Airgas Reports Record First Quarter EPS of $0.81

Quarterly net earnings grew 33% to $68.9 million, or $0.81 per diluted share, compared to $51.7 million, or $0.63 per diluted share, in the prior year. First quarter sales increased 22% from the prior year to $1.1 billion. Acquisitions contributed 15% to the increase, and total same-store sales grew 7% in the quarter, with hardgoods up 6% and gas and rent up 7%.

"Our strategic product categories, which are focused on healthcare, life sciences, research, environmental, and food and beverage markets, comprising about 40% of our sales, posted 10% organic growth in the quarter," said Airgas Chairman and Chief Executive Officer Peter McCausland. "The strong outlook for energy and infrastructure construction continues, and export activity is still supporting U.S. manufacturers in the face of slowing domestic demand. Acquisition activity is also contributing to our growth, and we have announced more than $130 million of acquired annual revenue since our fiscal year began in April."

Free cash flow* in the quarter was $58 million, compared to $28 million in the prior year. McCausland said, "We continue to generate strong free cash flow, which fuels our strategic growth initiatives."

"Costs escalated in the quarter faster than we planned, but we remain committed to staying ahead of the cost curve and our recently announced pricing action should accomplish that," McCausland continued. "We expect earnings per diluted share of $0.82 to $0.84 in the second quarter, and are updating our full-year expectations to $3.30 to $3.40 per diluted share in fiscal 2009." The previously announced range was $3.24 to $3.40.

The Company will conduct an earnings teleconference at 11:00 a.m. Eastern Time on Thursday, July 24. The teleconference will be available by calling (888) 277-7135. 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 under the "Company Information" heading on the Company's Internet site at www.airgas.com. A webcast of the teleconference will be available live and on demand through August 25 at http://investor.shareholder.com/arg/events.cfm. A replay of the teleconference will be available through July 31. To listen, call (888) 203-1112 and enter passcode 4559826.

* See attached reconciliation and calculation of the non-GAAP free cash flow financial measure.

About Airgas, Inc.

Airgas, Inc. (NYSE:ARG), through its subsidiaries, is the largest U.S. distributor of industrial, medical, and specialty gases, and hardgoods, such as welding equipment and supplies. Airgas is also one of the largest U.S. distributors of safety products, the largest U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast, and a leading distributor of process chemicals, refrigerants, and ammonia products. More than 14,000 employees work in over 1,100 locations, including branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also distributes 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.

Forward-Looking Statements

This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. These statements include, but are not limited to, statements regarding: the strong outlook for energy and infrastructure construction; export activity for U.S. manufacturers; our commitment to manage cost increases; and expectations for fiscal 2009 earnings per diluted share of $3.30 to $3.40 and second quarter earnings per diluted share of $0.82 to $0.84. 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. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include: an economic downturn; customer acceptance of price increases; supply cost pressures; increased industry competition; our ability to successfully identify, consummate and integrate acquisitions; adverse changes in customer buying patterns; significant fluctuations in interest rates; increases in energy costs and other operating expenses; 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 Form 10-K dated March 31, 2008, and other forms filed by the Company with the Securities and Exchange Commission.

Consolidated statements of earnings, condensed consolidated balance sheets, consolidated statements of cash flows, and a reconciliation of the non-GAAP free cash flow financial measure follow.

AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except per share data) (Unaudited) Three Months Ended June 30, 2008 2007 ----------- --------- Net sales $1,116,701 $915,099 ----------- --------- Costs and expenses: Cost of products sold (excl. deprec.) 537,695 437,978 Selling, distribution and administrative expenses 390,645 321,412 Depreciation 48,097 41,565 Amortization 5,405 2,907 ----------- --------- Total costs and expenses 981,842 803,862 ----------- --------- Operating income 134,859 111,237 Interest expense, net (19,084) (20,508) Discount on securitization of trade receivables (b) (2,984) (4,119) Other income (expense), net 317 (84) ----------- --------- Earnings before income tax expense and minority interest 113,108 86,526 Income tax expense (44,225) (34,095) Minority interest in earnings of consolidated affiliate - (711) ----------- --------- Net earnings $ 68,883 $ 51,720 =========== ========= Net earnings per common share (c): Basic earnings per share $ 0.83 $ 0.65 =========== ========= Diluted earnings per share $ 0.81 $ 0.63 =========== ========= Weighted average shares outstanding (c): Basic 82,687 79,004 Diluted 85,017 83,630 See attached Notes.

AIRGAS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) (Unaudited) June 30, March 31, 2008 2008 ----------- ---------- ASSETS Cash $ 64,946 $ 43,048 Trade receivables, net (b) 194,456 183,569 Inventories, net 340,939 330,732 Deferred income tax asset, net 23,475 22,258 Prepaid expenses and other current assets 58,235 67,110 ----------- ---------- TOTAL CURRENT ASSETS 682,051 646,717 Plant and equipment, net 2,235,256 2,194,870 Goodwill 977,985 969,059 Other intangible assets, net 160,828 148,998 Other non-current assets 34,384 27,620 ----------- ---------- TOTAL ASSETS $ 4,090,504 $3,987,264 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, trade $ 180,129 $ 185,111 Accrued expenses and other current liabilities 279,084 288,883 Current portion of long-term debt 43,458 40,400 ----------- ---------- TOTAL CURRENT LIABILITIES 502,671 514,394 Long-term debt 1,537,696 1,539,648 Deferred income tax liability, net 472,180 439,782 Other non-current liabilities 68,746 80,104 Stockholders' equity 1,509,211 1,413,336 ----------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,090,504 $3,987,264 =========== ========== See attached Notes.

AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Three Months Ended Three Months Ended June 30, 2008 June 30, 2007 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 68,883 $ 51,720 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 48,097 41,565 Amortization 5,405 2,907 Deferred income taxes 23,455 15,297 (Gain) loss on sales of plant and equipment (12) 749 Minority interest in earnings - 711 Stock-based compensation expense 7,973 5,890 Changes in assets and liabilities, excluding effects of business acquisitions: Securitization of trade receivables - 20,600 Trade receivables, net (6,526) (9,816) Inventories, net (9,874) (10,142) Prepaid expenses and other current assets 2,563 5,447 Accounts payable, trade (7,451) (13,700) Accrued expenses and other current liabilities (3,613) (6,506) Other non-current assets (542) (2,001) Other non-current liabilities 261 (194) ------------------ ------------------ Net cash provided by operating activities 128,619 102,527 ------------------ ------------------ CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (85,564) (63,389) Proceeds from sales of plant and equipment 3,329 2,006 Business acquisitions and holdback settlements (a) (21,680) (317,451) Other, net (1,518) (320) ------------------ ------------------ Net cash used in investing activities (105,433) (379,154) ------------------ ------------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 594,109 470,661 Repayment of debt (596,080) (183,383) Purchase of treasury stock (4,613) - Financing costs (5,000) - Minority interest in earnings - (711) Stock issued for the employee stock purchase plan 3,934 3,171 Tax benefit realized from the exercise of stock options 7,280 4,660 Proceeds from the exercise of stock options 9,927 6,945 Dividends paid to stockholders (10,040) (7,102) Change in cash overdraft (805) (2,024) ------------------ ------------------ Net cash (used in) provided by financing activities (1,288) 292,217 ------------------ ------------------ Change in cash $ 21,898 $ 15,590 Cash - Beginning of period 43,048 25,931 ------------------ ------------------ Cash - End of period $ 64,946 $ 41,521 ================== ================== See attached Notes.

Notes:

(a) During the three months ended June 30, 2008, the Company purchased three businesses, including two associated with the distribution of packaged gases and related hardgoods products and one international acquisition related to the rental of welding equipment. The three acquired businesses generate aggregate annual revenues of approximately $21 million. A total of $21.7 million was paid for the acquisitions and the settlement of holdback liabilities associated with prior acquisitions.

(b) The Company participates in a securitization agreement with three commercial banks to sell up to $360 million of qualified trade receivables. Net proceeds from the securitization were used to reduce borrowings under the Company's revolving credit facilities. The amount of outstanding receivables sold under the agreement was $360 million at both June 30, 2008 and March 31, 2008.

(c) The tables below present the computation of basic and diluted earnings per share:

(Unaudited) Three Months Ended June 30, (In thousands, except per share amounts) 2008 2007 -------- -------- Basic Earnings per Share Computation Numerator --------------------------------------------------- Net earnings $ 68,883 $51,720 ======== ======== Denominator --------------------------------------------------- Basic shares outstanding 82,687 79,004 ======== ======== Basic earnings per share $ 0.83 $ 0.65 ======== ======== Diluted Earnings per Share Computation Numerator --------------------------------------------------- Net earnings $ 68,883 $51,720 Plus: Preferred stock dividends (1) - 711 Plus: Income taxes on earnings of National Welders (1) - 245 -------- -------- Net earnings assuming preferred stock conversion $ 68,883 $52,676 ======== ======== Denominator --------------------------------------------------- Basic shares outstanding 82,687 79,004 Incremental shares from assumed conversions: --------------------------------------------------- Stock options and options under the employee stock purchase plan 2,330 2,299 Preferred stock of National Welders (1) - 2,327 -------- -------- Diluted shares outstanding 85,017 83,630 ======== ======== Diluted earnings per share $ 0.81 $ 0.63 ======== ========

(1) On July 3, 2007, the preferred stockholders of the National Welders joint venture exchanged their preferred stock for common stock of Airgas (the "NWS Exchange Transaction"). Prior to July 3, 2007, the preferred stockholders of National Welders had the option to exchange their 3.2 million preferred shares of National Welders either for cash at a price of $17.78 per share or for approximately 2.3 million shares of Airgas common stock. If Airgas common stock had a market value of $24.45 per share or greater, exchange of the preferred stock was assumed because it provided greater value to the preferred stockholders. Based on the assumed exchange of the preferred stock for Airgas common stock, the 2.3 million shares were included in the diluted shares outstanding.

The National Welders preferred stockholders earned a 5% dividend, recognized as "Minority interest in earnings of consolidated affiliate." Upon the exchange of the preferred stock for Airgas common stock, the dividend was no longer paid to the preferred stockholders, resulting in additional net earnings for Airgas. For the periods in which the exchange was assumed, the 5% preferred stock dividend was added back to net earnings in the diluted earnings per share computation.

For periods prior to the NWS Exchange Transaction, the earnings of National Welders for tax purposes were treated as a deemed dividend to Airgas, net of an 80% dividend exclusion. Upon the exchange of National Welders preferred stock for Airgas common stock, National Welders became a 100% owned subsidiary of Airgas. As a 100% owned subsidiary, the net earnings of National Welders are not subject to additional tax at the Airgas level. For the period in which the exchange was assumed, the additional tax was added back to net earnings in the diluted earnings per share computation.

(d) Business segment information for the Company's Distribution and All Other Operations segments is shown below:

(Unaudited) Three Months Ended June 30, 2008 ------------------------------------------ (In thousands) Distribution All Elim. Total Other Ops. ------------ -------- --------- ---------- Gas and rent $ 497,404 $208,747 $(49,241) $ 656,910 Hardgoods 429,813 32,306 (2,328) 459,791 ------------ -------- --------- ---------- Total net sales 927,217 241,053 (51,569) 1,116,701 Cost of products sold, excluding deprec. expense 463,072 126,192 (51,569) 537,695 Selling, distribution and administrative expenses 310,260 80,385 - 390,645 Depreciation 36,790 11,307 - 48,097 Amortization 4,281 1,124 - 5,405 ------------ -------- --------- ---------- Operating income $ 112,814 $ 22,045 $ - $ 134,859 ============ ======== ========= ========== (Unaudited) Three Months Ended June 30, 2007 ----------------------------------------- (In thousands) Distribution All Elim. Total Other Ops. ------------ -------- --------- --------- Gas and rent $ 411,281 $164,013 $(33,040) $ 542,254 Hardgoods 351,355 22,946 (1,456) 372,845 ------------ -------- --------- --------- Total net sales 762,636 186,959 (34,496) 915,099 Cost of products sold, excluding deprec. expense 381,996 90,478 (34,496) 437,978 Selling, distribution and administrative expenses 258,822 62,590 - 321,412 Depreciation 30,344 11,221 - 41,565 Amortization 2,085 822 - 2,907 ------------ -------- --------- --------- Operating income $ 89,389 $ 21,848 $ - $ 111,237 ============ ======== ========= =========

(e) Certain reclassifications have been made to prior period consolidated financial statements to conform to the current presentation.

Reconciliation of Non-GAAP Financial Measure (Unaudited)

Free Cash Flow:

Reconciliation and computation of free cash flow:

Three Months Ended June 30, (Amounts in thousands) 2008 2007(1) --------- --------- Net cash provided by operating activities $128,619 $102,527 Plus: Operating lease buyouts - 114 Proceeds from sales of plant and equipment 3,329 2,006 Tax benefit realized from the exercise of stock options 7,280 4,660 Stock issued for the employee stock purchase plan 3,934 3,171 Less: Cash provided by the securitization of trade receivables - (20,600) Capital expenditures (85,564) (63,389) --------- --------- Free Cash Flow $ 57,598 $ 28,489 ========= =========

(1) With the July 3, 2007 NWS Exchange Transaction, the Company's Free Cash Flow metric was modified to include the cash flows of National Welders in all periods for a more meaningful presentation.

Management believes that Free Cash Flow provides investors meaningful insight into the Company's ability to generate cash from operations, which is available for servicing debt obligations and for the execution of our business strategy, including acquisitions, the prepayment of debt, or to support other investing and financing activities. Non-GAAP numbers should be read in conjunction with the GAAP financial measures, as non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial measures. It should be noted as well that our Free Cash Flow metric may be different from Free Cash Flow metrics provided by other companies.

SOURCE: Airgas, Inc.

Airgas, Inc. Investor and Media Contact: Jay Worley, 610-902-6206 jay.worley@airgas.com