Airgas Reports Fiscal Third Quarter Earnings

Thu Jan 24, 2013 7:30am EST

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

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

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

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


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

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

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

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

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

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

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

Guidance

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

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

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

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

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

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

About Airgas, Inc.

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

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

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

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


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


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


                                                                                                                                                                                 
 Notes:                                                                                                                                                                          
                                                                                                                                                                                 
 a)    As a result of the Company`s operating realignment into four divisions, the Company initiated a related change in its legal entity structure on January 1, 2012 whereby   
       the majority of Airgas` distribution businesses have merged or will merge into a single limited liability company ("LLC") of which the Company is the sole member. The new 
       legal structure necessitated conformance of certain of the Company`s accounting policies, including those around inventory valuation. As a result, effective January 1,   
       2012, the Company changed its method of accounting for the portion of its hardgoods inventory valued using the last-in, first-out ("LIFO") method to the average-cost     
       method. The Company applied this change in accounting principle through retrospective application to the prior year`s financial statements. The impact of the change led  
       to increases in operating income of $407 thousand and $895 thousand for the three and nine months ended December 31, 2011, respectively, and a $0.01 increase in          
       previously reported diluted earnings per share for the nine-month period ended December 31, 2011.                                                                         
                                                                                                                                                                                 
 b)    Included within selling, distribution and administrative expenses are costs related to the Company`s SAP implementation of $8.7 million and $9.8 million for the three    
       months ended December 31, 2012 and 2011, respectively. SAP implementation costs of $27.3 million and $24.1 million were included in the consolidated results for the nine 
       months ended December 31, 2012 and 2011, respectively. Also included within selling, distribution and administrative expenses are multi-employer defined benefit pension  
       plan ("MEPP") withdrawal charges of $3.4 million and $4.3 million for the three and nine months ended December 31, 2011, respectively. As collective bargaining agreements 
       ("CBAs") came up for renewal, the Company actively negotiated the withdrawal from MEPPs replacing those retirement plans for CBA employees with defined contribution      
       plans. At December 31, 2012, the Company has successfully negotiated its withdrawal from all MEPPs in which it previously participated and has fully accrued for the      
       related withdrawal assessments.                                                                                                                                           
                                                                                                                                                                                 
 c)    Restructuring and other special charges consist of a net benefit of $1.7 million for the three months ended December 31, 2012 and a net cost of $6.4 million for the nine 
       months ended December 31, 2012. In May 2011, the Company announced its plan to realign its twelve regional distribution companies into four new divisions, and to         
       consolidate its regional company accounting and certain administrative functions into four newly created Business Support Centers. As a result of the plan, the Company   
       recorded a restructuring charge of $13.3 million during the three months ended June 30, 2011 for severance benefits expected to be paid under the Airgas, Inc. Severance  
       Pay Plan to employees whose jobs were eliminated as a result of the realignment. During the three months ended December 31, 2012, the Company re-evaluated its remaining  
       severance liability related to the realignment and, as a result of this analysis, reduced its severance liability by $3.7 million. The reduction in the severance         
       liability was driven by fewer than expected individuals meeting the requirements to receive severance benefits. This reduction was due to both the retention of employees 
       through relocation or acceptance of new positions, as well as former associates who chose not to remain with the Company through their designated separation dates.       
       Offsetting the benefit from the reduction to the severance liability were additional restructuring and other related costs of $2.0 million and $8.4 million for the three 
       and nine months ended December 31, 2012, respectively, primarily related to transition staffing, legal and other costs associated with the realignment and LLC formation. 
       In addition to the restructuring and other related costs, in June 2012, the Company re-evaluated the economic viability of a small hospital piping construction business  
       and, as a result of an impairment analysis performed on the assets at the associated reporting unit, the Company recorded a charge of $1.7 million related to certain of  
       the intangible assets associated with this business for the three months ended June 30, 2012.                                                                             
                                                                                                                                                                                 
       For the three and nine months ended December 31, 2011, restructuring and other special charges were $2.4 million and $18.3 million, respectively. During the three months 
       ended December 31, 2011, the Company recorded restructuring and other related costs of $2.4 million primarily related to facility closure, transition staffing, legal and 
       other costs associated with the realignment. Combined with the $13.3 million restructuring charge for severance benefits recorded during the three months ended June 30,  
       2011, total restructuring and other related costs were $15.7 million during the nine months ended December 31, 2011. In addition to the restructuring and other related   
       costs, the Company recorded a special charge related to an impairment analysis. In August 2011, the Company received 24 months notice that a supplier`s hydrogen plant,   
       which generates CO2 as a by-product that serves as the feedstock for the Company`s co-located liquid CO2 plant, will cease operations in calendar year 2013. The Company  
       expects the hydrogen plant to continue to supply the feedstock for its liquid CO2 plant during the remaining period. As a result of an impairment analysis performed on   
       the assets at this location, the Company recorded a charge of $2.5 million during the three months ended September 30, 2011.                                              
                                                                                                                                                                                 
 d)    During the three and nine months ended December 31, 2011, the Company recognized $1.2 million and $7.9 million, respectively, of benefits from lower than previously      
       estimated net costs related to the fiscal 2011 unsolicited takeover attempt by Air Products and Chemicals, Inc.                                                           
                                                                                                                                                                                 
 e)    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 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.                                                                                     
                                                                                                                                                                                 
 f)    The Company participates in a $750 million commercial paper program supported by its Credit Facility. This program allows the Company to obtain favorable short-term      
       borrowing rates with maturities that may vary, but will generally not exceed 90 days from the date of issue. The Company has used proceeds from the commercial paper      
       program to pay down amounts outstanding under its Credit Facility and for general corporate purposes. At December 31, 2012, $284 million was outstanding under the        
       commercial paper program.                                                                                                                                                 
                                                                                                                                                                                 
 g)    On October 1, 2012, the Company`s $300 million 2.85% notes were reclassified to the "Current portion of long-term debt" line item of the Company`s Consolidated Balance   
       Sheet. The notes mature on October 1, 2013.                                                                                                                               
                                                                                                                                                                                 
 h)    The Company`s Credit Facility matures on July 19, 2016. Including the borrowings under the commercial paper program, approximately $376 million was available to the      
       Company under the Credit Facility at December 31, 2012. On November 26, 2012, the Company issued $250 million of 2.90% senior notes maturing on November 15, 2022. The net 
       proceeds from the offering were used for general corporate purposes, including to fund acquisitions, repay indebtedness under the Company`s commercial paper program, and 
       repurchase shares pursuant to the Company`s stock repurchase program.                                                                                                     
                                                                                                                                                                                 
 i)    On October 23, 2012, the Company announced a $600 million share repurchase program. During the three months ended December 31, 2012, the Company repurchased 2.47 million 
       shares on the open market at an average price of $89.93. At December 31, 2012, $378 million was available for additional share repurchases under the program. During the  
       three months ended June 30, 2011, the Company completed a $300 million share repurchase program announced on May 5, 2011, repurchasing 4.46 million shares on the open    
       market at an average price of $67.19.                                                                                                                                     
                                                                                                                                                                                 
 j)    Business segment information for the Company`s Distribution and All Other Operations business segments is presented below. Business segment operating results for the     
       prior year quarter and prior year-to-date periods were adjusted for the retrospective application of the LIFO-to-average-cost change in accounting principle implemented  
       during the three months ended March 31, 2012. Amounts in the "Eliminations and Other" column below reported for net sales and cost of products sold (excluding            
       depreciation) represent the elimination of intercompany sales and associated gross profit on sales from the Company`s All Other Operations business segment to the        
       Distribution business segment. Although corporate operating expenses are generally allocated to each business segment based on sales dollars, the Company reports expenses 
       (excluding depreciation) related to the implementation of its SAP system and the Company`s withdrawal from various MEPPs under selling, distribution and administrative   
       expenses in the "Eliminations and Other" column below. Additionally, the Company`s net restructuring and other special charges (benefits) and the legal, professional and 
       other costs (benefits) incurred as a result of Air Products` unsolicited takeover attempt are not allocated to the Company`s business segments. These costs (benefits) are 
       also reflected in the "Eliminations and Other" column below.                                                                                                              
                                                                                                                                                                                 


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


Reconciliations of Non-GAAP Financial Measures (Unaudited)

Adjusted Earnings per Diluted Share and Earnings Guidance

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


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


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

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

Adjusted Operating Income and Adjusted Operating Margin

Reconciliations of adjusted operating income and adjusted operating margin:

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


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

Return on Capital

Reconciliations and computations of return on capital:

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


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

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

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

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


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

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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