any forward-looking statements for
any reason, except as required by law. Important factors that could cause
actual results to differ materially from those contained in any
forward-looking statement include: continued or increased disruption in our
helium supply chain; adverse changes in customer buying patterns resulting
from deterioration in current economic conditions; weakening in the operating
and financial performance of our customers, which could negatively impact our
sales and our ability to collect our accounts receivable; postponement of
projects due to economic developments; customer acceptance of price increases;
our ability to achieve anticipated acquisition synergies; supply cost
pressures; increased industry competition; our ability to successfully
identify, consummate, and integrate acquisitions; our continued ability to
access credit markets on satisfactory terms; significant fluctuations in
interest rates; increases in energy costs and other operating expenses eroding
planned cost savings; higher than expected implementation costs of the SAP
system; conversion or implementation problems related to the SAP system that
disrupt our business and negatively impact customer relationships; our ability
to achieve anticipated benefits enabled by our conversion to the SAP system;
higher than expected costs related to our Business Support Center transition;
the impact of tightened credit markets on our customers; the impact of changes
in tax and fiscal policies and laws; the potential for increased expenditures
relating to compliance with environmental regulatory initiatives; the impact
of new environmental, healthcare, tax, accounting, and other regulation; the
economic recovery in the U.S.; the effect of catastrophic events; political
and economic uncertainties associated with current world events; and other
factors described in the Company's reports, including its March 31, 2012 Form
10-K, subsequent Forms 10-Q, and other Forms filed by the Company with the
SEC.

Consolidated statements of earnings, condensed consolidated balance sheets,
consolidated statements of cash flows, and reconciliations and computations of
non-GAAP financial measures follow below.

                                              
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)
                                                 
                                                 
                 Three Months Ended              Nine Months Ended
                 December 31,                    December 31,
                 2012           2011            2012           2011
                                                                 
Net sales        $ 1,207,708    $ 1,153,751    $ 3,694,574    $ 3,505,134 
                                                                 
Costs and
expenses:
Cost of
products sold
(excluding         527,452         520,409         1,648,503       1,603,282
depreciation)
(a)
Selling,
distribution
and                462,288         433,050         1,380,720       1,279,933
administrative
expenses (b)
Restructuring
and other
special            (1,729    )     2,431           6,426           18,261
charges
(benefits),
net (c)
Costs
(benefits)
related to         -               (1,170    )     -               (7,870    )
unsolicited
takeover
attempt (d)
Depreciation       65,804          61,575          194,820         182,224
Amortization      6,614         6,437         19,950        18,841    
Total costs       1,060,429     1,022,732     3,250,419     3,094,671 
and expenses
                                                                 
Operating          147,279         131,019         444,155         410,463
income (a)
                                                                 
Interest           (16,472   )     (15,741   )     (48,102   )     (49,815   )
expense, net
Other income,     805           1,375         10,329        1,524     
net (e)
                                                                 
Earnings
before income      131,612         116,653         406,382         362,172
taxes
                                                                 
Income taxes      (48,697   )    (44,095   )    (151,649  )    (136,766  )
(a)
                                                                 
Net earnings     $ 82,915       $ 72,558       $ 254,733      $ 225,406   
(a)
                                                                 
Net earnings
per common
share:
                                                                 
Basic earnings   $ 1.07         $ 0.96         $ 3.30         $ 2.94      
per share (a)
                                                                 
Diluted
earnings per     $ 1.05         $ 0.93         $ 3.23         $ 2.88      
share (a)
                                                                 
Weighted
average shares
outstanding:
Basic              77,417          75,940          77,123          76,632
Diluted            78,944          77,705          78,883          78,340
                                                                 
See attached
Notes.
                                                                 

                                                             
AIRGAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
                                                                
                                                                
                                                 (Unaudited)
                                                 December 31,   March 31,
                                                 2012           2012
                                                                
ASSETS
Cash                                             $  66,606      $ 44,663
Trade receivables, net                              645,174       652,439
Inventories, net                                    462,379       408,438
Deferred income tax asset, net                      53,898        49,617
Prepaid expenses and other current assets          160,900      119,049
TOTAL CURRENT ASSETS                                1,388,957     1,274,206
                                                                
Plant and equipment, net                            2,674,258     2,616,059
Goodwill                                            1,198,698     1,163,803
Other intangible assets, net                        230,469       214,204
Other non-current assets                           46,679       52,313
TOTAL ASSETS                                     $  5,539,061   $ 5,320,585
                                                                
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, trade                          $  157,384     $ 174,868
Accrued expenses and other current liabilities      347,724       356,344
Short-term debt (f)                                 284,305       388,452
Current portion of long-term debt (g)              305,342      10,385
TOTAL CURRENT LIABILITIES                           1,094,755     930,049
                                                                
Long-term debt, excluding current portion (h)       1,706,926     1,761,902
Deferred income tax liability, net                  811,547       793,957
Other non-current liabilities                       88,087        84,419
                                                                
Stockholders’ equity                               1,837,746    1,750,258
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $  5,539,061   $ 5,320,585
                                                                
See attached Notes.
                                                                

                                               
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
                                                 
                                                 
                                                 Nine Months Ended
                                                 December 31,
                                                 2012          2011
                                                                
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (a)                                 $ 254,733      $ 225,406
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation                                       194,820        182,224
Amortization                                       19,950         18,841
Impairment (c)                                     1,729          2,500
Deferred income taxes (a)                          14,163         38,088
Gain on sales of plant and equipment               (126     )     (65        )
Gain on sale of businesses                         (6,822   )     -
Stock-based compensation expense                   22,744         21,352
                                                                
Changes in assets and liabilities, excluding
effects of business acquisitions and
divestitures:
Trade receivables, net                             15,579         (37,360    )
Inventories, net (a)                               (49,972  )     (27,954    )
Prepaid expenses and other current assets          (37,410  )     (10,908    )
Accounts payable, trade                            (19,594  )     (9,801     )
Accrued expenses and other current liabilities     (6,526   )     (62,329    )
Other non-current assets                           2,626          2,059
Other non-current liabilities                     (836     )    (1,002     )
Net cash provided by operating activities         405,058      341,051    
                                                                
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                               (244,052 )     (263,398   )
Proceeds from sales of plant, equipment and        23,438         12,199
businesses
Business acquisitions and holdback settlements     (94,630  )     (96,970    )
Other, net                                        (1,668   )    (1,473     )
Net cash used in investing activities             (316,912 )    (349,642   )
                                                                
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in short-term debt (f)     (104,181 )     406,701
Proceeds from borrowings of long-term debt (h)     260,372        1,065,560
Repayment of long-term debt                        (18,115  )     (1,147,735 )
Financing costs                                    (2,076   )     (4,567     )
Purchase of treasury stock (i)                     (222,163 )     (300,000   )
Proceeds from the exercise of stock options        78,091         22,890
Stock issued for the Employee Stock Purchase       12,781         11,361
Plan
Tax benefit realized from the exercise of          33,352         10,914
stock options
Dividends paid to stockholders                     (92,655  )     (70,819    )
Change in cash overdraft                          (11,609  )    2,858      
Net cash used in financing activities             (66,203  )    (2,837     )
                                                                
Change in cash                                   $ 21,943       $ (11,428    )
Cash – Beginning of period                        44,663       57,218     
Cash – End of period                             $ 66,606      $ 45,790     
                                                                
See attached Notes.


Notes:

     As a result of the Company’s operating realignment into four divisions,
     the Company initiated a related change in its legal entity structure on
     January 1, 2012 whereby the majority of Airgas’ distribution businesses
     have merged or will merge into a single limited liability company (“LLC”)
     of which the Company is the sole member. The new legal structure
     necessitated conformance of certain of the Company’s accounting policies,
     including those around inventory valuation. As a result, effective
a)  January 1, 2012, the Company changed its method of accounting for the
     portion of its hardgoods inventory valued using the last-in, first-out
     (“LIFO”) method to the average-cost method. The Company applied this
     change in accounting principle through retrospective application to the
     prior year’s financial statements. The impact of the change led to
     increases in operating income of $407 thousand and $895 thousand for the
     three and nine months ended December 31, 2011, respectively, and a $0.01
     increase in previously reported diluted earnings per share for the
     nine-month period ended December 31, 2011.

     Included within selling, distribution and administrative expenses are
     costs related to the Company’s SAP implementation of $8.7 million and
     $9.8 million for the three months ended December 31, 2012 and 2011,
     respectively. SAP implementation costs of $27.3 million and $24.1 million
     were included in the consolidated results for the nine months ended
     December 31, 2012 and 2011, respectively. Also included within selling,
     distribution and administrative expenses are multi-employer defined
b)   benefit pension plan (“MEPP”) withdrawal charges of $3.4 million and $4.3
     million for the three and nine months ended December 31, 2011,
     respectively. As collective bargaining agreements (“CBAs”) came up for
     renewal, the Company actively negotiated the withdrawal from MEPPs
     replacing those retirement plans for CBA employees with defined
     contribution plans. At December 31, 2012, the Company has successfully
     negotiated its withdrawal from all MEPPs in which it previously
     participated and has fully accrued for the related withdrawal
     assessments.

     Restructuring and other special charges consist of a net benefit of $1.7
     million for the three months ended December 31, 2012 and a net cost of
     $6.4 million for the nine months ended December 31, 2012. In May 2011,
     the Company announced its plan to realign its twelve regional
     distribution companies into four new divisions, and to consolidate its
     regional company accounting and certain administrative functions into
     four newly created Business Support Centers. As a result of the plan, the
     Company recorded a restructuring charge of $13.3 million during the three
     months ended June 30, 2011 for severance benefits expected to be paid
     under the Airgas, Inc. Severance Pay Plan to employees whose jobs were
     eliminated as a result of the realignment. During the three months ended
     December 31, 2012, the Company re-evaluated its remaining severance
     liability related to the realignment and, as a result of this analysis,
     reduced its severance liability by $3.7 million. The reduction in the
     severance liability was driven by fewer than expected individuals meeting
c)   the requirements to receive severance benefits. This reduction was due to
     both the retention of employees through relocation or acceptance of new
     positions, as well as former associates who chose not to remain with the
     Company through their designated separation dates. Offsetting the benefit
     from the reduction to the severance liability were additional
     restructuring and other related costs of $2.0 million and $8.4 million
     for the three and nine months ended December 31, 2012, respectively,
     primarily related to transition staffing, legal and other costs
     associated with the realignment and LLC formation. In addition to the
     restructuring and other related costs, in June 2012, the Company
     re-evaluated the economic viability of a small hospital piping
     construction business and, as a result of an impairment analysis
     performed on the assets at the associated reporting unit, the Company
     recorded a charge of $1.7 million related to certain of the intangible
     assets associated with this business for the three months ended June 30,
     2012.

     For the three and nine months ended December 31, 2011, restructuring and
     other special charges were $2.4 million and $18.3 million, respectively.
     During the three months ended December 31, 2011, the Company recorded
     restructuring and other related costs of $2.4 million primarily related
     to facility closure, transition staffing, legal and other costs
     associated with the realignment. Combined with the $13.3 million
     restructuring charge for severance benefits recorded during the three
     months ended June 30, 2011, total restructuring and other related costs
     were $15.7 million during the nine months ended December 31, 2011. In
     addition to the restructuring and other related costs, the Company
     recorded a special charge related to an impairment analysis. In August
     2011, the Company received 24 months notice that a supplier’s hydrogen
     plant, which generates CO[2] as a by-product that serves as the feedstock
     for the Company’s co-located liquid CO[2] plant, will cease operations in
     calendar year 2013. The Company expects the hydrogen plant to continue to
     supply the feedstock for its liquid CO[2] plant during the remaining
     period. As a result of an impairment analysis performed on the assets at
     this location, the Company recorded a charge of $2.5 million during the
     three months ended September 30, 2011.

     During the three and nine months ended December 31, 2011, the Company
d)   recognized $1.2 million and $7.9 million, respectively, of benefits from
     lower than previously estimated net costs related to the fiscal 2011
     unsolicited takeover attempt by Air Products and Chemicals, Inc.

     On June 1, 2012, the Company divested the assets and operations of five
     branch locations in western Canada. The Company realized a gain on the
e)   sale of $6.8 million ($5.5 million after tax) recorded in other income in
     its Consolidated Statement of Earnings. The operations were included in
     the Distribution business segment and contributed net sales that were not
     material to the Company’s Consolidated Statement of Earnings.

     The Company participates in a $750 million commercial paper program
     supported by its Credit Facility. This program allows the Company to
     obtain favorable short-term borrowing rates with maturities that may
f)   vary, but will generally not exceed 90 days from the date of issue. The
     Company has used proceeds from the commercial paper program to pay down
     amounts outstanding under its Credit Facility and for general corporate
     purposes. At December 31, 2012, $284 million was outstanding under the
     commercial paper program.

     On October 1, 2012, the Company’s $300 million 2.85% notes were
g)   reclassified to the “Current portion of long-term debt” line item of the
     Company’s Consolidated Balance Sheet. The notes mature on October 1,
     2013.

     The Company’s Credit Facility matures on July 19, 2016. Including the
     borrowings under the commercial paper program, approximately $376 million
     was available to the Company under the Credit Facility at December 31,
     2012. On November 26, 2012, the Company issued $250 million of 2.90%
h)   senior notes maturing on November 15, 2022. The net proceeds from the
     offering were used for general corporate purposes, including to fund
     acquisitions, repay indebtedness under the Company’s commercial paper
     program, and repurchase shares pursuant to the Company’s stock repurchase
     program.

     On October 23, 2012, the Company announced a $600 million share
     repurchase program. During the three months ended December 31, 2012, the
     Company repurchased 2.47 million shares on the open market at an average
i)   price of $89.93. At December 31, 2012, $378 million was available for
     additional share repurchases under the program. During the three months
     ended June 30, 2011, the Company completed a $300 million share
     repurchase program announced on May 5, 2011, repurchasing 4.46 million
     shares on the open market at an average price of $67.19.

     Business segment information for the Company’s Distribution and All Other
     Operations business segments is presented below. Business segment
     operating results for the prior year quarter and prior year-to-date
     periods were adjusted for the retrospective application of the
     LIFO-to-average-cost change in accounting principle implemented during
     the three months ended March 31, 2012. Amounts in the “Eliminations and
     Other” column below reported for net sales and cost of products sold
     (excluding depreciation) represent the elimination of intercompany sales
     and associated gross profit on sales from the Company’s All Other
     Operations business segment to the Distribution business segment.
j)   Although corporate operating expenses are generally allocated to each
     business segment based on sales dollars, the Company reports expenses
     (excluding depreciation) related to the implementation of its SAP system
     and the Company’s withdrawal from various MEPPs under selling,
     distribution and administrative expenses in the “Eliminations and Other”
     column below. Additionally, the Company’s net restructuring and other
     special charges (benefits) and the legal, professional and other costs
     (benefits) incurred as a result of Air Products’ unsolicited takeover
     attempt are not allocated to the Company’s business segments. These costs
     (benefits) are also reflected in the “Eliminations and Other” column
     below.
     

                                                                                                          
                 (Unaudited)                                                 (Unaudited)
                 Three Months Ended                                          Three Months Ended
                 December 31, 2012                                           December 31, 2011
                               All                                                         All
                               Other       Elim.                                           Other       Elim.
(In thousands)   Dist.         Ops.        & Other       Total               Dist.         Ops.        & Other       Total
Gas and rent     $ 642,884     $ 138,152   $ (8,062  )   $ 772,974           $ 611,005     $ 119,409   $ (8,959  )   $ 721,455
Hardgoods         433,218      1,518      (2      )    434,734           430,724      1,578      (6      )    432,296   
Total net          1,076,102     139,670     (8,064  )     1,207,708           1,041,729     120,987     (8,965  )     1,153,751
sales
                                                                                                                     
Cost of
products sold      461,917       73,599      (8,064  )     527,452             467,592       61,782      (8,965  )     520,409
(excluding
depreciation)
Selling,
distribution
and                408,704       44,866      8,718         462,288             379,894       40,002      13,154        433,050
administrative
expenses
Restructuring
and other
special            -             -           (1,729  )     (1,729    )         -             -           2,431         2,431
charges
(benefits),
net
Costs
(benefits)
related to         -             -           -             -                   -             -           (1,170  )     (1,170    )
unsolicited
takeover
attempt
Depreciation       60,372        5,432       -             65,804              56,695        4,880       -             61,575
Amortization      5,384        1,230      -           6,614             5,171        1,266      -           6,437     
Operating        $ 139,725     $ 14,543    $ (6,989  )   $ 147,279          $ 132,377     $ 13,057    $ (14,415 )   $ 131,019   
income
                                                                                                                     
                                                                                                                     
                 (Unaudited)                                                 (Unaudited)
                 Nine Months Ended                                           Nine Months Ended
                 December 31, 2012                                           December 31, 2011
                               All                                                         All
                               Other       Elim.                                           Other       Elim.
(In thousands)   Dist.         Ops.        & Other       Total               Dist.         Ops.        & Other       Total
Gas and rent     $ 1,914,092   $ 444,371   $ (26,370 )   $ 2,332,093         $ 1,827,302   $ 404,554   $ (28,584 )   $ 2,203,272
Hardgoods         1,357,502    4,984      (5      )    1,362,481         1,297,343    4,533      (14     )    1,301,862 
Total net          3,271,594     449,355     (26,375 )     3,694,574           3,124,645     409,087     (28,598 )     3,505,134
sales
                                                                                                                     
Cost of
products sold      1,441,482     233,396     (26,375 )     1,648,503           1,413,164     218,716     (28,598 )     1,603,282
(excluding
depreciation)
Selling,
distribution
and                1,222,697     130,749     27,274        1,380,720           1,131,263     120,258     28,412        1,279,933
administrative
expenses
Restructuring
and other
special            -             -           6,426         6,426               -             -           18,261        18,261
charges
(benefits),
net
Costs
(benefits)
related to         -             -           -             -                   -             -           (7,870  )     (7,870    )
unsolicited
takeover
attempt
Depreciation       178,759       16,061      -             194,820             168,026       14,198      -             182,224
Amortization      16,171       3,779      -           19,950            15,075       3,766      -           18,841    
Operating        $ 412,485     $ 65,370    $ (33,700 )   $ 444,155          $ 397,117     $ 52,149    $ (38,803 )   $ 410,463   
income
                                                                                                                     

Reconciliations of Non-GAAP Financial Measures (Unaudited)

Adjusted Earnings per Diluted Share and Earnings Guidance


Reconciliations of adjusted earnings per diluted share and earnings guidance:
                                                     
                                                         Three Months Ended
                                                         December 31,
                                                         2012       2011
Earnings per diluted share                               $ 1.05      $ 0.93
Restructuring and other special charges                    (0.01 )     0.02
(benefits), net
Costs (benefits) related to unsolicited takeover           -           (0.01 )
attempt
Multi-employer pension plan withdrawal charges            -         0.03  
Adjusted earnings per diluted share                      $ 1.04     $ 0.97  
                                                                             

                                                            
                 Three       (Guidance Range)                      (Guidance Range)
                 Months      Three Months Ending       Year        Year Ending
                 Ended       March 31, 2013            Ended       March 31, 2013
                 Mar. 31,                             Mar. 31,              
                 2012        Low        High           2012        Low         High
                                                                               
Earnings per     $ 1.12      $ 1.17     $ 1.23         $ 4.00      $ 4.40      $ 4.46
diluted share
                                                                               
Adjustments to
earnings per
diluted share:
Restructuring
and other
special            0.05        0.01       0.01           0.19        0.07        0.07
charges
(benefits),
net
Gain on sale       -           -          -              -           (0.07 )     (0.07 )
of businesses
Costs
(benefits)
related to         -           -          -              (0.06 )     -           -
unsolicited
takeover
attempt
Multi-employer
pension plan       -           -          -              0.04        -           -
withdrawal
charges
Income tax        (0.06 )    -        -            (0.06 )    -         -     
benefits
                                                                               
Adjusted
earnings per     $ 1.11     $ 1.18    $ 1.24        $ 4.11     $ 4.40     $ 4.46  
diluted share
Year-over-year                6    %    12   %                    7     %    9     %
change
                                                                               

Guidance for adjusted earnings per diluted share excludes Business Support
Center restructuring and other special charges (benefits), net, and the gain
on the sale of businesses.

The Company believes its adjusted earnings per diluted share financial measure
provides investors meaningful insight into its earnings performance without
the impact of Business Support Center restructuring and other special charges
(benefits), net, the gain on the sale of businesses, costs (benefits) related
to Air Products’ unsolicited takeover attempt, multi-employer pension plan
withdrawal charges, and income tax benefits related to the LLC reorganization
and foreign tax liability true-up. Non-GAAP financial measures should be read
in conjunction with GAAP financial measures, as non-GAAP financial measures
are merely a supplement to, and not a replacement for, GAAP financial
measures. It should also be noted that the Company’s adjusted earnings per
diluted share financial measure may be different from adjusted earnings per
diluted share financial measures provided by other companies.

Adjusted Operating Income and Adjusted Operating Margin

Reconciliations of adjusted operating income and adjusted operating margin:

                                               
                                                 Three Months Ended
                                                 December 31,
(In thousands)                                   2012           2011
                                                                 
Net sales                                        $ 1,207,708    $ 1,153,751 
                                                                 
Operating income                                 $ 147,279       $ 131,019
                                                                 
Operating margin                                   12.2      %     11.4      %
                                                                 
Adjustments to operating income:
Restructuring and other special charges            (1,729    )     2,431
(benefits), net
Costs (benefits) related to unsolicited            -               (1,170    )
takeover attempt
Multi-employer pension plan withdrawal charges    -             3,404     
Adjusted operating income                        $ 145,550      $ 135,684   
                                                                 
Adjusted operating margin                         12.1      %    11.8      %
                                                                 

The Company believes its adjusted operating income and adjusted operating
margin financial measures help investors assess its operating performance
without the impact of Business Support Center restructuring and other special
charges (benefits), net, costs (benefits) related to Air Products’ unsolicited
takeover attempt, and multi-employer pension plan withdrawal charges. Non-GAAP
financial measures should be read in conjunction with GAAP financial measures,
as non-GAAP financial measures are merely a supplement to, and not a
replacement for, GAAP financial measures. It should also be noted that the
Company’s adjusted operating income and adjusted operating margin financial
measures may be different from the adjusted operating income and adjusted
operating margin financial measures provided by other companies.

Return on Capital

Reconciliations and computations of return on capital:

                                                              
                                                 December 31,
(In thousands)                                   2012            2011
                                                                 
Operating income - trailing four quarters        $ 589,913       $ 526,263
Adjustments to operating income:
Restructuring and other special charges            12,613          18,261
(benefits), net
Costs (benefits) related to unsolicited            -               10,504
takeover attempt
Multi-employer pension plan withdrawal charges    -             4,304     
Adjusted operating income - trailing four        $ 602,526      $ 559,332   
quarters
                                                                 
Average of total assets                          $ 5,362,288     $ 5,033,985
Average of current liabilities (exclusive of      (519,787  )    (504,061  )
debt)
Average capital employed                         $ 4,842,501    $ 4,529,924 
                                                                 
Return on capital                                 12.4      %    12.3      %
                                                                 

The Company believes its return on capital financial measure helps investors
assess how effectively it uses the capital invested in its operations.
Non-GAAP financial measures should be read in conjunction with GAAP financial
measures, as non-GAAP financial measures are merely a supplement to, and not a
replacement for, GAAP financial measures. It should be noted as well that the
Company’s return on capital financial measure may be different from the return
on capital financial measures provided by other companies.

Adjusted Cash from Operations, Adjusted Capital Expenditures, and Free Cash
Flow

Reconciliations and computations of adjusted cash from operations, adjusted
capital expenditures, and free cash flow:

                                               
                                                 Nine Months Ended
                                                 December 31,                
(In thousands)                                   2012          2011
                                                                             
Net cash provided by operating activities        $ 405,058      $ 341,051    
                                                                             
Adjustments to cash provided by operating
activities:
Stock issued for Employee Stock Purchase Plan      12,781         11,361     
Tax benefit realized from the exercise of          33,352         10,914     
stock options
Net cash expenditures related to unsolicited       -              35,084     
takeover attempt
Cash expenditures related to multi-employer       -            18,323    
pension plan withdrawals
Adjusted cash from operations                     451,191      416,733   
                                                                             
Capital expenditures                               (244,052 )     (263,398 ) 
                                                                             
Adjustments to capital expenditures:
Proceeds from sales of plant and equipment         7,718          12,199     
Operating lease buyouts                           3,946        9,218     
Adjusted capital expenditures                     (232,388 )    (241,981 ) 
                                                                             
Free cash flow                                   $ 218,803     $ 174,752   
                                                                             

The Company believes its adjusted cash from operations, adjusted capital
expenditures, and free cash flow financial measures provide investors
meaningful insight into its ability to generate cash from operations,
excluding the impact of net cash expenditures related to Air Products’
unsolicited takeover attempt and multi-employer pension plan withdrawal
charges, which is available for servicing debt obligations and for the
execution of its business strategies, including acquisitions, the repayment of
debt, the payment of dividends, or to support other investing and financing
activities. Non-GAAP financial measures should be read in conjunction with
GAAP financial measures, as non-GAAP financial measures are merely a
supplement to, and not a replacement for, GAAP financial measures. It should
also be noted that the Company’s adjusted cash from operations, adjusted
capital expenditures, and free cash flow financial measures may be different
from adjusted cash from operations, adjusted capital expenditures, and free
cash flow financial measures provided by other companies.

Contact:

Airgas, Inc.
Investor Contact:
Barry Strzelec, 610-902-6256
barry.strzelec@airgas.com
or
Media Contact:
Doug Sherman, 610-902-6270
doug.sherman@airgas.com