Airgas Reports Fiscal 2014 Fourth Quarter and Full Year Earnings

  Airgas Reports Fiscal 2014 Fourth Quarter and Full Year Earnings

  *Fourth quarter diluted EPS of $1.17, up 4% over prior year, and adjusted
    diluted EPS* of $1.15, up 1% over prior year
  *Full year diluted EPS of $4.68, up 8% over prior year, and adjusted
    diluted EPS* of $4.72, up 9% over prior year
  *Fourth quarter organic sales down 1% compared to prior year; Distribution
    segment organic sales up 1% over prior year
  *Record full year free cash flow* of $441 million on adjusted cash from
    operations* of $776 million
  *Fiscal year 2015 diluted EPS guidance of $5.00 to $5.20, representing 6%
    to 10% growth over fiscal 2014 adjusted diluted EPS*

Business Wire

RADNOR, Pa. -- May 1, 2014

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 full year ended March 31, 2014,
which reflected the favorable impacts of the realization of SAP-related
benefits as planned and share repurchases completed in the second half of
fiscal 2013, but also reflected sluggish business conditions and the negative
impact on the Company’s refrigerants business from the EPA’s March 2013
ruling. Results for the fourth quarter also reflected the negative impact of
severe weather across much of the U.S. on both sales and expenses.

“We delivered record free cash flow* of $441 million and 9% growth in adjusted
EPS* for fiscal 2014 in a sluggish economic environment,” said Airgas
President and Chief Executive Officer Michael L. Molinini. “We remained
focused on outstanding customer service, expense management, and execution of
strategic initiatives, which included the achievement of our long-standing
target of reaching a run-rate of more than $75 million in SAP-enabled
operating income benefits by the end of calendar year 2013.”

Fourth Quarter Results

                                              Fourth Quarter
                                               FY2014     FY2013  % Change 
Earnings per diluted share (GAAP)              $ 1.17      $ 1.13   4        %
State income tax benefits                        (0.02 )     -
Restructuring and other special charges, net    -         0.01   
Adjusted earnings per diluted share            $ 1.15     $ 1.14   1        %
(non-GAAP)

“We estimate that in our fourth quarter the net impact of severe weather
conditions across much of the U.S. cost us at least $0.02 per diluted share
more than expected, and the negative year-over-year impact on earnings related
to our refrigerants business was $0.03 greater than anticipated,” Molinini
added. “Absent those particular issues, our earnings for the quarter were
within our guidance range.” The Company’s fourth quarter guidance had assumed
year-over-year negative impacts of approximately $0.03 per diluted share due
to severe weather conditions in January and $0.05 per diluted share related to
refrigerants.

Fourth quarter earnings per diluted share were $1.17, up 4% over prior year
earnings per diluted share of $1.13. Excluding a $0.02 state income tax
benefit, adjusted earnings per diluted share* were $1.15, up 1% over prior
year. Results included SAP-related benefits, net of implementation costs and
depreciation expense, of $0.16 per diluted share in the current year quarter
compared to $0.04 of net benefits in the prior year quarter.

“Though there were bright spots within certain sectors, on balance, underlying
business conditions remained choppy throughout the quarter, weather-related
challenges notwithstanding,” said Molinini. “We remain focused on the things
we can control, including leveraging the SAP system, managing expenses,
expanding our telesales business, and enhancing our e-Business platform, and
are ready to capitalize when sustained growth in the industrial economy
resumes.”

Fourth quarter sales were $1.27 billion, flat compared to prior year. Organic
sales in the quarter were down 1% compared to prior year, with gas and rent
down 1% and hardgoods down 2%. Distribution segment organic sales in the
quarter were up 1% compared to prior year, with gas and rent up 2% and
hardgoods down 2%. Acquisitions contributed sales growth of 1% in the quarter
on a consolidated basis and in the Distribution segment.

Selling, distribution, and administrative expenses increased 2% over the prior
year. The favorable impact of the reduction in SAP implementation costs
compared to the prior year was more than offset by rising healthcare costs and
higher operating expenses due to severe weather, as well as by expenses
associated with the Company’s expansion of its telesales business through
Airgas Total Access, strategic pricing initiative, and enhancement of its
e-Business platform.

Fourth quarter operating margin was 11.8%, down 30 basis points compared to
prior year operating margin of 12.1% and down 40 basis points compared to
prior year adjusted operating margin* of 12.2%, which included restructuring
and other special charges. Distribution segment operating margin was 12.5% for
the quarter, down 30 basis points compared to prior year.

The combination of a reduction in SAP implementation costs and the achievement
of SAP-related benefits contributed favorably to operating margin this quarter
as compared to the prior year. Low organic sales growth challenged the
Company’s operating margin in the quarter, as did R-22 pricing in its
refrigerants business following the EPA’s unexpected ruling in late March 2013
to allow for an increase in the production of R-22 during calendar 2013.

Full Year Results

                                           Full Year                        
                                            FY2014     FY2013     % Change 
Earnings per diluted share (GAAP)           $ 4.68      $ 4.35      8        %
State income tax benefits                     (0.04 )     -
Loss on the extinguishment of debt            0.08        -
Gain on sale of businesses                    -           (0.07 )
Restructuring and other special charges,     -         0.07             
net
Adjusted earnings per diluted share         $ 4.72     $ 4.35     9        %
(non-GAAP)

For the full year, earnings per diluted share were $4.68, an increase of 8%
over prior year earnings per diluted share of $4.35. Results included a loss
of $0.08 per diluted share on the early extinguishment of the Company’s 7.125%
senior subordinated notes which were originally due to mature in October 2018
but were redeemed in full on October 2, 2013, as well as $0.04 of state income
tax benefits. Excluding the loss on the extinguishment of debt and state
income tax benefits, adjusted earnings per diluted share* were $4.72, an
increase of 9% over prior year adjusted earnings per diluted share* of $4.35.
Earnings per diluted share and adjusted earnings per diluted share included
SAP-related benefits, net of implementation costs and depreciation expense, of
$0.47 per diluted share in the current year compared to $0.18 per diluted
share of net expense in the prior year. The favorable year-over-year impact of
share repurchases completed in the second half of fiscal 2013 on the Company’s
earnings growth in fiscal 2014 was more than offset by the negative
year-over-year impact related to its refrigerants business, which posted
record results in fiscal 2013.

Full year sales were $5.07 billion, an increase of 2% over the prior year.
Organic sales were flat compared to the prior year, with gas and rent up 1%
and hardgoods down 2%, while acquisitions contributed sales growth of 2% for
the year.

Full year free cash flow* was a record $441 million, up 48% over the prior
year, and adjusted cash from operations* was a record $776 million, up 29%
over the prior year. The increase in cash flows was primarily driven by lower
required investment in working capital in the current year compared to the
prior year.

Return on capital* was 12.2% for the twelve months ended March 31, 2014, a
decrease of 10 basis points from the prior year.

During fiscal year 2014, the Company acquired 11 businesses with aggregate
annual sales of approximately $82 million, including The Encompass Gas Group,
Inc., one of the largest privately-owned suppliers of industrial, medical, and
specialty gases and related hardgoods in the U.S.

Fiscal 2015 Guidance

“We had expected the U.S. industrial economy to be much stronger by now. But
areas of strength within certain industries are still being weighed down by
weakness in other areas. There are many significant non-residential
construction projects just now starting to move forward, which is a good sign;
however, given the persistent uncertainty in the U.S. industrial economy over
the past two years and with overall sluggishness still apparent, growth in
fiscal 2015 is very difficult to predict,” said Airgas Executive Chairman
Peter McCausland. “The low end of our fiscal 2015 guidance assumes a gradual
uptick in growth rates as the year progresses, with average organic sales
growth of 4% for the full year. The high end assumes a more robust
acceleration in growth rates over the course of the year, with average organic
sales growth of 6% for the full year.”

“We continue to believe the long-term growth prospects for the U.S.
manufacturing and energy industries are strong, as structural drivers like the
abundant supply of low-cost energy and higher shipping costs from overseas
should favor the U.S. for years to come,” McCausland added. “Fiscal 2015 will
be a year in which we continue to invest in the business to enhance our
long-term growth prospects through strategic initiatives, including the
development of our new e-Business platform, and enhancements to our regional
management structures, like the reorganizations of our Southwest and North
Central distribution regions this past year and other structural changes
within all of our regions. We expect these and other initiatives to help drive
decision-making as close to our customers as possible, bring additional focus
to our sales efforts and increase operating efficiencies enabled by SAP,
ultimately strengthening our competitive position and ability to capitalize
when sustained improvement in the industrial economy returns.”

For the first quarter of fiscal year 2015, the Company expects earnings per
diluted share in the range of $1.15 to $1.20, reflecting an increase of 1% to
5% over prior year earnings per diluted share of $1.14. First quarter guidance
assumes a year-over-year organic sales growth rate in the low single digits.

For the full fiscal year 2015, the Company expects earnings per diluted share
in the range of $5.00 to $5.20, reflecting an increase of 7% to 11% over prior
year earnings per diluted share and an increase of 6% to 10% over prior year
adjusted earnings per diluted share*. Full year guidance includes a $0.11 to
$0.16 per diluted share negative year-over-year impact from variable
compensation reset following a below-budget year. The Company currently
expects the contribution from its refrigerants business to year-over-year
earnings per diluted share growth in fiscal 2015 to be slightly favorable.

The Company will conduct an earnings teleconference at 10:00 a.m. Eastern Time
on Thursday, May 1. The teleconference will be available by calling (888)
401-4642 (U.S./Canada) or (719) 457-1509 (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 May 29 at
http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference
will be available through May 8. To listen, call (888) 203-1112 (U.S./Canada)
or (719) 457-0820 (International) and enter passcode 3683756.

* See attached reconciliations and computations of non-GAAP adjusted earnings
per diluted share, adjusted effective tax rate, 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 16,000
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: the Company’s expectations regarding its fiscal 2015 first
quarter and full fiscal year 2015 organic sales growth and earnings per
diluted share, and the Company’s intent to continue to invest in its strategic
initiatives to promote long-term growth. 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: adverse changes
in customer buying patterns or weakening in the operating and financial
performance of our customers, any of which could negatively impact our sales
and our ability to collect our accounts receivable; postponement of projects
due to economic conditions; customer acceptance of price increases; increases
in energy costs and other operating expenses at a faster rate than our ability
to increase prices; changes in customer demand resulting in our inability to
meet minimum product purchase requirements under long-term supply agreements
and the inability to negotiate alternative supply arrangements; supply cost
pressures; shortages and/or disruptions in the supply chain of certain gases,
including, but not limited to, the continued or increased disruption in our
helium supply chain; EPA rulings and the pace and manner of U.S. compliance
with the Montreal Protocol as they relate to the production and import of
Refrigerant-22 (also known as HCFC-22 or R-22); higher than expected expenses
associated with the expansion of our telesales business, our strategic pricing
initiatives and other strategic growth initiatives; increased industry
competition; our ability to successfully identify, consummate, and integrate
acquisitions; our ability to achieve anticipated acquisition synergies;
operating costs associated with acquired businesses; our continued ability to
access credit markets on satisfactory terms; significant fluctuations in
interest rates; the impact of changes in credit market conditions on our
customers; our ability to effectively leverage our new SAP system to improve
the operating and financial performance of our business; higher than expected
costs related to our Business Support Center transition; changes in tax and
fiscal policies and laws; increased expenditures relating to compliance with
environmental and other regulatory initiatives; the impact of new
environmental, healthcare, tax, accounting, and other regulations; the extent
and duration of sluggish conditions in the U.S. economy, including in
particular, the U.S. industrial economy; the economic recovery in the U.S.;
catastrophic events and/or severe weather conditions; 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,
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,
                 2014           2013            2014            2013
                                                                 
Net sales        $ 1,267,830    $ 1,262,923    $ 5,072,537    $ 4,957,497 
                                                                 
Costs and
expenses:
Cost of
products sold
(excluding
depreciation)      571,349         575,120         2,247,574       2,235,567
(a)
Selling,
distribution
and
administrative
expenses (a)       468,506         459,748         1,889,123       1,828,524
(b)
Restructuring
and
other special
charges, net       -               1,663           -               8,089
(c)
Depreciation       70,039          66,802          275,461         261,622
Amortization      7,704         7,328         29,845        27,278    
Total costs       1,117,598     1,110,661     4,442,003     4,361,080 
and expenses
                                                                 
Operating          150,232         152,262         630,534         596,417
income
                                                                 
Interest           (16,023   )     (19,392   )     (73,698   )     (67,494   )
expense, net
Loss on the
extinguishment     -               -               (9,150    )     -
of debt (d)
Other income,     340           4,165         4,219         14,494    
net (e)
                                                                 
Earnings
before income      134,549         137,035         551,905         543,417
taxes
                                                                 
Income taxes      (46,192   )    (50,894   )    (201,121  )    (202,543  )
(f)
                                                                 
Net earnings     $ 88,357       $ 86,141       $ 350,784      $ 340,874   
                                                                 
Net earnings
per common
share:
                                                                 
Basic earnings   $ 1.19         $ 1.15         $ 4.76         $ 4.45      
per share
                                                                 
Diluted
earnings per     $ 1.17         $ 1.13         $ 4.68         $ 4.35      
share
                                                                 
Weighted
average shares
outstanding:
Basic              73,975          75,205          73,623          76,651
Diluted            75,239          76,528          74,910          78,307
                                                                 
See attached
Notes.

                                                              
AIRGAS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
                                                                   
                                                     March 31,     March 31,
                                                     2014          2013
                                                                   
ASSETS
Cash                                                 $ 69,561      $ 86,386
Trade receivables, net                                 701,060       710,740
Inventories, net                                       478,149       474,821
Deferred income tax asset, net                         57,961        53,562
Prepaid expenses and other current assets             92,356       138,321
TOTAL CURRENT ASSETS                                   1,399,087     1,463,830
                                                                   
Plant and equipment, net                               2,802,415     2,686,305
Goodwill                                               1,289,896     1,195,613
Other intangible assets, net                           258,836       226,824
Other non-current assets                              43,080       45,653
TOTAL ASSETS                                         $ 5,793,314   $ 5,618,225
                                                                   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, trade                              $ 196,911     $ 183,258
Accrued expenses and other current liabilities         345,676       374,883
Short-term debt (g)                                    387,866       -
Current portion of long-term debt (h) (i)             400,322      303,573
TOTAL CURRENT LIABILITIES                              1,330,775     861,714
                                                                   
Long-term debt, excluding current portion (i)          1,706,774     2,304,245
Deferred income tax liability, net                     825,897       825,612
Other non-current liabilities                          89,219        89,671
Stockholders’ equity                                  1,840,649    1,536,983
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $ 5,793,314   $ 5,618,225
                                                                   
See attached Notes.

                                                               
AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
                                                                  
                                                   Year Ended
                                                   March 31,
                                                   2014           2013
                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings                                       $ 350,784      $ 340,874
Adjustments to reconcile net earnings to net
cash

provided by operating activities:
Depreciation                                         275,461        261,622
Amortization                                         29,845         27,278
Impairment (c)                                       -              1,729
Deferred income taxes                                (6,869   )     36,309
Gain on sales of plant and equipment                 (1,264   )     (1,551   )
Gain on sale of businesses (e)                       -              (6,822   )
Stock-based compensation expense                     28,961         27,053
Loss on the extinguishment of debt (d)               9,150          -
                                                                  
Changes in assets and liabilities, excluding
effects of business acquisitions and
divestitures:
Trade receivables, net                               20,030         (42,485  )
Inventories, net                                     2,291          (62,317  )
Prepaid expenses and other current assets            41,408         (14,706  )
Accounts payable, trade                              4,732          (2,636   )
Accrued expenses and other current liabilities       (4,463   )     (8,090   )
Other, net                                          (5,206   )    (5,990   )
Net cash provided by operating activities           744,860      550,268  
                                                                  
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                                 (354,587 )     (325,465 )
Proceeds from sales of plant, equipment and          15,483         31,413
businesses
Business acquisitions and holdback settlements       (203,529 )     (97,521  )
Other, net                                          (951     )    (1,286   )
Net cash used in investing activities               (543,584 )    (392,859 )
                                                                  
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term debt (g)       387,352        (388,452 )
Proceeds from borrowings of long-term debt (j)       135,861        862,832
Repayment of long-term debt (i)                      (636,587 )     (21,428  )
Financing costs                                      -              (6,697   )
Premium paid on call of senior subordinated          (7,676   )     -
notes (d)
Purchase of treasury stock (k)                       (8,127   )     (591,873 )
Proceeds from the exercise of stock options          38,310         88,700
Stock issued for the Employee Stock Purchase         17,313         17,088
Plan
Excess tax benefit realized from the exercise of     13,668         36,160
stock options
Dividends paid to stockholders                       (141,461 )     (122,202 )
Change in cash overdraft and other                  (16,754  )    10,186   
Net cash used in financing activities               (218,101 )    (115,686 )
                                                                  
Change in cash                                     $ (16,825  )   $ 41,723
Cash – Beginning of period                          86,386       44,663   
Cash – End of period                               $ 69,561      $ 86,386   
                                                                  
See attached Notes.

       
Notes:   
         
         Certain reclassifications were made to the consolidated statements of
         earnings for the prior year periods, as well as the related notes, to
         conform to the current year presentation. The Company reclassified
a)       $3.0 million and $15.0 million out of selling, distribution and
         administrative expenses into cost of products sold (excluding
         depreciation) for the three months and year ended March 31, 2013,
         respectively. Consolidated operating income and net earnings for the
         prior year periods were not impacted by the reclassifications.
         
         Included within selling, distribution and administrative expenses are
         costs related to the Company’s SAP implementation of $1.2 million and
         $6.0 million for the three months ended March 31, 2014 and 2013,
         respectively. SAP implementation costs of $7.4 million and $33.2
         million were included in the consolidated results for the years ended
b)       March 31, 2014 and 2013, 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 continued
         to incur some post-conversion support and training expenses related
         to the implementation of the new system through the end of fiscal
         2014.
         
         Restructuring and other special charges consist of $1.7 million and
         $8.1 million of net costs for the three months and year ended March
         31, 2013, respectively. 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 and year
         ended March 31, 2013, the Company recorded restructuring and other
         related costs of $1.7 million and $10.1 million, respectively,
         primarily related to transition staffing, legal and other costs
c)       associated with the realignment. The full year costs were partially
         offset by a $3.7 million reduction to the severance liability
         associated with the realignment based on a change in estimate
         recorded during the three months ended December 31, 2012. 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.
         
         On October 2, 2013, the Company redeemed all $215 million of its
         outstanding 7.125% senior subordinated notes originally due to mature
         in October 2018 (the “2018 Notes”) at a price of 103.563%. A loss on
d)       the early extinguishment of debt of $9.1 million ($5.6 million after
         tax, or $0.08 per diluted share) related to the redemption premium
         and the write-off of unamortized debt issuance costs on the 2018
         Notes was recognized in the three months ended December 31, 2013.
         
         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
e)       other income, 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 statements of earnings.
         
         During the three months ended September 30, 2013, the Company
         recognized a $1.5 million ($0.02 per diluted share) tax benefit
         related to a change in a state income tax law, allowing the Company
         to utilize additional net operating loss carryforwards. During the
         three months ended March 31, 2014, the Company recognized $1.8
f)       million ($0.02 per diluted share) of tax benefits related to enacted
         changes in state income tax rates. The Company’s adjusted effective
         tax rate*, which excludes the impact of the benefits to the Company’s
         income taxes, as well as the income tax impact related to the loss on
         the early extinguishment of debt, was 37.1% for the year ended March
         31, 2014.
         
         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
         vary, but will generally not exceed 90 days from the date of issue.
g)       The Company has used proceeds from the commercial paper program for
         general corporate purposes, including the repayment of its 2018 Notes
         and the maturity of its $300 million 2.85% senior notes (the “2013
         Notes”) in October 2013. At March 31, 2014, $388 million was
         outstanding under the commercial paper program.
         
         In September 2013, the Company’s $400 million 4.5% senior notes
h)       maturing September 2014 were reclassified to the “Current portion of
         long-term debt” line item of the Company’s consolidated balance
         sheet.
         
         In October 2013, the Company made its final payments on the 2013 and
         2018 Notes and financed these requirements with the proceeds from
         commercial paper issuances, excess cash and utilization under its
i)       accounts receivable securitization facility. Including the borrowings
         under the commercial paper program, approximately $257 million was
         available to the Company under the Credit Facility at March 31, 2014.
         The Company’s Credit Facility matures on July 19, 2016.
         
         During the prior year, the Company issued $850 million in the
         aggregate of senior notes. On November 26, 2012, the Company issued
         $250 million of 2.90% senior notes maturing on November 15, 2022. On
         February 14, 2013, the Company issued $325 million of 1.65% senior
j)       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 funding
         acquisitions, repaying indebtedness under the Company’s commercial
         paper program, and repurchasing shares pursuant to the Company’s
         stock repurchase program.
         
         On October 23, 2012, the Company announced a $600 million share
k)       repurchase program. During the six months ended March 31, 2013, the
         Company completed the program, repurchasing 6.29 million shares on
         the open market at an average price of $95.37.
         
         Business segment information for the Company’s Distribution and All
         Other Operations business segments is presented in the following
         tables. Amounts in the “Eliminations and Other” column 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
l)       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. Additionally, the Company’s
         restructuring and other special charges, net, are not allocated to
         the Company’s business segments, and are also reflected in the
         “Eliminations and Other” column.
         

                                                           
                 (Unaudited)                                  (Unaudited)
                 Three Months Ended                           Three Months Ended
                 March 31, 2014                               March 31, 2013
                             All                                          All
                                       Elim.                                        Elim.
(In thousands)   Dist.      Other              Total       Dist.      Other              Total
                                       & Other                                      & Other
                             Ops.                                         Ops.
Gas and rent     $ 688,932   $         $          $ 803,249   $ 663,809   $         $          $ 798,929
                             121,006   (6,689)                            142,951   (7,831)
Hardgoods        463,676     905       -          464,581     462,702     1,292     -          463,994
Total net        1,152,608   121,911   (6,689)    1,267,830   1,126,511   144,243   (7,831)    1,262,923
sales
                                                                                               
Cost of
products
sold
(excluding
depreciation)    515,195     62,843    (6,689)    571,349     505,147     77,804    (7,831)    575,120
Selling,
distribution
and
administrative
expenses         423,386     43,928    1,192      468,506     409,898     43,894    5,956      459,748
Restructuring
and
other special
charges, net     -           -         -          -           -           -         1,663      1,663
Depreciation     63,832      6,207     -          70,039      61,408      5,394     -          66,802
Amortization     6,637       1,067     -          7,704       6,126       1,202     -          7,328
Operating        $ 143,558   $ 7,866   $          $ 150,232   $ 143,932   $         $          $ 152,262
income                                 (1,192)                            15,949    (7,619)
                                                                                               
                 (Unaudited)                                  (Unaudited)
                 Year Ended                                   Year Ended
                 March 31, 2014                               March 31, 2013
                             All                                          All
                                       Elim.                                        Elim.
(In thousands)   Dist.       Other                Total       Dist.       Other                Total
                                       & Other                                      & Other
                             Ops.                                         Ops.
Gas and rent     $           $         $          $           $           $         $          $
                 2,717,272   539,954   (30,404)   3,226,822   2,577,901   587,322   (34,201)   3,131,022
Hardgoods        1,841,518   4,200     (3)        1,845,715   1,820,204   6,276     (5)        1,826,475
Total net        4,558,790   544,154   (30,407)   5,072,537   4,398,105   593,598   (34,206)   4,957,497
sales
                                                                                               
Cost of
products
sold
(excluding
depreciation)    1,996,065   281,916   (30,407)   2,247,574   1,958,573   311,200   (34,206)   2,235,567
Selling,
distribution
and
administrative
expenses         1,705,408   176,289   7,426      1,889,123   1,620,651   174,643   33,230     1,828,524
Restructuring
and
other special
charges, net     -           -         -          -           -           -         8,089      8,089
Depreciation     252,329     23,132    -          275,461     240,167     21,455    -          261,622
Amortization     25,512      4,333     -          29,845      22,297      4,981     -          27,278
Operating        $ 579,476   $         $          $ 630,534   $ 556,417   $         $          $ 596,417
income                       58,484    (7,426)                            81,319    (41,319)
                                                                                               

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,
                                    2014       2013     2014       2013
Earnings per diluted share          $ 1.17      $ 1.13   $ 4.68      $ 4.35
Adjustments to earnings per
diluted share:
State income tax benefits             (0.02 )     -        (0.04 )     -
Loss on the extinguishment of         -           -        0.08        -
debt
Gain on sale of businesses            -           -        -           (0.07 )
Restructuring and other special      -         0.01    -         0.07  
charges
Adjusted earnings per diluted       $ 1.15     $ 1.14   $ 4.72     $ 4.35  
share

                Three   (Guidance Range)                (Guidance Range)
                 Months   Three Months Ending  Year        Year Ending
                 Ended    June 30, 2014        Ended       March 31, 2015
                 June                         March 31,            
                 30,
                 2013     Low        High      2014        Low        High
                                                                      
Earnings per     $ 1.14   $ 1.15     $ 1.20    $ 4.68      $ 5.00     $ 5.20
diluted share
                                                                      
Adjustments to
earnings per
diluted share:
State income       -        -          -         (0.04 )     -          -
tax benefits
Loss on the
extinguishment    -       -        -       0.08      -        -    
of debt
                                                                      
Adjusted
earnings per     $ 1.14   $ 1.15    $ 1.20   $ 4.72     $ 5.00    $ 5.20 
diluted share
Year-over-year             1    %    5    %               6    %    10   %
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, the gain on the sale of businesses, benefits from the changes in
state income tax rates and law, and the loss on the extinguishment of debt.
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 Effective Tax Rate

Reconciliation of adjusted effective tax rate:

                                         Three Months Ended    Year Ended
                                          March 31,                March 31,
(In thousands)                            2014                     2014
                                                                   
Income taxes                              $    46,192              $ 201,121
Adjustments to income taxes:
Changes in state income tax rates and          1,800                 3,293
law
Loss on the extinguishment of debt            -                   3,504   
Adjusted income taxes                     $    47,992             $ 207,918 
                                                                   
Earnings before income taxes              $    134,549            $ 551,905 
Adjustments to earnings before income
taxes:
Loss on the extinguishment of debt            -                   9,150   
Adjusted earnings before income taxes     $    134,549            $ 561,055 
                                                                   
Effective tax rate                            34.3      %          36.4    %
                                                                   
Adjusted effective tax rate                   35.7      %          37.1    %

The Company believes its adjusted effective tax rate financial measure helps
investors assess its effective tax rate without the impact of benefits related
to changes in state income tax rates and law and the income tax impact related
to the loss on the extinguishment of debt. 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.

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)   2014           2013            2014           2013
                                                                 
Net sales        $ 1,267,830    $ 1,262,923    $ 5,072,537    $ 4,957,497 
                                                                 
Operating        $ 150,232       $ 152,262       $ 630,534       $ 596,417
income
                                                                 
Operating          11.8      %     12.1      %     12.4      %     12.0      %
margin
                                                                 
Adjustments to
operating
income:
Restructuring
and other         -             1,663         -             8,089     
special
charges, net
Adjusted
operating        $ 150,232      $ 153,925      $ 630,534      $ 604,506   
income
                                                                 
Adjusted
operating         11.8      %    12.2      %    12.4      %    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 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:

                                                March 31,
(In thousands)                                   2014           2013
                                                                 
Operating income - trailing four quarters        $ 630,534       $ 596,417
Adjustments to operating income:
Restructuring and other special charges, net      -             8,089     
Adjusted operating income - trailing four        $ 630,534      $ 604,506   
quarters
                                                                 
Average of total assets                          $ 5,676,227     $ 5,452,051
Average of current liabilities (exclusive of      (526,939  )    (533,217  )
debt)
Average capital employed                         $ 5,149,288    $ 4,918,834 
                                                                 
Return on capital                                 12.2      %    12.3      %

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

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

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

                                                  Year Ended
                                                   March 31,
(In thousands)                                     2014          2013
                                                                  
Net cash provided by operating activities          $ 744,860      $ 550,268
                                                                  
Adjustments to net cash provided by operating
activities:
Stock issued for the Employee Stock Purchase         17,313         17,088
Plan
Excess tax benefit realized from the exercise of    13,668       36,160   
stock options
Adjusted cash from operations                       775,841      603,516  
                                                                  
Capital expenditures                                 (354,587 )     (325,465 )
                                                                  
Adjustments to capital expenditures:
Proceeds from sales of plant and equipment           15,483         15,693
Operating lease buyouts                             4,420        3,946    
Adjusted capital expenditures                       (334,684 )    (305,826 )
                                                                  
Free cash flow                                     $ 441,157     $ 297,690  
                                                                  
Net cash used in investing activities              $ (543,584 )   $ (392,859 )
Net cash used in financing activities              $ (218,101 )   $ (115,686 )

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 prepayment of debt, the payment of
dividends, or to support other investing and financing activities. The
Company’s free cash flow financial measure has limitations and does not
represent the residual cash flow available for discretionary expenditures.
Certain non-discretionary expenditures such as payments on maturing debt
obligations are excluded from the Company’s computation of its free cash flow
financial measure. 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 & Media Contact:
Barry Strzelec
610-902-6256
barry.strzelec@airgas.com
or
Investor Contact:
Joseph Marczely
610-263-8277
joseph.marczely@airgas.com
or
Media Contact:
Sarah Stockton-Brown
610-263-8260
sarah.stockton-brown@airgas.com
 
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