Airgas Reports Fiscal 2013 Fourth Quarter and Full Year Earnings

  Airgas Reports Fiscal 2013 Fourth Quarter and Full Year Earnings

  *Fourth quarter diluted EPS of $1.13, up 1% over prior year, and adjusted
    diluted EPS* of $1.14, up 3% over prior year
  *Record full year diluted EPS of $4.35, up 9% over prior year, and record
    adjusted diluted EPS* of $4.35, up 6% over prior year
  *Fourth quarter organic sales flat compared to prior year; full year
    organic sales up 3% over prior year
  *Fourth quarter gross margin up 80 basis points over prior year; full year
    gross margin up 100 basis points over prior year
  *Full year free cash flow* of $298 million, up 14% over prior year
  *Fiscal year 2014 diluted EPS guidance of $5.00 to $5.35, representing 15%
    to 23% year-over-year growth

Business Wire

RADNOR, Pa. -- May 02, 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 results for its fourth quarter and fiscal year ended March 31, 2013,
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, net of implementation
costs incurred, as planned.

“In my view, fiscal 2013 was a very good year for Airgas. We achieved record
adjusted EPS* of $4.35, 6% over last year and only 7% below the low end of the
initial guidance we issued back in May 2012, despite the fact that economic
conditions deteriorated as the year progressed, with Non-Tech Industrial
Production coming in below our original expectations. In addition, our free
cash flow* increased by 14% over last year,” said Airgas Executive Chairman
Peter McCausland. “We also completed the implementation of SAP in the rest of
our regional Distribution businesses, realized the first tranche of
SAP-related benefits as planned for the year, completed the $600 million share
repurchase program announced in October, and acquired 18 businesses with
aggregate annual sales of more than $95 million. These achievements are
significant milestones in the development of our company and help position us
for sustainable long-term growth.”

                                                                  
                  Fourth Quarter                Full Year
                  FY2013  FY2012      %        FY2013      FY2012      %
                                       Change                           Change
Earnings per
diluted share     $ 1.13   $ 1.12      1%       $ 4.35      $ 4.00      9%
(GAAP)
Restructuring
and other           0.01     0.05                 0.07        0.19
special
charges, net
Gain on sale of     -        -                    (0.07 )     -
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      $ 1.14   $ 1.11     3%       $ 4.35     $ 4.11     6%
diluted share
(non-GAAP)
                                                                        

Fourth quarter earnings per diluted share were $1.13, up 1% over prior year
earnings per diluted share of $1.12. Excluding a $0.01 restructuring charge,
adjusted earnings per diluted share* were $1.14, an increase of 3% over prior
year adjusted earnings per diluted share* of $1.11. Results included
SAP-related benefits, net of implementation costs and depreciation expense, of
$0.04 per diluted share in the current year quarter compared to $0.09 of
expense in the prior year quarter. “As we announced on March 21^st, organic
sales growth in our Distribution segment was flat through February, and absent
a strong finish in March, we were likely to miss the low end of our fourth
quarter adjusted EPS* guidance of $1.18 by approximately 4%, and that is
essentially what happened,” said McCausland.

Fourth quarter sales were $1.26 billion, an increase of 2% over the prior
year. Organic sales in the quarter were flat compared to prior year, with gas
and rent up 4% and hardgoods down 5%. Acquisitions contributed sales growth of
2% in the quarter.

Operating margin was 12.1% and 11.7% in the current and prior year quarters,
respectively. Adjusted operating margin* was 12.2% in both the current and
prior year quarters.

For the full year, earnings per diluted share were $4.35, an increase of 9%
over prior year earnings per diluted share of $4.00. Adjusted earnings per
diluted share* were also $4.35, an increase of 6% over prior year adjusted
earnings per diluted share* of $4.11. Results included SAP implementation
costs and depreciation expense, net of benefits realized, of $0.18 per diluted
share in the current year compared to $0.34 of expense in the prior year.

Full year sales increased 4% over the prior year to $4.96 billion. Organic
sales increased 3% over the prior year, with gas and rent up 5% and hardgoods
up 1%, while acquisitions contributed 1% sales growth for the year.

“The more than 15,000 Airgas associates that make up the best team in the
business are to be commended for their hard work and focus on operating safely
and serving our customers day-in and day-out under difficult conditions,” said
Airgas President and Chief Executive Officer Michael L. Molinini. “While
uncertainty is likely to persist for our customers in the near term, we remain
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, and we will
continue to invest in our industry-leading position to drive growth.”

Free cash flow* for the year was $298 million, compared to $262 million in the
prior year, and adjusted cash from operations* was $604 million for the year,
compared to $593 million in the prior year. During the fourth quarter, the
Company completed the remainder of its previously-announced $600 million share
repurchase program, repurchasing 3.82 million shares on the open market for
$378 million, reflecting an average price of $98.89. During the third quarter,
the company had repurchased 2.47 million shares on the open market for $222
million, reflecting an average price of $89.93 per share.

Return on capital* was 12.3% for the twelve months ended March 31, 2013, a
decrease of 20 basis points from the prior year.

Guidance

“Our fiscal 2014 outlook assumes the continuation of current slow business
conditions for at least the first half of the year, followed by slight
improvement, resulting in low-to-mid single digit organic sales growth for the
full year, with gas and rent outpacing hardgoods. We have been investing and
will continue to invest to position Airgas for long-term growth. But we’re
going to keep a sharp eye on expenses this year and won’t hesitate to take
further action if the economy continues to weaken and our sales volumes don’t
recover,” said McCausland. “We’re also facing a challenging and unpredictable
year ahead for our refrigerants business. The Environmental Protection Agency
recently issued a ruling allowing for an increase in the production of R-22 in
calendar year 2013 rather than reaffirming the further reductions that much of
the industry had been expecting. Fortunately, compliance with the Montreal
Protocol almost certainly requires a significant step-down in R-22 production
in calendar year 2015, reinforcing our position as an industry leader in the
reclamation and distribution of recycled refrigerant products. As a result of
this one-year hurdle, our fiscal 2014 guidance includes an estimated $0.05 to
$0.10 per share year-over-year negative impact from refrigerants, as prices
and sales volumes of R-22 have both come under pressure following the EPA’s
ruling.”

“We expect to achieve a minimum of $75 million in run-rate operating income
benefits related to the SAP initiative by the end of calendar year 2013,
consistent with our long-standing target,” said Molinini. “In light of the
difficult business conditions we are facing in the near term, combined with
the extension of post SAP conversion support and training costs through the
first half of fiscal 2014, which we highlighted on our last earnings call, our
EPS guidance assumes a contribution from SAP benefits, net of expenses, at the
low end of our previously-announced range of $0.45 to $0.55 in fiscal 2014.
Our experience with SAP thus far reinforces our expectation that, as
highlighted at our December analyst meeting, this initiative will enhance our
earnings power over time as we leverage its capabilities in concert with the
execution of our strategic growth initiatives.”

For the first quarter of fiscal year 2014, the Company expects earnings per
diluted share to increase 1% to 6% from adjusted earnings per diluted share*
of $1.13 in the prior year to a range of $1.14 to $1.20, which includes an
estimated year-over-year increase of approximately $0.16 related to the SAP
initiative, reflecting an estimated $0.06 of net benefit in the fiscal 2014
first quarter compared to $0.10 of expense in the fiscal 2013 first quarter.
Guidance also reflects year-over-year negative impacts to earnings per share
related to variable compensation reset following a below-budget year and a
challenging and unpredictable refrigerants market, and a year-over-year
benefit to earnings per share related to the Company’s recently completed
share repurchase program.

For the full fiscal year 2014, the Company expects earnings per diluted share
to increase 15% to 23% from $4.35 in the fiscal 2013 to a range of $5.00 to
$5.35, which includes an estimated year-over-year increase of approximately
$0.63 related to the SAP initiative, reflecting an estimated $0.45 of net
benefit in fiscal 2014 compared to $0.18 of net expense in fiscal 2013.
Guidance also reflects year-over-year negative impacts to earnings per share
related to variable compensation reset following a below-budget year and a
challenging and unpredictable refrigerants market, and a year-over-year
benefit to earnings per share related to the Company’s recently completed
share repurchase program, one additional selling day in fiscal 2014, and the
incremental contribution from acquisitions closed during fiscal 2013.

The Company will conduct an earnings teleconference at 10:00 a.m. Eastern Time
on Thursday, May 2. The teleconference will be available by calling (888)
455-2295 (U.S./Canada) or (719) 325-2460 (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 May 31 at
http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference
will be available through May 9. To listen, call (888) 203-1112 (U.S./Canada)
or (719) 457-0820 (International) and enter passcode 7433226.

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
e-Business, 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: our expectation to continue to invest in our industry leading
position and our ability to sustain long-term growth; our expectations
regarding expenses and any actions we might take if the economy continues to
weaken and sales volumes don’t recover; our expectations for low-to-mid single
digit organic sales growth for fiscal 2014, with gas and rent outpacing
hardgoods; the magnitude and duration of the impact on our refrigerants
business of the EPA’s ruling regarding the production of R-22; the impact of
compliance with the Montreal Protocol; our continued expectations of a minimum
of $75 million in run-rate SAP-related operating income benefits by the end of
calendar year 2013; our expectations of fiscal 2014 first quarter earnings per
diluted share in the range of $1.14 to $1.20, reflecting an estimated $0.06 of
net benefits related to SAP, and the impacts from variable compensation reset,
refrigerants, and completion of the share repurchase program; our expectations
of fiscal 2014 full year earnings per diluted share in the range of $5.00 to
$5.35, reflecting an estimated $0.45 of net benefits related to SAP, and the
impacts from variable compensation reset, refrigerants, completion of the
share repurchase program, an additional selling day in 2014, and acquisitions
closed in fiscal 2013; and expectations of long-term contribution to earnings
power from the SAP initiative. 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; impacts of the EPA ruling
related to the production of R-22; the impact of compliance with the Montreal
Protocol; 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              Year Ended
                 March 31,                       March 31,
                  2013         2012          2013         2012      
                                                                 
Net sales        $ 1,262,923    $ 1,241,149    $ 4,957,497    $ 4,746,283 
                                                                 
Costs and
expenses:
Cost of
products sold      572,110         572,148         2,220,613       2,175,430
(excluding
depreciation)
Selling,
distribution
and                462,758         447,836         1,843,478       1,727,769
administrative
expenses (a)
Restructuring
and other
special            1,663           6,187           8,089           24,448
charges, net
(b)
Costs
(benefits)
related to         -               -               -               (7,870    )
unsolicited
takeover
attempt (c)
Depreciation       66,802          62,852          261,622         245,076
Amortization      7,328         6,368         27,278        25,209    
Total costs       1,110,661     1,095,391     4,361,080     4,190,062 
and expenses
                                                                 
Operating          152,262         145,758         596,417         556,221
income
                                                                 
Interest           (19,392   )     (16,522   )     (67,494   )     (66,337   )
expense, net
Other income,     4,165         758           14,494        2,282     
net (d)
                                                                 
Earnings
before income      137,035         129,994         543,417         492,166
taxes
                                                                 
Income taxes      (50,894   )    (42,027   )    (202,543  )    (178,792  )
(e)
                                                                 
Net earnings     $ 86,141       $ 87,967       $ 340,874      $ 313,374   
                                                                 
Net earnings
per common
share:
                                                                 
Basic earnings   $ 1.15         $ 1.15         $ 4.45         $ 4.09      
per share
                                                                 
Diluted
earnings per     $ 1.13         $ 1.12         $ 4.35         $ 4.00      
share
                                                                 
Weighted
average shares
outstanding:
Basic              75,205          76,446          76,651          76,586
Diluted            76,528          78,352          78,307          78,324
                                                                 
See attached
Notes.

                                                            
AIRGAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
                                                               
                                                 March 31,     March 31,
                                                 2013          2012
                                                               
ASSETS
Cash                                             $ 86,386      $ 44,663
Trade receivables, net                             710,740       652,439
Inventories, net                                   474,821       408,438
Deferred income tax asset, net                     53,562        49,617
Prepaid expenses and other current assets         138,321      119,049
TOTAL CURRENT ASSETS                               1,463,830     1,274,206
                                                               
Plant and equipment, net                           2,686,305     2,616,059
Goodwill                                           1,195,613     1,163,803
Other intangible assets, net                       226,824       214,204
Other non-current assets                          45,653       52,313
TOTAL ASSETS                                     $ 5,618,225   $ 5,320,585
                                                               
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, trade                          $ 183,258     $ 174,868
Accrued expenses and other current liabilities     374,883       356,344
Short-term debt (f)                                -             388,452
Current portion of long-term debt (g)             303,573      10,385
TOTAL CURRENT LIABILITIES                          861,714       930,049
                                                               
Long-term debt, excluding current portion (h)      2,304,245     1,761,902
Deferred income tax liability, net                 825,612       793,957
Other non-current liabilities                      89,671        84,419
                                                               
Stockholders’ equity                              1,536,983    1,750,258
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $ 5,618,225   $ 5,320,585
                                                               
See attached Notes.

                                                             
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
                                                                
                                                 Year Ended
                                                 March 31,
                                                  2013         2012       
                                                                
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings                                     $ 340,874      $ 313,374
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation                                       261,622        245,076
Amortization                                       27,278         25,209
Impairment (b)                                     1,729          4,250
Deferred income taxes                              36,309         68,552
Gain on sales of plant and equipment               (1,551   )     247
Gain on sale of businesses                         (6,822   )     -
Stock-based compensation expense                   27,053         25,608
                                                                
Changes in assets and liabilities, excluding
effects of business acquisitions and
divestitures:
Trade receivables, net                             (42,485  )     (89,976    )
Inventories, net                                   (62,317  )     (29,307    )
Prepaid expenses and other current assets          (14,706  )     (14,965    )
Accounts payable, trade                            (2,636   )     9,980
Accrued expenses and other current liabilities     (8,090   )     (55,294    )
Other non-current assets                           (5,374   )     2,795
Other non-current liabilities                     (616     )    857        
Net cash provided by operating activities         550,268      506,406    
                                                                
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                               (325,465 )     (356,514   )
Proceeds from sales of plant, equipment and        31,413         16,365
businesses
Business acquisitions and holdback settlements     (97,521  )     (160,115   )
Other, net                                        (1,286   )    (1,830     )
Net cash used in investing activities             (392,859 )    (502,094   )
                                                                
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in short-term debt (f)     (388,452 )     388,368
Proceeds from borrowings of long-term debt (h)     862,832        1,066,526
Repayment of long-term debt                        (21,428  )     (1,149,106 )
Financing costs                                    (6,697   )     (4,567     )
Purchase of treasury stock (i)                     (591,873 )     (300,000   )
Proceeds from the exercise of stock options        88,700         36,619
Stock issued for the Employee Stock Purchase       17,088         15,256
Plan
Excess tax benefit realized from the exercise      36,160         17,516
of stock options
Dividends paid to stockholders                     (122,202 )     (95,323    )
Change in cash overdraft and other                10,186       7,844      
Net cash used in financing activities             (115,686 )    (16,867    )
                                                                
Change in cash                                   $ 41,723       $ (12,555    )
Cash – Beginning of period                        44,663       57,218     
Cash – End of period                             $ 86,386      $ 44,663     
                                                                
See attached Notes.

Notes:
   
     Included within selling, distribution and administrative expenses are
     costs related to the Company’s SAP implementation of $6.0 million and
     $8.9 million for the three months ended March 31, 2013 and 2012,
     respectively. SAP implementation costs of $33.2 million and $33.0 million
     were included in the consolidated results for the years ended March 31,
     2013 and 2012, respectively. Also included within selling, distribution
     and administrative expenses are multi-employer defined benefit pension
a)   plan (“MEPP”) withdrawal charges of $4.3 million for the year ended March
     31, 2012. 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 March 31, 2013, 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, net were $1.7 million and $8.1
     million for the three months and year ended March 31, 2013, respectively.
     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
b)   expected individuals meeting 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
     anticipated separation dates. Offsetting the benefit from the reduction
     to the severance liability were additional restructuring and other
     related costs of $10.1 million for the year ended March 31, 2013,
     primarily related to transition staffing, legal and other costs
     associated with the realignment and limited liability company (“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 months and year ended March 31, 2012, restructuring and
     other special charges, net were $6.2 million and $24.4 million,
     respectively. During the three-month periods ended December 31, 2011 and
     March 31, 2012, the Company recorded restructuring and other related
     costs of $2.4 million and $4.4 million, respectively, 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 $20.1 million during the year ended March 31, 2012. In addition to
     the restructuring and other related costs, the Company recorded special
     charges related to impairment analyses. In August 2011, the Company
     received 24 months notice that a supplier’s hydrogen plant, which
     generates carbon dioxide (CO[2]) as a by-product that serves as the
     feedstock for the Company’s co-located liquid CO[2] plant, would cease
     operations in calendar year 2013. In February 2013, the Company announced
     plans to build a new 450 ton-per-day liquid CO[2] plant in the greater
     Houston area which will replace its supply of liquid CO[2] currently
     generated by the Company’s liquid CO[2] plant co-located with the
     hydrogen plant pending closure. The Company expects the hydrogen plant to
     continue to supply the feedstock for its co-located liquid CO[2] plant
     during the interim 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.
     Separately, in March 2012, the Company re-evaluated its plan for the
     operation of one of its smaller and less efficient air separation units
     over the long term. As a result of an impairment analysis performed on
     the assets at this location, the Company recorded a charge of $1.8
     million for the three months ended March 31, 2012.
     
     During the year ended March 31, 2012, the Company recognized $7.9 million
c)   of benefits from lower than previously estimated net costs related to the
     fiscal 2011 unsolicited takeover attempt by Air Products and Chemicals,
     Inc. (“Air Products”).

   
     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
d)   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.

     During the three months ended March 31, 2012, the Company recognized a
     $4.9 million ($0.06 per diluted share) tax benefit related to the merger
     into a single LLC of the majority of Airgas’ distribution businesses and
     a true-up of its foreign tax liabilities, the impact of which is
e)   reflected in the Company’s prior year effective tax rate. The LLC
     reorganization enabled the Company to realize certain state tax benefits
     that previously required a valuation allowance. The Company’s adjusted
     effective rate*, which excludes the $0.06 per diluted share benefit to
     the Company’s income taxes, was 36.2% for the prior year quarter and
     37.3% for the year ended March 31, 2012.

     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
     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
f)   amounts outstanding under its Credit Facility and for general corporate
     purposes. During the three months ended March 31, 2013, proceeds from the
     issuance of an aggregate $600 million of senior notes in February 2013
     (Note h) were used to pay down the balance on the commercial paper
     program and as a result, nothing was outstanding under the program at
     March 31, 2013.

     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. At March 31,
     2013, approximately $662 million was available to the Company under the
     Credit Facility. Based on the financial covenant of the Credit Facility,
     the Company’s borrowing capacity at March 31, 2013 was $590 million. On
     November 26, 2012, the Company issued $250 million of 2.90% senior notes
h)   maturing on November 15, 2022. On February 14, 2013, the Company issued
     $325 million of 1.65% senior notes maturing on February 15, 2018 and $275
     million of 2.375% senior notes maturing on February 15, 2020. The net
     proceeds from the offerings 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 six months ended March 31, 2013, the
     Company completed the program, repurchasing 6.29 million shares on the
i)   open market at an average price of $95.37. 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. 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. Although corporate operating expenses are generally
     allocated to each business segment based on sales dollars, the Company
j)   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 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
                 March 31, 2013                                            March 31, 2012
                               All                                                       All
                               Other       Elim.                                         Other       Elim.
(In thousands)   Dist.         Ops.        & Other       Total             Dist.         Ops.        & Other       Total
Gas and rent     $ 663,809     $ 142,951   $ (7,831  )   $ 798,929         $ 634,930     $ 138,556   $ (9,200  )   $ 764,286
Hardgoods         462,702      1,292      -           463,994          475,294      1,570      (1      )    476,863   
Total net          1,126,511     144,243     (7,831  )     1,262,923         1,110,224     140,126     (9,201  )     1,241,149
sales
                                                                                                                   
Cost of
products sold      502,137       77,804      (7,831  )     572,110           504,943       76,406      (9,201  )     572,148
(excluding
depreciation)
Selling,
distribution
and                412,908       43,894      5,956         462,758           396,954       41,945      8,937         447,836
administrative
expenses
Restructuring
and other          -             -           1,663         1,663             -             -           6,187         6,187
special
charges, net
Costs
(benefits)
related to         -             -           -             -                 -             -           -             -
unsolicited
takeover
attempt
Depreciation       61,408        5,394       -             66,802            57,696        5,156       -             62,852
Amortization      6,126        1,202      -           7,328            5,064        1,304      -           6,368     
Operating        $ 143,932     $ 15,949    $ (7,619  )   $ 152,262         $ 145,567     $ 15,315    $ (15,124 )   $ 145,758   
income
                                                                                                                   
                                                                           
                 (Unaudited)                                               (Unaudited)
                 Year Ended                                                Year Ended
                 March 31, 2013                                            March 31, 2012
                               All                                                       All
                               Other       Elim.                                         Other       Elim.
(In thousands)   Dist.         Ops.        & Other       Total             Dist.         Ops.        & Other       Total
Gas and rent     $ 2,577,901   $ 587,322   $ (34,201 )   $ 3,131,022       $ 2,462,232   $ 543,111   $ (37,784 )   $ 2,967,559
Hardgoods         1,820,204    6,276      (5      )    1,826,475        1,772,637    6,102      (15     )    1,778,724 
Total net          4,398,105     593,598     (34,206 )     4,957,497         4,234,869     549,213     (37,799 )     4,746,283
sales
                                                                                                                   
Cost of
products sold      1,943,619     311,200     (34,206 )     2,220,613         1,918,108     295,121     (37,799 )     2,175,430
(excluding
depreciation)
Selling,
distribution
and                1,635,605     174,643     33,230        1,843,478         1,528,215     162,205     37,349        1,727,769
administrative
expenses
Restructuring
and other          -             -           8,089         8,089             -             -           24,448        24,448
special
charges, net
Costs
(benefits)
related to         -             -           -             -                 -             -           (7,870  )     (7,870    )
unsolicited
takeover
attempt
Depreciation       240,167       21,455      -             261,622           225,723       19,353      -             245,076
Amortization      22,297       4,981      -           27,278           20,139       5,070      -           25,209    
Operating        $ 556,417     $ 81,319    $ (41,319 )   $ 596,417         $ 542,684     $ 67,464    $ (53,927 )   $ 556,221   
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     Year Ended
                                  March 31,              March 31,
                                  2013      2012        2013        2012
Earnings per diluted share        $ 1.13     $ 1.12      $ 4.35      $ 4.00
Restructuring and other special     0.01       0.05        0.07        0.19
charges, net
Gain on sale of businesses          -          -           (0.07 )     -
Costs (benefits) related to         -          -           -           (0.06 )
unsolicited takeover attempt
Multi-employer pension plan         -          -           -           0.04
withdrawal charges
Income tax benefits                -        (0.06 )    -         (0.06 )
Adjusted earnings per diluted     $ 1.14    $ 1.11     $ 4.35     $ 4.11  
share

                                                          
                 Three       (Guidance Range)                  (Guidance Range)
                 Months      Three Months Ending   Year        Year Ending
                 Ended       June 30, 2013         Ended       March 31, 2014
                 Jun. 30,                         Mar. 31,             
                  2012     Low        High        2013     Low        High
                                                                          
Earnings per     $ 1.15      $ 1.14     $ 1.20     $ 4.35      $ 5.00     $ 5.35
diluted share
                                                                          
Adjustments to
earnings per
diluted share:
Restructuring
and other          0.05        -          -          0.07        -          -
special
charges, net
Gain on sale      (0.07 )    -        -        (0.07 )    -        -    
of businesses
                                                                          
Adjusted
earnings per     $ 1.13     $ 1.14    $ 1.20    $ 4.35     $ 5.00    $ 5.35 
diluted share
Year-over-year                1    %    6    %                15   %    23   %
change
                                                                                 

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,
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              Year Ended
                 March 31,                       March 31,
(In thousands)    2013         2012          2013          2012      
                                                                 
Net sales        $ 1,262,923    $ 1,241,149    $ 4,957,497    $ 4,746,283 
                                                                 
Operating        $ 152,262       $ 145,758       $ 596,417       $ 556,221
income
                                                                 
Operating          12.1      %     11.7      %     12.0      %     11.7      %
margin
                                                                 
Adjustments to
operating
income:
Restructuring
and other          1,663           6,187           8,089           24,448
special
charges, net
Costs
(benefits)
related to         -               -               -               (7,870    )
unsolicited
takeover
attempt
Multi-employer
pension plan      -             -             -             4,304     
withdrawal
charges
Adjusted
operating        $ 153,925      $ 151,945      $ 604,506      $ 577,103   
income
                                                                 
Adjusted
operating         12.2      %    12.2      %    12.2      %    12.2      %
margin
                                                                             

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, 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:
                                                                 
                                                 March 31,
(In thousands)                                    2013          2012      
                                                                 
Operating income - trailing four quarters        $ 596,417       $ 556,221
Adjustments to operating income:
Restructuring and other special charges, net       8,089           24,448
Costs (benefits) related to unsolicited            -               (7,870    )
takeover attempt
Multi-employer pension plan withdrawal charges    -             4,304     
Adjusted operating income - trailing four        $ 604,506      $ 577,103   
quarters
                                                                 
Average of total assets                          $ 5,452,051     $ 5,126,871
Average of current liabilities (exclusive of      (533,217  )    (516,307  )
debt)
Average capital employed                         $ 4,918,834    $ 4,610,564 
                                                                 
Return on capital                                 12.3      %    12.5      %
                                                                             

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:
                                                               
                                         Year Ended
                                         March 31,
(In thousands)                              2013               2012      
                                                               
Net cash provided by operating           $   550,268           $  506,406
activities
                                                               
Adjustments to cash provided by
operating activities:
Stock issued for Employee Stock              17,088               15,256
Purchase Plan
Excess tax benefit realized from the         36,160               17,516
exercise of stock options
Net cash expenditures related to             -                    35,084
unsolicited takeover attempt
Cash expenditures related to
multi-employer pension plan                 -                  18,323    
withdrawals
Adjusted cash from operations               603,516            592,585   
                                                               
Capital expenditures                         (325,465   )         (356,514  )
                                                               
Adjustments to capital expenditures:
Proceeds from sales of plant and             15,693               16,365
equipment
Operating lease buyouts                     3,946              9,218     
Adjusted capital expenditures               (305,826   )        (330,931  )
                                                               
Free cash flow                           $   297,690          $  261,654   
                                                                            

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.

                                                                
Adjusted Effective Tax Rate

Reconciliations of adjusted effective tax rate:
                                                                   
                                              Three Months Ended   Year Ended
                                              March 31,            March 31,
(In thousands)                                    2012            2012    
                                                                   
Income taxes                                  $    42,027          $ 178,792
Adjustments to income taxes:
LLC reorganization and foreign tax                 4,924             4,924
liability true-up
Restructuring and other special charges            2,308             8,881
Costs (benefits) related to unsolicited            -                 (2,912  )
takeover attempt
Multi-employer pension plan withdrawal            -               1,564   
charges
Adjusted income taxes                         $    49,259         $ 191,249 
                                                                   
Earnings before income taxes                  $    129,994         $ 492,166
Adjustments to earnings before income
taxes:
Restructuring and other special charges            6,187             24,448
Costs (benefits) related to unsolicited            -                 (7,870  )
takeover attempt
Multi-employer pension plan withdrawal            -               4,304   
charges
Adjusted earnings before income taxes         $    136,181        $ 513,048 
                                                                   
Effective tax rate                                32.3      %      36.3    %
                                                                   
Adjusted effective tax rate                       36.2      %      37.3    %
                                                                             

The Company believes its adjusted effective tax rate financial measure helps
investors assess its effective tax rate without the impact of income tax
benefits resulting from the LLC reorganization and a foreign tax liability
true-up, and income tax impacts related to other special items. 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 effective tax rate financial measure may be different from
the adjusted effective tax rate 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