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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-K

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------

For the fiscal year ended March 31, 2002

or

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission File No. 1-9344

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AIRGAS, INC.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 56-0732648                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|259 North Radnor-Chester Road, Suite 100
Radnor, Pennsylvania  |  | 19087-5283                          
|(Address of principal executive offices)                       |  | (Zip Code)                          

(610) 687-5253(Registrant's telephone number, including area code)

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Securities
Registered Pursuant to Section 12 (b) of the Act:

|Title of Each Class                    |  | Name of Each Exchange
on Which Registered
|-------------------------------------- |  | -----------------------------------------
|Common Stock, par value $.01 per share |  | New York Stock Exchange                  

Securities
registered pursuant to Section 12 (g) of the Act: None.

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o

The
aggregate market value of the 64,925,699 shares of voting stock held by non-affiliates of the Registrant was approximately $1.11 billion computed by reference to
the closing price of such stock on the New York Stock Exchange on June 17, 2002. For purposes of this calculation, only executive officers and directors were deemed to be affiliates.

The
number of shares of common stock outstanding as of June 17, 2002 was 70,975,662.

DOCUMENTS INCORPORATED BY REFERENCE

The Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 31, 2002 is partially incorporated by reference into Part III.
Those portions of the Proxy Statement included in response to Item 402(k) and Item 402(l) of Regulation S-K are not incorporated by reference into Part III.

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AIRGAS, INC.        TABLE OF CONTENTS

|Item No.   |  |                                                                                       |  | Page
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I    
|1.         |  | Business                                                                              |  | 3   
|           |  | General                                                                               |  | 3   
|           |  | Distribution                                                                          |  | 3   
|           |  | Gas Operations                                                                        |  | 4   
|           |  | Airgas Growth Strategies                                                              |  | 5   
|           |  | Regulatory and Environmental Matters                                                  |  | 6   
|           |  | Insurance                                                                             |  | 6   
|           |  | Employees                                                                             |  | 6   
|           |  | Patents, Trademarks and Licenses                                                      |  | 6   
|           |  | Executive Officers of the Company                                                     |  | 7   
|2.         |  | Properties                                                                            |  | 8   
|3.         |  | Legal Proceedings                                                                     |  | 9   
|4.         |  | Submission of Matters to a Vote of Security Holders                                   |  | 9   
|PART II   
|5.         |  | Market for the Company's Common Stock and Related Stockholder Matters                 |  | 10  
|6.         |  | Selected Financial Data                                                               |  | 11  
|7.         |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 13  
|7A.        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 30  
|8.         |  | Financial Statements and Supplementary Data                                           |  | 32  
|9.         |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 32  
|PART III  
|10.        |  | Directors and Executive Officers of the Company                                       |  | 32  
|11.        |  | Executive Compensation                                                                |  | 32  
|12.        |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 32  
|13.        |  | Certain Relationships and Related Transactions                                        |  | 32  
|PART IV   
|14.        |  | Exhibits, Financial Statements Schedules, and Reports on Form 8-K                     |  | 33  
|Signatures |  | 36                                                                                   

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PART I

ITEM 1. BUSINESS.

GENERAL

Airgas, Inc. and subsidiaries ("Airgas" or the "Company") is the largest U.S. distributor of industrial, medical and specialty gases (delivered in
"packaged" or cylinder form), and welding, safety and related products ("hardgoods"). Airgas also produces dry ice, liquid carbon dioxide, nitrous oxide and specialty gases for distribution throughout
the United States. Airgas' integrated network of approximately 800 locations includes branches, retail stores, packaged gas fill plants, specialty gas labs, production facilities and distribution
centers. Airgas also distributes its products and services to its diversified customer base through eBusiness, catalog and telemarketing channels. Sales were $1.64 billion,
$1.63 billion, and $1.54 billion in fiscal years 2002, 2001, and 2000, respectively.

The
Company's two operating segments are Distribution and Gas Operations. Financial information by business segment can be found in Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" ("MD&A"), and Note 23 to the Company's Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."
Descriptions of the operating segments are as follows:

DISTRIBUTION

The Distribution segment accounts for approximately 90% of consolidated sales and reflects the distribution of industrial, medical and specialty gases, and
hardgoods. The Distribution segment also includes the equity affiliate earnings related to the Company's investment in National Welders Supply
Company, Inc., which is a producer and distributor of industrial, medical and specialty gases and hardgoods.

Principal Products and Services

The Distribution segment's principal products and services include packaged and small bulk gases, gas cylinder and welding equipment rental and hardgoods. Gas
sales include industrial, medical and specialty gases such as: nitrogen, oxygen, argon, helium, acetylene, carbon dioxide, nitrous oxide, hydrogen, welding gases, ultra high purity grades and special
application blends. Rent is derived from gas cylinders, cryogenic liquid containers, bulk storage tanks and through the rental of welding equipment. Gas and rent represented approximately 47%, 44%,
and 42% of the Distribution segment's sales in each of the fiscal years 2002, 2001 and 2000, respectively. Hardgoods consist of welding supplies and equipment, safety products, and industrial tools
and supplies. In each of the fiscal years 2002, 2001, and 2000, hardgoods sales represented approximately 53%, 56%, and 58% of the Distribution segment's sales, respectively (see Note 23 of the
Company's Consolidated Financial Statements for additional information regarding segment sales).

Principal Markets and Methods of Distribution

The Company believes the market for industrial, medical and specialty gases in the United States is approximately $9.4 billion annually. The industry has
three principal modes of distribution: on-site supply, bulk or merchant supply and cylinder ("packaged gas") supply. In the U.S. market, on-site supply accounts for
approximately 25% of sales, bulk or merchant supply accounts for approximately 35% of sales, and packaged gas supply accounts for the remaining 40% or $3.8 billion in sales. Airgas' market
focus has been on the packaged gas segment of the market and on small bulk customers. Generally, packaged gas distributors also distribute welding products. The Company believes the U.S. market for
welding products to be approximately $3.9 billion annually.

Airgas
is the largest distributor of packaged gases and welding products in the United States with approximately a 19% market share. The Company's competitors in this market are
approximately 900

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independent distributors that serve approximately 50% of the market through a fragmented distribution network. Large distributors, including vertically integrated gas producers such as
Praxair, Inc. ("Praxair"), Liquid Air Corporation of America ("Air Liquide"), and BOC Gases Group ("BOC Gases"), serve the remaining 31% of the packaged gas market. The Company also sells
safety equipment. The United States market for safety equipment is approximately $6 billion, of which Airgas' share is approximately 4%.

Customer Base

The Company's customer base is broad and includes many major industries. The Company estimates the following industry segments account for the indicated
percentages of the Company's total sales:



Suppliers

The Company purchases industrial, medical and specialty gases pursuant to requirements contracts from national and regional producers of industrial gases. In
connection with the acquisition of the U.S. packaged gas operations of Air Products and Chemical ("Air Products"), the Company entered into a 15-year supply agreement under which Air
Products will supply at least 35% of the Company's bulk liquid nitrogen, oxygen and argon requirements. Additionally, the Company will purchase helium from Air Products under the terms of the supply
agreement. The Company also manufactures certain gases, including acetylene, nitrous oxide, nitrogen, oxygen and argon. The Company believes, that if a
contractual arrangement with any supplier of gases or other raw materials was terminated, it would be able to locate alternative sources of supply without disruption of service. The Company purchases
hardgoods from major manufacturers and suppliers. For certain products, the Company has negotiated national purchasing arrangements. The Company believes that if an arrangement with any supplier of
hardgoods was terminated, it would be able to arrange comparable alternative supply arrangements.

GAS OPERATIONS

The Gas Operations segment produces and distributes certain gas products, principally dry ice, carbon dioxide, nitrous oxide and specialty gases. The Company also
operates two air separation plants that produce oxygen, nitrogen and argon which are sold to on-site customers and to the Distribution segment. A description of the businesses included in
the Gas Operations segment are as follows:

Dry Ice

The Company is a producer and distributor of dry ice in the United States. Customers include food processors, food service, pharmaceutical and biotech industries,
wholesale trade and grocery and other retail outlets. The dry ice business generally experiences a higher level of sales during the warmer

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months. The Company's carbon dioxide requirements (dry ice is the solid form of carbon dioxide) are purchased from the vertically integrated producers of carbon dioxide and from internal production
sources.

Carbon Dioxide

The Company is a producer and distributor of liquid carbon dioxide. Carbon dioxide requirements are met by eight Company-owned production facilities, a 50%-owned
joint venture and purchases from vertically integrated gas producers of carbon dioxide. The joint venture also produces and sells liquid carbon dioxide to other producers of industrial gases. The
Company believes the United States bulk supply market for liquid carbon dioxide is approximately $475 million annually. The largest customer segments include chemical producers and
manufacturers of foods and beverages. The Company primarily competes with three major carbon dioxide companies, Praxair, BOC Gases and Air Liquide, which produce over 70% of the merchant carbon
dioxide volumes in the United States.

Specialty and Other Gases

The Company operates 8 National labs, full scale testing and blending facilities, which blend various special application gas mixes, ultra high purity grade
gases, pure hydrocarbon mixtures, EPA protocol gases, and vehicle emission standard gases. Gas mixtures are used in process control, final product qualification and emissions monitoring. Specialty
gases produced are primarily sold to the Distribution segment (see Note 23 of the Company's Consolidated Financial Statements for disclosure related to segment sales). The third-party customer
base for these products consists primarily of environmental-related businesses, manufacturers of electronics, governmental entities, petroleum refiners, pharmaceutical companies and automotive
businesses. Gas Operations also provides technical support to 54 regional labs, limited scale testing and blending facilities, which are operated by the Distribution segment. The national and regional
labs perform testing and certification services for gas purity.

Nitrous Oxide

The Company is a manufacturer of nitrous oxide gas. Nitrous oxide is used as an anesthetic in the medical and dental fields, as a propellant in the packaged food
business and is utilized in the manufacturing process of certain high technology electronics industries. The Company's market focus includes bulk customers as well as sales to the Distribution
segment. The Company purchases the raw materials utilized in its nitrous oxide production pursuant to contracts with major manufacturers and suppliers.

Suppliers

The Company believes that if a contractual arrangement with any Gas Operations segment supplier was terminated, it would not have a material adverse effect on
operations. However, two of the Company's 15 dry ice production facilities are located on property owned by BOC Gases. If the current arrangements with BOC Gases were terminated, the Company's dry ice
production capabilities may be reduced.

AIRGAS GROWTH STRATEGIES

The Company's strategic objectives are to establish itself as the low-cost supplier in the industry and drive market-leading sales growth by
leveraging its national distribution infrastructure. To meet these objectives, the Company has established the following strategic initiatives:



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These
strategic objectives are designed to facilitate organic sales and earnings growth. The Company will also continue to supplement its internal growth strategies through core business
acquisitions.

REGULATORY AND ENVIRONMENTAL MATTERS

The Company's subsidiaries are subject to federal and state laws and regulations adopted for the protection of the environment and the health and safety of
employees and users of the Company's products. The Company has programs for the operation and design of its facilities to achieve compliance with applicable environmental regulations. The Company
believes that it is in compliance, in all material respects, with such laws and regulations. Expenditures for environmental purposes during fiscal 2002 were not material.

INSURANCE

The Company has established insurance programs to cover workers' compensation, business automobile, general and products liability. These programs have
self-insured retention of $500,000 per occurrence and an aggregate limit of $1.5 million of claims in excess of $500,000. The Company accrues estimated losses using actuarial models
and assumptions based on the Company's historical loss experience.

EMPLOYEES

On March 31, 2002, the Company employed approximately 8,500 employees of whom approximately 5% were covered by collective bargaining agreements. The
Company believes it has good relations with its employees and has not experienced a significant strike or work stoppage in over ten years.

PATENTS, TRADEMARKS AND LICENSES

The Company holds trademark registrations for "Airgas," "Red-D-Arc," "RED-D-ARC WELDERENTAL," "Gold Gas,"
"Stainless Mix," "Steelmix," "Alummix," "Powersource," and "VAWELD." The Company has trademarks pending for "RADNOR," "RADNOR Industrial Products," "RADNOR Safety Products," and "RADNOR Welding
Products," its private-label product brands. The Company believes that its businesses as a whole are not materially dependent upon any single patent, trademark or license.

6

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EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company are as follows:

|Name                   |  | Age |  | Position                                                                
|---------------------- |  | --- |  | ------------------------------------------------------------------------
|Peter McCausland(1)    |  | 52  |  | Chairman of the Board and Chief Executive Officer                       
|Glenn M. Fischer       |  | 51  |  | President and Chief Operating Officer                                   
|Roger F. Millay        |  | 44  |  | Senior Vice PresidentFinance and Chief Financial Officer               
|Andrew R. Cichocki     |  | 39  |  | Senior Vice PresidentHuman Resources                                   
|Robert A. Dougherty    |  | 44  |  | Senior Vice PresidentInformation Services and Chief Information Officer
|Gordon L. Keen, Jr.    |  | 57  |  | Senior Vice PresidentLaw and Corporate Development                     
|Michael L. Molinini    |  | 51  |  | Senior Vice PresidentHardgoods Operations                              
|Ted R. Schulte         |  | 51  |  | Senior Vice PresidentGas Operations                                    
|Patrick M. Visintainer |  | 38  |  | Senior Vice PresidentSales                                             
|Alfred B. Crichton     |  | 54  |  | Division PresidentWest                                                 
|B. Shaun Powers        |  | 50  |  | Division PresidentEast                                                 
|Dean A. Bertolino      |  | 33  |  | Vice President and General Counsel                                      

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Mr. McCausland
has been Chairman of the Board and Chief Executive Officer of the Company since May 1987. Mr. McCausland has also served as President from
June 1986 to August 1988, from April 1993 to November 1995, and from April 1997 to December 1998. In May 1997, Mr. McCausland was elected to the
board of directors of Hercules Inc., a worldwide manufacturer of chemical specialty products. He also serves on the Board of Trustees of the Eisenhower Exchange Fellowships.

Mr. Fischer
has been President and Chief Operating Officer since November 2000. Prior to joining Airgas, Mr. Fischer served as President of BOC
GasesNorth America from 1997 to 2000 and as Executive Vice President of BOC GasesAmericas from 1995 to 1997.

Mr. Millay
has been Senior Vice PresidentFinance and Chief Financial Officer since November 1999. Prior to joining Airgas, Mr. Millay served as Senior
Vice President and Chief Financial Officer of Transport International Pool, a division of General Electric Capital Corporation, from May 1995 to October 1999.

Mr. Cichocki
was appointed Senior Vice PresidentHuman Resources in May 2002. Prior to that time, Mr. Cichocki served as Senior Vice
PresidentProject One from February 2001 to April 2002, Senior Vice PresidentBusiness Operations and Planning from January 1999 to January 2001,
Vice PresidentCorporate Development from April 1997 to December 1998 and as Assistant Vice PresidentCorporate Development from August 1992 to
March 1997. In his current position, Mr. Cichocki replaced Mr. Giangrasso who had served as Senior Vice PresidentHuman Resources since May 2001.

Mr. Dougherty
has been Senior Vice PresidentInformation Services and Chief Information Officer since joining Airgas in January 2001. Prior to joining Airgas,
Mr. Dougherty served as Vice President and Chief Information Officer from August 1998 to December 2000 and as Director of Information Systems from November 1993 to
July 1998 of Subaru of America, Inc.

Mr. Keen
has been Senior Vice PresidentLaw and Corporate Development since April 1997. Prior to that time, Mr. Keen served as Vice
PresidentCorporate Development from January 1992 to March 1997.

Mr. Molinini
has been Senior Vice PresidentHardgoods Operations since August 2000. Prior to that time, Mr. Molinini served as Vice
PresidentHardgoods Operations from August 1999 to

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July 2000 and as Vice PresidentAirgas Direct Industrial from April 1997 to July 1999. Prior to joining Airgas, Mr. Molinini served as Vice President of
Marketing of National Welders Supply Company since 1991.

Mr. Schulte
has been Senior Vice PresidentGas Operations since August 2000. Prior to that time, Mr. Schulte served as Vice PresidentGas
Operations from November 1998 to July 2000 and as President of Airgas Carbonic from November 1997 to October 1998. Prior to joining Airgas, Mr. Schulte served as
Senior Vice President of Energetic Solutions, the US subsidiary of ICI Explosives, from June 1997 to October 1997 and as Vice President Industrial Gas Sales of Arcadian Corporation from
1992 through June 1997.

Mr. Visintainer
has been Senior Vice PresidentSales since January 1999. Prior to that time, Mr. Visintainer served as Vice PresidentSales
and Marketing from February 1998 to December 1998 and as President of one of the Company's subsidiaries from April 1996 to January 1998. Until March 1996, he was
employed by BOC Gases and served in various field positions including National Sales ManagerIndustrial/Specialty Gases and National Accounts Manager.

Mr. Crichton
has been Division PresidentWest since February 1993. Prior to that time, Mr. Crichton served in various leadership positions since joining
the Company in 1988 and has more than 30 years of experience in the industrial gas industry.

Mr. Powers
has been Division PresidentEast since joining Airgas in April 2001. Prior to joining Airgas, Mr. Powers served as Senior Vice President of
Industrial Gases at AGA from October 1995 to March 2001. Mr. Powers' career also includes 17 years with Air Products and Chemicals, Inc. where he served in various
leadership positions.

Mr. Bertolino
has been Vice President and General Counsel since December 2001. Prior to joining Airgas, Mr. Bertolino served as Assistant General Counsel of The BOC
Group, Inc. from 1999 to 2001 and as an Associate with the law firm of Brown & Wood LLP from 1994 to 1999.

ITEM 2. PROPERTIES.

The principal executive offices of the Company are located in leased space in Radnor, Pennsylvania.

The
Company's Distribution segment operates a network of multiple use facilities consisting of approximately 610 branch stores, 54 regional gas laboratories, 17 acetylene manufacturing
facilities, 5 regional distribution centers, 180 cylinder fill plants and various customer call centers. The Distribution segment conducts business in 46 states. The Company owns approximately 28% of
these facilities. The remaining facilities are primarily leased from third parties. A limited number of facilities leased from employees are on terms consistent with commercial rental rates prevailing
in the surrounding rental market.

The
Company's Gas Operations' segment consists of businesses, located throughout the United States, which operate approximately 40 branch locations, 8 liquid carbon dioxide and 15 dry
ice production facilities, 2 air separation plants, 8 national gas laboratories, and 3 nitrous oxide production facilities. The Company owns approximately 25% of these facilities. The remaining
facilities are leased from third parties.

The
Company's distribution network was expanded through the addition of 88 locations acquired from Air Products during the fourth quarter of fiscal 2002. The additional facilities are
included in the description above.

During
fiscal 2002, the Company's production facilities operated at approximately 75% of capacity based on an average daily production shift of 16 hours.

The
Company believes that its facilities are adequate for its present needs and that its properties are generally in good condition, well maintained and suitable for their intended use.

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ITEM 3. LEGAL PROCEEDINGS.

In July 1996, Praxair, Inc. ("Praxair") filed suit against the Company in the Circuit Court of Mobile County, Alabama, alleging tortious
interference with business or contractual relations with respect to Praxair's right of first refusal agreement with the majority shareholders of National Welders Supply Company, Inc. ("National
Welders") in connection with the Company's formation of a joint venture with National Welders. In June 1998, Praxair filed a motion to dismiss its own action in Alabama and commenced another
action in the Superior Court of Mecklenburg County, North Carolina, alleging substantially the same tortious interference by the Company. The North Carolina action also alleged breach of contract
against National Welders and certain shareholders of National Welders and unfair trade practices and conspiracy against all the defendants. In April 2002, the Company and Praxair entered into
an agreement to settle the litigation in order to avoid the time and expense of a lengthy trial. Each party denied any wrongdoing or liability and Praxair agreed to an early termination of the right
of first refusal. As a result of the settlement, in the fourth quarter of fiscal 2002, the Company recorded a charge to earnings, net of previously established reserves related to the litigation, of
$8.5 million. In fiscal 2001, the Company recorded a charge of $6.9 million for costs associated with defending the Praxair lawsuit.

In
fiscal 1997, the Company announced it was the victim of a fraudulent breach of contract by a third-party supplier of refrigerant gases and recorded a special charge related to product
losses and costs associated with the Company's efforts to investigate the fraud and pursue recoveries. In March 2001, the
Company reached a final settlement with its insurance carriers resulting in insurance recoveries of $4 million. The insurance settlement, net of associated legal expenses, was reflected in
special charge recoveries in the Consolidated Statement of Earnings included in Item 8.

In
fiscal 2000, the Company recorded a $7.5 million charge representing an estimate of the overall costs associated with the defense and settlement of certain class action
lawsuits pertaining to hazardous material charges paid to the Company by customers. In the fourth quarter of fiscal 2001, a settlement agreement and approving court orders covering all such class
actions against the Company became final, and the Company reversed $1.1 million of the previously accrued defense and settlement costs.

The
Company is involved in various legal and regulatory proceedings that have arisen in the ordinary course of its business and have not been fully adjudicated. These actions, when
ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the Company's consolidated financial condition, results of operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 2002.

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PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

The Company's common stock (the "common stock") is listed on the New York Stock Exchange (ticker symbol: ARG). The following table sets forth, for each quarter
during the last two fiscal years, the high and low closing price per share for the common stock as reported by the New York Stock Exchange:

|               |  | High |       | Low
|-------------- |  | ---- | ----- | ---
|Fiscal 2002    |  |      |       |    
|First Quarter  |  | $    | 11.90 |    
|Second Quarter |  |      | 14.31 |    
|Third Quarter  |  |      | 15.65 |    
|Fourth Quarter |  |      | 20.61 |    
|Fiscal 2001    |  |      |       |    
|First Quarter  |  | $    | 8.31  |    
|Second Quarter |  |      | 6.81  |    
|Third Quarter  |  |      | 8.44  |    
|Fourth Quarter |  |      | 9.70  |    

The
closing sale price of the Company's common stock as reported by the New York Stock Exchange on June 17, 2002, was $17.10 per share. As of June 17, 2002, there were
approximately 21,500 shareholders of record of the Company's common stock.

The
present policy of the Company is to retain earnings to provide funds for the operation and expansion of its business and not to pay cash dividends on its common stock. Any payment of
future dividends and the amounts thereof will depend upon the Company's earnings, financial condition, loan covenants, capital requirements and other factors deemed relevant by management and the
Company's Board of Directors.

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ITEM 6. SELECTED FINANCIAL DATA.

Selected financial data for the Company are presented in the table below and should be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations included in Item 7 and the Company's Consolidated Financial Statements and notes thereto included in Item 8 herein.

(In
thousands, except per share amounts):

|                                                      |  | Years Ended March 31,
|----------------------------------------------------- |  | ---------------------
|
|Operating Results:                                    |  |                      
|Net sales                                             |  | $                    
|Depreciation and amortization(6)                      |  |                      
|Special charges (recoveries), net                     |  |                      
|Operating income                                      |  |                      
|Interest expense, net                                 |  |                      
|Discount on securitization of trade receivables       |  |                      
|Other income, net                                     |  |                      
|Income taxes                                          |  |                      
|Cumulative effect of a change in accounting principle |  |                      
|Net earnings (loss)                                   |  |                      
|Basic earnings (loss) per share                       |  | $                    
|Diluted earnings (loss) per share                     |  | $                    
|Balance Sheet Data:                                   |  |                      
|Working capital                                       |  | $                    
|Total assets                                          |  |                      
|Current portion of long-term debt                     |  |                      
|Long-term debt                                        |  |                      
|Other non-current liabilities                         |  |                      
|Stockholders' equity(7)                               |  |                      
|Capital expenditures                                  |  |                      

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AIRGAS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations

ITEM 7.

RESULTS OF OPERATIONS: 2002 COMPARED TO 2001

OVERVIEW

The Company's net sales for the fiscal year ended March 31, 2002 were $1.64 billion compared to $1.63 billion in the prior year. Fiscal 2002
was marked by continued slowing of the U.S. economy, particularly in relation to industrial and manufacturing markets. Despite the weak economic environment, the Company was successful in maintaining
sales through its focus on strategic sales initiatives, including account penetration through the sale of safety products and sales to strategic account customers. The Company also continued to
implement selective price increases and a discount and contract management program during fiscal 2002 that helped offset rising costs related to purchased gases, personnel costs, insurance and process
improvement initiatives. Excluding the effect of the items outlined below, net earnings were $.78 per diluted share in fiscal 2002 compared to $.72 per diluted share in fiscal 2001, adjusted for
comparative purposes to exclude the amortization of goodwill. Results as reported in fiscal 2002 were a net loss of $10.4 million, or a loss of $.15 per diluted share, compared to net earnings
of $28.2 million, or $.42 per diluted share, in fiscal 2001.

As
discussed in the "Income Statement Commentary" below, fiscal 2002 results were affected by the following:



Fiscal
2001 results were affected by the following:



Fiscal
2002 was a significant year for the Company. In February 2002, the Company completed the largest acquisition in its 20-year history with the acquisition of the
majority of Air Products and Chemicals, Inc.'s ("Air Products") U.S. packaged gas business for cash of $241 million, including transaction costs, (the "Air Products acquisition"). The
acquisition included 88 locations in 30 states associated with the filling and distribution of cylinders, liquid dewars, tube trailers, and other containers of industrial gases and
non-electronic specialty gases, and the selling of welding hardgoods. The acquired business generates annual sales of approximately $223 million and employs nearly 1,100 people. The
Company expects that the Air Products acquisition will be accretive to earnings and return on capital in fiscal 2003. In September 2001, the Company also acquired six distributor locations from
Air Liquide America Corporation ("Air Liquide") for $11 million. In a separate transaction in October 2001, the Company sold two of its nitrous oxide facilities to Air Liquide for cash
proceeds of $10 million.

The
Company entered into an agreement with Praxair, Inc. ("Praxair") settling the litigation brought by Praxair against the Company in July 1996. The litigation alleged
tortious interference with Praxair's right of first refusal agreement with National Welders Supply Company, Inc. The parties

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entered into the settlement agreement in order to avoid the time and expense of a lengthy trial, which was scheduled to begin in July 2002. The settlement resulted in the Company recognizing a
charge of $8.5 million in the fourth quarter of fiscal 2002.

In
July 2001, the Company refinanced its revolving credit facilities to extend the term to 2006. Concurrent with the financing, the Company issued $225 million of 9.125%
senior subordinated notes. In conjunction with the Air Products acquisition, the Company also obtained a $100 million term loan from a syndicate of lenders. These transactions enabled the
Company to finance the Air Products acquisition entirely with senior bank debt. In fiscal 2002, exclusive of acquisition and divestiture activity and the Company's trade receivables securitization,
the Company reduced total debt by $118 million. The ability to reduce debt is indicative of the strong cash flow characteristics of the Company's business.

On
April 1, 2001, the Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets.
SFAS 142 requires goodwill and intangible assets with indefinite useful lives to no longer be amortized,
but instead be tested for impairment at least annually. With the adoption of SFAS 142, the Company used new criteria to assess whether goodwill associated with its business units was impaired.
The valuation indicated that goodwill associated with the Company's tool business was impaired, which resulted in the recognition of a $59 million non-cash charge as the cumulative
effect of a change in accounting principle. The impaired goodwill was not deductible for taxes, and accordingly, no tax benefit was recorded in relation to the charge.

As
prescribed by SFAS 142, fiscal 2002 results exclude the amortization of goodwill. For comparability to prior periods, certain discussions in the Management's Discussion and
Analysis present fiscal 2001 results adjusted to exclude the amortization of goodwill. The actual results as reported in fiscal 2001 are presented in the Consolidated Financial Statements included in
Item 8. Additionally, Note 7 to the Consolidated Financial Statements provides a reconciliation between the fiscal 2001 reported results and the adjusted results discussed in the
Management's Discussion and Analysis.

INCOME STATEMENT COMMENTARY

Net Sales

Net sales increased 0.4% in fiscal 2002 compared to 2001, reflecting same-store sales growth of 0.2%. The Company calculates same-store
sales based on a comparison of current period sales to prior period sales, adjusted for acquisitions and divestitures.

|               |  | 2002 |           | 2001 |   | Increase  | 
|-------------- |  | ---- | --------- | ---- | - | --------- | 
|
|Distribution   |  | $    | 1,494,267 |      | $ | 1,487,422 | 
|Gas Operations |  |      | 141,780   |      |   | 141,479   | 
|               |  |      |           |      |   |           | 
|               |  | $    | 1,636,047 |      | $ | 1,628,901 | 
|               |  |      |           |      |   |           | 

The
Distribution segment's principal products and services include industrial, medical and specialty gases, equipment rental and hardgoods. Industrial gases consist of packaged and small
bulk gases. Equipment rental fees are generally charged on cylinders, cryogenic liquid containers, bulk tanks and welding equipment. Hardgoods consist of welding supplies and equipment, safety
products, and industrial tools and supplies. Sales of the Distribution segment increased $6.8 million driven by acquisitions partially offset by a decline in same-store sales.
Fiscal 2002 acquisitions contributed sales of $22.6 million. Distribution same-store sales decreased $15.8 million (-0.6%) resulting from a decline in hardgoods
same-store sales of $59.9 million (-6.7%), partially offset by gas and rent sales growth of $44.1 million (7.1%). The decline in hardgoods same-store
sales resulted from lower sales volumes of

14

---

industrial tools and welding products reflecting the weak industrial and manufacturing environment, particularly with regard to metal fabrication and machinery industries. The decrease in hardgoods
sales was correlated with the decline in non-tech industrial production during fiscal 2002. Partially offsetting the decline in tools and welding hardgoods, sales of safety products grew
4% to $258 million compared
to the prior year reflecting continued success of account penetration initiatives and growth through the Company's telemarketing sales channel. Gas and rent same-store sales growth was
driven by price increases during the year in response to rising costs and by growth derived from strategic sales initiatives. Growth in strategic gas sales was driven by higher volumes of medical,
specialty and bulk gases. Rental revenue was also favorably impacted by a 12% increase in welder equipment rentals from the Company's expansion of its rental welder fleet. Sales to strategic account
customers (sales to large customers with multiple locations) grew 10% to $165 million in fiscal 2002 reflecting the Company's success in leveraging its broad distribution network to service
large customers. The Company has followed a strategy of focusing on strategic sales initiatives to drive sales growth and market penetration in the industries that it serves.

The
Gas Operations segment's sales primarily include dry ice and carbon dioxide that are used for cooling and the production of food, beverages and chemical products. In addition, the
segment includes businesses that produce and distribute specialty gases and nitrous oxide. Gas Operations' sales were flat as same-store sales growth was offset by divestiture activity.
Same-store sales increased $7.4 million (5.9%) driven by price increases to help offset rising costs and higher volumes of liquid carbon dioxide and dry ice. Divestiture activity
consisted of the sale of two nitrous oxide plants in fiscal 2002 and the divestiture of the Jackson Dome carbon dioxide reserves and associated pipeline (the "Jackson Dome pipeline") in
January 2001.

Gross Profits

Gross profits, excluding depreciation expense, increased 4.6% in fiscal 2002 compared to 2001. The gross profit margin increased 200 basis points to 50% in fiscal
2002 as compared to 48% in the prior year.

|               |  | 2002 |         | 2001 |   | Increase | 
|-------------- |  | ---- | ------- | ---- | - | -------- | 
|
|Distribution   |  | $    | 724,173 |      | $ | 689,999  | 
|Gas Operations |  |      | 93,121  |      |   | 91,702   | 
|               |  |      |         |      |   |          | 
|               |  | $    | 817,294 |      | $ | 781,701  | 
|               |  |      |         |      |   |          | 

Distribution
gross profits increased $34.2 million from both same-store gross profit growth and acquisition activity. The Distribution segment's gross profit margin of
48.5% in fiscal 2002 increased 210 basis points from 46.4% in the prior year. The improved margin was primarily due to a shift in sales mix towards higher margin gas and rent sales as well as price
increases and a discount management program. The shift in sales mix was driven principally by strategic sales initiatives and declining hardgoods sales. Gas and rent comprised 47.3% of Distribution
sales compared to 43.5% in the prior year.

Gas
Operations' gross profits increased $1.4 million primarily from same-store gross profit growth of $5.5 million partially offset by divestiture activity.
Same-store gross profit growth reflected higher volumes and pricing for liquid carbon dioxide and dry ice. Gas Operations' gross profit margin of 65.7% increased 90 basis points from 64.8%
in the prior year, reflecting volume gains leveraging fixed manufacturing costs and price increases.

15

---

Operating Expenses

Selling, distribution and administrative expenses ("SD&A") consist of personnel and related costs, distribution and warehouse costs, occupancy expenses and other
selling, general and administrative expenses. SD&A expenses increased $36 million (6.2%) compared to the prior fiscal year primarily from net acquisition and divestiture activity and higher
costs associated with personnel, health and workers' compensation insurance, costs associated with the Company's Project One initiative and litigation. The Project One initiative began in the second
half of fiscal 2001 and is focused on improving certain operational and administrative processes. On a same-store basis, SD&A expenses increased by approximately $27 million (5%) in
fiscal 2002 compared to fiscal 2001. Higher litigation costs resulted from a litigation settlement, discussed below. As a percentage of net sales, SD&A expenses increased 210 basis points to 37.9%
from 35.8% in fiscal 2001.

Litigation
costs were $11 million in fiscal 2002 compared to $7.5 million in fiscal 2001. Fiscal 2002 included a charge of $8.5 million, net of previously
established reserves, to settle litigation brought by Praxair, a competitor, against the Company in July 1996. Fiscal 2001 included a charge of $6.9 million for costs to defend against
the lawsuit brought by Praxair.

Amortization
expense was $8.2 million in fiscal 2002 compared to $23.8 million in fiscal 2001. On April 1, 2001, the Company adopted SFAS 142, Goodwill and Other Intangible Assets. Under the new
pronouncement, goodwill is no longer amortized, but instead is tested for impairment at least
annually. Fiscal 2002 amortization expense relates to non-competition agreements, which are amortized over the terms of the respective agreements. Depreciation expense of
$64.8 million in fiscal 2002 increased 3% compared to fiscal 2001.

Operating Income

Operating income increased 2.2% in fiscal 2002 as compared to 2001, adjusted to exclude the amortization of goodwill. Fiscal 2001 operating income reflects
special charges, net, of $3.6 million consisting of a charge associated with a cost reduction plan partially offset by a special charge recovery from an insurance settlement. Excluding special
charges in fiscal 2001, operating income decreased approximately 1% in fiscal 2002.

|                |  | 2002 |         | 2001(a) |   | Increase (Decrease) |   | As Reported
2001 |       
|--------------- |  | ---- | ------- | ------- | - | ------------------- | - | ---------------- | ------
|
|Distribution    |  | $    | 103,430 |         | $ | 104,506             |   | $                | (1,076
|Gas Operations  |  |      | 21,603  |         |   | 21,523              |   |                  | 80    
|Special Charges |  |      |        |         |   | (3,643              | ) |                  | 3,643 
|                |  |      |         |         |   |                     |   |                  |       
|                |  | $    | 125,033 |         | $ | 122,386             |   | $                | 2,647 
|                |  |      |         |         |   |                     |   |                  |       

---

The
Distribution segment's operating income margin of 6.9% in fiscal 2002 decreased slightly from 7.0% in fiscal 2001, as adjusted. The relatively stable operating income margin year
over year reflected the Company's success in raising prices to offset higher operating expenses.

The
Gas Operations segment's operating income margin was flat at 15.2% in both fiscal 2002 and fiscal 2001, as adjusted. Higher gross profits from volume and price increases in fiscal
2002 offset the divestiture of the Jackson Dome pipeline and the two nitrous oxide plants, both of which had higher than average operating margins reflected in the prior year's results.

16

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Interest Expense and Discount on Securitization of Trade Receivables

Interest expense, net, and the discount on securitization of trade receivables totaled $51.9 million representing a decrease of $9.7 million
(-15.7%) compared to the prior fiscal year. The decrease resulted primarily from lower average debt levels. The decrease in average debt levels was attributable to cash flow provided from
operations and proceeds from the divestiture of the Jackson Dome pipeline in the fourth quarter of fiscal 2001. Although the Air Products acquisition increased debt levels at the end of fiscal 2002,
average debt levels during fiscal 2002 were approximately $130 million lower than fiscal 2001. Weighted-average financing costs were slightly lower in the current year compared to the prior
year as higher rates of fixed cost debt associated with the Company's July 2001 debt refinancing were offset by lower prevailing market rates related to variable rate debt.

The
Company participates in a securitization agreement with two commercial banks to sell up to $175 million of qualifying trade receivables. The amount of outstanding receivables
under the agreement was $134 million and $73 million at March 31, 2002 and March 31, 2001, respectively. Net proceeds from the sale of trade receivables were used to reduce
borrowings under the Company's revolving credit facilities. The discount on the securitization of trade receivables represents the difference between the carrying value of the receivables and the
proceeds from their sale. The amount of the discount varies on a monthly basis depending on the amount of receivables sold and market rates.

As
discussed in "Liquidity and Capital Resources" and in Item 7A "Quantitative and Qualitative Disclosures About Market Risk," the Company manages its exposure to interest rate
risk of certain borrowings through participation in interest rate swap agreements. Including the effect of the interest rate swap agreements, the Company's ratio of fixed to variable interest rates at
March 31, 2002 was 48% fixed to 52% variable. A majority of the Company's variable rate debt is based on a spread over the London Interbank Offered Rate ("LIBOR"). Based on the Company's
outstanding variable rate debt and credit rating at March 31, 2002, for every increase in LIBOR of 25 basis points, it is estimated that the Company's annual interest expense would increase
approximately $1 million.

Other Income, net

Other income, net, totaled $1.4 million in fiscal 2002 compared to $242 thousand in fiscal 2001. Fiscal 2002 includes a net
non-recurring gain of $1.9 million consisting of a $7.4 million gain on the divestiture of two nitrous oxide plants partially offset by a $3.6 million charge to write
down a business unit held for sale to its net realizable value and a $1.9 million loss resulting from an indemnity claim related to a prior period divestiture.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates of $3.8 million was relatively flat compared to $4.0 million in fiscal 2001, adjusted for
comparative purposes to exclude goodwill amortization. Fiscal 2001 includes after-tax charges of $700 thousand related to asset impairments associated with two equity affiliates.
Including goodwill amortization, equity in earnings of unconsolidated affiliates as reported in fiscal 2001 was $2.3 million.

Income Tax Expense

The effective income tax rate was 38.0% of pre-tax earnings in fiscal 2002 compared to 35.5% in fiscal 2001, adjusted for comparative purposes for the
impact of SFAS 142. The increase in the effective income tax rate in fiscal 2002 was primarily due to the $3.6 million write-down of a business unit to its net realizable
value, which was not deductible for income taxes. The effective income tax rate as reported in fiscal 2001 was 42.3%.

17

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Cumulative Effect of a Change in Accounting Principle

In connection with the adoption of SFAS 142, the Company performed an evaluation of goodwill as of April 1, 2001. The results of the evaluation
indicated that goodwill related to one reporting unit, the Company's tool business, was impaired. The Company measured the amount of impairment based on a comparison of the fair value of the reporting
unit to its carrying value. Accordingly, the Company recognized a $59 million non-cash, after-tax charge, recorded as of April 1, 2001, as a cumulative effect of
a change in accounting principle for the write-down of goodwill of the tool business reporting unit to its fair value. The impaired goodwill was not deductible for taxes, and as a result,
no tax benefit was recorded in relation to the charge.

On
April 1, 2001, the Company adopted SFAS 133,Accounting for Derivative Instruments and Certain Hedging Activities, as amended by SFAS
No. 137 and 138. SFAS 133 requires all derivatives to be recorded on the balance sheet at fair value. In accordance with the transition provisions of
SFAS 133, the Company recorded the cumulative effect of this accounting change as a liability and a deferred loss of $6.7 million in the accumulated other comprehensive income (loss)
component of stockholders' equity to recognize, at fair value, interest rate swap agreements that are designated as cash flow hedging instruments. Additionally, the Company recorded an asset and
adjusted the carrying value of the hedged portion of its fixed rate debt by $6 million to recognize, at fair value, interest rate swap agreements that are designated as fair value hedging
instruments

Net Earnings (Loss)

The Company recognized a net loss in fiscal 2002 of $10.4 million, or a loss of $.15 per diluted share, compared to net earnings of $28.2 million,
or $.42 per diluted share, in fiscal 2001.

Air Products Acquisition Integration

The Air Products acquisition contemplated certain integration activities to optimize the combined operations. Those activities consist of facility exit costs and
employee severance related to closing duplicate or overlapping facilities and integration costs related to computer conversions, training and the cost of moving inventory and equipment. Although final
cost estimates for those activities are being prepared, the costs to exit existing Airgas facilities and sever employees are expected to be between $2.5 and $3.5 million and will be recognized
in a special charge in the first quarter of fiscal 2003. Integration costs are expected to be between $3.5 and $4.5 million and will be recognized in operating expenses as incurred throughout
fiscal 2003.

18

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AIRGAS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations

RESULTS OF OPERATIONS: 2001 COMPARED TO 2000

OVERVIEW

The Company's net sales for the fiscal year ended March 31, 2001 were $1.63 billion compared to $1.54 billion in the prior year. Despite a
slowing U.S. economy, the Company experienced positive same-store sales growth of 3.1%, continuing the same-store sales growth that began in the fiscal 2000 fourth quarter. The
Company's successful strategy of leveraging its distribution network to sign new strategic accounts, pursue cross-selling opportunities and promote strategic products had a favorable impact on net
sales. In addition, net sales were positively affected by the prior year acquisition of Mallinckrodt Inc.'s Puritan-Bennett medical gas subsidiary ("Puritan Medical Products"). The Company also
implemented price increases during fiscal 2001 that helped to offset rising costs related to purchased gases, salaries and wages, insurance, and distribution. Excluding the effect of the items
outlined below, net earnings were $.52 per diluted share in both fiscal 2001 and 2000. Net earnings, as reported, for fiscal 2001 were $28.2 million, or $.42 per diluted share, compared to
$38.3 million, or $.54 per diluted share, in fiscal 2000.

As
discussed in the "Income Statement Commentary" below, fiscal 2001 net earnings were affected by the following:



Fiscal
2000 net earnings were affected by the following:



Additionally
in fiscal 2001, the Company reduced total debt by $183.9 million. The ability to reduce debt is indicative of the strong cash flow characteristics of the Company's
business. Debt reduction resulted from cash flow from operations, divestitures and a securitization of trade receivables. Operations provided approximately $61 million, divestitures provided
approximately $50 million, principally the divestiture of the Jackson Dome carbon dioxide reserves and associated pipeline ("Jackson Dome pipeline"), and the trade receivables securitization
program provided approximately $73 million.

19

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INCOME STATEMENT COMMENTARY

Net Sales

Net sales increased 5.6% in fiscal 2001 compared to 2000, driven by same-store sales growth of 3.1% and prior year acquisitions included for a full
year in 2001.

2001

2000

Increase(In thousands)Distribution

$
1,487,422

$
1,409,949

$
77,473

5.5
%Gas Operations


141,479


132,385


9,094

6.9
%$
1,628,901

$
1,542,334

$
86,567

5.6
%


Distribution
sales increased $77.5 million as a result of net acquisition and divestiture activity and same-store sales growth. Fiscal 2001 sales increased
$43.8 million from seven distributor acquisitions since April 1, 1999, partially offset by a divestiture during fiscal 2000. The most significant of the acquisitions was that of Puritan
Medical Products in the fourth quarter of fiscal 2000. Distribution same-store sales growth of $33.7 million (2.7%) resulted from gas and rent sales growth of $28.8 million
(5.1%) and hardgoods sales growth of $4.9 million (1.0%). Gas and rent same-store sales growth was primarily attributable to higher volumes of strategic products and continued
success of certain sales initiatives, such as strategic accounts. Growth in strategic product sales resulted from expansion of the rental welder fleet and improvements in certain gas product sales
including medical and specialty gases. Price increases implemented during fiscal 2001 also contributed to gas and rent sales growth. Hardgoods same-store sales growth was driven
principally by an increase in safety sales resulting from the successful cross-selling of safety products through the Company's distribution network. Although hardgoods same-store sales
growth was positive in fiscal 2001, hardgoods sales slowed in the fiscal third quarter with further contraction in the fourth quarter resulting from the slowing U.S. industrial economy.

The
Gas Operations' sales increased $9.1 million in fiscal 2001 compared to the prior year primarily from same-store sales growth (7.2%). Gas Operations'
same-store sales growth resulted from higher volumes of liquid carbon dioxide, dry ice and nitrous oxide. Sales growth was also driven by price increases that were implemented during the
fourth quarter of fiscal 2001 to help offset the impact of higher energy and distribution costs. The reduction in sales from the divestiture of the Jackson Dome pipeline in fiscal 2001 and the
divestiture of operations in Poland and Thailand in fiscal 2000 were offset by nitrous oxide production businesses that were acquired with Puritan Medical Products.

Gross Profits

Gross profits, excluding depreciation expense, increased 7.7% in fiscal 2001 compared to 2000.

2001

2000

Increase(In thousands)Distribution

$
689,999

$
649,827

$
40,172

6.2
%Gas Operations


91,702


75,910


15,792

20.8
%$
781,701

$
725,737

$
55,964

7.7
%


Distribution
gross profits increased $40.2 million resulting from net acquisition and divestiture activity and same-store gross profits growth. Acquisition and
divestiture activity accounted for a net increase in gross profits of $29.0 million, primarily from the acquisition of Puritan Medical Products in the fourth quarter of fiscal 2000.
Same-store gross profits increased $11.2 million (2.4%) compared to the prior year. Same-store gross profit growth consisted of a $14.4 million (3.7%) increase in
gas and rent, partially offset by a decrease in hardgoods gross profits of $3.2 million. Same-store gross profits of

20

---

gas and rent increased resulting from higher sales volumes and price increases implemented during fiscal 2001. An expanded rental welder fleet also contributed to the increase in gross profits. The
Distribution segment's gross profit margin of 46.4% in fiscal 2001 increased 30 basis points from 46.1% in the prior year primarily as a result of a shift in sales mix to higher margin gases. The
shift in sales mix was driven principally by higher margin medical gases contributed by Puritan Medical Products. The decline in hardgoods same-store gross profits resulted from general
weakness in certain manufacturing and industrial hardgoods markets served by the Company. The decline in hardgoods gross profits was partially mitigated by lower costs from centralized purchasing
initiatives and continued growth of higher margin private label products. Private label products reached an annual run rate of $45 million in fiscal 2001 representing a 40% increase over the
prior year.

The
Gas Operations segment's gross profits increased $15.8 million primarily from same-store gross profit growth and net acquisition activity. Same-store
gross profit growth of $10.5 million (13.4%) resulted primarily from higher sales volumes and price increases of dry ice, liquid carbon dioxide and nitrous oxide. Gross profits increased
$1.5 million from net acquisition activity, primarily consisting of the prior year acquisition of Puritan Medical Products's nitrous oxide production businesses. In addition, the prior year was
adversely affected by an inventory write-down of $3.8 million related to certain specialty gas inventories. Gas Operations' gross profit margin was 64.8% compared to 57.3% in the
prior year. The gross profit margin in the prior year reflects the impact of the specialty gas inventory write-down.

Operating Expenses

Selling, distribution and administrative expenses ("SD&A") increased $50.8 million (9.5%) compared to the prior fiscal year primarily from net acquisition
and divestiture activity and higher costs associated with personnel, distribution and insurance. On a same-store basis, SD&A expenses are estimated to have increased approximately
$32 million in fiscal 2001 compared to fiscal 2000. Personnel costs were affected by rising salaries and wages driven by a competitive labor market. Higher distribution costs resulted primarily
from increases in the price of fuel and energy. Insurance costs were driven by rising medical costs related to workers' compensation and health insurance. The Company implemented a cost reduction plan
in the fourth quarter of fiscal 2001. The cost reduction plan focused on a reduction in workforce, the closure of 30 branch locations and the planned disposition of certain non-core
businesses. As a percentage of net sales, SD&A expenses increased to 35.8% from 34.5% in fiscal 2000.

Fiscal
2001 SD&A expenses included legal expenses of $7.5 million. Fiscal 2001 legal expenses reflect litigation charges of $5.3 million, net. The net litigation charges
consist primarily of a fourth quarter charge of $6.9 million related to a lawsuit brought by a competitor, Praxair, Inc. The charge reflected an estimate of the costs associated with the
defense of the lawsuit. The charge was partially offset by the final settlement and reversal of $1.1 million of liabilities established in fiscal 2000 associated with the defense and settlement
of class-action lawsuits related to hazardous materials charges. Legal expenses for fiscal 2000 of $9.6 million included a $7.5 million litigation charge representing the Company's
original estimate of the costs to defend against and settle the class-action lawsuits.

Depreciation
expense of approximately $63 million remained relatively flat compared to fiscal 2000. Amortization expense of $23.8 million decreased $1.9 million
(-7.2%) compared to fiscal 2000 primarily from the expiration of non-compete agreements related to prior acquisitions.

Special Charges (Recoveries)

Special charges in fiscal 2001 included a charge of $8.5 million related to a cost reduction plan implemented by the Company to improve operating results
at certain business units as well as to

21

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mitigate rising operating expenses. The fourth quarter 2001 cost reduction charge included severance costs for a reduction in workforce, exit costs for the closure of 30 branch locations and losses
associated with the anticipated divestiture of certain non-core businesses. The non-core businesses to be divested generated annual sales of approximately $10 million in
fiscal 2001 and were included in the Company's Distribution segment. The charge was partially offset by $4.9 million of special charge recoveries primarily consisting of a favorable insurance
settlement associated with the fiscal 1997 special charge. Special charge recoveries in fiscal 2000 consist of $2.8 million primarily from a favorable insurance settlement related to the fiscal
1997 special charge.

Operating Income

Operating income increased 1.1% in fiscal 2001 compared to 2000. Excluding special (charges) recoveries, operating income increased 7.4%.

2001

2000

Increase (Decrease)(In thousands)Distribution

$
92,186

$
94,671

$
(2,485
)
(2.6
)%Gas Operations


19,406


9,231


10,175

110
%Special (Charges) Recoveries


(3,643
)

2,829


(6,472
)
$
107,949

$
106,731

$
1,218

1.1
%


The
Distribution segment's operating income margin of 6.2% in fiscal 2001 decreased from 6.7% in fiscal 2000 primarily due to higher operating expenses, partially offset by gross profits
from same-store sales growth and acquisitions.

The
Gas Operations segment's operating income margin of 13.7% in fiscal 2001 increased from 7.0% in fiscal 2000. Fiscal 2001 results benefited from higher gross profits from
same-store sales growth and price increases. The prior year was adversely affected by a $3.8 million inventory write-down of certain specialty gas inventories. Gas
Operations' operating income margin was 9.8% in fiscal 2000, excluding the impact of the inventory write-down.

Interest Expense and Discount on Securitization of Trade Receivables

Interest expense, net, and the discount on securitization of trade receivables totaled $61.5 million and represents an increase of $4 million (6.9%)
compared to fiscal 2000. The increase resulted from higher average debt levels, partially offset by lower weighted-average interest rates. The increase in the average debt level in fiscal 2001 was
primarily due to the fourth quarter of fiscal 2000 acquisition of Puritan Medical Products as well as common stock repurchases during fiscal 2001.

In
December 2000, the Company entered into a trade receivables securitization agreement with two commercial banks. Net proceeds received by the Company through March 31,
2001 were $73.2 million and were used to reduce borrowings under the Company's revolving credit facilities. The discount on the securitization of trade receivables of $1.3 million in
fiscal 2001 represents the difference between the carrying value of the receivables and the proceeds from their sale. The amount of the discount varies on a monthly basis depending on the amount of
receivables sold and market rates.

Other Income, net

Other income, net, totaled $242 thousand in fiscal 2001 compared to $17.9 million in fiscal 2000. Fiscal 2000 includes a $14.9 million gain
from the divestitures of operations in Poland and Thailand.

22

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Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates of $2.3 million decreased $1.1 million compared to fiscal 2000. The decrease in fiscal 2001 was
primarily due to after-tax charges of $700 thousand related to asset impairments associated with two equity affiliates.

Income Tax Expense

The effective income tax rate was 42.3% of pre-tax earnings in fiscal 2001 compared to 44.8% in 2000. Excluding the tax effect related to certain
gains and special charges in both periods, the effective income tax rate was 41.1% of pre-tax earnings in fiscal 2001 compared to 41.5% in 2000.

Cumulative Effect of a Change in Accounting Principle

Fiscal 2000 includes a charge to net earnings of $590 thousand related to the adoption of Statement of Position 98-5, "Reporting on the Costs
of Start-up Activities." The charge primarily resulted from the write-off of start-up costs capitalized in prior fiscal years in connection with the Company's two
air separation units.

Net Earnings

Net earnings in fiscal 2001 were $28.2 million, or $.42 per diluted share, compared to $38.3 million, or $.54 per diluted share, in fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES

Fiscal 2002 Cash Flows

Net cash provided by operating activities totaled $249.4 million in fiscal 2002 compared to $199.0 million in fiscal 2001. Net earnings, adjusted
for non-cash items including the cumulative effect of a change in accounting principle, were $159.2 million compared to $125.1 million in fiscal 2001. The sale of trade
receivables under the trade receivables securitization program provided cash of $60.8 million in fiscal 2002 compared to $73.2 million in the prior year. Working capital and other assets
and liabilities, net, provided cash of $29.4 million compared to $696 thousand in fiscal 2001, representing a net improvement in cash flow of $28.7 million. Working capital
improvement was primarily driven by lower levels of inventory and trade receivables as well as higher outstanding accounts payable. Lower inventory levels resulted from a decline in hardgoods sales,
more effective utilization of the Company's centralized distribution centers and initiatives designed to consolidate product lines and vendors. Higher outstanding accounts payable reflected an
increase in days payable outstanding to 44 days from 39 days at March 31, 2001. Cash flow provided by operating activities was primarily used to reduce borrowings under the
Company's revolving credit facilities and fund capital expenditures.

Cash
used in investing activities totaled $294.7 million and primarily consisted of acquisitions and capital expenditures. Acquisitions in fiscal 2002 used cash of
$252.5 million and consisted of the fourth quarter acquisition of a majority of Air Products' U.S. packaged gas business and the third quarter acquisition of six gas distributor locations from
Air Liquide. Capital expenditures in fiscal 2002 of $58.3 million were 12% lower than the prior year resulting from lower cylinder purchases reflecting effective asset management initiatives.
The Company anticipates fiscal 2003 capital spending will fall within a range of $75 to $80 million. Proceeds of $10.2 million were also received from the divestiture of two nitrous
oxide plants during fiscal 2002.

Financing
activities provided cash of $45.3 million primarily from borrowings in relation to the Air Products acquisition. Financing activities also included the payment of
$12.5 million in financing costs related to the refinancing of the Company's revolving credit facilities, issuance of senior subordinated

23

---

notes and a term loan obtained in relation to the Air Products acquisition. The reduction in the cash overdraft used cash of $17 million. The cash overdraft represents the balance of
outstanding checks. Exclusive of acquisition and divestiture activity and the Company's trade receivables securitization, the Company reduced total debt by $118 million in fiscal 2002. The
ability to reduce debt is indicative of the strong cash flow characteristics of the Company's business.

Cash
on hand at the end of each fiscal year is zero. On a daily basis, depository accounts are swept of all available funds. The funds are deposited into a concentration account through
which all cash on hand is used to repay debt under the Company's revolving credit facilities.

The
Company will continue to look for appropriate acquisitions of distributors to complement its broad distribution network. Capital expenditures, current debt maturities and any future
acquisitions are expected to be funded through the use of cash flow from operations, revolving credit facilities, and other financing alternatives. The Company believes that its sources of financing
are adequate for its anticipated needs and that it could arrange additional sources of financing for unanticipated requirements. The cost and terms of any future financing arrangement depend on the
market conditions and the Company's financial position at that time.

The
Company does not currently pay dividends.

Financial Instruments

Revolving Credit Facilities

On July 30, 2001, the Company refinanced its revolving credit facilities due December 5, 2002. The refinanced credit facilities consist of unsecured
revolving credit facilities with a syndicate of lenders totaling $367.5 million and $50 million Canadian (U.S. $32 million) under a credit agreement with a maturity date of
July 30, 2006. At March 31, 2002, the Company had borrowings under the credit agreement of approximately $208 million and $35 million Canadian (U.S. $21 million).
The Company also had commitments under letters of credit supported by the credit agreement of approximately $38 million at March 31, 2002. The credit agreement contains covenants that
include the maintenance of certain leverage ratios, a fixed charge ratio, and potential restrictions on certain additional borrowing, the payment of dividends and the repurchase of common stock. Based
on restrictions related to certain leverage ratios, the Company had additional borrowing capacity under the revolving credit facilities of approximately $105 million at March 31, 2002.
The variable interest rates of the U.S. and Canadian revolving credit facilities are based on the London Interbank Offered Rate ("LIBOR") and Canadian Bankers' Acceptance Rates, respectively. At
March 31, 2002, the effective interest rates on borrowings under the revolving credit facilities were 3.98% on U.S. borrowings and 2.15% on Canadian borrowings.

Borrowings
under the revolving credit facilities are guaranteed by certain of the Company's domestic subsidiaries and Canadian borrowings are guaranteed by foreign subsidiaries. During
the fourth quarter of fiscal 2002, the Company's credit rating as determined by third-party credit agencies was lowered in response to additional indebtedness related to the Air Products acquisition.
The lower credit rating required the Company to pledge 100% of the stock of its domestic guarantor subsidiaries and 65% of
the stock of its foreign guarantor subsidiaries for the benefit of the syndicate of lenders. If the Company's credit rating is further reduced, the Company will be required to grant a security
interest in substantially all of the tangible and intangible assets of the Company for the benefit of the syndicate of lenders.

Term Loan

In February 2002, the Company completed the acquisition of the majority of Air Products' U.S. packaged gas business for cash of $241 million. In
anticipation of the transaction, the Company

24

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amended its revolving credit facilities to permit the acquisition and obtained a $100 million term loan. The term loan is due in quarterly installments beginning June 30, 2002 with a
final payment due July 30, 2006. The term loan is unsecured and bears a variable interest rate based on LIBOR plus a spread related to the Company's credit rating. At March 31, 2002, the
effective interest rate of the term loan was 4.15%. The additional term loan along with the Company's existing revolving credit facilities enabled the Company to finance the Air Products acquisition
entirely with senior bank debt.

Senior Subordinated Notes

On July 30, 2001, concurrent with the refinancing of the revolving credit facilities, the Company issued $225 million of senior subordinated notes
(the "Notes") with a maturity date of October 1, 2011. The Notes bear interest at a fixed annual rate of 9.125%, payable semi-annually on April 1 and October 1 of each
year with the first interest payment due April 1, 2002. The Notes were sold in accordance with the provisions of Rule 144A of the Securities Act of 1933 (the "Securities Act"). In
October 2001, the Company exchanged the Notes for substantially similar notes registered with the Securities and Exchange Commission in accordance with the Securities Act. The notes contain
covenants that could restrict the payment of dividends, the issuance of preferred stock, and the incurrence of additional indebtedness and liens. The notes are guaranteed on a subordinated basis by
each of the domestic guarantors under the revolving credit facilities.

Medium-Term Notes

The Company had the following medium-term notes outstanding at March 31, 2002: $75 million of unsecured notes due March 2004
bearing interest at a fixed rate of 7.14% and $100 million of unsecured notes due September 2006 bearing interest at a fixed rate of 7.75%. At March 31, 2002, the Company's
long-term debt also included acquisition notes and other long-term debt instruments of approximately $33 million with interest rates ranging from 7.00% to 9.00%. In the
first quarter of fiscal 2003, the Company refinanced $20 million of the acquisition notes with borrowings under its revolving credit facilities.

Interest Rate Swap Agreements

The Company manages its exposure to changes in market interest rates. At March 31, 2002, the Company was party to a total of 12 interest rate swap
agreements. The swap agreements are with major financial institutions and aggregate $323 million in notional principal amount at March 31, 2002. Seven swap agreements with approximately
$168 million in notional principal amount require the Company to make fixed interest payments based on an average effective rate of 6.64% and receive variable interest payments from its
counterparties based on three-month LIBOR (average rate of 1.93% at March 31, 2002). The remaining term of these swap agreements range from between three months and three years. Five swap
agreements with approximately $155 million in notional principal amount require the Company to make variable interest payments based on six-month LIBOR (average rate of 3.78% at
March 31, 2002) and receive fixed interest payments from its counterparties based on an average effective rate of 8.05% at March 31, 2002. The remaining term of these swap agreements
range from between one and nine years. The Company monitors its positions and the credit ratings of its counterparties, and does not anticipate non-performance by the counterparties. After
considering the effect of interest rate swap agreements, the Company's ratio of fixed to variable interest rates was 48% fixed to 52% variable at March 31, 2002.

A
majority of the Company's variable rate debt is based on a spread over LIBOR. Based on the Company's outstanding variable rate debt and credit rating at March 31, 2002, for
every increase in LIBOR of 25 basis points, it is estimated that the Company's annual interest expense would increase approximately $1 million.

25

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Trade Receivables Securitization

The Company participates in a securitization agreement with two commercial banks to sell up to $175 million of qualifying trade receivables. The agreement
expires in December 2003, but the initial term is subject to renewal provisions contained in the agreement. During fiscal 2002, the Company sold, net of its retained interest,
$1.71 billion of trade receivables and remitted to bank conduits, pursuant to a servicing agreement, $1.58 billion in collections on those receivables. The net proceeds were used to
reduce borrowings under the Company's revolving credit facilities. The amount of outstanding receivables under the agreement was $134 million at March 31, 2002 and $73 million at
March 31, 2001.

The
transaction has been accounted for as a sale under the provisions of Statement of Financial Accounting Standards No. 140,Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. Under the agreement, eligible trade receivables are sold to bank conduits through a bankruptcy-remote special
purpose entity, which is consolidated for financial reporting purposes. The difference between the proceeds from the sale and the carrying value of the receivables is recognized as "Discount on
securitization of trade receivables" in the accompanying Consolidated Statements of Earnings and varies on a monthly basis depending on the amount of receivables sold and market rates. The Company
retains a subordinated interest in the receivables sold, which is recorded at the receivables' previous carrying value. In accordance with a servicing agreement, the Company services, administers and
collects the trade receivables on behalf of the bank conduits. The servicing fees charged to the bank conduits approximate the costs of collections. The Company also maintains an allowance for
doubtful accounts on trade receivables that it retains.

Operating Lease with Trust

The Company leases real estate and certain equipment from a trust established by a commercial bank. The operating leases are structured as a
sale-leaseback transaction in which the trust holds title to the properties and equipment included in the leases. The rental payments are based on LIBOR plus an applicable margin and the
cost of the property acquired by the trust. At March 31, 2002, the non-cancelable lease obligation of the real estate and equipment lease totaled approximately $43 million.
The leases have a five-year term, which expires in October 2004. The Company has guaranteed a residual value of the real estate and the equipment at the end of the lease term of
approximately $30 million. A gain of approximately $12 million on the equipment portion of the transaction has been deferred until the expiration of the Company's guarantee of the
residual value.

Employee Benefits Trust

The Company maintains a grantor trust (the "Trust") to fund certain future obligations of the Company's employee benefit and compensation plans. The Company,
pursuant to a Common Stock Purchase Agreement, sold shares of common stock to the Trust. During fiscal 1999 through 2001, the Trust purchased a total of approximately 7 million shares of common
stock, previously held as treasury stock, from the Company, for approximately $54 million (based on the average market closing price for the five days preceding each transaction). The Company
holds promissory notes from the Trust in the amount of each purchase. Shares held by the Trust serve as collateral for the promissory notes and are available to fund certain employee benefit plan
obligations as the promissory notes are repaid. The shares held by the Trust are not considered outstanding for earnings per share purposes until they are released from serving as collateral for the
promissory notes. Approximately 1.4 million and 1.2 million shares were issued from the Trust for employee benefit programs during fiscal 2002 and 2001, respectively. As of
March 31, 2002, the Trust held approximately 4.3 million shares of Company common stock. An independent third-party financial institution serves as the Trustee. The Trustee votes or
tenders shares held by the Trust in accordance with instructions received from the participants in the employee benefit and compensation plans funded by the Trust.

26

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Inflation

While the U.S. inflation rate has been relatively modest for several years, rising costs continue to affect the Company's business. The Company strives to
minimize the effects of inflation through cost containment and price increases under highly competitive conditions.

OTHER

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires
management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated Financial
Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but
not limited to, determining the net carrying value of trade receivables, inventories, goodwill, other intangible assets and business insurance reserves. Actual results could differ from these
estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Consolidated Financial Statements.

Trade Receivables

The Company must make estimates of the collectability of its trade receivables. Management has established an allowance for doubtful accounts to adjust the
carrying value of trade receivables to fair value based on an estimate of the amount of trade receivables that are uncollectible. The allowance for doubtful accounts is determined based on historical
experience, economic trends, and known bankruptcies and problem accounts. Management believes that the allowances for doubtful accounts as of March 31, 2002 and 2001 are adequate.

Inventories

The Company's inventories are stated at the lower of cost or market. The Company writes down its inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and the estimated market value based upon its physical condition as well as assumptions about future demand and market conditions. If actual
demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.

Goodwill and Other Intangible Assets

The Company adopted SFAS 142,Goodwill and Other Intangible Assets,as of April 1, 2001.
SFAS 142 requires goodwill and intangible assets with indefinite useful lives will not be amortized, but instead be tested for impairment at least annually. The Company has elected to perform
its annual tests for indications of goodwill impairment as of October 31 of each year. The annual impairment test used by the Company consists of a discounted cash flow analysis. The discounted
cash flow analysis requires estimates, assumptions and judgments that could be materially different if different estimates, assumptions and judgments were used.

Business Insurance Reserves

The Company has insurance programs to cover workers' compensation, business automobile, general and products liability. The insurance programs have
self-insured retention of $500 thousand per occurrence and an aggregate limit of $1.5 million of claims in excess of $500 thousand. The Company
accrues estimated losses using actuarial models and assumptions based on the Company's historical loss experience. Although management believes that the insurance reserves are adequate, the reserve

27

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estimates are based on historical experience, which may not be indicative of current and future losses. In addition, the actuarial calculations used to estimate insurance reserves are based on
numerous assumptions, some of which are subjective. The Company will adjust its insurance reserves, if necessary, in the event that future loss experience differs from historical loss patterns.

New Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 143,Accounting for Asset Retirement Obligations.
SFAS 143 requires the recognition of a liability for an asset retirement obligation in the period in which it is incurred. A retirement obligation is defined as one in which a legal obligation
exists in the future resulting from existing laws, statutes or contracts. The Company is required to adopt SFAS 143 on April 1, 2003. The Company has evaluated SFAS 143 and does
not believe its adoption will have a material impact on its results of operations, financial position or liquidity.

In
August 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. SFAS 144 requires companies to separately report discontinued operations and extends that
reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell. The Company was required to adopt SFAS 144 on April 1, 2002. The adoption of SFAS 144 did not have a material
impact on the Company's consolidated financial condition, results of operations or liquidity.

Forward-looking Statements

This report contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but
are not limited to, statements regarding: the Company's strategy of leveraging its distribution network and focusing on strategic sales initiatives to drive sales growth and market penetration in the
industries that it serves; the effect of price increases on sales growth and the ability to offset rising costs; the correlation of hardgoods sales with non-tech industrial production; the
timing, scope and success of the Project One initiative designed to improve certain operational and administrative processes; the Company's estimate that for every increase in LIBOR of 25 basis
points, interest expense will increase approximately $1 million; the ability
of the Company to successfully integrate the business acquired from Air Products; the estimate of a fiscal 2003 first quarter special charge of $2.5 to $3.5 million for costs to exit existing
Airgas facilities and sever employees; the estimate of integration costs in fiscal 2003 of $3.5 to $4.5 million related to the business acquired from Air Products; the Company's expectation
that the Air Products acquisition will be accretive to fiscal 2003 earnings and return on capital; the Company's strong cash flow characteristics and its ability to reduce debt; the Company's estimate
of fiscal 2003 capital spending of $75 to $80 million; the identification of acquisition candidates; the funding of capital expenditures, current debt maturities and future acquisitions through
the use of cash flow from operations, revolving credit facilities and other financing alternatives; the ability of the Company to arrange additional sources of financing for unanticipated
requirements; the effect on the Company of higher interest rates; and performance of counterparties under interest rate swap agreements. These forward-looking statements involve risks and
uncertainties. Factors that could cause actual results to differ materially from those predicted in any forward-looking statement include, but are not limited to:

28

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adverse customer response to the Company's sales initiatives and resulting inability to drive sales growth and market penetration; underlying market conditions; a lack of or lower correlation of
hardgoods sales with non-tech industrial production in future periods; the market acceptance of price increases and the inability of price increases and sales growth to offset any
increases in costs; the Company's inability to control operating expenses and the potential impact of higher operating expenses in future periods; adverse changes in customer buying patterns; the
impact of higher than anticipated consulting expenses on future results; the inability of the Company's Project One initiatives to improve operational and administrative processes; an economic
downturn (including adverse changes in the specific markets for the Company's products); higher than estimated interest expense resulting from increases in LIBOR and changes in the Company's credit
rating; a higher than estimated special charge in the first quarter of fiscal 2003; higher than estimated costs to integrate the business acquired from Air Products; potential disruption to the
Company's business from integration problems associated with the business acquired from Air Products; higher or lower capital spending in fiscal 2003 than that estimated by the Company; inability to
generate sufficient cash flow from operations or other sources to fund future acquisitions, capital expenditures, current debt maturities and to reduce debt; the inability to identify and successfully
integrate acquisition candidates; changes in the Company's debt levels and/or credit rating which prevent the Company from arranging additional financing; the inability to manage interest rate
exposure; the effects of competition from independent distributors and vertically integrated gas producers on products, pricing and sales growth; changes in product prices from gas producers and
name-brand manufacturers and suppliers of hardgoods; uncertainties regarding accidents or litigation which may arise in the ordinary course of business; and the effects of, and changes in,
the economy, monetary and fiscal policies, laws and regulations, inflation and monetary fluctuations and fluctuations in interest rates, both on a national and international basis. The Company does
not undertake to update any forward-looking statement made herein or that may be made from time to time by or on behalf of the Company.

29

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company manages its exposure to changes in market interest rates. The interest rate exposure arises primarily from the interest payment terms of the Company's
borrowing agreements. Interest rate swap agreements are used to adjust the interest rate risk exposures that are inherent in its portfolio of funding sources. The Company has not, and will not
establish any interest risk positions for purposes other than managing the risk associated with its portfolio of funding sources. The Company maintains the ratio of fixed to variable rate debt within
parameters established by management under policies approved by the Board of Directors. After the effect of interest rate swap agreements, the ratio of fixed to variable rate debt was 48% to 52% at
March 31, 2002. Counterparties to interest rate swap agreements are major financial institutions. The Company has established counterparty credit guidelines and only enters into transactions
with financial institutions with long-term credit ratings of 'A' or better. In addition, the Company monitors its position and the credit ratings of its counterparties, thereby minimizing
the risk of non-performance by the counterparties.

The
table below summarizes the Company's market risks associated with long-term debt obligations, interest rate swaps and LIBOR-based agreements as of March 31, 2002.
For long-term debt obligations, the table presents cash flows related to payments of principal and interest by fiscal year of maturity. For interest rate swaps and LIBOR-based agreements,
the table presents the notional amounts underlying the agreements by year of maturity. The notional amounts are used to calculate contractual payments to be exchanged and are not actually paid or
received. Fair values were computed using market quotes, if available, or based on discounted cash flows using market interest rates as of the end of the period.

30

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|                                                |                                               | Fiscal Year of Maturity |  
|----------------------------------------------- | --------------------------------------------- | ----------------------- | -
|
|
|Fixed Rate Debt:                                |                                               |                         |  
|Medium-term notes                               |                                               | $                       | 
|                                                | Interest expense                              |                         | $
|                                                | Average interest rate                         |                         |  
|Acquisition and other notes                     |                                               | $                       | 3
|                                                | Interest expense                              |                         | $
|                                                | Average interest rate                         |                         |  
|Senior subordinated notes                       |                                               | $                       | 
|                                                | Interest expense                              |                         | $
|                                                | Interest rate                                 |                         |  
|Variable Rate Debt:                             |                                               |                         |  
|Revolving credit facilities                     |                                               | $                       | 
|                                                | Interest expense                              |                         | $
|                                                | Interest rate(a)                              |                         |  
|Term Loan                                       |                                               | $                       | 
|                                                | Interest expense                              |                         | $
|                                                | Interest rate(a)                              |                         |  
|Interest Rate Swaps:                            |                                               |                         |  
|US $ denominated Swaps:                         |                                               |                         |  
|7 Swaps Receive Variable/Pay Fixed              |                                               |                         |  
|                                                | Notional amounts                              |                         | $
|                                                | Swap payments/(receipts)                      |                         | $
|                                                | Variable Receive rate = 1.93% (3 month LIBOR) |                         |  
|                                                | Weighted average pay rate = 6.64%             |                         |  
|5 Swaps Receive Fixed/Pay Variable              |                                               |                         |  
|                                                | Notional amounts                              |                         | $
|                                                | Swap payments/(receipts)                      |                         | $
|                                                | Weighted average receive rate = 8.05%         |                         |  
|                                                | Variable pay rate = 3.78% (6 month LIBOR)     |                         |  
|Other Off-Balance Sheet LIBOR-based agreements: |                                               |                         |  
|Operating leases with trust(b)                  |                                               | $                       | 1
|                                                | Lease expense                                 |                         | $
|Trade receivable securitization(c)              |                                               | $                       | 
|                                                | Discount on securitization                    |                         | $

---

31

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Limitations of the tabular presentation

As the table incorporates only those interest rate risk exposures that exist as of March 31, 2002, it does not consider those exposures or positions that
could arise after that date. In addition, actual cash flows of financial instruments in future periods may differ materially from prospective cash flows presented in the table due to future
fluctuations in variable interest rates, debt levels and the Company's credit rating.

Foreign Currency Rate Risk

Canadian subsidiaries of the Company are funded in part with local currency debt. The Company does not otherwise hedge its exposure to translation gains and
losses relating to foreign currency net asset exposures. The Company considers its exposure to foreign currency exchange fluctuations to be immaterial to its consolidated financial position and
results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements, supplementary information and financial statement schedule of the Company are set forth at pages F-1 to
F-47 of the report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

The biographical information of the Company's directors appearing in the Proxy Statement relating to the Company's 2002 Annual Meeting of Stockholders is
incorporated herein by reference. Biographical
information relating to the Company's executive officers set forth in Item 1 of Part I of this Form 10-K Report is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information under "Board of Directors and Committees," "Executive Compensation" and "Certain Transactions" appearing in the Proxy Statement relating to the
Company's 2002 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is set forth in the sections headed "Security Ownership" and "Equity Compensation Plan Information" under "Executive
Compensation" appearing in the Company's Proxy Statement relating to the Company's 2002 Annual Meeting of Stockholders and such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.

32

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1)
and (2):

The
response to this portion of Item 14 is submitted as a separate section of this report beginning on page F-1. All other schedules have been omitted as
inapplicable, or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto.

(a)(3)
Exhibits.

The
exhibits required to be filed as part of this annual report on Form 10-K are listed in the attached Index to Exhibits.

On
January 7, 2002, the Company filed a current report on Form 8-K pursuant to Item 5, announcing an agreement to purchase the majority of the U.S.
packaged gas business of Air Products and Chemicals, Inc. ("Air Products").

On
January 25, 2002, the Company filed a current report on Form 8-K pursuant to Item 5, reporting its earnings for the third quarter and nine months
ended December 31, 2001.

On
March 15, 2002, the Company filed a current report on Form 8-K pursuant to Items 2 and 7, announcing the completion of its acquisition of the majority
of the U.S. packaged gas business of Air Products. The acquisition was financed through borrowings under the Company's revolving credit facilities and a $100 million term loan with a maturity
date of July 30, 2006. The Company also disclosed an agreement to purchase at least 35% of its entire liquid bulk gas requirements from Air Products for the 15-year period ended
September 1, 2017.

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                  
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Amended and Restated Certificate of Incorporation of Airgas, Inc. dated as of August 7, 1995. (Incorporated by reference to Exhibit 3.1 to the Company's September 30, 1995 Quarterly Report on
Form 10-Q).                                                                                                                                                                                  
|3.2         |  | Airgas, Inc. By-Laws Amended and Restated through August 2, 1999. (Incorporated by reference to Exhibit 3 to the Company's September 30, 1999 Quarterly Report on Form 10-Q).                                                                                                                                                                                                                
|4.1         |  | Tenth Amended and Restated Credit Agreement dated as of July 30, 2001 among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A. as U.S. Agent and Canadian Imperial Bank of Commerce as Canadian Agent.
(Incorporated by reference to Exhibit 4.1 to the Company's June 30, 2001 Quarterly Report on Form 10-Q).                                                     
|4.2         |  | First Amendment, dated December 31, 2001, to the Tenth Amended and Restated Credit Agreement dated as of July 30, 2001 among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A. as U.S. Agent and
Canadian Imperial Bank of Commerce as Canadian Agent. (Incorporated by reference to Exhibit 4.1 to the Company's December 31, 2001 Quarterly Report on Form 10-Q).
|4.3         |  | Indenture dated as of August 1, 1996 of Airgas, Inc. to Bank of New York, Trustee. (Incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-4 No. 333-23651 dated March 20,
1997).                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                                              

33

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|4.4   |  | Form of Airgas, Inc. Medium-Term Note (Fixed Rate). (Incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-4 No. 333-23651 dated March 20, 1997).                                                                                                                                                                                                                                                   
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.5   |  | Form of Airgas, Inc. Medium-Term Note (Floating Rate). (Incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-4 No. 333-23651 dated March 20, 1997).                                                                                                                                                                                                                                                
|4.6   |  | Senior Subordinated Notes. (Incorporated by reference to the Company's Registration Statement on Form S-4 No. 333-68722 dated September 14, 2001).                                                                                                                                                                                                                                                                                       
|      |  | There are no other instruments with respect to long-term debt of the Company that involve indebtedness or securities authorized thereunder exceeding 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The
Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission.
|4.7   |  | Rights Agreement, dated as of April 1, 1997, between Airgas, Inc. and The Bank of New York, N.A., as Rights Agent, which includes as Exhibit B thereto the Form of Right Certificate. (Incorporated by reference to Exhibit 1.1
to the Company's Form 8-A filed on April 28, 1997).                                                                                                                                                      
|4.8   |  | First Amendment, dated November 12, 1998, to the Rights Agreement dated as of April 1, 1997, between Airgas, Inc. and The Bank of New York. (Incorporated by reference to Exhibit 4 to the Company's December 31, 1998 Quarterly
Report on Form 10-Q).                                                                                                                                                                                   
|*10.1 |  | Amended and Restated 1984 Stock Option Plan, as amended effective May 22, 1995. (Incorporated by reference to Exhibit 10.1 to the Company's September 30, 1995 Quarterly Report on Form 10-Q).                                                                                                                                                                                                                                           
|*10.2 |  | 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees), as amended. (Incorporated by reference to Exhibit 10.7 to the Company's March 31, 1992 report on Form 10-K).                                                                                                                                                                                                                                                         
|*10.3 |  | Amendment to the 1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) as amended through August 7, 1995 (Incorporated by reference to Exhibit 10.2 to the Company's September 30, 1995 Quarterly Report on
Form 10-Q).                                                                                                                                                                                                     
|*10.4 |  | 2001 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 No. 333-69214 dated September 10, 2001).                                                                                                                                                                                                                                                                  
|*10.5 |  | Joint Venture Agreement dated June 28, 1996 between Airgas, Inc. and National Welders Supply Company, Inc. and J.A. Turner, III, and Linerieux B. Turner and Molo Limited Partnership, Turner (1996) Limited partnership,
Charitable Remainder Unitrust for James A. Turner, Jr. and Foundation for the Carolinas (Incorporated by reference to Exhibit 2.1 to the Company's June 28, 1996 Report on Form 8-K).                          
|*10.6 |  | Letter dated July 24, 1992 between Airgas, Inc. (on behalf of the Nominating and Compensation Committee) and Peter McCausland regarding the severance agreement between the Company and Peter McCausland (Incorporated by reference to
Exhibit 10.9 to the Company's March 31, 1997 Report on Form 10-K).                                                                                                                                
|*10.7 |  | 1997 Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the Company's September 30, 1997 Quarterly Report on Form 10-Q).                                                                                                                                                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                          

34

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|*10.8  |  | 1997 Directors' Stock Option Plan (Incorporated by reference to Exhibit 10.2 to the Company's September 30, 1997 Quarterly Report on Form 10-Q).                                                                                                                                                                                                                                                                                                                                                                           
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.9  |  | Employee Benefits Trust Agreement, dated March 30, 1999, between Airgas, Inc. and First Union National Bank, as Trustee, which includes as Exhibit 1 thereto the Common Stock Purchase Agreement, dated March 30, 1999, between Airgas,
 Inc. and First Union National Bank, as Trustee, and Exhibit 2 thereto the Promissory Note, dated March 31, 1999, between Airgas, Inc. and First Union National Bank, as Trustee. (Incorporated by reference to Exhibit 10.12 to
the Company's March 31, 1999 Report on Form 10-K).
|*10.10 |  | Employee Benefits Trust Amendment Letter, dated March 7, 2000, between Airgas, Inc. and First Union National Bank, as Trustee (Incorporated by reference to Exhibit 10.13 to the Company's March 31, 2000 Report on
Form 10-K).                                                                                                                                                                                                                                                                                            
|*10.11 |  | Airgas, Inc. Fiscal Year 2002 Executive Bonus Plan dated April 1, 2001. (Incorporated by reference to Exhibit 10.18 to the Company's March 31, 2002 Report on Form 10-K).                                                                                                                                                                                                                                                                                                                                                  
|*10.12 |  | Airgas, Inc. Deferred Compensation Plan dated December 17, 2001. (Incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 No. 333-75258 dated December 17, 2001).                                                                                                                                                                                                                                                                                                                       
|10.13  |  | Asset Purchase Agreement dated January 3, 2002, by and among Air Products and Chemicals, Inc., Airgas, Inc. and National Welders Supply Company, Inc. A Liquid Bulk Product Supply Agreement is included as Exhibit E-1 to the
Asset Purchase Agreement. (Incorporated by reference to Exhibit 2.1 to Form 8-K dated February 28, 2002).                                                                                                                                                                                   
|*10.14 |  | Airgas, Inc. Fiscal Year 2003 Executive Bonus Plan dated April 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|*10.15 |  | Change of Control Agreement between Airgas, Inc. and Glenn Fischer dated October 10, 2000. Eleven other Executive Officers, including Peter McCausland, are parties to substantially identical agreements.                                                                                                                                                                                                                                                                                                                 
|11     |  | Statement re: computation of earnings per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|21     |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|23     |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

---

35

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS, INC.(Registrant)
| |  | ------------------------
| |  | By:                     

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                                   |  | Date         
|--------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | -------------
|                                              |  |                                                                                         |  |              
|/s/PETER MCCAUSLAND(Peter McCausland)         |  | Director, Chairman of the Board, and Chief Executive Officer                            |  | June 21, 2002
|/s/ROGER F. MILLAY(Roger F. Millay)           |  | Senior Vice PresidentFinance and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Corporate Controller (Principal Accounting Officer)                  |  | June 21, 2002
|/s/W. THACHER BROWN(W. Thacher Brown)         |  | Director                                                                                |  | June 21, 2002
|/s/FRANK B. FOSTER, III(Frank B. Foster, III) |  | Director                                                                                |  | June 21, 2002
|/s/JAMES W. HOVEY(James W. Hovey)             |  | Director                                                                                |  | June 21, 2002
|/s/JOHN A.H. SHOBER(John A.H. Shober)         |  | Director                                                                                |  | June 21, 2002
|                                              |  |                                                                                         |  |              

36

---

|/s/PAULA A. SNEED(Paula A. Sneed) |  | Director |  | June 21, 2002
|--------------------------------- |  | -------- |  | -------------
|/s/DAVID M. STOUT(David M. Stout) |  | Director |  | June 21, 2002
|/s/LEE M. THOMAS(Lee M. Thomas)   |  | Director |  | June 21, 2002
|/s/ROBERT L. YOHE(Robert L. Yohe) |  | Director |  | June 21, 2002

37

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS EAST, INC.(Registrant)
| |  | -----------------------------
| |  | By:                          

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/JAMES A. MULLER(James A. Muller)           |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/JOSEPH MICALI(Joseph Micali)               |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/B. SHAUN POWERS(B. Shaun Powers)           |  | Director                                                                 |  | June 21, 2002

38

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS GREAT LAKES, INC.(Registrant)
| |  | ------------------------------------
| |  | By:                                 

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/JOHN MUSSELMAN(John Musselman)             |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/JIM JOHNSTON(Jim Johnston)                 |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/B. SHAUN POWERS(B. Shaun Powers)           |  | Director                                                                 |  | June 21, 2002

39

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS MID AMERICA, INC.(Registrant)
| |  | ------------------------------------
| |  | By:                                 

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/ROBERT HILLIARD(Robert Hilliard)           |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/LEE CHERRY(Lee Cherry)                     |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/B. SHAUN POWERS(B. Shaun Powers)           |  | Director                                                                 |  | June 21, 2002

40

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS NORTH CENTRAL, INC.(Registrant)
| |  | --------------------------------------
| |  | By:                                   

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/JOHN MCDEVITT(John McDevitt)               |  | President and Director (Principal Executive Officer)                     |  | June 7, 2002 
|/s/MICHAEL ALLISON(Michael Allison)           |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 12, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/B. SHAUN POWERS(B. Shaun Powers)           |  | Director                                                                 |  | June 21, 2002

41

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS SOUTH, INC.(Registrant)
| |  | ------------------------------
| |  | By:                           

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/MICHAEL ROHDE(Michael Rohde)               |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/JAY SULLIVAN(Jay Sullivan)                 |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/B. SHAUN POWERS(B. Shaun Powers)           |  | Director                                                                 |  | June 21, 2002

42

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS GULF STATES, INC.(Registrant)
| |  | ------------------------------------
| |  | By:                                 

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/HENRY B. COKER, III(Henry B. Coker, III)   |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/RONALD A. ZIENTEK(Ronald A. Zientek)       |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/B. SHAUN POWERS(B. Shaun Powers)           |  | Director                                                                 |  | June 21, 2002

43

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS MID SOUTH, INC.(Registrant)
| |  | ----------------------------------
| |  | By:                               

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/MICHAEL DUVALL(Michael Duvall)             |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/TERRY LODGE(Terry Lodge)                   |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/ALFRED B. CRICHTON(Alfred B. Crichton)     |  | Director                                                                 |  | June 21, 2002

44

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS INTERMOUNTAIN, INC.(Registrant)
| |  | --------------------------------------
| |  | By:                                   

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/DANIEL L. TATRO(Daniel L. Tatro)           |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/TERESA MILLER(Teresa Miller)               |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 11, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/ALFRED B. CRICHTON(Alfred B. Crichton)     |  | Director                                                                 |  | June 21, 2002

45

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS NOR PAC, INC.(Registrant)
| |  | --------------------------------
| |  | By:                             

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/MARK CLEMENS(Mark Clemens)                 |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/CURTIS FLAMM(Curtis Flamm)                 |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/ALFRED B. CRICHTON(Alfred B. Crichton)     |  | Director                                                                 |  | June 21, 2002

46

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS NORTHERN CALIFORNIA & NEVADA, INC.(Registrant)
| |  | -----------------------------------------------------
| |  | By:                                                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/JAMES D. MCCARTHY(James D. McCarthy)       |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/LYNN OATES(Lynn Oates)                     |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/ALFRED B. CRICHTON(Alfred B. Crichton)     |  | Director                                                                 |  | June 21, 2002

47

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS SOUTHWEST, INC.(Registrant)
| |  | ----------------------------------
| |  | By:                               

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/BRENT SPARKS(Brent Sparks)                 |  | President and Director (Principal Executive Officer)                     |  | June 7, 2002 
|/s/JAY WORLEY(Jay Worley)                     |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 7, 2002 
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/ALFRED B. CRICHTON(Alfred B. Crichton)     |  | Director                                                                 |  | June 21, 2002

48

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS WEST, INC.(Registrant)
| |  | -----------------------------
| |  | By:                          

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/MAX D. HOOPER(Max D. Hooper)               |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/DONALD JENSEN(Donald Jensen)               |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002
|/s/ALFRED B. CRICHTON(Alfred B. Crichton)     |  | Director                                                                 |  | June 21, 2002

49

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS SAFETY, INC.(Registrant)
| |  | -------------------------------
| |  | By:                            

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/DAVID LEVIN(David Levin)                   |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/DONALD CARLINO(Donald Carlino)             |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002

50

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | RUTLAND TOOL & SUPPLY CO., INC.(Registrant)
| |  | -------------------------------------------
| |  | By:                                        

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                                   |  | Date         
|--------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | -------------
|                                              |  |                                                                                         |  |              
|/s/DAVID LEVIN(David Levin)                   |  | President and Director (Principal Executive Officer)                                    |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Financial Officer/ Principal Accounting Officer) |  | June 21, 2002

51

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS CARBONIC, INC.(Registrant)
| |  | ---------------------------------
| |  | By:                              

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/PHILIP J. FILER(Philip J. Filer)           |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/CHARLES TOOMEY(Charles Toomey)             |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002

52

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS SPECIALTY GASES, INC.(Registrant)
| |  | ----------------------------------------
| |  | By:                                     

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/WILLIAM RUSSO(William Russo)               |  | President and Director (Principal Executive Officer)                     |  | June 7, 2002 
|/s/TODD CURRY(Todd Curry)                     |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002

53

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | NITROUS OXIDE CORP.(Registrant)
| |  | -------------------------------
| |  | By:                            

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/RONALD SCOTT(Ronald Scott)                 |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/CHARLES TOOMEY(Charles Toomey)             |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002

54

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | PURITAN MEDICAL PRODUCTS, INC.(Registrant)
| |  | ------------------------------------------
| |  | By:                                       

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/TED R. SCHULTE(Ted R. Schulte)             |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/TODD CURRY(Todd Curry)                     |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002

55

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | RED-D-ARC INC.(Registrant)
| |  | --------------------------
| |  | By:                       

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                    |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------------
|                                              |  |                                                                          |  |              
|/s/MITCH M. IMIELINSKI(Mitch M. Imielinski)   |  | President and Director (Principal Executive Officer)                     |  | June 21, 2002
|/s/STEVEN DARROCH(Steven Darroch)             |  | Vice President and Chief Financial Officer (Principal Financial Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Accounting Officer)               |  | June 21, 2002

56

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS REALTY, INC.(Registrant)
| |  | -------------------------------
| |  | By:                            

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                                   |  | Date         
|--------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | -------------
|                                              |  |                                                                                         |  |              
|/s/GLENN M. FISCHER(Glenn M. Fischer)         |  | President and Director (Principal Executive Officer)                                    |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President and Director (Principal Financial Officer/ Principal Accounting Officer) |  | June 21, 2002

57

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | ATNL, INC.(Registrant)
| |  | ----------------------
| |  | By:                   

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                                                          |  | Date         
|--------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | -------------
|                                              |  |                                                                                                                |  |              
|/s/CONNIE S. LINHART(Connie S. Linhart)       |  | President and Treasurer (Principal Executive Officer/Principal Financial Officer/Principal Accounting Officer) |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Director                                                                                                       |  | June 21, 2002
|/s/JOSEPH C. SULLIVAN(Joseph C. Sullivan)     |  | Director                                                                                                       |  | June 21, 2002
|/s/PETER CAMPBELL(Peter Campbell)             |  | Director                                                                                                       |  | June 21, 2002

58

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
June 21, 2002

| |  | AIRGAS DATA, LLC(Registrant)
| |  | ----------------------------
| |  | By:                         

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                     |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------- |  | -------------
|                                              |  |                                                                           |  |              
|/s/CAREY M. VERGER(Carey M. Verger)           |  | President and Member (Principal Executive Officer)                        |  | June 21, 2002
|/s/ROBERT M. MCLAUGHLIN(Robert M. McLaughlin) |  | Vice President (Principal Financial Officer/Principal Accounting Officer) |  | June 21, 2002

59

---



AIRGAS, INC. AND SUBSIDIARIES    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  AND FINANCIAL STATEMENT SCHEDULES

|                                                                                                  |  | Page
Reference In
Report On
Form 10-K
|------------------------------------------------------------------------------------------------- |  | -------------------------------------
|Financial Statements:                                                                             |  |                                      
|Independent Auditors' Report                                                                      |  | F-2                                  
|Statement of Management's Financial Responsibility                                                |  | F-3                                  
|Consolidated Statements of Earnings for the Years Ended March 31, 2002, 2001 and 2000             |  | F-4                                  
|Consolidated Balance Sheets as of March 31, 2002 and 2001                                         |  | F-5                                  
|Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 2002, 2001 and 2000 |  | F-6                                  
|Consolidated Statements of Cash Flows for the Years Ended March 31, 2002, 2001 and 2000           |  | F-7                                  
|Notes to Consolidated Financial Statements                                                        |  | F-8                                  
|Financial Statement Schedule:                                                                     |  |                                      
|Schedule IIValuation and Qualifying Accounts                                                     |  | F-47                                 

All
other schedules for which provision is made in the applicable accounting regulations promulgated by the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.

F-1

---



INDEPENDENT AUDITORS' REPORT

The
Board of Directors
Airgas, Inc.:

We
have audited the consolidated financial statements of Airgas, Inc. and subsidiaries (the Company) listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Airgas, Inc. and subsidiaries as of
March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2002, in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As
discussed in note 1 to the consolidated financial statements, the Company changed its method of accounting for goodwill and other intangible assets and derivative instruments
and hedging activities for the year ended March 31, 2002.



Philadelphia,
Pennsylvania
May 6, 2002

F-2

---

STATEMENT OF MANAGEMENT'S FINANCIAL RESPONSIBILITY

Management
has prepared and is responsible for the integrity and objectivity of the consolidated financial statements and related financial information in this Annual Report on
Form 10-K. The statements are prepared in conformity with accounting principles generally accepted in the United States of America. The financial statements reflect management's
informed judgment and estimation as to the effect of events and transactions that are accounted for or disclosed.

Management
maintains a system of internal control at each business unit. This system is designed to provide reasonable assurance that assets are safeguarded and records properly reflect
transactions executed in accordance with management's authorization. The Company also maintains a staff of internal auditors who review and evaluate the system of internal control on a continual
basis. In determining the extent of the system of internal control, management recognizes that the cost should not exceed the benefits derived. The evaluation of these factors requires estimates and
judgment by management.

The
Company's financial statements have been audited by KPMG LLP, independent auditors. Their Independent Auditors' Report, which is based on an audit made in accordance with
auditing standards generally accepted in the United States of America, is presented on the previous page. In performing their audit, KPMG LLP considers the Company's internal control structure to the
extent they deem
necessary in order to plan their audit, determine the nature, timing and extent of tests to be performed and issue their report on the consolidated financial statements.

The
Audit Committee of the Board of Directors, consisting solely of non-employee Directors, meets regularly (jointly and separately) with the independent auditors, the
internal auditors and management to satisfy itself that they are properly discharging their responsibilities. The auditors have direct access to the Audit Committee.

|Airgas, Inc.                                                                                |  |                                                                         
|------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------
|/s/ROGER F. MILLAYRoger F. Millay Senior Vice PresidentFinance and Chief Financial
Officer |  | /s/PETER MCCAUSLANDPeter McCausland Chairman and Chief Executive Officer
|May 6, 2002                                                                                 |  |                                                                         

F-3

---



AIRGAS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF EARNINGS

|                                                               |                                                                                            | Years Ended March 31,    |          
|-------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------ | ---------
|
|
|Net Sales                                                      |                                                                                            |                          |          
|Distribution                                                   |                                                                                            | $                        | 1,494,267
|Gas Operations                                                 |                                                                                            |                          | 141,780  
|                                                               |                                                                                            |                          |          
|                                                               |                                                                                            | Total net sales          |          
|                                                               |                                                                                            |                          |          
|Costs and Expenses                                             |                                                                                            |                          |          
|Cost of products sold (excluding depreciation expense)         |                                                                                            |                          |          
|                                                               | Distribution                                                                               |                          |          
|                                                               | Gas Operations                                                                             |                          |          
|Selling, distribution and administrative expenses              |                                                                                            |                          | 619,316  
|Depreciation                                                   |                                                                                            |                          | 64,785   
|Amortization (Note 7)                                          |                                                                                            |                          | 8,160    
|Special charges (recoveries), net (Note 3)                     |                                                                                            |                          |         
|                                                               |                                                                                            |                          |          
|                                                               |                                                                                            | Total costs and expenses |          
|                                                               |                                                                                            |                          |          
|Operating Income                                               |                                                                                            |                          |          
|Distribution                                                   |                                                                                            |                          | 103,430  
|Gas Operations                                                 |                                                                                            |                          | 21,603   
|Special (charges) recoveries, net                              |                                                                                            |                          |         
|                                                               |                                                                                            |                          |          
|                                                               |                                                                                            | Total operating income   |          
|Interest expense, net (Note 16)                                |                                                                                            |                          | (47,013  
|Discount on securitization of trade receivables (Note 12)      |                                                                                            |                          | (4,846   
|Other income, net (Note 2)                                     |                                                                                            |                          | 1,382    
|Equity in earnings of unconsolidated affiliates (Note 15)      |                                                                                            |                          | 3,835    
|                                                               |                                                                                            |                          |          
|                                                               | Earnings before income taxes and the cumulative effect of a change in accounting principle |                          |          
|Income taxes (Note 17)                                         |                                                                                            |                          | 29,806   
|                                                               |                                                                                            |                          |          
|                                                               | Earnings before the cumulative effect of a change in accounting principle                  |                          |          
|Cumulative effect of a change in accounting principle (Note 1) |                                                                                            |                          | (59,000  
|                                                               |                                                                                            |                          |          
|Net Earnings (Loss)                                            |                                                                                            | $                        | (10,415  
|                                                               |                                                                                            |                          |          
|Basic earnings (loss) per share:                               |                                                                                            |                          |          
|                                                               | Earnings per share before the cumulative effect of a change in accounting principle        |                          | $        
|                                                               | Cumulative effect per share of a change in accounting principle                            |                          |          
|                                                               |                                                                                            |                          |          
|                                                               | Net earnings (loss) per share                                                              |                          | $        
|                                                               |                                                                                            |                          |          
|Diluted earnings (loss) per share:                             |                                                                                            |                          |          
|                                                               | Earnings per share before the cumulative effect of a change in accounting principle        |                          | $        
|                                                               | Cumulative effect per share of a change in accounting principle                            |                          |          
|                                                               |                                                                                            |                          |          
|                                                               | Net earnings (loss) per share                                                              |                          | $        
|                                                               |                                                                                            |                          |          
|Weighted average shares outstanding:                           |                                                                                            |                          |          
|Basic (Note 4)                                                 |                                                                                            |                          | 68,100   
|                                                               |                                                                                            |                          |          
|Diluted (Note 4)                                               |                                                                                            |                          | 69,900   
|                                                               |                                                                                            |                          |          
|Comprehensive income (loss)                                    |                                                                                            | $                        | (13,663  
|                                                               |                                                                                            |                          |          

See accompanying notes to consolidated financial statements, including Note 7 containing
pro forma amounts assuming the retroactive application of SFAS 142.

F-4

---

AIRGAS, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS

|                                                                                                                                  |                          | March 31,                                  |          
|--------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------------------------------------------ | ---------
|
|
|ASSETS                                                                                                                            |                         
|Current Assets                                                                                                                    |                          |                                            |          
|Trade receivables, less allowances for doubtful accounts of $8,176 in 2002 and $7,402 in 2001 (Note 12)                           |                          | $                                          | 88,634   
|Inventories, net (Note 5)                                                                                                         |                          |                                            | 154,045  
|Deferred income tax asset, net (Note 17)                                                                                          |                          |                                            | 13,210   
|Prepaid expenses and other current assets                                                                                         |                          |                                            | 47,654   
|                                                                                                                                  |                          |                                            |          
|                                                                                                                                  |                          | Total current assets                       |          
|                                                                                                                                  |                          |                                            |          
|Plant and equipment, at cost (Note 6)                                                                                             |                          |                                            | 1,309,001
|Less accumulated depreciation                                                                                                     |                          |                                            | (415,986 
|                                                                                                                                  |                          |                                            |          
|                                                                                                                                  | Plant and equipment, net |                                            |          
|                                                                                                                                  |                          |                                            |          
|Goodwill (Note 7)                                                                                                                 |                          |                                            | 406,548  
|Other intangible assets, net (Note 7)                                                                                             |                          |                                            | 25,718   
|Investments in unconsolidated affiliates (Note 15)                                                                                |                          |                                            | 64,626   
|Other non-current assets                                                                                                          |                          |                                            | 23,607   
|                                                                                                                                  |                          |                                            |          
|                                                                                                                                  |                          | Total assets                               |          
|                                                                                                                                  |                          |                                            |          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                              |                         
|Current Liabilities                                                                                                               |                          |                                            |          
|Accounts payable, trade                                                                                                           |                          | $                                          | 82,485   
|Accrued expenses and other current liabilities (Note 8)                                                                           |                          |                                            | 136,390  
|Current portion of long-term debt (Note 9)                                                                                        |                          |                                            | 2,456    
|                                                                                                                                  |                          |                                            |          
|                                                                                                                                  |                          | Total current liabilities                  |          
|                                                                                                                                  |                          |                                            |          
|Long-term debt, excluding current portion (Note 9)                                                                                |                          |                                            | 764,124  
|Deferred income tax liability, net (Note 17)                                                                                      |                          |                                            | 198,173  
|Other non-current liabilities                                                                                                     |                          |                                            | 30,343   
|Commitments and contingencies (Notes 20 and 21)                                                                                   |                          |                                            |         
|Stockholders' Equity(Note 13)                                                                                                     |                          |                                            |          
|Preferred stock, no par value, 20,000 shares authorized, no shares issued or outstanding in 2002 and 2001                         |                          |                                            |         
|Common stock, par value $.01 per share, 200,000 shares authorized, 75,193 and 74,361 shares issued in 2002 and 2001, respectively |                          |                                            | 752      
|Capital in excess of par value                                                                                                    |                          |                                            | 198,500  
|Retained earnings                                                                                                                 |                          |                                            | 345,181  
|Accumulated other comprehensive loss                                                                                              |                          |                                            | (4,401   
|Treasury stock, 547 and 516 common shares at cost in 2002 and 2001, respectively                                                  |                          |                                            | (4,289   
|Employee benefits trust, 4,331 and 5,701 common shares at cost in 2002 and 2001, respectively                                     |                          |                                            | (32,657  
|                                                                                                                                  |                          |                                            |          
|                                                                                                                                  |                          | Total stockholders' equity                 |          
|                                                                                                                                  |                          |                                            |          
|                                                                                                                                  |                          | Total liabilities and stockholders' equity |          
|                                                                                                                                  |                          |                                            |          

See
accompanying notes to consolidated financial statements.

F-5

---



AIRGAS, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF    STOCKHOLDERS' EQUITY

|                                                                                      |  | Years Ended March 31, 2002, 2001 and 2000 | 
|------------------------------------------------------------------------------------- |  | ----------------------------------------- | 
|
|
|BalanceMarch 31, 1999                                                                |  | 72,023.7                                  | 
|Net earnings                                                                          |  |                                           | 
|Foreign currency translation adjustment                                               |  |                                           | 
|Purchase of treasury stock (Note 13)                                                  |  |                                           | 
|Reissuance of treasury stock for stock options exercised (Note 13)                    |  |                                           | 
|Shares issued in connection with stock options exercised (Note 14)                    |  | 544.4                                     | 
|Tax benefit associated with exercise of stock options (Note 17)                       |  |                                           | 
|Shares issued in connection with Employee Stock Purchase Plan (Note 14)               |  | 575.7                                     | 
|Shares issued from Employee Benefits Trust for Employee Stock Purchase Plan (Note 13) |  |                                           | 
|Shares of treasury stock sold to Employee Benefits Trust (Note 13)                    |  |                                           | 
|                                                                                      |  |                                           | 
|BalanceMarch 31, 2000                                                                |  | 73,143.8                                  | 
|Net earnings                                                                          |  |                                           | 
|Foreign currency translation adjustment                                               |  |                                           | 
|Purchase of treasury stock (Note 13)                                                  |  |                                           | 
|Shares issued in connection with a prior year acquisition agreement                   |  | 787.6                                     | 
|Shares issued in connection with stock options exercised (Note 14)                    |  | 429.5                                     | 
|Tax benefit associated with exercise of stock options (Note 17)                       |  |                                           | 
|Shares issued from Employee Benefits Trust for Employee Stock Purchase Plan (Note 13) |  |                                           | 
|Shares of treasury stock sold to Employee Benefits Trust (Note 13)                    |  |                                           | 
|                                                                                      |  |                                           | 
|BalanceMarch 31, 2001                                                                |  | 74,360.9                                  | 
|Net loss                                                                              |  |                                           | 
|Foreign currency translation adjustment                                               |  |                                           | 
|Purchase of treasury stock (Note 13)                                                  |  |                                           | 
|Shares issued in connection with stock options exercised (Note 14)                    |  | 832.0                                     | 
|Tax benefit associated with exercise of stock options (Note 17)                       |  |                                           | 
|Shares issued from Employee Benefits Trust for Employee Stock Purchase Plan (Note 13) |  |                                           | 
|Issuance of warrants (Note 13)                                                        |  |                                           | 
|Cumulative effect of a change in accounting Principle (Note 1)                        |  |                                           | 
|Net change in fair value of interest rate swap Agreements (Note 11)                   |  |                                           | 
|Net tax benefit of comprehensive income items                                         |  |                                           | 
|                                                                                      |  |                                           | 
|BalanceMarch 31, 2002                                                                |  | 75,192.9                                  | 
|                                                                                      |  |                                           | 

See accompanying notes to consolidated financial statements.

F-6

---

AIRGAS, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                |                                                       | Years Ended March 31, |         
|----------------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------- | --------
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                                            |                                                       |                       |         
|Net earnings (loss)                                                                             |                                                       | $                     | (10,415 
|Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:      |                                                       |                       |         
|                                                                                                | Depreciation and amortization                         |                       |         
|                                                                                                | Deferred income taxes                                 |                       |         
|                                                                                                | Equity in earnings of unconsolidated affiliates       |                       |         
|                                                                                                | Gains on divestitures                                 |                       |         
|                                                                                                | (Gain)/loss on sale of plant and equipment            |                       |         
|                                                                                                | Stock issued for employee stock purchase plan         |                       |         
|                                                                                                | Cumulative effect of a change in accounting principle |                       |         
|                                                                                                | Other non-cash charges                                |                       |         
|Changes in assets and liabilities, excluding effects of business acquisitions and divestitures: |                                                       |                       |         
|                                                                                                | Securitization of trade receivables                   |                       |         
|                                                                                                | Trade receivables, net                                |                       |         
|                                                                                                | Inventories, net                                      |                       |         
|                                                                                                | Prepaid expenses and other current assets             |                       |         
|                                                                                                | Accounts payable, trade                               |                       |         
|                                                                                                | Accrued expenses and other current liabilities        |                       |         
|                                                                                                | Other assets and liabilities, net                     |                       |         
|                                                                                                |                                                       |                       |         
|                                                                                                | Net cash provided by operating activities             |                       |         
|                                                                                                |                                                       |                       |         
|CASH FLOWS FROM INVESTING ACTIVITIES                                                            |                                                       |                       |         
|Capital expenditures                                                                            |                                                       |                       | (58,297 
|Proceeds from sale of plant and equipment                                                       |                                                       |                       | 3,216   
|Proceeds from divestitures                                                                      |                                                       |                       | 10,200  
|Business acquisitions, net of cash acquired                                                     |                                                       |                       | (252,538
|Business acquisitions, holdback and other settlements                                           |                                                       |                       | (5,018  
|Investment in unconsolidated affiliates                                                         |                                                       |                       |        
|Dividends and fees from unconsolidated affiliates                                               |                                                       |                       | 2,583   
|Other, net                                                                                      |                                                       |                       | 5,153   
|                                                                                                |                                                       |                       |         
|                                                                                                | Net cash used in investing activities                 |                       |         
|                                                                                                |                                                       |                       |         
|CASH FLOWS FROM FINANCING ACTIVITIES                                                            |                                                       |                       |         
|Proceeds from borrowings                                                                        |                                                       |                       | 680,144 
|Repayment of debt                                                                               |                                                       |                       | (612,779
|Financing costs                                                                                 |                                                       |                       | (12,461 
|Purchase of treasury stock                                                                      |                                                       |                       |        
|Exercise of stock options                                                                       |                                                       |                       | 7,442   
|Cash overdraft                                                                                  |                                                       |                       | (17,026 
|                                                                                                |                                                       |                       |         
|                                                                                                | Net cash provided by (used in) financing activities   |                       |         
|                                                                                                |                                                       |                       |         
|CHANGE IN CASH                                                                                  |                                                       | $                     |        
|CashBeginning of year                                                                          |                                                       |                       |        
|                                                                                                |                                                       |                       |         
|CashEnd of year                                                                                |                                                       | $                     |        
|                                                                                                |                                                       |                       |         

For
supplemental cash flow disclosures see Note 22.
   
See accompanying notes to consolidated financial statements.

F-7

---



AIRGAS, INC. AND SUBSIDIARIES    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of the Business

Airgas, Inc. and subsidiaries (the "Company") is the largest U.S. distributor of industrial, medical and specialty gases (delivered in "packaged" or
cylinder form), and welding, safety and related products. The Company also produces dry ice, liquid carbon dioxide, nitrous oxide and specialty gases for distribution throughout the United States. The
Company was founded in 1982 and became publicly traded on the New York Stock Exchange in 1986.

(b) Basis of Presentation

The consolidated financial statements include the accounts of Airgas, Inc. and subsidiaries. Unconsolidated affiliates are accounted for on the equity
method and generally consist of 20-50% owned operations where control does not exist or is considered temporary. Intercompany accounts and transactions are eliminated in consolidation.

The
Company has made estimates and assumptions relating to the reporting of assets and liabilities and disclosure of contingent assets and liabilities to prepare these statements in
conformity with accounting principles generally accepted in the United States of America. Estimates are used for, but not limited to, determining the net carrying value of trade receivables,
inventories, plant and equipment, goodwill, other intangible assets and loss contingencies. Actual results could differ from those estimates.

(c) Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method for approximately
91% and 88% of the inventories at March 31, 2002 and 2001, respectively. Cost for the remainder of inventories is determined using the last-in, first-out (LIFO) method.

(d) Plant and Equipment

Plant and equipment are initially stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the
related assets. The carrying values of long-lived assets, including plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the recorded
value cannot be recovered from undiscounted future cash flows. When the book value of an asset exceeds associated expected future cash flows, it is considered to be impaired and is written down to
fair value, which is determined based on either future cash flows or appraised values.

(e) Other Intangible Assets and Deferred Financing Costs

Costs and payments pursuant to non-competition arrangements entered into in connection with business acquisitions are amortized over the terms of the
arrangements, which are principally over five years. The Company assesses the recoverability of non-competition arrangements by determining whether the amortization of the asset balance
can be recovered through projected undiscounted future cash flows of the related business over its remaining life.

Costs
related to the issuance of long-term debt are deferred and amortized over the term of the related debt.

F-8

---

(f) Commitments and Contingencies

The Company's policy is to accrue future legal fees associated with outstanding litigation. Liabilities for loss contingencies arising from claims, assessments,
litigation and other sources are recorded when it is
probable that a liability has been incurred and the amount of the claim, assessment or damages can be reasonably estimated.

The
Company maintains business insurance programs with significant self-insured retention, which covers workers' compensation, business automobile and general products
liability claims. The Company accrues estimated losses using actuarial models and assumptions based on historical loss experience. The actuarial calculations used to estimate business insurance
reserves are based on numerous assumptions, some of which are subjective. The Company will adjust its business insurance reserves, if necessary, in the event future loss experience differs from
historical loss patterns.

(g) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets
when it is more likely than not that a tax benefit will not be realized.

(h) Foreign Currency Translation

The functional currency of the Company's foreign operations is the applicable local currency. The translation of foreign currencies into U.S. dollars is performed
for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using average exchange rates during each reporting period. The gains or
losses, net of applicable deferred income taxes, resulting from such translations are included in stockholders' equity as a component of "Accumulated other comprehensive loss." Gains and losses
arising from foreign currency transactions are reflected in the consolidated statements of earnings as incurred.

(i) Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. Concentrations of credit
risk are limited due to the Company's large number of customers and their dispersion across many industries throughout North America. Credit terms granted to customers are generally net
30 days.

(j) Financial Instruments

In managing interest rate risk exposure, the Company enters into interest rate swap agreements. An interest rate swap is a contractual exchange of interest
payments between two parties. A standard interest rate swap involves the payment of a fixed rate times a notional amount by one party in exchange for a floating rate times the same notional amount
from another party. As interest rates change, the difference to be paid or received is accrued and recognized as interest expense over the life of the agreement. These instruments are not entered into
for trading purposes and the Company has the ability and intent to hold these instruments to maturity. Counterparties to the Company's interest rate swap agreements are major financial institutions.
With the adoption of the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 133,Accounting

F-9

---

for Derivative Instruments and Certain Hedging Activities, as amended by SFAS No. 137 and 138,in fiscal 2002 (see Note (1) (n)), the Company recognizes interest
rate swap agreements on the balance sheet at fair value. The interest rate swap agreements are marked to market with changes in fair value recognized in either other comprehensive income (loss) or in
the carrying value of the hedged portions of the medium-term and senior subordinated debt notes.

The
carrying amounts for trade receivables and accounts payable approximate fair value based on the short-term maturity of these financial instruments.

(k) Employee Benefits Trust

The Company established a grantor trust (the "Trust") to fund future obligations of the Company's employee benefit and compensation plans. Shares are purchased by
the Trust from the Company at fair market value and are reflected as a reduction of stockholders' equity in the Company's Consolidated Balance Sheets under the caption "Employee benefits trust."
Shares are transferred from the Trust to fund compensation and employee benefit obligations based on the original cost of the shares to the Trust. The satisfaction of compensation and employee benefit
plan obligations is based on the fair value of shares transferred. Differences between the original cost of the shares to the Trust and the fair market value of shares transferred is charged or
credited to capital in excess of par value.

(l) Revenue Recognition

Revenue from sales of gas and hardgoods products is recognized when products are delivered to customers. Rental fees on cylinders, bulk gas storage tanks and
other equipment are recognized when earned. Under long-term lease agreements in which rental fees are collected in advance, revenues are deferred and recognized over the terms of the lease
agreements.

(m) Shipping and Handling Fees and Costs

The Company recognizes delivery and freight charges to customers as elements of net sales. Costs of third-party freight are recognized as cost of sales while
costs of deliveries by company vehicles and personnel are recognized as elements of selling, distribution and administrative expenses and depreciation expense.

(n) Accounting and Disclosure Changes

SFAS 133

On April 1, 2001, the Company adopted SFAS No. 133, which requires all derivatives to be recorded on the balance sheet at fair value. In accordance
with the transition provisions of SFAS 133, on April 1, 2001, the Company recorded the cumulative effect of this accounting change as a liability and a deferred loss of
$6.7 million in the accumulated other comprehensive income (loss) component of stockholders' equity to recognize, at fair value, interest rate swap agreements that are designated as cash flow
hedging instruments. Additionally, the Company recorded an asset and adjusted the carrying value of the hedged portion of its fixed rate debt by $6 million to recognize, at fair value, interest
rate swap agreements that are designated as fair value hedging instruments.

SFAS 141

Effective July 1, 2001, the Company adopted SFAS No. 141,Business Combinations. SFAS 141
requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. The adoption of SFAS 141 did not have an impact on the historical
results of operations, financial position or liquidity of the Company.

F-10

---

SFAS 142

In July 2001, the FASB issued SFAS No. 142,Goodwill and Other Intangible Assets. As allowed under
the Standard, the Company adopted SFAS 142 retroactively to April 1, 2001. SFAS 142 requires goodwill and intangible assets with indefinite useful lives to no longer be amortized,
but instead be tested for impairment at least annually.

With
the adoption of SFAS 142, the Company reassessed the useful lives and residual values of all acquired intangible assets to make any necessary amortization period adjustments.
Based on that assessment, no adjustments were made to the amortization period or residual values of other intangible assets. Additionally, certain reclassifications were made to previously issued
financial statements to conform to the presentation required by SFAS 142 (see Note 7).

SFAS 142
provides a six-month transitional period from the effective date of adoption for the Company to perform an assessment of whether there is an indication that
goodwill is impaired. To the extent that an indication of impairment exists, the Company must perform a second test to measure the amount of the impairment. The Company determined the implied fair
value of each of its reporting units using a discounted cash flow analysis and compared such values to the respective reporting units' carrying amounts. This evaluation indicated that goodwill
recorded in the Distribution segment associated with its industrial tool reporting unit was impaired as of April 1, 2001. Conditions that contributed to the goodwill impairment included the
deterioration of the industrial and machine tool markets since the acquisition of the businesses in this reporting unit and difficulty in achieving expected cross-selling synergies. The resulting
business performance made it difficult to justify further investment to achieve the growth originally forecast for the business. Accordingly, the Company recognized a $59 million
non-cash charge, recorded as of April 1, 2001, as the cumulative effect of a change in accounting principle for the write-down of goodwill to its fair value. The
impaired goodwill was not deductible for taxes, and as a result, no tax benefit was recorded in relation to the charge.

SFAS 142
also requires goodwill to be tested annually and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. The Company has elected to perform its annual tests for indications of goodwill impairment as of October 31 of each year. As of October 31,
2001, the Company's annual assessment of each of its reporting units indicated that goodwill was not impaired.

Statement of Position 98-5

The Company adopted Statement of Position 98-5,Reporting on the Costs of Start-up
Activities, as required, in fiscal 2000 resulting in a charge to net earnings of $590 thousand as a cumulative effect of a change in accounting principle. The charge
primarily resulted from the write-off of start-up costs capitalized in connection with the Company's two air separation units.

(o) Reclassifications

Certain reclassifications have been made to prior period financial statements to conform to the current presentation.

(2)  ACQUISITIONS & DIVESTITURES

(a) Acquisitions

Acquisitions have been recorded using the purchase method of accounting and, accordingly, results of their operations have been included in the Company's
consolidated financial statements since the effective dates of the respective acquisitions.

F-11

---

Fiscal 2002

On February 28, 2002, the Company purchased the majority of Air Products and Chemicals, Inc.'s ("Air Products") U.S. packaged gas business,
excluding its electronic gases and magnetic resonance imaging-related helium operations, for cash of approximately $241 million, including transaction costs paid through March 31, 2002.
The transaction was financed entirely with senior bank debt. The acquisition included 88 facilities in 30 states associated with the filling and distribution of cylinders, liquid dewars, tube
trailers, and other containers of industrial gases and non-electronic specialty gases, and the selling of welding hardgoods, including customer service centers, warehouses, and other
related assets. Airgas expects that the transaction will be a strategic fit with the Company's core business and that the acquisition will strengthen its national network by giving it a presence in
important geographies. Additionally, the Company expects the acquisition of Air Products' non-electronic specialty gas operations will strengthen the core competencies of Airgas' Specialty
Gas Operations, enabling it to enhance its competitiveness. Separately, Air Products sold its packaged gas operations in the Carolinas and southern Virginia to National Welders Supply
Company, Inc. ("National Welders"), with which the Company has a joint venture. The operations acquired by National Welders generated approximately $17 million in revenue and employ
about 100 people.

The
estimates of fair values of net assets acquired, identified intangibles and goodwill related to the transaction with Air Products are based on a preliminary estimate. The Company has
not yet finalized the determination of the specific fair values of the assets acquired. Additional work related to the performance of asset appraisals needs to be completed to finalize the allocation
of the purchase price to net assets, identified intangibles and goodwill acquired. The entire purchase price ultimately assigned to goodwill will be deductible for income taxes. The Company does not
expect the final allocation of the purchase price to differ materially from the amounts included in the accompanying consolidated financial statements.

Below
is the preliminary purchase price allocation to each major asset and liability caption of the acquired packaged gas business:

(In thousands)Current assets

$
27,049Property, plant and equipment, net


197,674Goodwill


22,208Intangible assets


3,786Current liabilities


(8,635
)Long-term liabilities


(812
)Total

$
241,270


Additionally,
in September 2001, the Company acquired six retail distributor locations from Air Liquide America Corporation ("Air Liquide"). The purchase price of
$11 million was paid to Air Liquide on October 1, 2001 and resulted in goodwill of approximately $7 million. The amount of goodwill associated with the Air Liquide transaction is
consistent with similarly sized gas distribution acquisitions and is entirely deductible for income taxes.

Fiscal 2001

During fiscal 2001, the Company purchased one business for approximately $2 million.

Fiscal 2000

During fiscal 2000, the Company purchased six businesses. The largest of these acquisitions and their effective dates included Brown Welding Supply, LLC.
(July 1, 1999), Oxygen Sales & Service, Inc. (August 1, 1999) and Puritan-Bennett Corporation (January 21, 2000). The aggregate purchase price for these acquisitions
amounted to approximately $105 million. The purchase price for the remaining 3 businesses amounted to approximately $4 million.

F-12

---

In
connection with the above acquisitions, the total purchase price, cash paid and liabilities assumed were as follows:

|                                                        |  | Years Ended March 31,
|------------------------------------------------------- |  | ---------------------
|
|
|Cash paid                                               |  | $                    
|Issuance of common stock                                |  |                      
|Notes issued to sellers                                 |  |                      
|Notes payable and capital leases assumed                |  |                      
|Other liabilities assumed and accrued acquisition costs |  |                      
|                                                        |  |                      
|Total purchase price                                    |  | $                    
|                                                        |  |                      

The
purchase price for business acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Such
allocations have been based on preliminary estimates of fair value at the date of acquisition, which may be revised at a later date. Costs in excess of net assets acquired (goodwill) for fiscal 2002,
2001 and 2000 amounted to $29.6 million, $600 thousand and $33 million, respectively.

The
following presents unaudited estimated pro forma operating results as if the fiscal 2002 and 2001 acquisitions had been consummated on April 1, 2000. The pro forma results
were prepared from financial information provided by Air Products and reflect that company's historic cost structure, which included a significant allocation of corporate overhead. Pro forma
adjustments to the Air Products results were limited to those related to the Company's stepped-up basis in acquired assets and adjustments to reflect the Company's borrowing and tax rates.
The pro forma adjustments reflect the decline in the Company's average borrowing rates under the senior bank debt used to finance the acquisition. Those rates were 4.8% in fiscal 2002 and 8.2% in
fiscal 2001. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of April 1,
2000 or of results that may occur in the future.

Unaudited
Years Ended March 31,2002

2001(In thousands, except per share amounts)Net sales

$
1,845,817

$
1,863,064Income before the cumulative effect of a change in accounting principle


52,633


26,232Net earnings (loss)


(6,367
)

26,232Diluted earnings (loss) per share


(.09
)

.39


(b) Divestitures

In December 2001, the carrying values of the net assets of Kendeco, Inc., an industrial tool business in the Distribution operating segment, were
reduced by $3.6 million to their net realizable value based on the estimated selling price less cost to sell of $3.5 million. The loss, reflected in Other income, net, included the
write-off of $3.1 million of non-tax deductible goodwill. The Company completed the sale of Kendeco in May 2002. Kendeco's operations were reflected in the
operating results of the Distribution segment.

In
October 2001, the Company sold two of its nitrous oxide production facilities to Air Liquide. The Company has retained its remaining four nitrous oxide production facilities to
meet its requirements as a major producer and distributor of nitrous oxide. After-tax proceeds from the sale of

F-13

---

approximately $10 million were used to reduce borrowings under the Company's revolving credit facilities. The Company recognized a gain on the transaction of $7.4 million in Other
income, net in the fiscal 2002 third quarter. The nitrous oxide facilities were reflected in the operating results of the Gas Operations segment.

In
January 2001, the Company divested its Jackson Dome carbon dioxide reserve and associated pipeline for cash proceeds of approximately $42 million resulting in an
insignificant gain. The Jackson Dome carbon dioxide reserve and associated pipeline was reflected in the operating results of the Gas Operations segment.

In
May 2000, the Company completed the sale of its equity investment in Bhoruka Gases Ltd., a regional industrial gas distributor in India. Proceeds from the sale,
including a note receivable, were $1.1 million. The investment was sold for a loss of approximately $1.7 million, which had been provided for under the Company's 1998 special charges. In
August 2000, the Company completed the sale of Superior Air Products Ltd., also located in India. Proceeds from the sale were $6.4 million and resulted in an insignificant gain.
The equity investments in India were reflected in the operating results of the Distribution segment.

During
fiscal 2000, the Company completed the sale of its operations in Poland and Thailand and sold a non-core medical equipment distribution business. Proceeds from the
sales amounted to $55.6 million and resulted in a gain of $17.5 million, which was recognized in Other income, net. The operations in Poland and Thailand were reflected in the operating
results of the Distribution segment.

The
following table sets forth selected financial data, by business segment, related to the divested operations in fiscal years 2002, 2001 and 2000:

|                  |                        | Years Ended March 31,
|----------------- | ---------------------- | ---------------------
|
|
|Net sales:        |                        |                      
|                  | Distribution           |                      
|                  | Gas operations         |                      
|                  |                        |                      
|                  | Total net sales        |                      
|                  |                        |                      
|Operating income: |                        |                      
|                  | Distribution           |                      
|                  | Gas operations         |                      
|                  |                        |                      
|                  | Total operating income |                      
|                  |                        |                      

(3)  SPECIAL CHARGES (RECOVERIES)

During the fourth quarter of fiscal 2002, the Company announced the outsourcing of certain administrative functions to a financial shared services center to be
managed and operated by an outside firm. The Company recorded a fourth quarter special charge of approximately $1.0 million ("2002 Special Charge") for severance costs (workforce reduction of
125 employees) and costs related to exiting one facility associated with the fiscal 2003 transition to the shared services center.

During
the fourth quarter of fiscal 2001, the Company recorded net special charges of $3.6 million. The net special charges (the "2001 Special Charges") included a charge of
$8.5 million related to a cost reduction plan focused on improving results at certain business units partially offset by special charge recoveries of $4.9 million principally consisting
of a favorable insurance settlement related to a fiscal 1997 special charge associated with the fraudulent breach of contract by a third-party supplier of refrigerant gases. The cost reduction plan
included severance costs from a reduction in workforce; facility exit costs, primarily non-cancelable lease obligations, for the closure of 30 branch locations; and

F-14

---

impairment write-downs associated with the planned divestiture of certain non-core businesses. The major components of the fiscal 2001 Special Charges were as follows:

2001(In thousands)Severance costs

$
3,880Facility exit costs


2,464Impairment write-down


2,1882001 Special Charges


8,532Special charge recoveries


(4,889
)Special Charges, net

$
3,643


At
March 31, 2002 and 2001, accrued liabilities associated with the 2001 special charge were as follows:

|                         |  | Severance
costs |        | Facility exit
costs |   | Divestitures |   | Total |       
|------------------------ |  | --------------- | ------ | ------------------- | - | ------------ | - | ----- | ------
|
|2001 Special Charges     |  | $               | 3,880  |                     | $ | 2,464        |   | $     | 2,188 
|Cash payments            |  |                 | (913   | )                   |   | (34          | ) |       |      
|Incurred losses          |  |                 | (240   | )                   |   |             |   |       | (2,188
|                         |  |                 |        |                     |   |              |   |       |       
|March 31, 2001 liability |  | $               | 2,727  |                     | $ | 2,430        |   | $     |      
|Cash payments            |  |                 | (2,162 | )                   |   | (289         | ) |       |      
|Change in estimates      |  |                 | (565   | )                   |   | (392         | ) |       |      
|                         |  |                 |        |                     |   |              |   |       |       
|March 31, 2002 liability |  | $               |       |                     | $ | 1,749        |   | $     |      
|                         |  |                 |        |                     |   |              |   |       |       

During
fiscal 2002, the Company reduced its estimate related to severance and facility exit costs associated with the 2001 cost reduction plan by approximately $1.0 million. The
change in estimate was recorded as a recovery in fiscal 2002 through the Special charges (recoveries) line in the Consolidated Statement of Earnings. The liability for facility exit costs at
March 31, 2002 relates to non-cancelable lease obligations that will be reduced over future periods as lease payments are made over the remaining terms of the leases.

Special
charge recoveries in fiscal 2000 primarily consist of recoveries of $2.8 million from an insurance settlement related to a fiscal 1997 special charge associated with the
fraudulent breach of contract by a third-party supplier of refrigerant gases.

F-15

---

(4)  EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of shares of the Company's common stock outstanding
during the period. Outstanding shares consist of issued shares less treasury stock and common stock held by the Employee Benefits Trust. Diluted earnings (loss) per share is calculated by dividing net
earnings (loss) by the weighted average common shares outstanding adjusted for the dilutive effect of common stock equivalents related to stock options, warrants and contingently issuable shares.

The
table below reconciles basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the three years ended March 31, 2002, 2001
and 2000:

|                                            |                              | Years Ended March 31,
|------------------------------------------- | ---------------------------- | ---------------------
|
|
|Weighted average common shares outstanding: |                              |                      
|Basic                                       |                              | 68,100               
|                                            | Stock options and warrants   |                      
|                                            | Contingently issuable shares |                      
|                                            |                              |                      
|Diluted                                     |                              | 69,900               
|                                            |                              |                      

Contingently
issuable shares represent the required issuance of Company common stock in connection with a prior year acquisition.

(5)  INVENTORIES, NET

Inventories, net, consist of:

March 31,2002

2001(In thousands)Hardgoods

$
139,034

$
143,121Gases


15,011


11,903$
154,045

$
155,024


Net
inventories determined by the LIFO inventory method totaled $15.2 million and $19.1 million at March 31, 2002 and 2001, respectively. If the FIFO inventory
method had been used for these inventories, they would have been $1.3 million and $1.5 million higher at March 31, 2002 and 2001, respectively. Substantially all of the
inventories are finished goods.

F-16

---

(6)  PLANT AND EQUIPMENT

The major classes of plant and equipment, at cost, are as follows:

|                                              |  |         |  | March 31,
|--------------------------------------------- |  | ------- |  | ---------
|
|
|
|Land and land improvements                    |  |        |  | $        
|Buildings and leasehold improvements          |  | 25      |  |          
|Cylinders                                     |  | 30      |  |          
|Machinery and equipment, including bulk tanks |  | 7 to 30 |  |          
|Computers and furniture and fixtures          |  | 3 to 10 |  |          
|Transportation equipment                      |  | 3 to 15 |  |          
|Construction in progress                      |  |        |  |          
|                                              |  |         |  |          
|                                              |  |         |  | $        
|                                              |  |         |  |          

(7)  GOODWILL AND OTHER INTANGIBLE ASSETS

As described in Note 1, the Company adopted SFAS 142 as of April 1, 2001. The following table reconciles the reported operating income,
equity in earnings of unconsolidated affiliates, earnings before the cumulative effect of a change in accounting principle and net income for fiscal 2001 and 2000 to their respective pro forma
balances adjusted to exclude goodwill amortization expense, which is no longer recognized under the provisions of SFAS 142. Fiscal 2002 results, adjusted for a cumulative effect of a change in
accounting principle, are presented for comparative purposes.

F-17

---

|                                                                           |                                                                                    | Years Ended March 31,
|-------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------------------
|
|
|Operating income:                                                          |                                                                                    |                      
|                                                                           | Distribution segment                                                               |                      
|                                                                           | Gas Operations segment                                                             |                      
|                                                                           |                                                                                    |                      
|                                                                           | Total reported operating income                                                    |                      
|                                                                           |                                                                                    |                      
|                                                                           | Add back: Distribution goodwill amortization                                       |                      
|                                                                           | Add back: Gas Operations goodwill amortization.                                    |                      
|                                                                           |                                                                                    |                      
|                                                                           | Add back: Total goodwill amortization                                              |                      
|                                                                           |                                                                                    |                      
|                                                                           | Adjusted Distribution operating income                                             |                      
|                                                                           | Adjusted Gas Operations operating income                                           |                      
|                                                                           |                                                                                    |                      
|                                                                           | Adjusted total operating income                                                    |                      
|                                                                           |                                                                                    |                      
|Equity in earnings of unconsolidated affiliates:                           |                                                                                    |                      
|                                                                           | Reported equity in earnings of unconsolidated affiliates                           |                      
|                                                                           | Add back: equity method goodwill amortization                                      |                      
|                                                                           |                                                                                    |                      
|                                                                           | Adjusted equity in earnings of unconsolidated affiliates                           |                      
|                                                                           |                                                                                    |                      
|Earnings before the cumulative effect of a change in accounting principle: |                                                                                    |                      
|                                                                           | Reported earnings before the cumulative effect of a change in accounting principle |                      
|                                                                           | Add back: goodwill amortization after tax                                          |                      
|                                                                           |                                                                                    |                      
|                                                                           | Adjusted earnings before the cumulative effect of a change in accounting principle |                      
|                                                                           |                                                                                    |                      
|Net income:                                                                |                                                                                    |                      
|                                                                           | Reported net income (loss)                                                         |                      
|                                                                           | Add back: goodwill amortization after tax                                          |                      
|                                                                           | Cumulative effect of a change in accounting principle                              |                      
|                                                                           |                                                                                    |                      
|                                                                           | Adjusted net income                                                                |                      
|                                                                           |                                                                                    |                      
|Basic earnings (loss) per share:                                           |                                                                                    |                      
|                                                                           | Reported net income (loss)                                                         |                      
|                                                                           | Goodwill amortization after tax                                                    |                      
|                                                                           | Cumulative effect of a change in accounting principle                              |                      
|                                                                           |                                                                                    |                      
|                                                                           | Adjusted basic earnings per share                                                  |                      
|                                                                           |                                                                                    |                      
|Diluted earnings (loss) per share:                                         |                                                                                    |                      
|                                                                           | Reported net income (loss)                                                         |                      
|                                                                           | Goodwill amortization after tax                                                    |                      
|                                                                           | Cumulative effect of a change in accounting principle                              |                      
|                                                                           |                                                                                    |                      
|                                                                           | Adjusted diluted earnings per share                                                |                      
|                                                                           |                                                                                    |                      

F-18

---

Changes in the carrying amount of goodwill for fiscal 2002 were as follows:

|                          |                                                       | Distribution
Segment |         | Gas Operations
Segment |   | Total  |     
|------------------------- | ----------------------------------------------------- | -------------------- | ------- | ---------------------- | - | ------ | ----
|
|Balance at March 31, 2001 |                                                       | $                    | 364,943 |                        | $ | 75,114 |     
|                          | Acquisitions                                          |                      |         | 29,616                 |   |        |    
|                          | Divestitures                                          |                      |         | (3,146                 | ) |        | (811
|                          | Cumulative effect of a change in accounting principle |                      |         | (59,000                | ) |        |    
|                          | Other adjustments                                     |                      |         | (88                    | ) |        | (80 
|                          |                                                       |                      |         |                        |   |        |     
|Balance at March 31, 2002 |                                                       | $                    | 332,325 |                        | $ | 74,223 |     
|                          |                                                       |                      |         |                        |   |        |     

Other
intangible assets amounted to $25.7 million (net of accumulated amortization of $77.6 million) and $29.6 million (net of accumulated amortization of
$71.5 million) at March 31, 2002 and 2001, respectively. These intangible assets primarily consist of non-compete agreements entered into in connection with business
combinations and are amortized over the term of the agreements, principally five years. There are no expected residual values related to these intangible assets. Estimated future amortization expense
by fiscal year is as follows ($ in millions): 2003$6.6; 2004$6.2; 2005$4.3; 2006$3.7 and $4.9 thereafter.

F-19

---

(8)  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities include:

|                                               |  | March 31,
|---------------------------------------------- |  | ---------
|
|
|Cash overdraft                                 |  | $        
|Accrued payroll and employee benefits          |  |          
|Business insurance reserves                    |  |          
|Health insurance reserves                      |  |          
|Accrued interest expense                       |  |          
|Litigation reserves                            |  |          
|Other accrued expenses and current liabilities |  |          
|                                               |  |          
|                                               |  | $        
|                                               |  |          

The
cash overdraft is attributable to the float of the Company's outstanding checks. The litigation reserves in both fiscal years primarily relate to defense and settlement costs
associated with the Praxair litigation (see Note 21).

(9)  INDEBTEDNESS

(a)Long-term Debt

Long-term debt consists of:

|                                          |  | March 31, |        
|----------------------------------------- |  | --------- | -------
|
|
|Revolving credit borrowings               |  | $         | 229,309
|Term loan                                 |  |           | 100,000
|Medium-term notes                         |  |           | 181,275
|Senior subordinated notes                 |  |           | 222,864
|Acquisition and other notes               |  |           | 33,132 
|                                          |  |           |        
|Total long-term debt                      |  |           | 766,580
|Less current portion of long-term debt    |  |           | (2,456 
|                                          |  |           |        
|Long-term debt, excluding current portion |  | $         | 764,124
|                                          |  |           |        

Revolving Credit Facilities

On July 30, 2001, the Company refinanced its existing revolving credit facilities due December 5, 2002. The refinanced credit facilities consist of
revolving credit facilities with a syndicate of lenders totaling $367.5 million and $50 million Canadian (US $32 million), including letters of credit. The revolving credit
facilities will mature on July 30, 2006. At March 31, 2002, the Company had borrowings under the revolving facilities of approximately $208 million and $35 million Canadian
(US $21 million). The Company also had commitments under letters of credit supported by the revolving credit facilities of approximately $38 million at March 31, 2002. Based on
restrictions related to certain leverage ratios, the Company had additional borrowing capacity under the revolving facilities of approximately $105 million at March 31, 2002. The
variable interest rates of the U.S. and Canadian revolving credit facilities are based on the London Interbank Offered Rate ("LIBOR") and Canadian Bankers' Acceptance Rates, respectively. At
March 31, 2002, the effective interest rates on borrowings under the

F-20

---

revolving facilities were 3.98% on U.S. borrowings and 2.15% on Canadian borrowings. Certain of the Company's domestic subsidiaries guarantee borrowings under the revolving facilities and foreign
subsidiaries also guarantee Canadian borrowings. During the fourth quarter of fiscal 2002, the Company's credit rating as determined by third-party credit rating agencies was lowered in response to
additional indebtedness related to the Air Products acquisition (see Note 2). The lower credit rating required the Company to pledge 100% of the stock of its domestic guarantor subsidiaries and
65% of the stock of its foreign guarantor subsidiaries for the benefit of the syndicate of lenders. If the Company's credit rating is further reduced, the Company will be required to grant a security
interest in substantially all of the tangible and intangible assets of the Company for the benefit of the syndicate of lenders. The revolving credit facilities also contain covenants, which include
the maintenance of certain leverage ratios, a fixed charge ratio, and potential restrictions on certain additional borrowings, the payment of dividends and the repurchase of common stock.

Term Loan

In connection with the Air Products acquisition in February 2002, the Company amended its revolving credit facilities to permit the acquisition and
obtained a $100 million term loan from a syndicate of lenders. The term loan is due in quarterly installments beginning June 30, 2002 with a final payment due July 30, 2006. The
term loan is unsecured and bears a variable interest rate based on LIBOR plus a spread related to the Company's credit rating. At March 31, 2002, the effective interest rate of the term loan
was 4.15%. The additional term loan along with the Company's revolving credit facilities enabled Company to finance the Air Products acquisition entirely with senior bank debt.

Medium-Term Notes

At March 31, 2002, the Company had the following medium-term notes outstanding: $75 million of unsecured notes due March 2004
bearing interest at a fixed rate of 7.14% and $100 million of unsecured notes due September 2006 bearing interest at a fixed rate of 7.75%.

Senior Subordinated Notes

On July 30, 2001, concurrent with the refinancing of its revolving credit facilities, the Company issued $225 million of senior subordinated notes
(the "Notes") with a maturity date of October 1, 2011. The Notes bear interest at a fixed annual rate of 9.125%, payable semi-annually on April 1 and October 1 of each
year with the first interest payment due on April 1, 2002. The Notes were sold in accordance with the provisions of Rule 144A of the Securities Act of 1933 (the "Securities Act"). In
October 2001, the Company exchanged the Notes for substantially similar notes that are registered with the Securities and Exchange Commission in accordance with the Securities Act. No gain or
loss was recognized as a result of the exchange. The notes contain covenants that restrict the payment of dividends, the issuance of preferred stock, and the incurrence of additional indebtedness and
liens. The notes are guaranteed on a subordinated basis by each of the domestic guarantors under the revolving credit facilities.

Acquisition and Other Notes

Acquisition and other notes principally represent notes issued to sellers of businesses acquired and are repayable in periodic installments. At March 31,
2002, acquisition and other notes of $33 million had interest rates ranging from 7.00% to 9.00%. In the first quarter of fiscal 2003, the Company refinanced $20 million of the
acquisition notes with borrowings under its revolving credit facilities.

F-21

---

Aggregate Long-term Debt Maturities

The aggregate maturities of long-term debt are as follows:

Years Ending March 31,

Aggregate Maturity(In thousands)2003

$
2,4562004


96,0312005


23,1432006


35,8182007


385,847Thereafter


223,285$
766,580


(b)Swap Agreements

In managing interest rate exposure, the Company participates in 12 interest rate swap agreements with a total notional principal amount of $323 million at
March 31, 2002. Counterparties to the interest rate swap agreements are major financial institutions. The Company monitors its positions and the credit ratings of its counterparties, and does
not anticipate nonperformance by the counterparties.

Seven
swap agreements with approximately $168 million in notional principal amount require the Company to make fixed interest payments based on an average effective rate of 6.64%
and receive variable interest payments from its counterparties based on three month LIBOR (average rate of 1.93% at March 31, 2002.) The remaining terms of these swap agreements range from
between three months and three years. Five swap agreements with approximately $155 million in notional principal amount require the Company to make variable interest payments based on six month
LIBOR (average rate of 3.78% at March 31, 2002) and receive fixed interest payments from its counterparties based on an average effective rate of 8.05% at March 31, 2002. The remaining
terms of these swap agreements range from between one and nine years. Under the terms of one of the swap agreements, the Company has elected to receive the discounted value of the counterparty's
interest payments up front. At March 31, 2002, $424 thousand of such payments was included in other current liabilities. The effect of the swap agreements was to increase interest
expense by approximately $2.9 million, $1.6 million and $3.2 million in 2002, 2001 and 2000, respectively.

The
aggregate maturities of the Company's interest rate swaps by type of swap for the five years ending March 31, 2007 and thereafter are as follows:

Notional Principal AmountsYears Ending March 31,Pay-Fixed

Pay-Variable(In thousands)2003

$
127,500

$
2004





30,0002005


40,000


2006





2007





50,000Thereafter





75,000$
167,500

$
155,000


F-22

---

(10) FAIR VALUE OF FINANCIAL INSTRUMENTS

Summarized below are the carrying and fair values of the Company's financial instruments at March 31, 2002 and 2001.

The
fair value of the Company's financial instruments is based on estimates using standard pricing models that take into account the present value of future cash flows as of the balance
sheet date. The computation of fair values of these instruments is generally performed by the Company. The carrying amounts reported in the balance sheet for trade receivables and payables, accrued
liabilities, accrued income taxes, and short-term borrowings approximate fair value due to the short-term nature of these instruments. Accordingly, these items have been
excluded from the table below.

|                                      |                   | 2002
Carrying
Value |         | 2002
Fair
Value |   | 2001
Carrying
Value |        | 2001
Fair
Value |        
|------------------------------------- | ----------------- | ------------------- | ------- | --------------- | - | ------------------- | ------ | --------------- | -------
|
|Financial Instruments:                |                   |                     |         |                 |   |                     |        |                 |        
|Revolving credit borrowings           |                   | $                   | 229,309 |                 | $ | 229,309             |        | $               | 414,983
|Senior subordinated notes             |                   |                     | 222,864 |                 |   | 234,000             |        |                 |       
|Term loan                             |                   |                     | 100,000 |                 |   | 100,000             |        |                 |       
|Medium-term notes                     |                   |                     | 181,275 |                 |   | 175,000             |        |                 | 225,000
|Acquisition and other notes           |                   |                     | 33,132  |                 |   | 33,094              |        |                 | 53,626 
|Prepaid interest rate swap agreements |                   |                     | 424     |                 |   | 680                 |        |                 | 1,441  
|Interest rate swap agreements:        |                   |                     |         |                 |   |                     |        |                 |        
|                                      | Fair value hedge |                     |         | (4,140          | ) |                     | (4,140 | )               |        
|                                      | Cash flow hedge  |                     |         | 4,924           |   |                     | 4,924  |                 |        

(11) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company's involvement with derivative instruments is limited to highly effective fixed and floating interest rate swap agreements used to manage
well-defined interest rate risk exposures. Interest rate swap agreements are not entered into for trading purposes. As described in Note 1, the Company adopted SFAS 133 as of
April 1, 2001.

F-23

---

At March 31, 2002, the Company had a notional amount of $168 million in fixed interest rate swap agreements that effectively convert a corresponding amount of variable
interest rate borrowings under the revolving credit facilities and operating leases to fixed interest rate instruments. In fiscal 2002, the Company recorded a net change in the fair value of the fixed
interest rate swap agreements of $1.7 million as accumulated other comprehensive income (loss). The net additional interest payments made under these swap agreements during the quarter were
recognized in interest expense. Over the next 12 months, the Company expects to reclassify approximately $2.7 million of the deferred loss from accumulated other comprehensive income
(loss) to interest expense as swap agreements mature.

At
March 31, 2002, the Company also had a notional amount of $155 million in variable interest rate swap agreements that effectively converts a corresponding amount of
fixed rate medium-term and senior subordinated notes to variable rate debt. The fair value of these variable interest rate swap agreements and the increased carrying value of the hedged
portions of the medium-term and senior subordinated notes at March 31, 2002 was $4.1 million. The changes in the fair value of the swap agreements are offset by changes in
the fair value of the hedged portions of the medium-term and senior subordinated notes.

(12) TRADE RECEIVABLES SECURITIZATION

The Company participates in a securitization agreement with two commercial banks to sell up to $175 million of qualifying trade receivables. The agreement
expires in December 2003, but the initial term is subject to renewal provisions contained in the agreement. During fiscal 2002, the Company sold, net of its retained interest,
$1.71 billion of trade receivables and remitted to bank conduits, pursuant to a servicing agreement, $1.58 billion in collections on those receivables. The net proceeds were used to
reduce borrowings under the Company's revolving credit facilities. The amount of outstanding receivables under the agreement was $134 million at March 31, 2002 and $73 million at
March 31, 2001. Proceeds received by the Company pursuant to the securitization agreement were used to reduce borrowings on its revolving credit facilities.

The
transaction has been accounted for as a sale under the provisions of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. Under the securitization agreement, eligible trade receivables are sold to bank conduits through a bankruptcy-remote special purpose entity,
which is consolidated for financial reporting purposes. The difference between the proceeds from the sale and the carrying value of the receivables is recognized as discount on securitization of trade
receivables in the accompanying Consolidated Statements of Earnings and varies on a monthly basis depending on the amount of receivables sold and market rates. The Company
retains a subordinated interest in the receivables sold, which is recorded at the receivables' previous carrying value. A subordinated retained interest of approximately $41 million and
$26 million is included in Trade receivables in the accompanying Consolidated Balance Sheets at March 31, 2002 and 2001, respectively. In accordance with a servicing agreement, the
Company will continue to service, administer and collect the trade receivables on behalf of the bank conduits. The servicing fees charged to the bank conduits approximate the costs of collections. The
Company also maintains an allowance for doubtful accounts on trade receivables that it retains.

(13) STOCKHOLDERS' EQUITY

(a)Common Stock

The Company is authorized to issue up to 200 million shares of common stock with a par value of $.01 per share. At March 31, 2002, the number of
shares of common stock outstanding was 70.3 million, excluding 547 thousand shares of common stock held as treasury stock and 4.3 million shares of common stock held in a grantor
trust as described under Note 13(d).

F-24

---

(b)Preferred Stock and Redeemable Preferred Stock

The Company is authorized to issue up to 20 million shares of preferred stock. Of the 20 million shares authorized, 200 thousand shares have
been designated as Series A Junior Participating Preferred Stock and 200 thousand shares have been designated as Series B Junior Participating Preferred Stock (see
Note 13(e) for further discussion). At March 31, 2002 and 2001, no shares of the preferred stock were issued or outstanding. The preferred stock may be issued from time to time by the
Company's Board of Directors in one or more series. The Board of Directors is authorized to fix the dividend rights and terms, conversion rights, voting rights, rights and terms of redemption,
liquidation preferences, and any other rights, preferences, privileges and restrictions of any series of preferred stock, and the number of shares constituting each such series and designation
thereof.

Additionally,
the Company is authorized to issue 30 thousand shares of redeemable preferred stock. At March 31, 2002 and 2001, no shares were issued or outstanding.

(c)Treasury Stock

In March 1999, the Company's Board of Directors authorized the repurchase of up to seven million shares of the Company's outstanding common stock.
The authorization provided for the repurchase of shares in the open market or in privately negotiated transactions depending on market conditions and other factors. In accordance with the
March 1999 share repurchase authorization, the Company acquired 31 thousand, 1.4 million and 5.3 million shares of common stock in fiscal 2002, 2001 and 2000, respectively.
In fiscal 2001 and 2000, the Company reissued 2 million and 4.2 million shares of common stock to the Company's Employee Benefits Trust (the "Trust"), as discussed in Note 13(d).
No shares were reissued from treasury in fiscal 2002. When treasury shares are reissued, the Company uses an average cost method with the excess of the repurchase cost over the reissuance price
accounted for as a charge to capital in excess of par value. The Company's stock repurchase program has been completed.

(d)Shares in Employee Benefits Trust

In March 1999, the Company established the grantor Trust to fund certain future obligations of the Company's employee benefit and compensation plans. The
Company, pursuant to a Common Stock Purchase Agreement, sold shares of common stock to the Trust. The Company holds promissory notes from the Trust in the amount of each purchase. Shares held by the
Trust serve as collateral for the promissory notes and are available to fund employee benefit plan obligations as the promissory notes are repaid. The shares held by the Trust are not considered
outstanding for earnings per share purposes until they are released from serving as collateral for the promissory notes. An independent third-party financial institution serves as the Trustee. The
Trustee votes or tenders shares held by the Trust in accordance with instructions received from the participants in the employee benefit and compensation plans to be funded by the Trust. Since
inception of the Trust in fiscal 1999, the Trust purchased approximately seven million shares of common stock, previously held as treasury stock, from the Company, for approximately
$54 million. Approximately 1.4 million, 1.2 million and 230 thousand shares were issued from the Trust for employee benefit programs during fiscal 2002, 2001 and 2000,
respectively.

(e)Stockholder Rights Plan

Effective April 1, 1997, the Company's Board of Directors adopted a new stockholder rights plan (the "1997 Rights Plan"). Pursuant to the 1997 Rights Plan,
the Board of Directors declared a dividend distribution of one right for each share of common stock. Each right entitles the holder to purchase from the Company one one-thousandth of a
share Series B Junior Participating Preferred Stock at an initial exercise price of $100 per share.

F-25

---

Rights
become exercisable only following the acquisition by a person or group of 15 percent (or 20 percent in the case of the Chairman and certain of his affiliates) or
more of the Company's common stock or after the announcement of a tender offer or exchange offer to acquire 15 percent (or 20 percent in the case of the Chairman and certain of his
affiliates) or more of the outstanding common stock. If such a person or group acquires 15 percent or more (or 20 percent or more, as the case may be) of the common stock, each right
(other than such person's or group's rights, which will become void) will entitle the holder to purchase, at the exercise price, common stock having a market value equal to twice the exercise price.
In certain circumstances, the rights may be redeemed by the Company. If not redeemed, they will expire on April 1, 2007.

(f)Warrants

During fiscal 2002, the Company granted warrants to purchase 324,000 shares of the Company's common stock to an outside consulting firm for services rendered. The
warrants have a term of three years from the date of grant and have exercise prices in excess of market value on the date of grant ranging from $11.98 to $18.78 per share. The aggregate value of the
warrants on the dates of grant, as determined by the Black-Scholes model, was $1.1 million, which the Company expensed during fiscal 2002.

(14) STOCK-BASED COMPENSATION

The Company has elected to continue to account for its stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, as permitted by SFAS No. 123,Accounting for Stock-Based
Compensation. Accordingly, no compensation expense has been recognized for its stock option and employee stock purchase plans. However, pro forma information regarding net
earnings and earnings per share is required. Had compensation expense for the Company's stock-based compensation plans been determined based on the fair value at the grant date, the Company's pro
forma net earnings and earnings per share for fiscal 2002, 2001 and 2000 would be as follows:

|                                  |  |             |  | Years Ended March 31,
|--------------------------------- |  | ----------- |  | ---------------------
|
|
|Net earnings (loss)               |  | As reported |  | $                    
|                                  |  | Pro forma   |  | $                    
|Diluted earnings (loss) per share |  | As reported |  | $                    
|                                  |  | Pro forma   |  | $                    

The
pro forma impact only takes into account options granted since April 1, 1995 and is likely to have a greater impact in future years as additional options are granted and
amortized ratably over the vesting period.

The
Company's stock-based compensation plans are described below.

(a)Employee Stock Option Plans

The Company has a stock plan under which officers and key employees may be granted options. In May 1997, the Company adopted the 1997 Stock Option Plan
(the "1997 Plan"). The 1997 Plan replaced the previous 1984 Stock Option Plan. Options granted under the 1997 Plan vest 25% annually and have a maximum term of ten years. Under the 1997 Plan, at
March 31, 2002, 2001 and 2000, 2.6 million, 3.7 million and 5.4 million options, respectively, were available for issuance. In fiscal 2002, 2001 and 2000,
1.5 million, 1.7 million and 1.1 million options, respectively, were granted with an

F-26

---

exercise price equal to market price at the date of grant. Options under the 1997 Plan are generally granted in May of each year.

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for fiscal 2002,
2001 and 2000 option grants, respectively: expected volatility of 48.8%, 51.1% and 44.2%, risk-free interest rate of 4.7%, 6.5% and 5.6%, and expected life of 7.2, 5.6 and
4.9 years. The weighted average fair value per share of the options granted during fiscal 2002, 2001 and 2000 was $5.31, $3.13 and $5.19, respectively.

The
following table summarizes the activity of the employee stock option plans during the three years ended March 31, 2002:

Number
of Shares

Exercise Price
Per ShareMarch 31, 2000Outstanding, beginning of year

7,209,520

$
1.83

-

$
23.25Granted

1,126,845


6.06

-


12.50Exercised

(576,772
)

1.83

-


11.32Expired

(489,932
)

6.31

-


22.00March 31, 2001Outstanding, beginning of year

7,269,661


1.83

-


23.25Granted

1,734,215


4.63

-


8.25Exercised

(397,494
)

1.83

-


8.50Expired

(300,421
)

5.21

-


22.00March 31, 2002Outstanding, beginning of year

8,305,961


1.83

-


23.25Granted

1,525,120


8.54

-


19.45Exercised

(1,049,173
)

1.83

-


19.00Expired

(556,798
)

5.50

-


22.00Outstanding, end of year

8,225,110

$
3.30

-

$
23.25


Options
for 4.7 million, 4.9 million and 4.6 million shares were exercisable at March 31, 2002, 2001 and 2000, respectively.

(b)Board of Directors Stock Option Plans

The Company also maintains stock option plans covering directors who are not employees. In May 1997, the Company adopted the 1997 Directors' Stock Option
Plan (the "1997 Directors' Plan"). The 1997 Directors' Plan replaced the previous 1989 Stock Option Plan for Directors. The 1997 Directors' Plan reserved 500 thousand shares for issuance.
Options under the 1997 Directors' Plan are exercisable in full on the date of grant.

Under
the 1997 Directors' Plan, at March 31, 2002, 173,500 options were available for issuance. During fiscal 2002, 2001 and 2000, 80,000, 100,000 and 62,500 options,
respectively, were granted with an exercise price equal to the market price at the date of grant and have a maximum term of ten years.

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for fiscal 2002,
2001 and 2000 option grants, respectively: expected volatility of 51.1%, 51.1% and 44.8%, risk-free interest rate of 4.6%, 6.1% and 5.8%, and expected life of 5.7, 5.6 and
5.4 years. The weighted average fair value per share of the stock options granted during fiscal 2002, 2001 and 2000 was $6.61, $2.85 and $6.01, respectively.

F-27

---

The
following table summarizes the activity of the Board of Directors stock option plans during the three years ended March 31, 2002:

Number
of Shares

Exercise Price Per ShareMarch 31, 2000Outstanding, beginning of year

314,000

$
2.09

-

$
19.25Granted

62,500


12.25Exercised

(16,000
)

2.20March 31, 2001Outstanding, beginning of year

360,500


2.09

-


19.25Granted

100,000


5.25Exercised

(32,000
)

2.09

-


2.14March 31, 2002Outstanding, beginning of year

428,500


2.09

-


19.25Granted

80,000


12.40Exercised

(32,000
)

2.09

-


13.82Outstanding, end of year

476,500

$
4.16

-

$
19.25


Options
for 476,500, 428,500 and 360,500 shares were exercisable at March 31, 2002, 2001 and 2000, respectively.

The
following table summarizes information about options outstanding and exercisable for the employee and Board of Directors stock option plans at March 31, 2002:

Options OutstandingWeighted Average
Remaining Life

Number
Outstanding

Exercise Price
Per Share1.89

594,134

$
3.30

-

$
5.258.13

1,258,380


5.44

-


5.504.60

1,329,057


5.56

-


8.508.89

1,437,170


8.54

-


8.995.99

1,145,269


9.29

-


11.504.47

1,491,642


11.98

-


15.635.15

1,006,350


15.94

-


21.254.16

439,608


22.00

-


23.255.84

8,701,610

$
3.30

-

$
23.25


F-28

---

Options ExercisableNumber of Options
Exercisable

Weighted Average
Exercise Price Per Share592,072

$
3.89252,762


5.50989,949


7.2641,250


8.56666,305


11.431,427,642


14.41814,771


16.63439,608


22.055,224,359

$
11.99


(c) Employee Stock Purchase Plans

In August 2001, the Company established the Airgas, Inc. 2001 Employee Stock Purchase Plan (the "2001 Plan") to encourage and assist employees in
acquiring an equity interest in the Company. The 2001 Plan replaced the previous 1998 Employee Stock Purchase Plan (the "1998 Plan"). During fiscal 2002, the remaining shares of common stock
authorized under the 1998 Plan were issued. The 2001 Plan is authorized to issue up to 1.5 million shares of common stock. Eligible employees may elect to
have up to 15% of their annual gross earnings withheld to purchase common stock at 85% of the market value. Market value under the 2001 Plan is defined as either the closing share price on the New
York Stock Exchange as of the employees' enrollment date or the closing price on the last business day of a fiscal quarter, whichever is lower. An employee may lock-in a purchase price for
up to 27 months. The 2001 Plan is designed to comply with the requirements of Sections 421 and 423 of the Internal Revenue Code. The terms of the Company's previous 1998 Plan were
substantially identical to the terms of the 2001 Plan. During fiscal 2002, the Company issued 1.1 million shares, provided from the Employee Benefits Trust, to fund purchases made by employees
under the 2001 and 1998 Plans at an average purchase price of $6.58 per share. During fiscal 2001, the Company issued 1.2 million shares from the Employee Benefits Trust for the 1998 Plan at an
average purchase price of $4.86 per share. During fiscal 2000, the Company issued 806 thousand shares from the Employee Benefits Trust and treasury stock for the 1998 Plan at an average
purchase price of $7.09 per share.

Compensation
expense under SFAS 123 is measured based on the fair value of the employees' option to purchase shares of common stock at the grant date and is recognized over the
future periods in which the related employee service is rendered. The fair value of the employees' option to purchase shares of common stock is estimated using the Black-Scholes model. The assumptions
used to estimate the fair value of the employees' option to purchase shares of common stock at grant dates in fiscal 2002, 2001 and 2000, respectively, were: average expected volatility of 61%, 63%
and 51%, average risk-free interest rate of 2.6%, 5.4% and 6.0%, and expected option terms ranging from 3 to 27 months. Had the Company adopted SFAS 123, compensation expense
related to the Employee Stock Purchase Plans would have been $4.1 million, $1.7 million, and $3.7 million in fiscal 2002, 2001 and 2000, respectively.

(15) INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company's investments in unconsolidated affiliates totaled approximately $65 million at March 31, 2002, and $63 million at
March 31, 2001. The Company's investments include a 47% joint venture interest in the voting capital stock of National Welders. National Welders is a distributor of industrial, medical and
specialty gases and related equipment based in Charlotte, North Carolina. On

F-29

---

February 28, 2002, National Welders purchased Air Products' packaged gas operations in the Carolinas and southern Virginia. These operations have annual revenues of approximately
$17 million. The investment in National Welders totaled approximately $57 million at March 31, 2002 and $55 million at March 31, 2001. The Company's other
investments in unconsolidated affiliates totaled approximately $8 million at March 31, 2002 and 2001 and primarily consist of a 50% joint venture interest in AC Industries.

The
Company accounts for investments in unconsolidated affiliates by the equity method of accounting, as described in Note 1. The Company's share of earnings from all
unconsolidated affiliates was $3.8 million, $2.3 million, $3.4 million for the years ended March 31, 2002, 2001, and 2000, respectively.

A
summary of unaudited financial information for investments in unconsolidated affiliates for the years ended March 31, 2002 and 2001 were as follows:

March 31,2002

2001(In thousands)Current assets

$
39,704

$
44,731Non-current assets


144,439


121,852Total assets

$
184,143

$
166,583Current liabilities

$
24,942

$
29,441Non-current liabilities


105,474


91,798Stockholders' equity


53,727


45,344Total liabilities and stockholders' equity

$
184,143

$
166,583


Years Ended March 31,2002

2001

2000(In thousands)Net sales

$
166,702

$
182,630

$
193,335Cost of sales


105,476


118,244


126,249Gross profit


61,226


64,386


67,086Earnings before taxes


13,409


13,086


13,571Net earnings


8,725


9,162


9,428Preferred stock dividends and equity earnings adjustments


(4,890
)

(6,902
)

(6,037
)Equity in earnings of unconsolidated affiliates

$
3,835

$
2,260

$
3,391


The
Company's fiscal 2002 equity in earnings of unconsolidated affiliates reflects the Company's adoption of FAS 142 under which the carrying value of the Company's investment in
excess of its unconsolidated affiliates' underlying equity is no longer amortized. See Note 7 for a reconciliation of prior period results as reported to results adjusted to exclude this
amortization expense.

F-30

---

(16) INTEREST EXPENSE, NET

Interest expense, net, consists of:

Years Ended March 31,2002

2001

2000(In thousands)Interest expense

$
48,035

$
61,434

$
58,712Interest and finance charge income


(1,022
)

(1,227
)

(1,152
)$
47,013

$
60,207

$
57,560


(17) INCOME TAXES

Earnings before income taxes and the cumulative effect of a change in accounting principle were derived from the following sources:

Years Ended March 31,2002

2001

2000(In thousands)United States

$
74,947

$
46,021

$
69,028Foreign


3,444


2,920


1,396$
78,391

$
48,941

$
70,424


Income
tax expense (benefit) consists of:

Years Ended March 31,2002

2001

2000(In thousands)Current:Federal

$
(6,693
)
$
12,286

$
16,554Foreign


1,534


1,135


408State


387


2,145


1,466(4,772
)

15,566


18,428Deferred:Federal


32,348


6,173


10,325Foreign


329


594


847State


1,901


(1,615
)

1,95134,578


5,152


13,123$
29,806

$
20,718

$
31,551


As
of March 31, 2002, the Company has reflected a tax refund receivable of $27.7 million in Prepaid expenses and other current assets. The tax refund was principally the
result of the 2002 Job Creation and Work Assistance Act ("the Act"), which provided for a 30% bonus depreciation deduction for assets placed in service after September 10, 2001. As a result of
the Act and the Company's significant acquisitions subsequent to September 10, 2001, the Company recognized a current period tax benefit and deferred tax expense related to the bonus
depreciation deduction. The bonus depreciation deduction was a principle contributor to a current net operating loss position, which the company elected to carry back to prior tax years.

F-31

---

Significant differences between taxes computed at the federal statutory rate and the provision for income taxes were:

|                                         |                                                 | Years Ended March 31, |     
|---------------------------------------- | ----------------------------------------------- | --------------------- | ----
|
|Taxes at U.S. federal statutory rate     |                                                 | 35.0                  | %   
|Increase in income taxes resulting from: |                                                 |                       |     
|                                         | State income taxes, net of federal benefit      |                       | 1.5 
|                                         | Amortization of non-deductible goodwill         |                       |     
|                                         | Divestitures                                    |                       | 1.8 
|                                         | Equity accounting for unconsolidated affiliates |                       | (1.2
|                                         | Other, net                                      |                       | 0.9 
|                                         |                                                 |                       |     
|                                         |                                                 | 38.0                  | %   
|                                         |                                                 |                       |     

The
decrease in the effective tax rate in fiscal 2002 is primarily related to the Company no longer amortizing goodwill as described in Notes 1 and 7.

The
tax effects of cumulative temporary differences that gave rise to the significant portions of the deferred tax assets and liabilities were as follows:

March 31,2002

2001(In thousands)Deferred Tax Assets:Inventories

$
5,955

$
5,852Accounts receivable


(124
)

406Deferred rental income


959


528Insurance reserves


7,573


4,391Special charges (Note 3)


1,581


5,396Litigation settlement and other reserves


6,406


1,649Intangible assets


(5,907
)

(71
)Other


14,365


11,523Valuation allowance


(5,976
)

(4,263
)24,832


25,411Deferred Tax Liabilities:Plant and equipment


(194,703
)

(160,000
)Other


(15,092
)

(16,444
)(209,795
)

(176,444
)Net deferred tax liability

$
(184,963
)
$
(151,033
)


F-32

---

Current
tax assets and current tax liabilities have been netted for presentation purposes. Non-current tax assets and non-current tax liabilities have also been
netted. Deferred tax assets and liabilities are reflected in the Company's consolidated balance sheets as follows:

March 31,2002

2001(In thousands)Current deferred tax asset, net

$
13,210

$
10,143Non-current deferred tax liability, net


(198,173
)

(161,176
)Net deferred tax liability

$
(184,963
)
$
(151,033
)


The
Company has recorded tax benefits amounting to $4.3 million, $800 thousand and $1.6 million in fiscal 2002, 2001 and 2000, respectively, resulting from the
exercise of stock options. This benefit has been recorded in capital in excess of par value.

In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities and projected future taxable income in making this assessment. Based upon the level
of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of the existing valuation allowances, at March 31, 2002. Valuation allowances which increased by $1.7 million in fiscal
year 2002, primarily relate to certain state tax net operating loss carry forwards.

(18) BENEFIT PLANS

The Company has a defined contribution 401(k) plan (the "401(k) plan") covering substantially all full-time employees. Under the terms of the 401(k)
plan, the Company makes matching contributions up to two percent of participants' wages plus additional discretionary profit sharing contributions based upon the profitability of the Company. Amounts
expensed under the 401(k) plan for fiscal 2002, 2001, and 2000 were $4.7 million, $5.8 million and $5.9 million, respectively.

Certain
subsidiaries of the Company participate in multi-employer pension and post-retirement plans which provide defined benefits to union employees. Contributions are made
to the plans in accordance with negotiated labor contracts. The Company has not taken any action to terminate or withdraw from these plans. Management believes that the Company's liability, if any,
for multi-employer plan withdrawal liability will not have a material effect on the Company's financial condition, results of operations or liquidity. Amounts expensed under the pension plans for
fiscal 2002, 2001 and 2000 were $642 thousand, $543 thousand and $526 thousand, respectively.

Effective
January 2002, the Company offered eligible employees the opportunity to participate in a non-qualified deferred compensation plan (the "Plan"). The Plan,
which is not required to be funded, allows eligible employees to defer a portion of their compensation until their retirement. The costs associated with the Plan during fiscal 2002 were not material.
At March 31, 2002, the Company had a liability of $100 thousand related to compensation deferred and related interest under the Plan.

(19) RELATED PARTIES

During the years ended March 31, 2002, 2001 and 2000, National Welders, an unconsolidated equity affiliate, paid $3.8 million, $3.8 million
and $3.5 million, respectively, to the Company for gas products, hardgoods and services. In addition, National Welders sold gas products and hardgoods to the

F-33

---

Company in the amounts of $1.1 million, $787 thousand and $330 thousand in fiscal 2002, 2001 and 2000, respectively. In connection with the Praxair litigation (see
Note 21), the Company reimbursed National Welders for legal fees of $482 thousand, $260 thousand and $484 thousand in fiscal 2002, 2001 and 2000, respectively.

The
Company paid $7.7 million, $7.9 million and $9.1 million to AC Industries, an unconsolidated equity affiliate, for the purchase of liquid carbon dioxide during
the years ended March 31, 2002, 2001 and 2000, respectively. In addition, the Company had a net payable balance to AC Industries totaling $1.2 million, $1.2 million and
$695 thousand at March 31, 2002, 2001 and 2000, respectively.

(20) LEASES

The Company leases certain distribution facilities and equipment under long-term operating leases with varying terms. Most leases contain renewal
options and in some instances, purchase options. Rentals under these long-term leases for the years ended March 31, 2002, 2001, and 2000, amounted to $45.4 million,
$43.7 million, and $38.5 million, respectively. Certain operating facilities are leased at market rates from employees of the Company who were previous owners of businesses acquired. The
Company also has several capital leases assumed as part of prior acquisitions. Outstanding capital lease obligations and the related capital assets are not material to the consolidated balance sheets
at March 31, 2002 and 2001.

The
Company leases real estate and certain equipment from a trust established by a commercial bank. The operating leases are structured as a sale-leaseback transaction in
which the trust holds title to the properties and equipment included in the leases. The rental payments are based on LIBOR plus an applicable margin and the cost of the property acquired by the trust.
At March 31, 2002, the non-cancelable lease obligation of the real estate and equipment leases totaled approximately $43 million. The lease terms expire in
October 2004. The Company has guaranteed a residual value of the real estate and the equipment at the end of the lease terms of approximately $30 million. A gain of approximately
$12 million on the equipment portion of the transaction has been deferred until the expiration of the Company's guarantee of the residual value.

At
March 31, 2002, future minimum lease payments under noncancelable operating leases, including the residual value associated with the sale-leaseback transaction, are
as follows:

(In thousands)2003

$
37,9002004


31,0402005


65,7102006


19,5172007


13,889Thereafter


15,418$
183,474


(21) COMMITMENTS AND CONTINGENCIES

(a)Legal

In July 1996, Praxair, Inc. ("Praxair") filed suit against the Company in the Circuit Court of Mobile County, Alabama, alleging tortious
interference with business or contractual relations with respect to Praxair's right of first refusal agreement with the majority shareholders of National Welders in connection with the Company's
formation of a joint venture with National Welders. In June 1998, Praxair filed a motion to dismiss its own action in Alabama and commenced another action in the

F-34

---

Superior Court of Mecklenburg County, North Carolina, alleging substantially the same tortious interference by the Company. The North Carolina action also alleged breach of contract against National
Welders and certain shareholders of National Welders and unfair trade practices and conspiracy against all the defendants. In April 2002, the Company and Praxair entered into an agreement to
settle the litigation in order to avoid the time and expense of a lengthy trial. Each party denied any wrongdoing or liability and Praxair agreed to an early termination of the right of first refusal.
As a result of the settlement, in the fourth quarter of fiscal 2002, the Company recorded a charge to earnings, net of previously established reserves related to the litigation, of
$8.5 million. In fiscal 2001, the Company recorded a charge of $6.9 million for costs associated with defending the Praxair lawsuit.

In
fiscal 1997, the Company announced it was the victim of a fraudulent breach of contract by a third-party supplier of refrigerant gases and recorded a special charge related to product
losses and costs associated with the Company's efforts to investigate the fraud and pursue recoveries. In March 2001, the Company reached a final settlement with its insurance carriers
resulting in insurance recoveries of $4 million. The insurance settlement, net of associated legal expenses, was reflected in special charge recoveries in the Consolidated Statement of
Earnings.

In
fiscal 2000, the Company recorded a $7.5 million charge representing an estimate of the overall costs associated with the defense and settlement of certain class action
lawsuits pertaining to hazardous material charges paid to the Company by customers. In the fourth quarter of fiscal 2001, a settlement agreement and approving court orders covering all such class
actions against the Company became final, and the Company reversed $1.1 million of the previously accrued defense and settlement costs.

The
Company is involved in various legal and regulatory proceedings that have arisen in the ordinary course of its business and have not been fully adjudicated. These actions, when
ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the Company's consolidated financial condition, results of operations or liquidity.

(b)Insurance Coverage

The Company has established insurance programs to cover workers' compensation, business automobile, general and products liability. These programs have
self-insured retention of $500 thousand per occurrence and an aggregate limit of $1.5 million for claims in excess of $500 thousand. The Company believes its insurance
reserves are adequate. The Company accrues estimated losses using actuarial models and assumptions based on historical loss experience.

The
nature of the Company's business may subject it to product and general liability lawsuits. To the extent that the Company is subject to claims that exceed its liability insurance
coverage of $100 million, such suits could have a material adverse effect on the Company's financial position, results of operations or liquidity.

(c)Supply Agreements

In connection with the Air Products acquisition, the Company entered into a 15-year supply agreement under which Air Products will supply at least 35%
of the Company's bulk liquid nitrogen, oxygen and argon requirements. Additionally, the Company has commitments to purchase helium under the terms of the supply agreement. Based on fiscal 2002
results, the Air Products supply agreement represents approximately $40 million in annual liquid bulk gas purchases. In addition, the Company is a party to
other long-term supply agreements primarily for the purchase of liquid carbon dioxide, representing approximately $14 million, or 24% of the Company's annual carbon dioxide
requirements.

F-35

---

(22) SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest expense and income taxes was as follows:

|                              |  | Years Ended March 31,
|----------------------------- |  | ---------------------
|
|
|Interest                      |  | $                    
|Income taxes (net of refunds) |  |                      

Significant
non-cash investing and financing transactions were as follows:

|                                  |                     | Years Ended March 31,
|--------------------------------- | ------------------- | ---------------------
|
|
|Acquisition related transactions: |                     |                      
|                                  | Debt assumed        |                      
|                                  | Liabilities assumed |                      
|                                  | Debt issued         |                      

(23) SUMMARY BY BUSINESS SEGMENT

The Company aggregates its operations, based on products and services, into two reportable segments, Distribution and Gas Operations. The Distribution segment
accounts for approximately 90% of consolidated sales. The segment's principal products and services are packaged and small bulk gases, gas cylinder and welding equipment rental and hardgoods. Gas
sales include industrial, medical and specialty gases such as: nitrogen, oxygen, argon, helium, acetylene, carbon dioxide, nitrous oxide, hydrogen, welding gases, ultra high purity grades and special
application blends. Rent is derived from gas cylinders, cryogenic liquid containers, bulk storage tanks and through the rental of welding equipment. Hardgoods consist of welding supplies and
equipment, safety products, and industrial tools and supplies.

The
Gas Operations segment produces and distributes certain gas products, principally dry ice, carbon dioxide, nitrous oxide and specialty gases. The Company also operates two air
separation plants that produce oxygen, nitrogen and argon which are sold to on-site customers and to the Distribution segment.

The
Company's operations are principally in the United States. The Company's customer base is diverse and sales are not dependent on a single or small group of customers.

The
accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (Note 1). Additionally, Corporate operating expenses are
allocated to each segment
pro rata based on sales dollars; Corporate assets have been allocated to the Distribution segment; intercompany sales are recorded on the same basis as sales to third parties; and intercompany
transactions are eliminated in consolidation. As a result of adopting SFAS 142 effective April 1, 2001, the financial results for the year ended March 31, 2002 do not reflect
goodwill amortization expense (see Note 1). See Note 7 for a reconciliation of prior period financial results as reported to financial results adjusted to exclude goodwill amortization
expense. See Note 2 for the impact of acquisitions and divestitures on the operating results of each segment. Certain reclassifications have been made to the prior periods segment disclosures
to conform to the current presentation.

Management
utilizes more than one measurement and multiple views of data to measure segment performance and to allocate resources to the segments. However, the dominant measurements are
consistent with the Company's consolidated financial statements and, accordingly, are reported on the same basis herein. Management evaluates the performance of its segments primarily based on sales,

F-36

---

operating income, EBITDA (operating income plus equity in earnings of unconsolidated affiliates, depreciation and amortization) and overall economic returns.

|                                                         |                 | Distribution |           | Gas Operations |   | Combined |        
|-------------------------------------------------------- | --------------- | ------------ | --------- | -------------- | - | -------- | -------
|
|Fiscal 2002                                              |                 |              |           |                |   |          |        
|Gas and rent                                             |                 | $            | 707,435   |                | $ | 139,524  |        
|Hardgoods                                                |                 |              | 786,832   |                |   | 2,256    |        
|                                                         |                 |              |           |                |   |          |        
|                                                         | Total net sales |              |           | 1,494,267      |   |          | 141,780
|Intersegment sales                                       |                 |              |          |                |   | 32,227   |        
|Gross profit                                             |                 |              | 724,173   |                |   | 93,121   |        
|Gross profit margin                                      |                 |              | 48.5      | %              |   | 65.7     | %      
|Depreciation and amortization expense                    |                 |              | 61,275    |                |   | 11,670   |        
|Operating income                                         |                 |              | 103,430   |                |   | 21,603   |        
|Equity earnings of unconsolidated affiliates             |                 |              | 2,878     |                |   | 957      |        
|Assets                                                   |                 |              | 1,520,492 |                |   | 196,565  |        
|Investment in equity method investees                    |                 |              | 58,579    |                |   | 6,047    |        
|Capital expenditures                                     |                 |              | 52,414    |                |   | 5,883    |        
|Fiscal 2001                                              |                 |              |           |                |   |          |        
|Gas and rent                                             |                 | $            | 647,525   |                | $ | 138,383  |        
|Hardgoods                                                |                 |              | 839,897   |                |   | 3,096    |        
|                                                         |                 |              |           |                |   |          |        
|                                                         | Total net sales |              |           | 1,487,422      |   |          | 141,479
|Intersegment sales                                       |                 |              |          |                |   | 31,805   |        
|Gross profit                                             |                 |              | 689,999   |                |   | 91,702   |        
|Gross profit margin                                      |                 |              | 46.4      | %              |   | 64.8     | %      
|Depreciation and amortization expense                    |                 |              | 72,552    |                |   | 14,202   |        
|Operating income, excluding special (charges) recoveries |                 |              | 92,186    |                |   | 19,406   |        
|Special (charges) recoveries, net                        |                 |              | (6,279    | )              |   | 2,636    |        
|                                                         |                 |              |           |                |   |          |        
|Operating income                                         |                 |              | 85,907    |                |   | 22,042   |        
|Equity earnings of unconsolidated affiliates             |                 |              | 1,386     |                |   | 874      |        
|Assets                                                   |                 |              | 1,406,928 |                |   | 174,362  |        
|Investment in equity method investees                    |                 |              | 56,671    |                |   | 6,591    |        
|Capital expenditures                                     |                 |              | 56,228    |                |   | 9,682    |        
|Fiscal 2000                                              |                 |              |           |                |   |          |        
|Gas and rent                                             |                 | $            | 592,449   |                | $ | 128,703  |        
|Hardgoods                                                |                 |              | 817,500   |                |   | 3,682    |        
|                                                         |                 |              |           |                |   |          |        
|                                                         | Total net sales |              |           | 1,409,949      |   |          | 132,385
|Intersegment sales                                       |                 |              |          |                |   | 18,253   |        
|Gross profit                                             |                 |              | 649,827   |                |   | 75,910   |        
|Gross profit margin                                      |                 |              | 46.1      | %              |   | 57.3     | %      
|Depreciation and amortization expense                    |                 |              | 76,483    |                |   | 12,825   |        
|Operating income, excluding special (charges) recoveries |                 |              | 94,671    |                |   | 9,231    |        
|Special (charges) recoveries, net                        |                 |              | 577       |                |   | 2,252    |        
|                                                         |                 |              |           |                |   |          |        
|Operating income                                         |                 |              | 95,248    |                |   | 11,483   |        
|Equity earnings of unconsolidated affiliates             |                 |              | 1,658     |                |   | 1,733    |        
|Assets                                                   |                 |              | 1,512,666 |                |   | 226,665  |        
|Investment in equity method investees                    |                 |              | 57,339    |                |   | 15,620   |        
|Capital expenditures                                     |                 |              | 56,361    |                |   | 8,850    |        

F-37

---

(24) SUPPLEMENTARY INFORMATION (UNAUDITED)

This table summarizes the unaudited results of operations for each quarter of fiscal 2002 and 2001:

|                                   |  | First |         | Second |   | Third   |  | Fourth
|---------------------------------- |  | ----- | ------- | ------ | - | ------- |  | ------
|
|2002                               |  |       |         |        |   |         |  |       
|Net sales                          |  | $     | 415,675 |        | $ | 411,982 |  | $     
|Operating income                   |  |       | 32,784  |        |   | 34,839  |  |       
|Net earnings                       |  |       | (45,549 | )      |   | 14,553  |  |       
|Basic earnings per share(a),(b)    |  | $     | (.68    | )      | $ | ..21    |  | $     
|Diluted earnings per share(a),(b)  |  | $     | (.67    | )      | $ | .21     |  | $     
|2001                               |  |       |         |        |   |         |  |       
|Net sales                          |  | $     | 408,998 |        | $ | 410,097 |  | $     
|Operating income                   |  |       | 31,043  |        |   | 33,046  |  |       
|Net earnings                       |  |       | 9,816   |        |   | 10,403  |  |       
|Basic earnings per share(a),(c)    |  | $     | ..15    |        | $ | ..16    |  | $     
|Diluted earnings per share (a),(c) |  | $     | .15     |        | $ | .16     |  | $     

---

(25) CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF SUBSIDIARY GUARANTORS

As described in Note 9, on July 30, 2001, the Company refinanced its revolving credit facilities and issued $225 million of senior
subordinated notes (the "Notes"). The obligations of the Company under the Notes are guaranteed by the Company's domestic subsidiaries that guarantee the Company's revolving credit facilities (the
"Guarantors"). The Company's joint venture operations, foreign holdings and bankruptcy remote special purpose entity (the "Non-guarantors") are not guarantors of the Notes. The guarantees
are made on a joint and several basis. The claims of creditors of Non-guarantor subsidiaries have priority over the rights of the Company to receive dividends or distributions from such
subsidiaries. Presented below is condensed consolidating financial information for the Company, the Guarantors and the Non-guarantors as of March 31, 2002 and March 31, 2001
and for the years ended March 31, 2002, 2001 and 2000. On August 31, 2001, two Non-guarantor entities were merged into the parent. These entities were holding companies
through which the Company managed its operations in Poland and Thailand. The operations in Poland and Thailand were divested in fiscal 2000. The net assets of the two Non-guarantor
entities in the amount of $42.7 million were transferred to the parent.

F-38

---



AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Balance Sheet        March 31, 2002

|                                               |  | Parent |           | Guarantors |   | Non-
Guarantors |   | Elimination
Entries |         | Consolidated |  
|---------------------------------------------- |  | ------ | --------- | ---------- | - | --------------- | - | ------------------- | ------- | ------------ | -
|
|ASSETS                                         |  |        |           |            |   |                 |   |                     |         |              |  
|Current Assets:                                |  |        |           |            |   |                 |   |                     |         |              |  
|Trade receivables, net                         |  | $      |          |            | $ | 25,088          |   | $                   | 63,546  |              | $
|Intercompany receivable/(payable)              |  |        |          |            |   | (6,174          | ) |                     | 6,174   |              |  
|Inventories, net                               |  |        |          |            |   | 151,334         |   |                     | 2,711   |              |  
|Deferred income tax asset, net                 |  |        | 7,850     |            |   | 5,360           |   |                     |        |              |  
|Prepaid expenses and other current assets      |  |        | 31,137    |            |   | 16,321          |   |                     | 196     |              |  
|                                               |  |        |           |            |   |                 |   |                     |         |              |  
|Total current assets                           |  |        | 38,987    |            |   | 191,929         |   |                     | 72,627  |              |  
|Plant and equipment, net                       |  |        | 15,924    |            |   | 856,978         |   |                     | 20,113  |              |  
|Goodwill                                       |  |        |          |            |   | 396,242         |   |                     | 10,306  |              |  
|Other intangible assets, net                   |  |        | 997       |            |   | 24,721          |   |                     |        |              |  
|Investments in unconsolidated affiliates       |  |        | 58,578    |            |   | 6,048           |   |                     |        |              |  
|Investments in subsidiaries                    |  |        | 1,314,314 |            |   |                |   |                     |        |              |  
|Intercompany receivable/(payable)              |  |        | (141,785  | )          |   | 168,176         |   |                     | (26,391 | )            |  
|Other non-current assets                       |  |        | 19,765    |            |   | 2,921           |   |                     | 921     |              |  
|                                               |  |        |           |            |   |                 |   |                     |         |              |  
|Total assets                                   |  | $      | 1,306,780 |            | $ | 1,647,015       |   | $                   | 77,576  |              | $
|                                               |  |        |           |            |   |                 |   |                     |         |              |  
|LIABILITIES AND STOCKHOLDERS' EQUITY           |  |        |           |            |   |                 |   |                     |         |              |  
|Current Liabilities:                           |  |        |           |            |   |                 |   |                     |         |              |  
|Accounts payable, trade                        |  | $      | 5,047     |            | $ | 74,968          |   | $                   | 2,470   |              | $
|Accrued expenses and other current liabilities |  |        | 60,385    |            |   | 75,582          |   |                     | 423     |              |  
|Current portion of long-term debt              |  |        |          |            |   | 2,375           |   |                     | 81      |              |  
|                                               |  |        |           |            |   |                 |   |                     |         |              |  
|Total current liabilities                      |  |        | 65,432    |            |   | 152,925         |   |                     | 2,974   |              |  
|Long-term debt, excluding current portion      |  |        | 732,544   |            |   | 9,828           |   |                     | 21,752  |              |  
|Deferred income tax liability, net             |  |        | 951       |            |   | 192,004         |   |                     | 5,218   |              |  
|Other non-current liabilities                  |  |        | 4,767     |            |   | 25,268          |   |                     | 308     |              |  
|Commitments and contingencies                  |  |        |          |            |   |                |   |                     |        |              |  
|Stockholders' Equity:                          |  |        |           |            |   |                 |   |                     |         |              |  
|Preferred stock, no par value                  |  |        |          |            |   |                |   |                     |        |              |  
|Common stock, par value $.01 per share         |  |        | 752       |            |   |                |   |                     |        |              |  
|Capital in excess of par value                 |  |        | 198,500   |            |   | 907,765         |   |                     | 8,224   |              |  
|Retained earnings                              |  |        | 345,181   |            |   | 359,442         |   |                     | 40,037  |              |  
|Accumulated other comprehensive loss           |  |        | (4,401    | )          |   | (217            | ) |                     | (937    | )            |  
|Treasury stock                                 |  |        | (4,289    | )          |   |                |   |                     |        |              |  
|Employee benefits trust                        |  |        | (32,657   | )          |   |                |   |                     |        |              |  
|                                               |  |        |           |            |   |                 |   |                     |         |              |  
|Total stockholders' equity                     |  |        | 503,086   |            |   | 1,266,990       |   |                     | 47,324  |              |  
|                                               |  |        |           |            |   |                 |   |                     |         |              |  
|Total liabilities and stockholders' equity     |  | $      | 1,306,780 |            | $ | 1,647,015       |   | $                   | 77,576  |              | $
|                                               |  |        |           |            |   |                 |   |                     |         |              |  

F-39

---

AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Balance Sheet        March 31, 2001

|                                               |  | Parent |           | Guarantors |   | Non-
Guarantors |   | Elimination
Entries |        | Consolidated |  
|---------------------------------------------- |  | ------ | --------- | ---------- | - | --------------- | - | ------------------- | ------ | ------------ | -
|
|ASSETS                                         |  |        |           |            |   |                 |   |                     |        |              |  
|Current Assets:                                |  |        |           |            |   |                 |   |                     |        |              |  
|Trade receivables, net                         |  | $      |          |            | $ | 101,326         |   | $                   | 41,803 |              | $
|Intercompany receivable/(payable)              |  |        | 170       |            |   | (4,428          | ) |                     | 4,258  |              |  
|Inventories, net                               |  |        |          |            |   | 151,402         |   |                     | 3,622  |              |  
|Deferred income tax asset, net                 |  |        | 6,297     |            |   | 3,846           |   |                     |       |              |  
|Prepaid expenses and other current assets      |  |        | 10,165    |            |   | 14,463          |   |                     | 921    |              |  
|                                               |  |        |           |            |   |                 |   |                     |        |              |  
|Total current assets                           |  |        | 16,632    |            |   | 266,609         |   |                     | 50,604 |              |  
|Plant and equipment, net                       |  |        | 6,851     |            |   | 677,480         |   |                     | 20,315 |              |  
|Goodwill                                       |  |        |          |            |   | 429,942         |   |                     | 10,115 |              |  
|Other intangible assets, net                   |  |        | 1,122     |            |   | 28,179          |   |                     | 367    |              |  
|Investments in unconsolidated affiliates       |  |        | 56,656    |            |   | 6,591           |   |                     | 15     |              |  
|Investments in subsidiaries                    |  |        | 1,197,856 |            |   |                |   |                     |       |              |  
|Intercompany receivable/(payable)              |  |        | (107,248  | )          |   | 99,650          |   |                     | 7,598  |              |  
|Other non-current assets                       |  |        | 5,294     |            |   | 3,814           |   |                     | 704    |              |  
|                                               |  |        |           |            |   |                 |   |                     |        |              |  
|Total assets                                   |  | $      | 1,177,163 |            | $ | 1,512,265       |   | $                   | 89,718 |              | $
|                                               |  |        |           |            |   |                 |   |                     |        |              |  
|LIABILITIES AND STOCKHOLDERS' EQUITY           |  |        |           |            |   |                 |   |                     |        |              |  
|Current Liabilities:                           |  |        |           |            |   |                 |   |                     |        |              |  
|Accounts payable, trade                        |  | $      | 3,339     |            | $ | 71,045          |   | $                   | 1,953  |              | $
|Accrued expenses and other current liabilities |  |        | 40,920    |            |   | 88,990          |   |                     | 963    |              |  
|Current portion of long-term debt              |  |        | 50,000    |            |   | 22,863          |   |                     | 82     |              |  
|                                               |  |        |           |            |   |                 |   |                     |        |              |  
|Total current liabilities                      |  |        | 94,259    |            |   | 182,898         |   |                     | 2,998  |              |  
|Long-term debt, excluding current portion      |  |        | 585,465   |            |   | 10,354          |   |                     | 24,845 |              |  
|Deferred income tax liability, net             |  |        | 194       |            |   | 158,230         |   |                     | 2,752  |              |  
|Other non-current liabilities                  |  |        | 396       |            |   | 21,999          |   |                     | 51     |              |  
|Commitments and contingencies                  |  |        |          |            |   |                |   |                     |       |              |  
|Stockholders' Equity:                          |  |        |           |            |   |                 |   |                     |        |              |  
|Preferred stock, no par value                  |  |        |          |            |   |                |   |                     |       |              |  
|Common stock, par value $.01 per share         |  |        | 744       |            |   |                |   |                     |       |              |  
|Capital in excess of par value                 |  |        | 188,629   |            |   | 775,625         |   |                     | 33,211 |              |  
|Retained earnings                              |  |        | 355,596   |            |   | 363,461         |   |                     | 26,712 |              |  
|Accumulated other comprehensive loss           |  |        | (1,153    | )          |   | (302            | ) |                     | (851   | )            |  
|Treasury stock                                 |  |        | (3,982    | )          |   |                |   |                     |       |              |  
|Employee benefits trust                        |  |        | (42,985   | )          |   |                |   |                     |       |              |  
|                                               |  |        |           |            |   |                 |   |                     |        |              |  
|Total stockholders' equity                     |  |        | 496,849   |            |   | 1,138,784       |   |                     | 59,072 |              |  
|                                               |  |        |           |            |   |                 |   |                     |        |              |  
|Total liabilities and stockholders' equity     |  | $      | 1,177,163 |            | $ | 1,512,265       |   | $                   | 89,718 |              | $
|                                               |  |        |           |            |   |                 |   |                     |        |              |  

F-40

---



AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Statement of Earnings        Year Ended        March 31, 2002

|                                                                                         |                         | Parent |         | Guarantors |   | Non-
Guarantors |         | Elimination
Entries |         | Consolidated |  
|---------------------------------------------------------------------------------------- | ----------------------- | ------ | ------- | ---------- | - | --------------- | ------- | ------------------- | ------- | ------------ | -
|
|Net sales                                                                                |                         | $      |        |            | $ | 1,616,178       |         | $                   | 19,869  |              | $
|Costs and Expenses:                                                                      |                         |        |         |            |   |                 |         |                     |         |              |  
|Costs of products sold (excluding depreciation)                                          |                         |        |        |            |   | 813,485         |         |                     | 5,268   |              |  
|Selling, distribution and administrative expenses                                        |                         |        | 57,631  |            |   | 541,201         |         |                     | 20,484  |              |  
|Depreciation                                                                             |                         |        | 3,419   |            |   | 59,317          |         |                     | 2,049   |              |  
|Amortization                                                                             |                         |        | 161     |            |   | 7,999           |         |                     |        |              |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |         |              |  
|                                                                                         | Operating Income (Loss) |        |         | (61,211    | ) |                 | 194,176 |                     |         | (7,932       | )
|Interest (expense) income, net                                                           |                         |        | (53,788 | )          |   | 6,656           |         |                     | 119     |              |  
|(Discount) gain on securitization of trade receivables                                   |                         |        |        |            |   | (59,840         | )       |                     | 54,994  |              |  
|Other income (expense), net                                                              |                         |        | 54,099  |            |   | (54,621         | )       |                     | 1,904   |              |  
|Equity in earnings of unconsolidated affiliates                                          |                         |        | 2,861   |            |   | 974             |         |                     |        |              |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |         |              |  
|Earnings (loss) before taxes and a cumulative effect of a change in accounting principle |                         |        | (58,039 | )          |   | 87,345          |         |                     | 49,085  |              |  
|Income tax benefit (expense)                                                             |                         |        | 20,313  |            |   | (32,363         | )       |                     | (17,756 | )            |  
|Equity in earnings of subsidiaries                                                       |                         |        | 27,311  |            |   |                |         |                     |        |              |  
|Cumulative effect of a change in accounting principle                                    |                         |        |        |            |   | (59,000         | )       |                     |        |              |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |         |              |  
|                                                                                         | Net Earnings (Loss)     |        | $       | (10,415    | ) | $               | (4,018  | )                   | $       | 31,329       |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |         |              |  

F-41

---

AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Statement of Earnings        Year Ended        March 31, 2001

|                                                       |                         | Parent |         | Guarantors |   | Non-
Guarantors |         | Elimination
Entries |        | Consolidated |  
|------------------------------------------------------ | ----------------------- | ------ | ------- | ---------- | - | --------------- | ------- | ------------------- | ------ | ------------ | -
|
|Net sales                                              |                         | $      |        |            | $ | 1,606,965       |         | $                   | 21,936 |              | $
|Costs and Expenses:                                    |                         |        |         |            |   |                 |         |                     |        |              |  
|Costs of products sold (excluding depreciation)        |                         |        |        |            |   | 841,403         |         |                     | 5,797  |              |  
|Selling, distribution and administrative expenses      |                         |        | 37,124  |            |   | 535,573         |         |                     | 10,658 |              |  
|Depreciation                                           |                         |        | 2,637   |            |   | 58,222          |         |                     | 2,079  |              |  
|Amortization                                           |                         |        | 249     |            |   | 23,175          |         |                     | 392    |              |  
|Special Charge (Recoveries)                            |                         |        |        |            |   | 3,643           |         |                     |       |              |  
|                                                       |                         |        |         |            |   |                 |         |                     |        |              |  
|                                                       | Operating Income (Loss) |        |         | (40,010    | ) |                 | 144,949 |                     |        | 3,010        |  
|Interest (expense) income, net                         |                         |        | (63,555 | )          |   | 2,070           |         |                     | 1,278  |              |  
|(Discount) gain on securitization of trade receivables |                         |        |        |            |   | (10,143         | )       |                     | 8,840  |              |  
|Other income (expense), net                            |                         |        | 59,576  |            |   | (59,366         | )       |                     | 32     |              |  
|Equity in earnings of unconsolidated affiliates        |                         |        | 1,178   |            |   | 2,006           |         |                     | (924   | )            |  
|                                                       |                         |        |         |            |   |                 |         |                     |        |              |  
|Earnings (loss) before income taxes                    |                         |        | (42,811 | )          |   | 79,516          |         |                     | 12,236 |              |  
|Income tax benefit (expense)                           |                         |        | 14,983  |            |   | (30,700         | )       |                     | (5,001 | )            |  
|Equity in earnings of subsidiaries                     |                         |        | 56,051  |            |   |                |         |                     |       |              |  
|                                                       |                         |        |         |            |   |                 |         |                     |        |              |  
|                                                       | Net Earnings (Loss)     |        | $       | 28,223     |   | $               | 48,816  |                     | $      | 7,235        |  
|                                                       |                         |        |         |            |   |                 |         |                     |        |              |  

F-42

---



AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Statement of Earnings        Year Ended        March 31, 2000

|                                                                                         |                         | Parent |         | Guarantors |   | Non-
Guarantors |         | Elimination
Entries |        | Consolidated |  
|---------------------------------------------------------------------------------------- | ----------------------- | ------ | ------- | ---------- | - | --------------- | ------- | ------------------- | ------ | ------------ | -
|
|Net sales                                                                                |                         | $      |        |            | $ | 1,508,118       |         | $                   | 34,216 |              | $
|Costs and Expenses:                                                                      |                         |        |         |            |   |                 |         |                     |        |              |  
|Costs of products sold (excluding depreciation)                                          |                         |        |        |            |   | 805,264         |         |                     | 11,333 |              |  
|Selling, distribution and administrative expenses                                        |                         |        | 27,240  |            |   | 489,488         |         |                     | 15,799 |              |  
|Depreciation                                                                             |                         |        | 2,786   |            |   | 57,656          |         |                     | 3,193  |              |  
|Amortization                                                                             |                         |        | 362     |            |   | 24,598          |         |                     | 713    |              |  
|Special Charge (Recoveries)                                                              |                         |        |        |            |   | (2,829          | )       |                     |       |              |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |        |              |  
|                                                                                         | Operating Income (Loss) |        |         | (30,388    | ) |                 | 133,941 |                     |        | 3,178        |  
|Interest (expense) income, net                                                           |                         |        | (59,356 | )          |   | 2,153           |         |                     | (357   | )            |  
|Other income (expense), net                                                              |                         |        | 57,440  |            |   | (58,115         | )       |                     | 18,537 |              |  
|Equity in earnings of unconsolidated affiliates                                          |                         |        | 1,447   |            |   | 2,076           |         |                     | (132   | )            |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |        |              |  
|Earnings (loss) before taxes and a cumulative effect of a change in accounting principle |                         |        | (30,857 | )          |   | 80,055          |         |                     | 21,226 |              |  
|Income tax benefit (expense)                                                             |                         |        | 10,800  |            |   | (34,950         | )       |                     | (7,401 | )            |  
|Equity in earnings of subsidiaries                                                       |                         |        | 58,340  |            |   |                |         |                     |       |              |  
|Cumulative effect of a change in accounting principle                                    |                         |        |        |            |   | (590            | )       |                     |       |              |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |        |              |  
|                                                                                         | Net Earnings            |        | $       | 38,283     |   | $               | 44,515  |                     | $      | 13,825       |  
|                                                                                         |                         |        |         |            |   |                 |         |                     |        |              |  

F-43

---

AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Statement of Cash Flows        Year Ended        March 31, 2002

|                                                       |  | Parent |          | Guarantors |   | Non-
Guarantors |   | Elimination
Entries |        | Consolidated |  
|------------------------------------------------------ |  | ------ | -------- | ---------- | - | --------------- | - | ------------------- | ------ | ------------ | -
|
|Net cash provided by (used in) operating activities    |  | $      | (44,830  | )          | $ | 282,515         |   | $                   | 11,696 |              | $
|                                                       |  |        |          |            |   |                 |   |                     |        |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES                   |  |        |          |            |   |                 |   |                     |        |              |  
|Capital expenditures                                   |  |        | (9,901   | )          |   | (46,554         | ) |                     | (1,842 | )            |  
|Proceeds from sale of plant and equipment              |  |        |         |            |   | 3,216           |   |                     |       |              |  
|Proceeds from divestiture                              |  |        |         |            |   | 10,200          |   |                     |       |              |  
|Business acquisitions, net of cash acquired            |  |        |         |            |   | (252,538        | ) |                     |       |              |  
|Business acquisitions, holdbacks and other settlements |  |        |         |            |   | (5,018          | ) |                     |       |              |  
|Dividends and fees from unconsolidated affiliates      |  |        | 954      |            |   | 1,629           |   |                     |       |              |  
|Other, net                                             |  |        | 16,329   |            |   | (11,098         | ) |                     | (78    | )            |  
|                                                       |  |        |          |            |   |                 |   |                     |        |              |  
|Net cash provided by (used in) investing activities    |  |        | 7,382    |            |   | (300,163        | ) |                     | (1,920 | )            |  
|                                                       |  |        |          |            |   |                 |   |                     |        |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES                   |  |        |          |            |   |                 |   |                     |        |              |  
|Proceeds from borrowings                               |  |        | 677,605  |            |   |                |   |                     | 2,539  |              |  
|Repayment of debt                                      |  |        | (580,527 | )          |   | (26,619         | ) |                     | (5,633 | )            |  
|Financing costs                                        |  |        | (12,461  | )          |   |                |   |                     |       |              |  
|Exercise of stock options                              |  |        | 7,442    |            |   |                |   |                     |       |              |  
|Cash overdraft                                         |  |        |         |            |   | (17,026         | ) |                     |       |              |  
|Inter-company                                          |  |        | (54,611  | )          |   | 61,293          |   |                     | (6,682 | )            |  
|                                                       |  |        |          |            |   |                 |   |                     |        |              |  
|Net cash provided by (used in) financing activities    |  |        | 37,448   |            |   | 17,648          |   |                     | (9,776 | )            |  
|                                                       |  |        |          |            |   |                 |   |                     |        |              |  
|CHANGE IN CASH                                         |  | $      |         |            | $ |                |   | $                   |       |              | $
|CashBeginning of year                                 |  |        |         |            |   |                |   |                     |       |              |  
|                                                       |  |        |          |            |   |                 |   |                     |        |              |  
|CashEnd of year                                       |  | $      |         |            | $ |                |   | $                   |       |              | $
|                                                       |  |        |          |            |   |                 |   |                     |        |              |  

F-44

---



AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Statement of Cash Flows        Year Ended        March 31, 2001

|                                                      |  | Parent |          | Guarantors |   | Non-
Guarantors |   | Elimination
Entries |         | Consolidated |  
|----------------------------------------------------- |  | ------ | -------- | ---------- | - | --------------- | - | ------------------- | ------- | ------------ | -
|
|Net cash provided by (used in) operating activities   |  | $      | (24,647  | )          | $ | 255,815         |   | $                   | (32,163 | )            | $
|                                                      |  |        |          |            |   |                 |   |                     |         |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES                  |  |        |          |            |   |                 |   |                     |         |              |  
|Capital expenditures                                  |  |        | (484     | )          |   | (62,221         | ) |                     | (3,205  | )            |  
|Proceeds from sale of plant and equipment             |  |        |         |            |   | 2,854           |   |                     |        |              |  
|Proceeds from divestiture                             |  |        |         |            |   | 42,123          |   |                     | 7,506   |              |  
|Business acquisitions, net of cash acquired           |  |        |         |            |   | (1,006          | ) |                     |        |              |  
|Business acquisitions, holdback and other settlements |  |        |         |            |   | (4,752          | ) |                     |        |              |  
|Dividends and fees from unconsolidated affiliates     |  |        | 947      |            |   | 2,721           |   |                     |        |              |  
|Other, net                                            |  |        | 6,333    |            |   | (4,734          | ) |                     | 3,066   |              |  
|                                                      |  |        |          |            |   |                 |   |                     |         |              |  
|Net cash provided by (used in) investing activities   |  |        | 6,796    |            |   | (25,015         | ) |                     | 7,367   |              |  
|                                                      |  |        |          |            |   |                 |   |                     |         |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES                  |  |        |          |            |   |                 |   |                     |         |              |  
|Proceeds from borrowings                              |  |        | 157,238  |            |   |                |   |                     |        |              |  
|Repayment of debt                                     |  |        | (321,238 | )          |   | (15,044         | ) |                     | (4,840  | )            |  
|Purchase of treasury stock                            |  |        | (11,214  | )          |   |                |   |                     |        |              |  
|Exercise of stock options                             |  |        | 1,460    |            |   |                |   |                     |        |              |  
|Cash overdraft                                        |  |        |         |            |   | 5,485           |   |                     |        |              |  
|Inter-company                                         |  |        | 191,605  |            |   | (221,241        | ) |                     | 29,636  |              |  
|                                                      |  |        |          |            |   |                 |   |                     |         |              |  
|Net cash provided by (used in) financing activities   |  |        | 17,851   |            |   | (230,800        | ) |                     | 24,796  |              |  
|                                                      |  |        |          |            |   |                 |   |                     |         |              |  
|CHANGE IN CASH                                        |  | $      |         |            | $ |                |   | $                   |        |              | $
|CashBeginning of year                                |  |        |         |            |   |                |   |                     |        |              |  
|                                                      |  |        |          |            |   |                 |   |                     |         |              |  
|CashEnd of year                                      |  | $      |         |            | $ |                |   | $                   |        |              | $
|                                                      |  |        |          |            |   |                 |   |                     |         |              |  

F-45

---

AIRGAS, INC. AND SUBSIDIARIES        Condensed Consolidating Statement of Cash Flows        Year Ended        March 31, 2000

|                                                    |  | Parent |          | Guarantors |   | Non-
Guarantors |   | Elimination
Entries |         | Consolidated |  
|--------------------------------------------------- |  | ------ | -------- | ---------- | - | --------------- | - | ------------------- | ------- | ------------ | -
|
|Net cash provided by (used in) operating activities |  | $      | (13,236  | )          | $ | 107,318         |   | $                   | 6,010   |              | $
|                                                    |  |        |          |            |   |                 |   |                     |         |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES                |  |        |          |            |   |                 |   |                     |         |              |  
|Capital expenditures                                |  |        | (1,801   | )          |   | (58,572         | ) |                     | (4,838  | )            |  
|Proceeds from sale of plant and equipment           |  |        |         |            |   | 36,982          |   |                     | 472     |              |  
|Proceeds from divestitures                          |  |        | 12,150   |            |   | 9,408           |   |                     | 34,038  |              |  
|Business acquisitions, net of cash acquired         |  |        |         |            |   | (99,204         | ) |                     |        |              |  
|Business acquisitions, holdback settlement          |  |        |         |            |   | (2,289          | ) |                     |        |              |  
|Investment in unconsolidated affiliates             |  |        |         |            |   | (30             | ) |                     |        |              |  
|Dividends and fees from unconsolidated affiliates   |  |        | 984      |            |   | 2,989           |   |                     |        |              |  
|Other, net                                          |  |        | 7,291    |            |   | (639            | ) |                     | (2,402  | )            |  
|                                                    |  |        |          |            |   |                 |   |                     |         |              |  
|Net cash provided by (used in) investing activities |  |        | 18,624   |            |   | (111,355        | ) |                     | 27,270  |              |  
|                                                    |  |        |          |            |   |                 |   |                     |         |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES                |  |        |          |            |   |                 |   |                     |         |              |  
|Proceeds from borrowings                            |  |        | 166,241  |            |   |                |   |                     | 2,328   |              |  
|Repayment of debt                                   |  |        | (139,289 | )          |   | (20,349         | ) |                     |        |              |  
|Purchase of treasury stock                          |  |        | (47,125  | )          |   |                |   |                     |        |              |  
|Exercise of stock options                           |  |        | 1,562    |            |   |                |   |                     |        |              |  
|Cash overdraft                                      |  |        |         |            |   | 2,001           |   |                     |        |              |  
|Inter-company                                       |  |        | 13,223   |            |   | 22,385          |   |                     | (35,608 | )            |  
|                                                    |  |        |          |            |   |                 |   |                     |         |              |  
|Net cash used in financing activities               |  |        | (5,388   | )          |   | 4,037           |   |                     | (33,280 | )            |  
|                                                    |  |        |          |            |   |                 |   |                     |         |              |  
|CHANGE IN CASH                                      |  | $      |         |            | $ |                |   | $                   |        |              | $
|CashBeginning of year                              |  |        |         |            |   |                |   |                     |        |              |  
|                                                    |  |        |          |            |   |                 |   |                     |         |              |  
|CashEnd of year                                    |  | $      |         |            | $ |                |   | $                   |        |              | $
|                                                    |  |        |          |            |   |                 |   |                     |         |              |  

F-46

---



SCHEDULE II

AIRGAS, INC. AND SUBSIDIARIES        VALUATION AND QUALIFYING ACCOUNTS        For the Years Ended March 31, 2002, 2001 and 2000        (In thousands of dollars)

|                                                     |  | Column A |        | Column B |   | Column C |  | Column D |       | Column E
|---------------------------------------------------- |  | -------- | ------ | -------- | - | -------- |  | -------- | ----- | --------
|
|
|2002                                                 |  |          |        |          |   |          |  |          |       |         
|Accounts receivableallowances for doubtful accounts |  | $        | 7,402  |          | $ | 9,537    |  | $        | 1,371 | (1)     
|Insurance reserves                                   |  |          | 15,596 |          |   | 48,008   |  |          |      |         
|Deferred tax asset valuation allowance               |  |          | 4,263  |          |   | 1,713    |  |          |      |         
|Litigation reserve                                   |  |          | 8,007  |          |   | 8,697    |  |          |      |         
|2001                                                 |  |          |        |          |   |          |  |          |       |         
|Accounts receivableallowances for doubtful accounts |  | $        | 6,194  |          | $ | 8,730    |  | $        | 820   | (1)     
|Insurance reserves                                   |  |          | 11,475 |          |   | 40,991   |  |          | 577   |         
|Deferred tax asset valuation allowance               |  |          | 1,840  |          |   | 2,423    |  |          |      |         
|Litigation reserve                                   |  |          | 7,500  |          |   | 9,160    |  |          |      |         
|2000                                                 |  |          |        |          |   |          |  |          |       |         
|Accounts receivableallowances for doubtful accounts |  | $        | 6,092  |          | $ | 6,303    |  | $        | 1,078 | (1)     
|Insurance reserves                                   |  |          | 9,584  |          |   | 44,492   |  |          |      |         
|Deferred tax asset valuation allowance               |  |          | 1,672  |          |   | 168      |  |          |      |         
|Litigation reserve                                   |  |          |       |          |   | 7,500    |  |          |      |         

---

F-47

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