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Airgas Reports Fiscal 2014 First Quarter Earnings



  Airgas Reports Fiscal 2014 First Quarter Earnings

  * Diluted EPS of $1.14, down 1% compared to prior year diluted EPS and up 1%
    over prior year adjusted diluted EPS*
  * Challenging refrigerants market following EPA ruling reduced earnings by
    $0.07 per diluted share compared to prior year
  * Organic sales flat compared to prior year; Distribution segment organic
    sales up 1% compared to prior year
  * Free cash flow* of $100 million, up 31% over prior year
  * Updated fiscal year 2014 diluted EPS guidance of $5.00 to $5.15,
    representing 15% to 18% year-over-year growth

Business Wire

RADNOR, Pa. -- July 25, 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 first quarter ended June 30, 2013, which reflected
the impact of continued economic uncertainty and sluggish business conditions
on its diversified customer base, as well as a greater than expected negative
impact on its refrigerants business from the recent Environmental Protection
Agency (EPA) ruling on R-22 production allowances. Results for the quarter
also reflected the realization of SAP-related benefits, net of implementation
costs incurred, as planned.

“The EPA’s unexpected ruling in late March to allow for an increase in the
production of R-22 this year challenged our refrigerants business to a greater
extent than we had estimated, with the unusually cool spring weather across
much of the country exacerbating its impact on our results. Both volumes and
pricing of R-22 were pressured following the EPA ruling, and the
year-over-year negative impact on our earnings this quarter was $0.07 per
diluted share compared to the estimated year-over-year negative impact of
$0.04 per diluted share we had assumed in our guidance,” said Airgas President
and Chief Executive Officer Michael L. Molinini. “Absent the incremental
refrigerants impact, our results for the quarter were in-line with the
mid-point of our earnings per share guidance range, with Distribution segment
organic sales up 1% in what continues to be a very challenging economic
environment.”

                                                                     
                                             First Quarter
                                             FY2014     FY2013        % Change
Earnings per diluted share (GAAP)            $ 1.14     $ 1.15        -1   %
Restructuring and other special charges,       -          0.05
net
Gain on sale of businesses                     -          (0.07 )
Adjusted earnings per diluted share          $ 1.14     $ 1.13        1    %
(non-GAAP)
                                                                            

First quarter earnings per diluted share were $1.14, down 1% compared to prior
year earnings per diluted share of $1.15 and up 1% over prior year adjusted
earnings per diluted share* of $1.13. Results included SAP-related benefits,
net of implementation costs and depreciation expense, of $0.06 per diluted
share in the current year quarter compared to $0.10 of expense in the prior
year quarter, as well as the year-over-year decline in earnings per diluted
share related to our refrigerants business.

First quarter sales were $1.28 billion, an increase of 2% over the prior year.
Organic sales in the quarter were flat compared to the prior year, with gas
and rent up 2% and hardgoods down 3%. Acquisitions contributed sales growth of
2% in the quarter.

“Selling, distribution, and administrative expenses increased 4% over the
prior year, with operating costs associated with acquired businesses
representing more than 1% of the increase. The favorable impact of the
reduction in SAP implementation costs compared to prior year was substantially
offset by expenses associated with the expansion of our telesales business
through Total Access, our strategic pricing initiative, and other strategic
growth initiatives,” said Molinini. “We’re focused on effective management of
expenses and have already taken additional steps to help alleviate the impact
of rising costs in the second quarter. We will evaluate the need for further
action on a quarterly basis, cognizant of the balance between the needs for
short-term cost-containment and investing to continue to position Airgas for
long-term growth.”

Operating margin was 12.2%, up 10 basis points over prior year operating
margin of 12.1% and down 30 basis points compared to prior year adjusted
operating margin* of 12.5%, which excluded prior year net restructuring and
other special charges.

“The decrease in adjusted operating margin* reflects a significant decline in
operating margins in our refrigerants business as well as overall margin
pressure from low organic sales growth, partially offset by the favorable
impact of the increase in SAP-related benefits, net of costs,” Molinini added.

Free cash flow* for the quarter was $100 million, up 31% over the prior year,
and adjusted cash from operations* was $178 million, up 15% over the prior
year. The increase in cash flows was driven by the lower required investment
in working capital in the current quarter compared to the prior year quarter.

Return on capital* was 12.1% for the twelve months ended June 30, 2013, a
decrease of 50 basis points from the prior year.

Updated Guidance

“Airgas is well-positioned for growth. We continue to be 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 capitalize on the opportunities that lie
ahead,” said Airgas Executive Chairman Peter McCausland. “Near-term
uncertainty persists for our customers, however, and accordingly the mid-point
of our fiscal 2014 guidance assumes only slight sequential improvement in
daily sales volumes as the year progresses and low to mid single digit
year-over-year organic sales growth rates for the remainder of the year, in
part due to easing year-over-year comparisons. Given the challenging and
unpredictable nature of the refrigerants market, including its impact on our
first quarter results, our guidance also assumes an estimated $0.12 to $0.15
year-over-year negative impact related to R-22 pricing and volume following
the EPA’s ruling. Consistent with our long-standing target, 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. Our EPS guidance
assumes a contribution from SAP benefits, net of expenses, of approximately
$0.47 per diluted share in fiscal 2014.”

For the second quarter of fiscal year 2014, the Company expects earnings per
diluted share to increase 17% to 21% from adjusted earnings per diluted share*
of $1.05 in the prior year to a range of $1.23 to $1.27, which includes an
estimated year-over-year increase of approximately $0.20 related to the SAP
initiative, reflecting an estimated $0.11 of net benefit in the fiscal 2014
second quarter compared to $0.09 of expense in the fiscal 2013 second quarter.
Guidance also reflects year-over-year negative impacts to earnings per diluted
share related to variable compensation reset following a below-budget year and
a challenging and unpredictable refrigerants market; and year-over-year
benefits to earnings per diluted share related to the Company’s fiscal 2013
share repurchase program and one additional selling day in the fiscal 2014
second quarter.

For the full fiscal year 2014, the Company expects earnings per diluted share
to increase 15% to 18% from $4.35 in fiscal 2013 to a range of $5.00 to $5.15,
which includes an estimated year-over-year increase of approximately $0.65
related to the SAP initiative, reflecting an estimated $0.47 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 diluted share related
to variable compensation reset following a below-budget year and a challenging
and unpredictable refrigerants market, and year-over-year benefits to earnings
per diluted share related to the Company’s fiscal 2013 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, July 25. The teleconference will be available by calling (888)
857-6932 (U.S./Canada) or (719) 325-2320 (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 Relations”
section of the Company’s website at www.airgas.com. A webcast of the
teleconference will be available live and on demand through August 23 at
http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference
will be available through August 1. To listen, call (888) 203-1112
(U.S./Canada) or (719) 457-0820 (International) and enter passcode 6370852.

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,
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 expectations as to future growth; our focus on effective
management of expenses and our intent to evaluate costs on a quarterly basis;
the magnitude and duration of the impact on our refrigerants business of the
EPA’s ruling regarding the production of R-22; 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 second quarter
earnings per diluted share in the range of $1.23 to $1.27, reflecting an
estimated $0.11 of net benefits related to SAP, and the impacts from variable
compensation reset, refrigerants, and completion of the fiscal 2013 share
repurchase program, and one additional selling day in the fiscal 2014 second
quarter; our expectations of fiscal 2014 full year earnings per diluted share
in the range of $5.00 to $5.15, reflecting an estimated $0.47 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: supply shortages of certain gases including
the continued or increased disruption in our helium supply chain; impacts of
the EPA ruling related to the production of R-22; the pace and manner of U.S.
compliance with the Montreal Protocol; adverse changes in customer buying
patterns resulting from adverse 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; the
impact of operating costs associated with acquired businesses; higher than
expected expenses associated with the expansion of our telesales business, our
strategic pricing initiatives and other strategic growth initiatives; 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 at a
faster rate than our ability to increase price eroding planned cost savings;
changes in customer demand resulting in the inability to meet minimum product
purchases under long-term supply agreements and the inability to negotiate
alternative supply arrangements; costs associated with the construction of a
new CO[2 ]plant in the Houston area; 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 extent and duration of current economic trends in the
U.S.; 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, 2013
Form 10-K 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
                                               June 30,
                                               2013              2012
                                                                              
Net sales                                      $ 1,279,891       $ 1,257,256  
                                                                              
Costs and expenses:
Cost of products sold (excluding                 575,543           573,361
depreciation) (a)
Selling, distribution and administrative         473,475           455,508
expenses (a) (b)
Restructuring and other special charges,         -                 5,712
net (c)
Depreciation                                     67,030            64,367
Amortization                                     7,229             6,618      
Total costs and expenses                         1,123,277         1,105,566  
                                                                              
Operating income                                 156,614           151,690
                                                                              
Interest expense, net                            (20,794   )       (15,750   )
Other income, net (d)                            113               8,363      
                                                                              
Earnings before income taxes                     135,933           144,303
                                                                              
Income taxes                                     (51,247   )       (53,505   )
                                                                              
Net earnings                                   $ 84,686          $ 90,798     
                                                                              
Net earnings per common share:
                                                                              
Basic earnings per share                       $ 1.16            $ 1.18       
                                                                              
Diluted earnings per share                     $ 1.14            $ 1.15       
                                                                              
Weighted average shares outstanding:
Basic                                            73,321            76,833
Diluted                                          74,536            78,799
                                                                              
See attached Notes.
                                                                              

 
AIRGAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
 
 
                                                                  
                                                   June 30,        March 31,
                                                   2013            2013
                                                                      
ASSETS
Cash                                               $ 70,976        $ 86,386
Trade receivables, net                               720,494         710,740
Inventories, net                                     485,874         474,821
Deferred income tax asset, net                       53,298          53,562
Prepaid expenses and other current assets            99,985          138,321
TOTAL CURRENT ASSETS                                 1,430,627       1,463,830
                                                                      
Plant and equipment, net                             2,694,405       2,686,305
Goodwill                                             1,196,945       1,195,613
Other intangible assets, net                         219,916         226,824
Other non-current assets                             45,995          45,653
TOTAL ASSETS                                       $ 5,587,888     $ 5,618,225
                                                                      
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, trade                            $ 168,288       $ 183,258
Accrued expenses and other current liabilities       347,224         374,883
Short-term debt (e)                                  49,000          -
Current portion of long-term debt                    301,759         303,573
TOTAL CURRENT LIABILITIES                            866,271         861,714
                                                                      
Long-term debt, excluding current portion (f)        2,188,572       2,304,245
Deferred income tax liability, net                   828,714         825,612
Other non-current liabilities                        88,497          89,671
                                                                      
Stockholders’ equity                                 1,615,834       1,536,983
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $ 5,587,888     $ 5,618,225
                                                                      
See attached Notes.
                                                                      

 
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
 
                                                  Three Months Ended
                                                  June 30,
                                                  2013             2012
                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings                                      $ 84,686         $ 90,798
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation                                        67,030           64,367
Amortization                                        7,229            6,618
Impairment (c)                                      -                1,729
Deferred income taxes                               3,995            6,464
Gain on sales of plant and equipment                (334     )       (398    )
Gain on sale of businesses (d)                      -                (6,822  )
Stock-based compensation expense                    13,728           12,749
                                                                              
Changes in assets and liabilities, excluding
effects of business acquisitions and
divestitures:
Trade receivables, net                              (10,032  )       (27,250 )
Inventories, net                                    (11,006  )       (24,123 )
Prepaid expenses and other current assets           15,745           7,251
Accounts payable, trade                             (14,048  )       2,673
Accrued expenses and other current                  16,925           14,082
liabilities
Other, net                                          (3,219   )       (515    )
Net cash provided by operating activities           170,699          147,623  
                                                                              
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                                (81,998  )       (82,143 )
Proceeds from sales of plant, equipment and         3,998            17,721
businesses
Business acquisitions and holdback                  (5,143   )       (2,817  )
settlements
Other, net                                          (1,007   )       (774    )
Net cash used in investing activities               (84,150  )       (68,013 )
                                                                              
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term debt          49,000           (42,219 )
(e)
Proceeds from borrowings of long-term debt          3,522            6,500
(f)
Repayment of long-term debt                         (119,561 )       (16,360 )
Purchase of treasury stock (g)                      (8,127   )       -
Proceeds from the exercise of stock options         11,053           7,857
Stock issued for the Employee Stock Purchase        4,398            4,211
Plan
Excess tax benefit realized from the exercise       2,672            3,060
of stock options
Dividends paid to stockholders                      (35,202  )       (30,779 )
Change in cash overdraft and other                  (9,714   )       (1,648  )
Net cash used in financing activities               (101,959 )       (69,378 )
                                                                              
Change in cash                                    $ (15,410  )     $ 10,232
Cash – Beginning of period                          86,386           44,663   
Cash – End of period                              $ 70,976         $ 54,895   
                                                                              
See attached Notes.
                                                                              

    
Notes:
      
     Certain reclassifications were made to the Consolidated Statement of
     Earnings for the prior year, as well as the related notes, to conform to
     the current year presentation. These reclassifications resulted in a $4.6
a)   million decrease to selling, distribution and administrative expenses and
     a $4.6 million increase to cost of products sold (excluding depreciation)
     in the prior year quarter. Consolidated operating income and net earnings
     for the prior year quarter were not impacted by the reclassifications.
      
     Included within selling, distribution and administrative expenses are
     costs related to the Company’s SAP implementation of $2.7 million and
     $9.9 million for the three months ended June 30, 2013 and 2012,
b)   respectively. While the Company has successfully converted its Safety
     telesales and hardgoods infrastructure businesses, as well as all of its
     regional distribution businesses, to the SAP platform, the Company
     continues to incur post-conversion support and training expenses related
     to the implementation of the new system.
      
     In May 2011, the Company announced the alignment of its then twelve
     regional distribution companies into four new divisions, and the
     consolidation of its regional company accounting and certain
     administrative functions into four newly created Business Support
     Centers. During the three months ended June 30, 2012, the Company
     recorded restructuring and other related costs of $4.0 million, primarily
     related to transition staffing and legal and other costs associated with
c)   the realignment. Also 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. Total restructuring and other
     special charges for the three months ended June 30, 2012 were $5.7
     million.
      
     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
     sale of $6.8 million ($5.5 million after tax) recorded in other income,
d)   net, 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
e)   obtain favorable short-term borrowing rates with maturities that may
     vary, but will generally not exceed 90 days from the date of issue. At
     June 30, 2013, $49 million was outstanding under the commercial paper
     program.
      
     The Company’s Credit Facility matures on July 19, 2016. Including the
     borrowings under the commercial paper program, approximately $611 million
f)   was available to the Company under the Credit Facility at June 30, 2013.
     Additionally, the Company had borrowing capacity of $118 million under
     its accounts receivable securitization agreement at June 30, 2013.
      
     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
g)   open market at an average price of $95.37. The final repurchase under the
     program, however, settled subsequent to the fiscal 2013 year end,
     resulting in a cash outflow of $8.1 million related to the repurchase
     program in fiscal 2014.
      
     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
h)   business segment. 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 under selling, distribution and administrative expenses
     in the “Eliminations and Other” column below. Additionally, the Company’s
     net restructuring and other special charges are not allocated to the
     Company’s business segments. These costs are also reflected in the
     “Eliminations and Other” column below.
      

                                                                                                                             
                   (Unaudited)                                                  (Unaudited)
                   Three Months Ended                                           Three Months Ended
                   June 30, 2013                                                June 30, 2012
                                   All                                                          All
                                                 Elim.                                                        Elim.
(In thousands)     Dist.           Other                        Total           Dist.           Other                         Total
                                                 & Other                                                      & Other
                                   Ops.                                                         Ops.
Gas and rent       $ 672,486       $ 145,867     $ (8,461 )     $ 809,892       $ 638,610       $ 152,125     $ (9,179  )     $ 781,556
Hardgoods            468,598         1,403         (2     )       469,999         473,991         1,710         (1      )       475,700
Total net            1,141,084       147,270       (8,463 )       1,279,891       1,112,601       153,835       (9,180  )       1,257,256
sales
                                                                                                                                 
Cost of
products sold        505,127         78,879        (8,463 )       575,543         505,236         77,305        (9,180  )       573,361
(excluding
depreciation)
Selling,
distribution
and                  427,231         43,540        2,704          473,475         404,196         41,374        9,938           455,508
administrative
expenses
Restructuring
and other            -               -             -              -               -               -             5,712           5,712
special
charges, net
Depreciation         61,664          5,366         -              67,030          59,096          5,271         -               64,367
Amortization         6,062           1,167         -              7,229           5,367           1,251         -               6,618
Operating          $ 141,000       $ 18,318      $ (2,704 )     $ 156,614       $ 138,706       $ 28,634      $ (15,650 )     $ 151,690
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
                                                 June 30,
                                                 2013       2012
Earnings per diluted share                       $ 1.14     $ 1.15
Restructuring and other special charges, net       -          0.05
Gain on sale of businesses                         -          (0.07 )
Adjusted earnings per diluted share              $ 1.14     $ 1.13   
                                                             

                                                                                  
                   Three      (Guidance Range)                        (Guidance Range)
                   Months     Three Months Ending       Year          Year Ending
                   Ended      September 30, 2013        Ended         March 31, 2014
                   Sep.                                 Mar. 31,
                   30,
                   2012       Low          High         2013          Low          High
                                                                                           
Earnings per       $ 1.03     $ 1.23       $ 1.27       $ 4.35        $ 5.00       $ 5.15
diluted share
                                                                                           
Adjustments to
earnings per
diluted share:
Restructuring
and other            0.02       -            -            0.07          -            -
special
charges, net
Gain on sale         -          -            -            (0.07 )       -            -     
of businesses
                                                                                           
Adjusted
earnings per       $ 1.05     $ 1.23       $ 1.27       $ 4.35        $ 5.00       $ 5.15  
diluted share
Year-over-year                  17   %       21   %                     15   %       18   %
change
                                                                                           

The Company believes its adjusted earnings per diluted share financial measure
provides investors meaningful insight into its earnings performance without
the impact of net Business Support Center restructuring and other special
charges and the gain on the sale of businesses. 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 the
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
                                               June 30,
(In thousands)                                 2013              2012
                                                                              
Net sales                                      $ 1,279,891       $ 1,257,256  
                                                                              
Operating income                               $ 156,614         $ 151,690
                                                                              
Operating margin                                 12.2      %       12.1      %
                                                                              
Adjustments to operating income:
Restructuring and other special charges,         -                 5,712      
net
Adjusted operating income                      $ 156,614         $ 157,402    
                                                                              
Adjusted operating margin                        12.2      %       12.5      %
                                                                              

The Company believes its adjusted operating income and adjusted operating
margin financial measures help investors assess its operating performance
without the impact of net Business Support Center restructuring and other
special 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:

                                                                
                                               June 30,
(In thousands)                                 2013              2012
                                                                              
Operating income - trailing four quarters      $ 601,341         $ 570,642
Adjustments to operating income:
Restructuring and other special charges,         2,377             16,830
net
Costs (benefits) related to unsolicited          -                 (1,170    )
takeover attempt
Multi-employer pension plan withdrawal           -                 3,404      
charges
Adjusted operating income - trailing four      $ 603,718         $ 589,706    
quarters
                                                                              
Average of total assets                        $ 5,505,512       $ 5,212,402
Average of current liabilities (exclusive        (530,077  )       (514,031  )
of debt)
Average capital employed                       $ 4,975,435       $ 4,698,371  
                                                                              
Return on capital                                12.1      %       12.6      %
                                                                              

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:

                                                                  
                                                   Three Months Ended
                                                   June 30,
(In thousands)                                     2013            2012
                                                                              
Net cash provided by operating activities          $ 170,699       $ 147,623
                                                                              
Adjustments to net cash provided by operating
activities:
Stock issued for the Employee Stock Purchase         4,398           4,211
Plan
Excess tax benefit realized from the exercise        2,672           3,060    
of stock options
Adjusted cash from operations                        177,769         154,894  
                                                                              
Capital expenditures                                 (81,998 )       (82,143 )
                                                                              
Adjustments to capital expenditures:
Proceeds from sales of plant and equipment           3,998           2,001
Operating lease buyouts                              -               1,350    
Adjusted capital expenditures                        (78,000 )       (78,792 )
                                                                              
Free cash flow                                     $ 99,769        $ 76,102   
                                                                              

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, 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 the 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
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