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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2007
 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
 AIRGAS, INC.
  Delaware
    
    56-0732648(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)259 North Radnor-Chester Road, Suite 100Radnor, Pennsylvania
    
    19087-5283(Address of principal executive offices)
    
    (Zip Code)
 (610) 687-5253
  Name of Each ExchangeTitle of Each Class
    
    on Which RegisteredCommon Stock, par value $0.01 per share
    
    New York Stock Exchange
  þ o
 o þ
 þ o
 þ
  þ o o
  o o
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



AIRGAS, INC.
  ITEM NO.
    
    PAGEPART I1. Business
    
    
    31a. Risk Factors
    
    
    111b. Unresolved Staff Comments
    
    
    152. Properties
    
    
    153. Legal Proceedings
    
    
    154. Submission of Matters to a Vote of Security Holders
    
    
    15PART II5. Market for the Companys Common Equity and Related Stockholder Matters
    
    
    166. Selected Financial Data
    
    
    187. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    217a. Quantitative and Qualitative Disclosures About Market Risk
    
    
    458. Financial Statements and Supplementary Data
    
    
    489. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    489a. Controls and Procedures
    
    
    489b. Other Information
    
    
    49PART III10. Directors and Executive Officers of the Company
    
    
    4911. Executive Compensation
    
    
    4912. Security Ownership of Certain Beneficial Owners and Management
    
    
    4913. Certain Relationships and Related Transactions
    
    
    4914. Principal Accountant Fees and Services
    
    
    49PART IV15. Exhibits and Financial Statement Schedules
    
    
    50Signatures
    
    
    54Packaged Gas Business Equity Purchase AgreementSTATEMENT RE: COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGESAirgas, Inc. and SubsidiariesConsent of KPMG LLPCERTIFICATIONCERTIFICATIONCERTIFICATIONCERTIFICATION
  2




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PART I
 
 ITEM 1. BUSINESS.
   Consolidation of Variable
Interest Entities,
    Principal Products and Services
  3




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Principal Markets and Methods of Distribution
   Customer Base
  
    
    Industrial Manufacturing (29%)
    
    Repair & Maintenance (26%)
    
    Non-residential construction (12%)
    
    Medical (7%)
    
    Wholesale Trade (5%)
    
    Food Products (6%)
    
    Petrochemical (5%)
    
    Utilities and Mining (2%)
    
    Analytical (3%)
    
    Transportation (2%)
    
    Other (3%).
 4




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Suppliers
     Gas Operations Division
  5




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Airgas Merchant Gases
  National Welders Supply Company, Inc.
  Suppliers
    6




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
    
    high potential growth markets such as non-residential construction, medical, energy, research life sciences
and food products;
    
    strategic product offerings expected to grow faster than the overall economy, e.g., bulk gases, specialty
gases, medical products, carbon dioxide and safety products;
    
    improved training, tools and resources for front line associates;
    
    reducing costs associated with production, cylinder maintenance and distribution logistics;
    
    continued account penetration; and
    
    acquisitions to complement and expand our business.
        7




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2 2 2
   Name
    
    Age
    
    PositionPeter McCausland (1)
    
    
    57
    
    
    Chairman of the Board, President and Chief Executive OfficerMichael L. Molinini
    
    
    56
    
    
    Executive Vice President and Chief Operating OfficerRobert M. McLaughlin
    
    
    50
    
    
    Senior Vice President and Chief Financial OfficerRobert A. Dougherty
    
    
    49
    
    
    Senior Vice President and Chief Information OfficerPatrick M. Visintainer
    
    
    43
    
    
    Senior Vice President  SalesDwight T. Wilson
    
    
    51
    
    
    Senior Vice President  Human ResourcesLeslie J. Graff
    
    
    46
    
    
    Senior Vice President  Corporate DevelopmentMax D. Hooper
    
    
    47
    
    
    Division President  WestB. Shaun Powers
    
    
    55
    
    
    Division President  EastTed R. Schulte
    
    
    56
    
    
    Division President  Gas OperationsDean A. Bertolino
    
    
    38
    
    
    Vice President, General Counsel and SecretaryThomas M. Smyth
    
    
    53
    
    
    Vice President and Controller
 
 (1)
    
    Member of the Board of Directors    8




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9




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llp
    Code of Ethics and Business Conduct
  
 Corporate Governance Guidelines
  Certifications
   10




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ITEM 1a. RISK FACTORS.
  We have significant debt and our debt service obligations are substantial, which could diminish our
ability to raise additional capital and limit our ability to engage in certain transactions.
   
    
    increasing our vulnerability to general adverse economic and industry conditions;
 
    
    limiting our ability to obtain additional financing for working capital, capital expenditures,
acquisitions and other purposes;
 
    
    requiring the dedication of a significant portion of our expected cash flow from operations to
service our indebtedness, thereby reducing the amount of our expected cash flow available for
working capital, capital expenditures, acquisitions and other purposes;
 
    
    limiting our flexibility in planning for, or reacting to, changes in our business and industry;
 
    
    placing us at a possible competitive disadvantage relative to less leveraged competitors;
 
    
    increasing the amount of our interest expense, because some of our borrowings are at variable
rates of interest, which, if interest rates increase, would result in higher interest expense
(at current debt levels and ratio of fixed to floating rate debt, we estimate that for every
25 basis point rise of LIBOR, annual interest expense would increase by $3 million); and
 
    
    limiting, through the financial and other restrictive covenants in our indebtedness, among
other things, our ability to borrow additional funds, dispose of assets or make investments.
  11




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Despite currently expected levels of indebtedness, we and our subsidiaries will be able to incur
substantially more debt, which would increase the risk associated with our significant debt levels.
  Demand for our products is affected by general economic conditions and by the cyclical nature of
many of the industries we serve, which can cause significant fluctuations in our sales and results.
  We may not be successful in generating market leading sales growth and in controlling expenses,
which could limit our ability to achieve our expected growth.
  
    
    competition from independent distributors and vertically integrated gas producers on products and pricing;
 
    
    changes in supply prices from gas producers and manufacturers of hardgoods; and
 
    
    general economic conditions in the industrial markets which we serve.
  Increases in product and energy costs could reduce our profitability.
  Our financial results may be adversely affected by gas supply disruptions
  12




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We may not be successful in completing acquisitions, which may adversely affect our growth and
operating results.
  We may not be successful in integrating our past and future acquisitions and achieving intended
benefits and synergies.
  
    
    difficulty with the assimilation of acquired operations, information systems and products;
 
    
    failure to achieve targeted synergies;
 
    
    inability to retain key employees, customers and business relationships of acquired companies; and
 
    
    diversion of the attention and resources of our management team.
  Acquisitions may have a material adverse effect on our business if we are required to assume debt
and other liabilities of the acquired business.
  We depend on our key personnel to manage our business effectively and they may be difficult to
replace.
  We are subject to litigation risk as a result of the nature of our business, which may have a
material adverse effect on our business.
  13




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We have established insurance programs with significant deductibles and maximum coverage limits
which could result in the recognition of significant losses.
  Catastrophic events may disrupt our business and adversely affect our operating results.
  Our financial statements reflect the operating results of our joint venture, National Welders, over
which we have limited control and any disagreement with National Welders could potentially
adversely affect the business and operations of the joint venture.
 Consolidation of Variable Interest
Entities,
  We are subject to environmental, health and safety regulations which could subject us to liability
and we will have ongoing environmental costs.
  We operate in a highly competitive environment and such competition could negatively impact us.
  Although the current trend is for increasing prices, the industrial gas industry has experienced
periods of falling prices, and if such a trend were to return, we could experience reduced revenues and/or
cash flows.
  14




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ITEM 1b. UNRESOLVED STAFF COMMENTS.
  
 ITEM 2. PROPERTIES.
      
 ITEM 3. LEGAL PROCEEDINGS.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  15




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PART II
 
 ITEM 5. MARKET FOR THE COMPANYS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
  Dividends PerHigh
    
    Low
    
    ShareFiscal 2007First Quarter
    
    $
    41.41
    
    
    $
    33.79
    
    
    $
    0.070Second Quarter
    
    
    38.12
    
    
    
    34.11
    
    
    
    0.070Third Quarter
    
    
    42.91
    
    
    
    36.05
    
    
    
    0.070Fourth Quarter
    
    
    42.72
    
    
    
    39.31
    
    
    
    0.070Fiscal 2006First Quarter
    
    $
    25.00
    
    
    $
    21.58
    
    
    $
    0.060Second Quarter
    
    
    29.75
    
    
    
    24.73
    
    
    
    0.060Third Quarter
    
    
    33.44
    
    
    
    27.30
    
    
    
    0.060Fourth Quarter
    
    
    39.58
    
    
    
    31.83
    
    
    
    0.060
   16




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Stock Repurchase Plan
  Equity Compensation Plan Information
  (a)
    
    
    (b)
    
    
    (c)Number of securitiesremaining available forNumber of securities to be
    
    
    Weighted-average
    
    
    future issuance under equityissued upon exercise of
    
    
    exercise price of
    
    
    compensation plansoutstanding options,
    
    
    outstanding options,
    
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))Equity compensation plans approved by
    
    
    102,755
    
    
    
    30.86
    
    
    
    1,710,603
    
    ESPP shares (2)security holders(1)
    
    
    6,882,974
    
    
    $
    19.12
    
    
    
    4,510,969
    
    Stock Option PlansEquity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total:
    
    
    6,985,729
    
    
    $
    19.29
    
    
    
    6,221,572
 
 (1)
    
    At the Companys August 2006 Annual Meeting of
Stockholders, the stockholders approved the 2006 Equity Incentive
Plan (the 2006 Equity Plan). The 2006 Equity Plan replaced
both the 1997 Stock Option Plan for employees and the 1997
Directors Stock Option Plan. Shares subject to outstanding
stock options that terminate, expire or are canceled without having
been exercised and stock options available for grant under the prior
stock option plans were carried forward to the 2006 Equity Plan.
Future grants of stock options to employees and directors will be
issued from the 2006 Equity Plan to the extent there are options
available for grant. As of March 31, 2007, only stock option
awards have been granted under the 2006 Equity Plan and predecessor
stock options plans. (2)
    
    The Amended and Restated 2003 Employee Stock Purchase Plan
(ESPP) was approved by the Companys stockholders in
August 2006. The ESPP encourages and assist employees in
acquiring an equity interest in the Company by allowing eligible
employees to purchase common stock at a discount.
 17




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ITEM 6. SELECTED FINANCIAL DATA.
  18




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Years Ended March 31,(In thousands, except per share amounts):
    
    2007(1)
    
    2006(2)(7)
    
    2005(3)(7)
    
    2004(4)(7)
    
    2003(5)(7)Operating Results:Net sales
    
    $
    3,205,051
    
    
    $
    2,829,610
    
    
    $
    2,367,782
    
    
    $
    1,855,360
    
    
    $
    1,745,891Depreciation and amortization
    
    
    147,343
    
    
    
    127,542
    
    
    
    111,078
    
    
    
    87,447
    
    
    
    79,279Special charges (recoveries), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (776
    )
    
    
    2,694Operating income
    
    
    341,452
    
    
    
    268,758
    
    
    
    202,454
    
    
    
    168,544
    
    
    
    156,336Interest expense, net
    
    
    60,180
    
    
    
    53,812
    
    
    
    51,245
    
    
    
    42,357
    
    
    
    46,374Discount on securitization of trade
receivables
    
    
    13,630
    
    
    
    9,371
    
    
    
    4,711
    
    
    
    3,264
    
    
    
    3,326Loss on debt extinguishment
    
    
    12,099
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income, net
    
    
    1,601
    
    
    
    2,462
    
    
    
    1,129
    
    
    
    1,472
    
    
    
    2,132Income taxes
    
    
    99,883
    
    
    
    77,866
    
    
    
    54,261
    
    
    
    47,659
    
    
    
    41,571Minority interest in earnings of
consolidated affiliate
    
    
    (2,845
    )
    
    
    (2,656
    )
    
    
    (1,808
    )
    
    
    (452
    )
    
    
    Equity in earnings of unconsolidated
affiliate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,365
    
    
    
    2,684Income from continuing operations
    
    
    154,416
    
    
    
    127,515
    
    
    
    91,558
    
    
    
    80,649
    
    
    
    69,881Income (loss) from discontinued
operations, net of tax
    
    
    
    
    
    
    (1,424
    )
    
    
    464
    
    
    
    (457
    )
    
    
    (1,776
    )Cumulative effect of a change in accounting
principle, net of tax
    
    
    
    
    
    
    (2,540
    )
    
    
    
    
    
    
    
    
    
    
    Net earnings
    
    $
    154,416
    
    
    $
    123,551
    
    
    $
    92,022
    
    
    $
    80,192
    
    
    $
    68,105NET EARNINGS (LOSS) PER COMMON SHAREBASICEarnings from continuing operations
    
    $
    1.98
    
    
    $
    1.66
    
    
    $
    1.22
    
    
    $
    1.11
    
    
    $
    0.99Earnings (loss) from discontinued
operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    (0.02
    )Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    Net earnings per share
    
    $
    1.98
    
    
    $
    1.61
    
    
    $
    1.23
    
    
    $
    1.10
    
    
    $
    0.97DILUTEDEarnings from continuing operations
    
    $
    1.92
    
    
    $
    1.62
    
    
    $
    1.19
    
    
    $
    1.08
    
    
    $
    0.96Earnings (loss) from discontinued
operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    (0.02
    )Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    Net earnings per share
    
    $
    1.92
    
    
    $
    1.57
    
    
    $
    1.20
    
    
    $
    1.07
    
    
    $
    0.94Dividends per common share declared and
paid (6)
    
    $
    0.28
    
    
    $
    0.24
    
    
    $
    0.18
    
    
    $
    0.16
    
    
    $
    Balance Sheet Data at March 31:Working capital
    
    $
    121,543
    
    
    $
    (17,138
    )
    
    $
    132,969
    
    
    $
    88,826
    
    
    $
    66,027Total assets
    
    
    3,333,457
    
    
    
    2,474,412
    
    
    
    2,291,863
    
    
    
    1,960,606
    
    
    
    1,726,004Current portion of long-term debt
    
    
    40,296
    
    
    
    131,901
    
    
    
    6,948
    
    
    
    6,140
    
    
    
    2,229Long-term debt
    
    
    1,309,719
    
    
    
    635,726
    
    
    
    801,635
    
    
    
    682,698
    
    
    
    658,031Deferred income tax liability, net
    
    
    373,246
    
    
    
    327,818
    
    
    
    282,186
    
    
    
    253,529
    
    
    
    207,069Other non-current liabilities
    
    
    39,963
    
    
    
    30,864
    
    
    
    24,391
    
    
    
    28,756
    
    
    
    33,657Minority interest in affiliate
    
    
    57,191
    
    
    
    57,191
    
    
    
    36,191
    
    
    
    36,191
    
    
    
    Stockholders equity
    
    
    1,125,382
    
    
    
    947,159
    
    
    
    814,172
    
    
    
    691,901
    
    
    
    596,933Capital expenditures for years ended
March 31,
    
    
    243,583
    
    
    
    214,193
    
    
    
    167,977
    
    
    
    93,749
    
    
    
    67,969
 
 (1)
    
    As discussed in Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations and in the notes to the Companys Consolidated Financial Statements
included in Item 8, the results for fiscal 2007 include stock-based compensation expense of
$15.4 million ($10.9 million after tax), or $0.13 per diluted share, due to adopting Financial
Accounting Standard No. 123R, Share-Based Payment,utilizing the modified prospective method.
No stock-based compensation expense was reflected in prior periods. Fiscal 2007 results also
include a charge of $12.1 million ($7.9 million after tax), or approximately $0.10 per diluted
share, for the early extinguishment of debt and a one-time tax benefit of $0.02 per diluted
share related to a change in the state income tax law in Texas. 19




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(2)
    
    As discussed in Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations and in the notes to the Companys Consolidated Financial Statements
included in Item 8, the results for fiscal 2006 include an after-tax charge of $2.5 million as
a result of the adoption of Financial Accounting Standards Board Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement
No. 143,which was recorded as a cumulative effect of a change in accounting principle, an
after-tax loss of $1.9 million on the divestiture of Rutland Tool, which was reported as a
discontinued operation, and an estimated loss of $2.2 million ($1.4 million after tax) related
to hurricanes Katrina and Rita. Working capital decreased in fiscal 2006 compared to 2005
primarily due to an increase in the current portion of long-term debt.(3)
    
    As discussed in Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations and in the notes to the Companys Consolidated Financial Statements
included in Item 8, the results for fiscal 2005 include integration costs related to the
acquisition of the U.S. packaged gas business of The BOC Group, Inc. and employee separation
costs of $6.4 million ($4 million after tax). Fiscal 2005 also reflected a full year of
National Welders as a consolidated affiliate. See Note 15 to the Consolidated Financial
Statements included under Item 8, Financial Statements and Supplementary Data, for the
effect of the consolidation of National Welders on the Consolidated Financial Statements.(4)
    
    The results for fiscal 2004 include a fourth quarter special charge recovery of $776 thousand
($480 thousand after tax) reflecting lower estimates of the ultimate cost of prior years
restructuring activities. Fiscal 2004 results also include the fourth quarter consolidation of
the National Welders joint venture in accordance with Financial Accounting Standards Board
Interpretation No. 46R, Consolidation of Variable Interest Entities, (FIN 46R). Prior to
the adoption of FIN 46R, the Company used the Equity Method of Accounting for its investment
in National Welders. Accordingly, the consolidation of National Welders under FIN 46R did not
have an impact on the Companys net earnings.(5)
    
    The results for fiscal 2003 include special charges of
$2.7 million ($2.1 million
after tax) consisting of a restructuring charge related to the
integration of the business acquired from Air Products & Chemicals, Inc.(6)
    
    During fiscal 2007, 2006, 2005 and 2004, the Company paid its stockholders regular quarterly
cash dividends of $0.07, $0.06, $0.045 and $0.04 per share, respectively. In addition, on May
8, 2007, the Companys Board of Directors declared a regular quarterly cash dividend of $0.09
per share payable June 29, 2007 to stockholders of record as of June 15, 2007. Future
dividend declarations and associated amounts paid 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.(7)
    
    Certain reclassifications have been made to prior period financial statements to conform to
the current presentation. The reclassifications reflect the presentation of Rutland Tool as
discontinued operations. 20




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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: 2007 COMPARED TO 2006
 OVERVIEW
  Accounting Change
 Share-Based Payment
 Financing
   21




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Acquisitions
   Pending Acquisition
  Looking Forward
  22




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INCOME STATEMENT COMMENTARY
 Net Sales
  
 (In thousands)
    
    2007
    
    
    2006
    
    
    IncreaseDistribution
    
    $
    2,691,814
    
    
    $
    2,395,938
    
    
    $
    295,876
    
    
    
    12
    %All Other Operations
    
    
    579,671
    
    
    
    493,430
    
    
    
    86,241
    
    
    
    17
    %Intercompany eliminations
    
    
    (66,434
    )
    
    
    (59,758
    )
    
    
    (6,676
    )$
    3,205,051
    
    
    $
    2,829,610
    
    
    $
    375,441
    
    
    
    13
    %
    23




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®
  Gross Profits
  24




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##### Table of Contents



(In thousands)
    
    2007
    
    
    2006
    
    
    IncreaseDistribution
    
    $
    1,336,447
    
    
    $
    1,172,503
    
    
    $
    163,944
    
    
    
    14
    %All Other Operations
    
    
    301,514
    
    
    
    255,129
    
    
    
    46,385
    
    
    
    18
    %$
    1,637,961
    
    
    $
    1,427,632
    
    
    $
    210,329
    
    
    
    15
    %
   Operating Expenses
    25




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Operating Income
  
 (In thousands)
    
    2007
    
    
    2006
    
    
    IncreaseDistribution
    
    $
    266,708
    
    
    $
    208,466
    
    
    $
    58,242
    
    
    
    28
    %All Other Operations
    
    
    74,744
    
    
    
    60,292
    
    
    
    14,452
    
    
    
    24
    %$
    341,452
    
    
    $
    268,758
    
    
    $
    72,694
    
    
    
    27
    %
    Interest Expense and Discount on Securitization of Trade Receivables
    26




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Loss on Debt Extinguishment
  Income Tax Expense
  Income from Continuing Operations
  Income (loss) from Discontinued Operations
  27




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Cumulative Effect of a Change in Accounting Principle
 Accounting for Conditional Asset Retirement Obligations, an interpretation
of FASB Statement No. 143
 Net Earnings
   28




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RESULTS OF OPERATIONS: 2006 COMPARED TO 2005
 OVERVIEW
  Accounting Change
 Accounting for Conditional Asset Retirement Obligations, an
interpretation of FASB Statement No. 143
 Discontinued Operations
  Acquisitions
  29




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INCOME STATEMENT COMMENTARY
 Net Sales
   (In thousands)
    
    2006
    
    
    2005
    
    
    IncreaseDistribution
    
    $
    2,395,938
    
    
    $
    2,035,112
    
    
    $
    360,826
    
    
    
    18
    %All Other Operations
    
    
    493,430
    
    
    
    385,611
    
    
    
    107,819
    
    
    
    28
    %Intercompany
eliminations
    
    
    (59,758
    )
    
    
    (52,941
    )
    
    
    (6,817
    )$
    2,829,610
    
    
    $
    2,367,782
    
    
    $
    461,828
    
    
    
    20
    %
    30




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##### Table of Contents



Gross Profits
   (In thousands)
    
    2006
    
    
    2005
    
    
    IncreaseDistribution
    
    $
    1,172,503
    
    
    $
    1,004,828
    
    
    $
    167,675
    
    
    
    17
    %All Other Operations
    
    
    255,129
    
    
    
    211,172
    
    
    
    43,957
    
    
    
    21
    %$
    1,427,632
    
    
    $
    1,216,000
    
    
    $
    211,632
    
    
    
    17
    %
   Operating Expenses
  31




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##### Table of Contents



Operating Income
   (In thousands)
    
    2006
    
    
    2005
    
    
    IncreaseDistribution
    
    $
    208,466
    
    
    $
    157,239
    
    
    $
    51,227
    
    
    
    33
    %All Other Operations
    
    
    60,292
    
    
    
    45,215
    
    
    
    15,077
    
    
    
    33
    %$
    268,758
    
    
    $
    202,454
    
    
    $
    66,304
    
    
    
    33
    %
   Interest Expense and Discount on Securitization of Trade Receivables
    32




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##### Table of Contents



Income Tax Expense
  Income from Continuing Operations
  Income (loss) from Discontinued Operations
  Cumulative Effect of a Change in Accounting Principle
  Net Earnings
   33




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Fiscal 2007 Cash Flows
    Dividends
  Stock Repurchase Plan
  34




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##### Table of Contents



Financial Instruments
 Debt Refinancing
    Total Borrowing Capacity and Acquisition Financing
    35




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##### Table of Contents



Money Market Loan
  Senior Subordinated Notes
    Acquisition and Other Notes
  Financial Instruments of the National Welders Joint Venture
 Consolidation of Variable Interest Entities
  36




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##### Table of Contents



Trade Receivables Securitization
  Interest Rate Swap Agreements
    37




---



##### Table of Contents



OTHER
 Critical Accounting Estimates
  Trade Receivables
  Inventories
  38




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##### Table of Contents



Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
  Business Insurance Reserves
  39




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##### Table of Contents



Contractual Obligations and Off-Balance Sheet Arrangements
  Payments Due by Period(In thousands)
    
    
    
    
    
    Less than 1
    
    
    
    
    
    
    
    
    
    More than 5Contractual and Off-Balance Sheet Obligations
    
    Total
    
    Year
    
    1 to 3 Years
    
    3 to 5 Years
    
    YearsObligations reflected on the March 31, 2007 Balance Sheet:Long-term debt (1)
    
    $
    1,350,015
    
    
    $
    40,296
    
    
    $
    268,753
    
    
    $
    889,186
    
    
    $
    151,780Estimated interest payments on
long-term debt (2)
    
    
    313,849
    
    
    
    80,624
    
    
    
    137,900
    
    
    
    85,225
    
    
    
    9,675Estimated payments (receipts) on
interest rate swap agreements (3)
    
    
    (1,200
    )
    
    
    (500
    )
    
    
    (700
    )
    
    
    
    
    
    
    Off-balance sheet obligations as of March 31, 2007:Operating leases (4)
    
    
    212,889
    
    
    
    59,757
    
    
    
    90,817
    
    
    
    49,546
    
    
    
    12,769Trade receivables
securitization (5)
    
    
    264,400
    
    
    
    
    
    
    
    264,400
    
    
    
    
    
    
    
    Estimated discount on
securitization (6)
    
    
    44,814
    
    
    
    14,938
    
    
    
    29,876
    
    
    
    
    
    
    
    Letters of credit (7)
    
    
    34,426
    
    
    
    34,426
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations:Liquid bulk gas supply
agreements (8)
    
    
    808,021
    
    
    
    89,015
    
    
    
    165,716
    
    
    
    158,750
    
    
    
    394,540Liquid carbon dioxide supply
agreements (9)
    
    
    180,072
    
    
    
    15,981
    
    
    
    23,700
    
    
    
    17,851
    
    
    
    122,540Ammonia supply agreements (10)
    
    
    87,557
    
    
    
    18,469
    
    
    
    34,544
    
    
    
    34,544
    
    
    
    Other purchase commitments (11)
    
    
    43,996
    
    
    
    17,121
    
    
    
    11,562
    
    
    
    7,983
    
    
    
    7,330Construction commitments (12)
    
    
    64,974
    
    
    
    44,810
    
    
    
    20,164
    
    
    
    
    
    
    
    Total
    
    $
    3,403,813
    
    
    $
    413,483
    
    
    $
    1,046,732
    
    
    $
    1,163,710
    
    
    $
    698,634
 
 (1)
    
    The less than one year relates to obligations due in fiscal 2008. The 1 to 3 years
column relates to obligations due in fiscal years ended March 31, 2009 and 2010. The 3 to
5 years column relates to obligations due in fiscal years ended March 31, 2011 and 2012.
The more than 5 years column relates to obligations due in fiscal years ended March 31,
2013 and beyond. Aggregate long-term debt instruments are reflected in the Consolidated
Balance Sheet as of March 31, 2007. Long-term debt includes capital lease obligations,
which were not material and, therefore, did not warrant separate disclosure. See Note 9 to
the Consolidated Financial Statements for more information regarding long-term debt
instruments.(2)
    
    The future interest payments on the Companys long-term debt obligations were estimated
based on the current outstanding principal reduced by scheduled maturities in each period
presented and interest rates 40




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##### Table of Contents



as of March 31, 2007. The estimated interest payments may
differ materially from those presented above based on actual amounts of long-term debt
outstanding and actual interest rates in future periods.(3)
    
    Payments or receipts under interest rate swap agreements result from changes in market
interest rates compared to contractual rates and payments to be exchanged between the
parties to the agreements. The estimated receipts in future periods were determined based
on interest rates as of March 31, 2007. Actual receipts or payments may differ materially
from those presented above based on actual interest rates in future periods.(4)
    
    The Companys operating leases include approximately $140 million in fleet vehicles
under long-term operating leases. The Company guarantees a residual value of $18 million
related to its leased vehicles.(5)
    
    The Company participates in a securitization agreement with three commercial banks to
sell up to $285 million of qualifying trade receivables. The agreement expires in March
2010, but may be renewed subject to provisions contained in the agreement. Under the
securitization agreement, on a monthly basis, trade receivables are sold to three
commercial banks through a bankruptcy-remote special purpose entity. Proceeds received
from the sale of receivables were used by the Company to reduce its
borrowings under its Credit Facility. The securitization agreement is a form of off-balance sheet
financing. Also see Note 12 to the Consolidated Financial Statements.(6)
    
    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 interest rates. The estimated discount in future periods is based on receivables
sold and interest rates as of March 31, 2007. The actual discount recognized in future
periods may differ materially from those presented above based on actual amounts of
receivables sold and market rates.(7)
    
    Letters of credit are guarantees of payment to third parties. The Companys letters of
credit principally back obligations associated with the Companys self-insured retention on
workers compensation, automobile and general liability claims.
The letters of credit are supported
by the Companys Credit Facility.(8)
    
    In addition to the gas volumes supplied by the recently formed Airgas Merchant
Gases, the Company purchases industrial, medical and specialty gases pursuant to
requirements contracts from national and regional producers of industrial gases. The
Company has a long term take-or-pay supply agreement, in effect through September 1,
2017, under which Air Products and Chemicals, Inc. (Air Products) will supply at
least 35% of the Companys bulk liquid nitrogen, oxygen and argon requirements,
exclusive of the volumes produced by the Company and those purchased under the Linde
supply agreements noted below. Additionally, the Company purchases helium under the
terms of the supply agreement. Based on the volume of fiscal 2007 purchases, the Air
Products supply agreement represents approximately $50 million annually in liquid bulk
gas purchases. The purchase commitments for future periods contained in the table
above reflect estimates based on fiscal 2007 purchases.The Company and Linde AG as successor to BOC entered into a long term take-or-pay supply
agreement to purchase oxygen, nitrogen and argon. The agreement will expire in July
2019 and represents approximately $3 million in annual bulk gas purchases. In September
and October 2006, the Company and Linde AG entered into a long term
take-or-pay supply agreements to purchase helium. The total annual commitment amount
under the Linde agreements is
approximately $28 million.The Company also participates in a long term agreement with Praxair to swap production
of bulk nitrogen, oxygen, and argon through 2014. The Praxair agreement represents
approximately $7 million annually. 41




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##### Table of Contents



The supply agreements above contain periodic adjustments based on certain economic
indices and market analysis. The Company believes the minimum product purchases under
the agreements are within the Companys normal product purchases. Actual purchases in
future periods under the supply agreements could differ materially from those presented
in the table due to fluctuations in demand requirements related to varying sales levels
as well as changes in economic conditions.(9)
    
    The Company is a party to long-term take-or-pay supply agreements for the purchase of
liquid carbon dioxide. The aggregate obligations under the supply agreements represent
approximately 20% of the Companys annual carbon dioxide requirements. The purchase
commitments for future periods contained in the table above reflect estimates based on
fiscal 2007 purchases. The Company believes the minimum product purchases under the
agreements are within the Companys normal product purchases. Actual purchases in future
periods under the carbon dioxide supply agreements could differ materially from those
presented in the table due to fluctuations in demand requirements related to varying sales
levels as well as changes in economic conditions. Certain of the liquid carbon dioxide
supply agreements contain market pricing subject to certain economic indices.(10)
    
    The Company purchases ammonia from a variety of sources. With one of those sources,
the Company has minimum purchase commitments under supply agreements, which is perpetual
pending a 180-day written notification of termination from either party.(11)
    
    Other purchase commitments primarily include property, plant and equipment expenditures.(12)
    
    Construction commitments represent outstanding commitments to customers to build and
operate air separation plants in Carrollton, KY and New Carlisle, IN. The projects are
expected to begin operating in the spring of 2009. 42




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##### Table of Contents



New Accounting Pronouncements
 Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 and 140
 Accounting for Servicing of Financial Assets
 an amendment of FASB Statement No. 140
 How Taxes Collected from Customers and
Remitted to Governmental Authorities Should Be Presented in the Income Statement
 Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes,
 Fair Value Measurements.
 The Fair Value Option for Financial Assets
and Financial Liabilities-Including an amendment of FASB Statement No. 115.
 43




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##### Table of Contents



Forward-looking Statements
   44




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
   45




---



##### Table of Contents



Fiscal year of MaturityFair(In millions)
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter
    
    Total
    
    ValueFixed Rate DebtAcquisition and other notes
    
    $
    6
    
    
    $
    5
    
    
    $
    4
    
    
    $
    
    
    
    $
    
    
    
    $
    2
    
    
    $
    17
    
    
    $
    17Interest expense
    
    $
    0.9
    
    
    $
    0.6
    
    
    $
    0.3
    
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.2
    
    
    $
    2.2Average interest rate
    
    
    5.59
    %
    
    
    5.65
    %
    
    
    5.32
    %
    
    
    5.32
    %
    

    
    4.99
    %

    
    
    4.99
    %Senior subordinated
notes due 2014
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    150
    
    
    $
    150
    
    
    $
    146Interest expense
    
    $
    9
    
    
    $
    9
    
    
    $
    9
    
    
    $
    9
    
    
    $
    9
    
    
    $
    19
    
    
    $
    64Interest rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %National Welders:Acquisition and other notes
    
    $
    0.7
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.7
    
    
    $
    .07Interest expense
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest rate
    
    
    7.00
    %
 Fiscal year of MaturityFair(In millions)
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter
    
    Total
    
    ValueVariable Rate DebtRevolving credit facilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    489
    
    
    $
    
    
    
    $
    489
    
    
    $
    489Interest expense
    
    $
    30
    
    
    $
    30
    
    
    $
    30
    
    
    $
    30
    
    
    $
    10
    
    
    $
    
    
    
    $
    130Interest rate (a)
    
    
    6.06
    %
    
    
    6.06
    %
    
    
    6.06
    %
    
    
    6.06
    %
    
    
    6.06
    %Term loan
    
    $
    
    
    
    $
    90
    
    
    $
    90
    
    
    $
    236
    
    
    $
    162
    
    
    $
    
    
    
    $
    578
    
    
    $
    578Interest expense
    
    $
    34
    
    
    $
    28
    
    
    $
    23
    
    
    $
    15
    
    
    $
    2
    
    
    $
    
    
    
    $
    102Interest rate (a)
    
    
    6.10
    %
    
    
    6.10
    %
    
    
    6.10
    %
    
    
    6.10
    %
    
    
    6.10
    %Money market loans
    
    $
    30
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30
    
    
    $
    30Interest expense
    
    $
    1.2
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1.2Interest rate (a)
    
    
    5.75
    %National Welders:Revolving credit facility
    
    $
    
    
    
    $
    
    
    
    $
    73
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    73
    
    
    $
    73Interest expense
    
    $
    4.4
    
    
    $
    4.4
    
    
    $
    1.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10.6Interest rate (a)
    
    
    6.02
    %
    
    
    6.02
    %
    
    
    6.02
    %Term loan A
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    12
    
    
    $
    12Interest expense
    
    $
    0.7
    
    
    $
    0.6
    
    
    $
    0.4
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    
    
    
    $
    2.0Interest rate (a)
    
    
    6.02
    %
    
    
    6.02
    %
    
    
    6.02
    %
    
    
    6.02
    %
 46




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##### Table of Contents



Fiscal year of MaturityFair(In millions)
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter
    
    Total
    
    ValueInterest Rate Swaps:6 Swaps (Receive Variable)/Pay FixedNotional amounts
    
    $
    
    
    
    $
    100
    
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    150
    
    
    $
    (.04
    )Swap payments/(receipts)
    
    $
    (0.5
    )
    
    $
    (0.6
    )
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1.2
    )$100 million notional amountVariable Receive rate = 5.35%Weighted average pay rate = 5.39%$50 million notional amountVariable Receive rate = 5.32%Weighted average pay rate = 4.15%National Welders:1 Swap (Receive Variable)/Pay FixedNotional amounts
    
    $
    
    
    
    $
    
    
    
    $
    27
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    27
    
    
    $
    Variable
Receive rate = 5.35%
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Weighted average pay rate = 5.36%Other Off-Balance SheetLIBOR-based agreements:Trade receivable securitization (b)
    
    $
    
    
    
    $
    
    
    
    $
    264
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    264
    
    
    $
    264Discount on securitization
    
    $
    15
    
    
    $
    15
    
    
    $
    15
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    45
 
 (a)
    
    The variable rate of U.S. Credit Facility and term loan is based on LIBOR as of March 31,
2007. The variable rate of the Canadian dollar portion of the Credit Facility is the rate on
Canadian Bankers Acceptances outstanding as of March 31, 2007.(b)
    
    The trade receivables securitization agreement expires in March 2010, but may be renewed
subject to renewal provisions contained in the agreement. Limitations of the tabular presentation
  Foreign Currency Rate Risk
  47




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  
 ITEM 9A. CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
 Internal Control  Integrated Framework. Consolidation of Variable Interest Entities
   Changes in Internal Control
  48




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##### Table of Contents



ITEM 9B. OTHER INFORMATION.
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
  
 ITEM 11. EXECUTIVE COMPENSATION.
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
  
 ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES.
  49




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
    Exhibit No.
    
    Description3.1
    
    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
    
    Second Amendment, dated August 20, 2002, 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 4.3 to the Companys March 31, 2003
Report on Form 10-K).4.4
    
    Third Amendment, dated May 2, 2003, 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 4.4 to the Companys March 31, 2003 Report on Form
10-K).4.5
    
    Fourth Amendment, dated February 6, 2004, 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 to the Companys December 31, 2003
Quarterly Report on Form 10-Q).
 
 50




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##### Table of Contents



Exhibit No.
    
    Description4.6
    
    The Eleventh Amended and Restated Credit Agreement, dated as of January 14, 2005, among
Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A., as U.S.
Administration Agent and The Bank of Nova Scotia as Canadian Agent. (Incorporated by
reference to Exhibit 4.1 to the Companys December 31, 2004 Quarterly Report on Form 10-Q).4.7
    
    The Twelfth Amended and Restated Credit Agreement, dated as of July 25, 2006, among
Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A., as U.S.
Administration Agent and The Bank of Nova Scotia as Canadian Agent. (Incorporated by
reference to Exhibit 4 to the Companys September 30, 2006 Quarterly Report on Form 10-Q).4.8
    
    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).4.9
    
    Form of Airgas, Inc. Medium-Term Note. (Incorporated by reference to
Exhibit 4(f) to the Companys Registration Statement on Form S-4 No. 333-08113 dated July
15, 1996).4.10
    
    Indenture, dated as of July 30, 2001, among Airgas, Inc., the subsidiary
guarantors of Airgas, Inc. and The Bank of New York, as Trustee, related to the 9.125%
Senior Subordinated Notes due 2011 (including exhibits). (Incorporated by reference to
Exhibit 4.7 to the Companys Registration Statement on Form S-4 No. 333-68722 dated August
30, 2001 and as amended September 14, 2001).4.11
    
    Exchange and Registration Rights Agreement, dated as of July 30, 2001, among Airgas,
Inc., the subsidiary guarantors of Airgas, Inc. and the initial purchasers of the 9.125%
Senior Subordinated Notes due 2011. (Incorporated by reference to Exhibit 4.8 to the
Companys Registration Statement on Form S-4 No. 333-68722 dated August 30, 2001 and as
amended September 14, 2001).4.12
    
    Indenture, dated as of March 8, 2004, among Airgas, Inc., the subsidiary guarantors of
Airgas, Inc. and The Bank of New York, as Trustee, relating to the 6.25% Senior
Subordinated Notes due 2014. (Incorporated by reference to Exhibit 4.14 to the Companys
Registration Statement on Form S-4 No. 333-114499 dated April 15, 2004).4.13
    
    Exchange and Registration Rights Agreement, dated as of March 8, 2004, among Airgas,
Inc., the subsidiary guarantors of Airgas, Inc. and the initial purchasers of the 6.25%
Senior Subordinated Notes due 2014. (Incorporated by reference to Exhibit 4.15 to the
Companys Registration Statement on Form S-4 No. 333-114499 dated April 15, 2004).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.4.14
    
    Rights Agreement, dated as of May 8, 2007, between Airgas, Inc. and The Bank of New York, as Rights
Agent, which includes
as Exhibits thereto the Form of Certificate of Designation, the Form of Right
Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively.
(Incorporated by
reference to Exhibit
4.1 to the Companys
Form 8-K filed on May
10, 2007).
 51




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##### Table of Contents



Exhibit No.
    
    Description*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 through
August 7, 1995. (Incorporated by reference to Exhibit 10.2 to the Companys September 30,
1995 Quarterly Report on Form 10-Q).*10.3
    
    Amended and Restated 2003 Employee Stock Purchase Plan dated June 21, 2006, and approved
by the Companys stockholders on August 9, 2006. (Incorporated by reference to the Definitive
Proxy statement on Form DEF14A dated June 30, 2006).*10.4
    
    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).*10.5
    
    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).*10.6
    
    1997 Stock Option Plan, as amended through May 7, 2002, and approved by the Companys
stockholders on July 31, 2002. (Incorporated by reference to Exhibit 10.1 to the Companys
June 30, 2002 Quarterly Report on Form 10-Q).*10.7
    
    1997 Directors Stock Option Plan as amended on May 25, 2004, and approved by the
Companys stockholders on August 4, 2004. (Incorporated by reference to the Definitive Proxy
statement on Form DEF14A dated June 28, 2004).*10.8
    
    2006 Equity Incentive Plan dated June 21, 2006, and approved by the
Companys stockholders on August 9, 2006. (Incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form
8-K dated August 9, 2006).*10.9
    
    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).*10.10
    
    Airgas, Inc. Deferred Comp Plan II dated May 23, 2006.
(Incorporated by reference to Exhibit 4 to the Companys
Registration Statement on Form S-8 No. 333-136463 dated August 9,
2006).*10.11
    
    Change of Control Agreement between Airgas, Inc. and Peter
McCausland dated March 17, 1999. (Incorporated by reference to
Exhibit 10.12 to the Companys March 31, 2005 Form 10-K). Seven
other
Executive Officers are parties to substantially identical agreements.
 52




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##### Table of Contents



Exhibit No.
    
    Description*10.12
    
    Airgas, Inc. 2004 Executive Bonus Plan. (Incorporated by reference to Exhibit 10.14 to the Companys March 31,
2005 Form 10-K).*10.13
    
    Bulk Gas Business Equity Purchase Agreement, dated November 22, 2006, by and among Holox (USA) B.V., Holox Inc.,
Linde AG and Airgas, Inc. (Incorporated by reference to Exhibit 10.1 to the Companys December 31, 2006 Quarterly
Report on Form 10-Q).10.14
    
    Packaged Gas Business Equity Purchase Agreement, dated March 29, 2007, by and among Linde Gas Inc., Linde Aktiengesellschaft, and Airgas, Inc.12
    
    Statement re: computation of the ratio of earnings to fixed charges.21
    
    Subsidiaries of the Company.23
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of Peter McCausland as Chairman and Chief Executive Officer of Airgas, Inc.
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Robert M. McLaughlin as Senior Vice President and Chief Financial Officer of
Airgas, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Peter McCausland as Chairman and Chief Executive Officer of Airgas, Inc.
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    Certification of Robert M. McLaughlin as Senior Vice President and Chief Financial Officer of
Airgas, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    A management contract or compensatory plan required to be filed by Item 14(c) of this Report. 53




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##### Table of Contents



SIGNATURES
   Airgas, Inc.
(Registrant)By:
    /s/ Peter McCauslandPeter McCauslandChairman, President and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Peter McCausland
    
    Director, Chairman of the Board,
    
    May 29, 2007(Peter McCausland)
    
    President
and Chief Executive Officer/s/ Robert M. McLaughlin
    
    Senior Vice President and Chief
Financial Officer
    
    May 29, 2007(Robert M. McLaughlin)
    
    (Principal Financial Officer)/s/ Thomas M. Smyth
    
    Vice President and Controller
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Accounting Officer)/s/ William O. Albertini
    
    Director
    
    May 29, 2007(William O. Albertini)/s/ W. Thacher Brown
    
    Director
    
    May 29, 2007(W. Thacher Brown)/s/ James W. Hovey
    
    Director
    
    May 29, 2007(James W. Hovey)
 54




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Richard C. III
    
    Director
    
    May 29, 2007(Richard C. III)/s/ Paula A. Sneed
    
    Director
    
    May 29, 2007(Paula A. Sneed)/s/ David M. Stout
    
    Director
    
    May 29, 2007(David M. Stout)/s/ Lee M. Thomas
    
    Director
    
    May 29, 2007(Lee M. Thomas)/s/ John C. van Roden, Jr.
    
    Director
    
    May 29, 2007(John C. van Roden, Jr.)
 55




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##### Table of Contents



SIGNATURES
   Airgas East, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ James A. Muller
    
    President and Director
    
    May 29, 2007(James A. Muller)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    May 29, 2007(B. Shaun Powers)
 56




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##### Table of Contents



SIGNATURES
   Airgas Great Lakes, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Michael Ziegler
    
    President and Director
    
    May 29, 2007(Michael Ziegler)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    May 29, 2007(B. Shaun Powers)
 57




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##### Table of Contents



SIGNATURES
   Airgas Mid America, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ J. Robert Hilliard
    
    President and Director
    
    May 29, 2007(J. Robert Hilliard)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal
Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    May 29, 2007(B. Shaun Powers)
 58




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##### Table of Contents



SIGNATURES
   Airgas North Central, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Ronald Stark
    
    President and Director
    
    May 29, 2007(Ronald Stark)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    May 29, 2007(B. Shaun Powers)
 59




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##### Table of Contents



SIGNATURES
   Airgas South, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ L. Jay Sullivan
    
    President and Director
    
    May 29, 2007(L. Jay Sullivan)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    May 29, 2007(B. Shaun Powers)
 60




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##### Table of Contents



SIGNATURES
   Airgas Gulf States, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Henry B. Coker, III
    
    President and Director
    
    May 29, 2007(Henry B. Coker, III)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    May 29, 2007(B. Shaun Powers)
 61




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##### Table of Contents



SIGNATURES
   Airgas Mid South, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ D. Michael Duvall
    
    President and Director
    
    May 29, 2007(D. Michael Duvall)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    May 29, 2007(Max D. Hooper)
 62




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##### Table of Contents



SIGNATURES
   Airgas Intermountain, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Douglas L. Jones
    
    President and Director
    
    May 29, 2007(Douglas L. Jones)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    May 29, 2007(Max D. Hooper)
 63




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##### Table of Contents



SIGNATURES
   Airgas Nor Pac, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Daniel L. Tatro
    
    President and Director
    
    May 29, 2007(Daniel L. Tatro)
    
    (Principal
Executive Officer)/s/ Thomas M. Smyth
    
    Vice President and Director
    
    May 29, 2007(Thomas M. Smyth)
    
    (Principal
Financial Officer/Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    May 29, 2007(Max D. Hooper)
 64




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##### Table of Contents



SIGNATURES
   Airgas Northern California & Nevada, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ James D. McCarthy

(James D. McCarthy)
    
    President and Director
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007/s/ Max D. Hooper

(Max D. Hooper)
    
    Director
    
    May 29, 2007
 65




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##### Table of Contents



SIGNATURES
   Airgas Southwest, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ J. Brent Sparks

(J. Brent Sparks)
    
    President and Director
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007/s/ Max D. Hooper

(Max D. Hooper)
    
    Director
    
    May 29, 2007
 66




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##### Table of Contents



SIGNATURES
   Airgas West, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Glen Irving

(Glen Irving)
    
    President and Director
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007/s/ Max D. Hooper

(Max D. Hooper)
    
    Director
    
    May 29, 2007
 67




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##### Table of Contents



SIGNATURES
   Airgas Safety, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Don Carlino

(Don Carlino)
    
    President
(Principal Executive Officer)
    
    May 29, 2007/s/ Michael L. Molinini

(Michael L. Molinini)
    
    Director
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007
 68




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##### Table of Contents



SIGNATURES
   Airgas Carbonic, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Philip J. Filer

(Philip J. Filer)
    
    President and Director
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007/s/ Peter McCausland

(Peter McCausland)
    
    Director
    
    May 29, 2007
 69




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##### Table of Contents



SIGNATURES
   Airgas Specialty Gases, Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ William Russo

(William Russo)
    
    President and Director
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007/s/ Michael E. Rohde

(Michael E. Rohde)
    
    Director
    
    May 29, 2007
 70




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##### Table of Contents



SIGNATURES
   Nitrous Oxide Corp.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Ted Schulte

(Ted Schulte)
    
    President and Director
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007
 71




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##### Table of Contents



SIGNATURES
   Red-D-Arc Inc.
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President and Director  Signature
    
    Title
    
    Date/s/ Mitch M. Imielinski

(Mitch M. Imielinski)
    
    President and Director
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President and Director
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007/s/ B. Shaun Powers

(B. Shaun Powers)
    
    Director
    
    May 29, 2007
 72




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##### Table of Contents



SIGNATURES
   ATNL, Inc.
(Registrant)By:
    /s/ Melanie AndrewsMelanie AndrewsPresident  Signature
    
    Title
    
    Date/s/ Melanie Andrews

(Melanie Andrews)
    
    President
(Principal Executive Officera/Principal
Financial Officer/Principal Accounting Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Director
    
    May 29, 2007/s/ Joseph C. Sullivan

(Joseph C. Sullivan)
    
    Director
    
    May 29, 2007/s/ Keith R. Sattesahn

(Keith R. Sattesahn)
    
    Director
    
    May 29, 2007/s/ Gordon W. Stewart

(Gordon W. Stewart)
    
    Director
    
    May 29, 2007
 73




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##### Table of Contents



SIGNATURES
   Airgas Data, LLC
(Registrant)By:
    /s/ Thomas M. SmythThomas M. SmythVice President  Signature
    
    Title
    
    Date/s/ Carey M. Verger

(Carey M. Verger)
    
    Vice president
(Principal Executive Officer)
    
    May 29, 2007/s/ Thomas M. Smyth

(Thomas M. Smyth)
    
    Vice President
(Principal Financial Officer/Principal
Accounting Officer)
    
    May 29, 2007
 74




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AIRGAS, INC. AND SUBSIDIARIES
 PageReference InReport OnForm 10-KFinancial Statements:Statement of Managements Financial Responsibility
    
    
    F-2Managements Report on Internal Control Over Financial Reporting
    
    
    F-3Report of Independent Registered Public Accounting Firm  Consolidated Financial
Statements
    
    
    F-4Report of Independent Registered Public Accounting Firm  Internal Control Over
Financial Reporting
    
    
    F-5Consolidated Statements of Earnings for the Years Ended
March 31, 2007, 2006 and 2005
    
    
    F-7Consolidated Balance Sheets as of March 31, 2007 and 2006
    
    
    F-8Consolidated Statements of Stockholders Equity for the
Years Ended March 31, 2007, 2006 and 2005
    
    
    F-9Consolidated Statements of Cash Flows for the Years Ended
March 31, 2007, 2006 and 2005
    
    
    F-10Notes to Consolidated Financial Statements
    
    
    F-11Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    
    
    F-60
  F-1




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##### Table of Contents



Consolidation of Variable Interest Entities,
 Internal Control  Integrated
Framework
   /s/ Peter McCausland
    
    /s/ Robert M. McLaughlinPeter McCausland
    
    Robert M. McLaughlinChairman, President and
    
    Senior Vice President andChief Executive Officer
    
    Chief Financial Officer
  F-2




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##### Table of Contents



Consolidation of Variable Interest Entities
 Internal Control  Integrated Framework
  /s/ Peter McCausland
    
    /s/ Robert M. McLaughlinPeter McCausland
    
    Robert M. McLaughlinChairman, President and
    
    Senior Vice President andChief Executive Officer
    
    Chief Financial Officer
  F-3




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##### Table of Contents



Share-Based Payment, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements Accounting
for Conditional Asset Retirement Obligations an interpretation of Statement of Financial Accounting
Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations
 Internal
Control-Integrated Framework
 
 F-4




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##### Table of Contents



Internal Control-Integrated Framework
    Internal Control-Integrated Framework Internal Control-Integrated Framework
 Consolidation of Variable Interest Entities
 F-5




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F-6




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 Years Ended March 31,(In thousands, except per share amounts)
    
    2007
    
    2006
    
    2005Net Sales
    
    $
    3,205,051
    
    
    $
    2,829,610
    
    
    $
    2,367,782Cost and ExpensesCost of products sold (excluding depreciation expense)
    
    
    1,567,090
    
    
    
    1,401,978
    
    
    
    1,151,782Selling, distribution and administrative expenses
    
    
    1,149,166
    
    
    
    1,031,332
    
    
    
    902,468Depreciation
    
    
    138,818
    
    
    
    122,396
    
    
    
    105,614Amortization (Note 7)
    
    
    8,525
    
    
    
    5,146
    
    
    
    5,464Total costs and expenses
    
    
    2,863,599
    
    
    
    2,560,852
    
    
    
    2,165,328Operating Income
    
    
    341,452
    
    
    
    268,758
    
    
    
    202,454Interest expense, net (Note 16)
    
    
    (60,180
    )
    
    
    (53,812
    )
    
    
    (51,245
    )Discount on securitization of trade receivables (Note 12)
    
    
    (13,630
    )
    
    
    (9,371
    )
    
    
    (4,711
    )Loss on the extinguishment of debt (Note 9)
    
    
    (12,099
    )
    
    
    
    
    
    
    Other income, net
    
    
    1,601
    
    
    
    2,462
    
    
    
    1,129Earnings from continuing operations before income taxes,
minority interest and change in accounting principle
    
    
    257,144
    
    
    
    208,037
    
    
    
    147,627Income taxes (Note 17)
    
    
    (99,883
    )
    
    
    (77,866
    )
    
    
    (54,261
    )Minority interest in earnings of consolidated affiliate (Note 15)
    
    
    (2,845
    )
    
    
    (2,656
    )
    
    
    (1,808
    )Income from continuing operations before the cumulative effect of
a change in accounting principle
    
    
    154,416
    
    
    
    127,515
    
    
    
    91,558Income (loss) from discontinued operations, net of tax (Note 3)
    
    
    
    
    
    
    (1,424
    )
    
    
    464Cumulative effect of a change in accounting principle, net of tax (Note 2)
    
    
    
    
    
    
    (2,540
    )
    
    
    Net Earnings
    
    $
    154,416
    
    
    $
    123,551
    
    
    $
    92,022NET EARNINGS PER COMMON SHARE (NOTE 4)BASICEarnings from continuing operations before the cumulative effect of
a change in accounting principle
    
    $
    1.98
    
    
    $
    1.66
    
    
    $
    1.22Earnings (loss) from discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.01Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (0.03
    )
    
    
    Net earnings per share
    
    $
    1.98
    
    
    $
    1.61
    
    
    $
    1.23DILUTEDEarnings from continuing operations before the cumulative effect of
a change in accounting principle
    
    $
    1.92
    
    
    $
    1.62
    
    
    $
    1.19Earnings (loss) from discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.01Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (0.03
    )
    
    
    Net earnings per share
    
    $
    1.92
    
    
    $
    1.57
    
    
    $
    1.20Weighted average shares outstanding:Basic
    
    
    78,025
    
    
    
    76,624
    
    
    
    74,911Diluted
    
    
    82,566
    
    
    
    81,152
    
    
    
    76,957Comprehensive income
    
    $
    153,848
    
    
    $
    125,693
    
    
    $
    97,197
  F-7




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 March 31,(In thousands, except per share amounts)
    
    2007
    
    
    2006ASSETSCurrent AssetsCash
    
    $
    25,931
    
    
    $
    34,985Trade receivables, less allowances for doubtful accounts of $15,692 in 2007
and $14,782 in 2006 (Note 12)
    
    
    193,664
    
    
    
    132,245Inventories, net (Note 5)
    
    
    250,308
    
    
    
    229,523Deferred income tax asset, net (Note
17)
    
    
    31,004
    
    
    
    30,141Prepaid expenses and other current assets
    
    
    48,592
    
    
    
    31,622Total current assets
    
    
    549,499
    
    
    
    458,516Plant and equipment at cost (Note 6)
    
    
    2,755,747
    
    
    
    2,191,673Less accumulated depreciation
    
    
    (890,329
    )
    
    
    (792,916
    )Plant and equipment, net
    
    
    1,865,418
    
    
    
    1,398,757Goodwill (Note 7)
    
    
    832,162
    
    
    
    566,074Other intangible assets, net (Note 7)
    
    
    62,935
    
    
    
    26,248Other non-current assets
    
    
    23,443
    
    
    
    24,817Total assets
    
    $
    3,333,457
    
    
    $
    2,474,412LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable, trade
    
    $
    146,385
    
    
    $
    143,752Accrued expenses and other current liabilities (Note 8)
    
    
    241,275
    
    
    
    200,001Current portion of long-term debt (Note 9)
    
    
    40,296
    
    
    
    131,901Total current liabilities
    
    
    427,956
    
    
    
    475,654Long-term debt, excluding current portion (Note 9)
    
    
    1,309,719
    
    
    
    635,726Deferred income tax liability, net (Note 17)
    
    
    373,246
    
    
    
    327,818Other non-current liabilities
    
    
    39,963
    
    
    
    30,864Minority interest in affiliate (Note 15)
    
    
    57,191
    
    
    
    57,191Commitments and contingencies (Note 21)Stockholders Equity(Note 13)Preferred stock, no par value, 20,000 shares authorized, no shares issued or
outstanding in 2007 and 2006
    
    
    
    
    
    
    Common
stock, par value $0.01 per share, 200,000 shares authorized,
79,960 and 78,569 shares issued in 2007 and 2006, respectively
    
    
    799
    
    
    
    786Capital in excess of par value
    
    
    341,101
    
    
    
    289,598Retained earnings
    
    
    792,433
    
    
    
    665,158Accumulated other comprehensive income
    
    
    4,183
    
    
    
    4,751Treasury stock 1,292 common shares at cost at March 31, 2007 and 2006
    
    
    (13,134
    )
    
    
    (13,134
    )Total stockholders equity
    
    
    1,125,382
    
    
    
    947,159Total liabilities and stockholders equity
    
    $
    3,333,457
    
    
    $
    2,474,412
  F-8




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Years Ended March 31, 2007, 2006, and 2005Shares of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon
    
    
    
    
    
    
    Capital in
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    EmployeeStock $0.01
    
    
    Common
    
    
    Excess of
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Benefits
    
    
    Comprehensive(In thousands)
    
    Par Value
    
    
    Stock
    
    
    Par Value
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Stock
    
    
    Trust
    
    
    IncomeBalance  March 31, 2004
    
    
    77,159
    
    
    $
    772
    
    
    $
    233,574
    
    
    $
    481,677
    
    
    $
    (2,566
    )
    
    $
    (4,658
    )
    
    $
    (16,898
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,022Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,314
    
    
    
    
    
    
    
    
    
    
    
    2,314Shares issued in connection with
stock options exercised (Note 14)
    
    
    308
    
    
    
    3
    
    
    
    10,278
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,095Shares issued from treasury stock associated
with warrants exercised (Note 13)
    
    
    
    
    
    
    
    
    
    
    (893
    )
    
    
    
    
    
    
    
    
    
    
    893Dividends paid on common stock
($0.18 per share) (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,643
    )Tax benefit associated with exercise
of stock options and warrants
    
    
    
    
    
    
    
    
    
    
    8,435Shares issued from Employee Benefits Trust
for Employee Stock Purchase Plan (Note 14)
    
    
    
    
    
    
    
    
    
    
    5,648
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,258Net change in fair value of interest rate swap
agreements (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,894
    
    
    
    
    
    
    
    
    
    
    
    2,894Net change in fair value of National Welders
interest rate swap agreement (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,583
    
    
    
    
    
    
    
    
    
    
    
    1,583Net tax expense of comprehensive income items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,616
    )
    
    
    
    
    
    
    
    
    
    
    (1,616
    )Balance  March 31, 2005
    
    
    77,467
    
    
    $
    775
    
    
    $
    257,042
    
    
    $
    560,056
    
    
    $
    2,609
    
    
    $
    (3,765
    )
    
    $
    (2,545
    )
    
    $
    97,197Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,551Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,012
    
    
    
    
    
    
    
    
    
    
    
    1,012Shares issued in connection with
stock options exercised (Note 14)
    
    
    570
    
    
    
    6
    
    
    
    14,136
    
    
    
    
    
    
    
    
    
    
    
    3,402
    
    
    
    2,545Purchase of treasury stock (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,771
    )Dividends paid on common stock
($0.24 per share) (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,449
    )Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    7,891Shares issued in connection with the
Employee Stock Purchase Plan (Note 14)
    
    
    532
    
    
    
    5
    
    
    
    10,529Net change in fair value of interest rate swap
agreements (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    867
    
    
    
    
    
    
    
    
    
    
    
    867Net change in fair value of National Welders
interest rate swap agreement (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    885
    
    
    
    
    
    
    
    
    
    
    
    885Net tax expense of comprehensive income items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (622
    )
    
    
    
    
    
    
    
    
    
    
    (622
    )Balance  March 31, 2006
    
    
    78,569
    
    
    $
    786
    
    
    $
    289,598
    
    
    $
    665,158
    
    
    $
    4,751
    
    
    $
    (13,134
    )
    
    $
    
    
    
    $
    125,693Cummulative adjustment to retained earnings for
adoption of SAB 108, net of tax (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,161
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154,416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154,416Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Shares issued in connection with
stock options exercised (Note 14)
    
    
    960
    
    
    
    10
    
    
    
    15,097Dividends paid on common stock
($0.28 per share) (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,980
    )Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    9,013Shares issued in connection with the
Employee Stock Purchase Plan (Note 14)
    
    
    431
    
    
    
    3
    
    
    
    11,948Expense related to stock-based compensation
    
    
    
    
    
    
    
    
    
    
    15,445Net change in fair value of interest rate swap
agreements (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,222
    )
    
    
    
    
    
    
    
    
    
    
    (1,222
    )Net change in fair value of National Welders
interest rate swap agreement (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    372
    
    
    
    
    
    
    
    
    
    
    
    372Net tax expense of comprehensive income items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280
    
    
    
    
    
    
    
    
    
    
    
    280Balance  March 31, 2007
    
    
    79,960
    
    
    $
    799
    
    
    $
    341,101
    
    
    $
    792,433
    
    
    $
    4,183
    
    
    $
    (13,134
    )
    
    $
    
    
    
    $
    153,848
  F-9




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended March 31,2007
    
    2006
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet earnings
    
    $
    154,416
    
    
    $
    123,551
    
    
    $
    92,022Adjustments to reconcile net earnings to net cash provided by
operating activities:Depreciation
    
    
    138,818
    
    
    
    122,396
    
    
    
    105,614Amortization
    
    
    8,525
    
    
    
    5,146
    
    
    
    5,464Deferred income taxes
    
    
    51,911
    
    
    
    47,148
    
    
    
    31,639Loss (gain) on divestiture
    
    
    
    
    
    
    1,900
    
    
    
    (360
    )Loss (gain) on sales of plant and equipment
    
    
    39
    
    
    
    (1,330
    )
    
    
    (321
    )Minority interest in earnings
    
    
    2,845
    
    
    
    2,656
    
    
    
    1,808Stock-based compensation expense
    
    
    15,445
    
    
    
    
    
    
    
    Loss on debt extinguishment
    
    
    12,099
    
    
    
    
    
    
    
    Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    2,540
    
    
    
    Changes in assets and liabilities, excluding effects of business
acquisitions and divestitures:Securitization of trade receivables
    
    
    20,200
    
    
    
    54,300
    
    
    
    27,300Trade receivables, net
    
    
    (37,687
    )
    
    
    (17,021
    )
    
    
    (39,583
    )Inventories, net
    
    
    (1,491
    )
    
    
    (14,087
    )
    
    
    (32,356
    )Prepaid expenses and other current assets
    
    
    (23,326
    )
    
    
    12,603
    
    
    
    (8,149
    )Accounts payable, trade
    
    
    (23,351
    )
    
    
    1,533
    
    
    
    27,984Accrued expenses and other current liabilities
    
    
    266
    
    
    
    9,323
    
    
    
    (574
    )Other non-current assets
    
    
    1,809
    
    
    
    3,340
    
    
    
    4,107Other non-current liabilities
    
    
    (2,363
    )
    
    
    (2,363
    )
    
    
    (2,185
    )Net cash provided by operating activities
    
    
    318,155
    
    
    
    351,635
    
    
    
    212,410CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (243,583
    )
    
    
    (214,193
    )
    
    
    (167,977
    )Proceeds from sales of plant and equipment
    
    
    8,685
    
    
    
    8,202
    
    
    
    5,361Proceeds from divestitures
    
    
    
    
    
    
    14,562
    
    
    
    828Business acquisitions and holdback settlements
    
    
    (687,892
    )
    
    
    (153,428
    )
    
    
    (191,820
    )Other, net
    
    
    (474
    )
    
    
    170
    
    
    
    171Net cash used in investing activities
    
    
    (923,264
    )
    
    
    (344,687
    )
    
    
    (353,437
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings
    
    
    1,591,464
    
    
    
    568,379
    
    
    
    621,450Repayment of debt
    
    
    (1,008,186
    )
    
    
    (606,532
    )
    
    
    (494,684
    )Purchase of treasury stock
    
    
    
    
    
    
    (12,771
    )
    
    
    Financing costs
    
    
    (5,103
    )
    
    
    
    
    
    
    (2,531
    )Premium paid on call of senior subordinated notes
    
    
    (10,267
    )
    
    
    
    
    
    
    Termination of interest rate hedge
    
    
    
    
    
    
    
    
    
    
    3,948Minority interest in earnings
    
    
    (2,845
    )
    
    
    (2,656
    )
    
    
    (1,808
    )Minority stockholder note prepayment
    
    
    
    
    
    
    21,000
    
    
    
    Proceeds from the exercise of stock options
    
    
    15,107
    
    
    
    19,707
    
    
    
    20,374Stock issued for employee stock purchase plan
    
    
    11,951
    
    
    
    10,534
    
    
    
    9,907Tax benefit realized from the exercise of stock options
    
    
    9,013
    
    
    
    
    
    
    
    Dividends paid to stockholders
    
    
    (21,980
    )
    
    
    (18,449
    )
    
    
    (13,643
    )Cash overdraft
    
    
    16,901
    
    
    
    16,185
    
    
    
    5,592Net cash provided by (used in) financing activities
    
    
    596,055
    
    
    
    (4,603
    )
    
    
    148,605CHANGE IN CASH
    
    $
    (9,054
    )
    
    $
    2,345
    
    
    $
    7,578Cash  Beginning of year
    
    
    34,985
    
    
    
    32,640
    
    
    
    25,062Cash  End of year
    
    $
    25,931
    
    
    $
    34,985
    
    
    $
    32,640
 
 F-10




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  ( ) Description of the Business
  Basis of Presentation
   Reclassifications
  ) Cash and Cash Overdraft
  F-11




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Allowance for Doubtful Accounts
  Inventories
  Plant and Equipment
  Goodwill, Other Intangible Assets and Deferred Financing Costs
    F-12




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Asset Retirement Obligations
  Commitments and Contingencies
    Income Taxes
  Foreign Currency Translation
  F-13




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Concentrations of Credit Risk
  Financial Instruments
 Accounting for Derivative Instruments and Certain Hedging Activities,
  Employee Benefits Trust
  Revenue Recognition
  F-14




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Cost of Products Sold
   Selling, Distribution and Administrative Expenses
  Depreciation
  Shipping and Handling Fees and Distribution Costs
   SFAS 123 (Revised 2004)
 Share-Based Payment Accounting for Stock
Issued to Employees
 F-15




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Transition Election Related to Accounting for the Tax Effects of
Share-Based Payment Awards.
 SFAS 151
 Inventory Costs Inventory Pricing
 SFAS 153
 Exchanges of Nonmonetary Assets, Accounting for Nonmonetary Transactions
 SFAS 154
 Accounting Changes and Error Corrections,
 F-16




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  SAB 108
 Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,
(SAB 108)
  Accounting
for Leases
   BeginningDeferred Cylinder
    
    
    Straight-Line
    
    
    Retained EarningsRent
    
    
    Real Estate Leases
    
    
    Balance(In thousands)
    
    Dr (Cr)
    
    
    Dr (Cr)
    
    
    Dr (Cr)Beginning Retained Earnings as of April 1, 2006
    
    
    
    
    
    
    
    
    
    $
    (665,158
    )Deferred Tax Asset
    
    $
    5,581
    
    
    $
    
    
    
    
    (5,581
    )Goodwill
    
    
    5,351
    
    
    
    
    
    
    
    (5,351
    )Accrued Real Estate Leases
    
    
    
    
    
    
    (3,269
    )
    
    
    3,269Deferred Cylinder Rental Income
    
    
    (14,091
    )
    
    
    
    
    
    
    14,091Long-Term Portion Deferred Tax Liability
    
    
    
    
    
    
    1,267
    
    
    
    (1,267
    )Cumulative Adjustment to Beginning Retained
Earnings
    
    
    
    
    
    
    
    
    
    
    5,161Adjusted Beginning Retained Earnings
as of April 1, 2006
    
    
    
    
    
    
    
    
    
    $
    (659,997
    )
 F-17




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  FASB Financial Interpretation No. 47
 Accounting for
Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143 conditional asset retirement obligation
   (a) Acquisitions
  Fiscal 2007
  F-18




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Purchase Price Allocation
  Linde Bulk Gas
    
    
    RemainingAcquisition
    
    
    AcquisitionsAll Other
    
    
    
    
    
    
    All OtherDistribution
    
    
    Operations
    
    
    Distribution
    
    
    Operations(In thousands)
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    TotalCurrent assets, net
    
    $
    18,220
    
    
    $
    8,704
    
    
    $
    26,694
    
    
    $
    9,745
    
    
    $
    63,363Property and equipment
    
    
    79,471
    
    
    
    222,917
    
    
    
    66,572
    
    
    
    1,653
    
    
    
    370,613Goodwill
    
    
    86,705
    
    
    
    80,215
    
    
    
    70,194
    
    
    
    23,480
    
    
    
    260,594Other intangible assets
    
    
    12,715
    
    
    
    3,985
    
    
    
    20,400
    
    
    
    7,442
    
    
    
    44,542Current liabilities
    
    
    (70
    )
    
    
    (16,184
    )
    
    
    (23,303
    )
    
    
    264
    
    
    
    (39,293
    )Long-term liabilities
    
    
    (1,491
    )
    
    
    (377
    )
    
    
    (5,682
    )
    
    
    (4,377
    )
    
    
    (11,927
    )Total cash consideration
    
    $
    195,550
    
    
    $
    299,260
    
    
    $
    154,875
    
    
    $
    38,207
    
    
    $
    687,892
 Pro Forma Operating Results
  UnauditedYears Ended March 31,(In thousands, except per share amounts)
    
    2007
    
    2006Net sales
    
    $
    3,449,150
    
    
    $
    3,188,787Net earnings
    
    
    162,029
    
    
    
    128,302Diluted earnings per share
    
    $
    2.01
    
    
    $
    1.63
 F-19




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal 2006
  Purchase Price Allocation
  All OtherDistribution
    
    
    Operations(In thousands)
    
    Segment
    
    
    Segment
    
    
    TotalCurrent assets, net
    
    $
    13,146
    
    
    $
    17,045
    
    
    $
    30,191Property and equipment
    
    
    23,668
    
    
    
    23,757
    
    
    
    47,425Goodwill
    
    
    21,409
    
    
    
    32,723
    
    
    
    54,132Other intangible assets
    
    
    7,328
    
    
    
    7,519
    
    
    
    14,847Current liabilities
    
    
    (4,817
    )
    
    
    (6,926
    )
    
    
    (11,743
    )Long-term liabilities
    
    
    (6,286
    )
    
    
    (266
    )
    
    
    (6,552
    )Total cash consideration
    
    $
    54,448
    
    
    $
    73,852
    
    
    $
    128,300
  F-20




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Pro Forma Operating Results
  UnauditedYears Ended March 31,(In thousands, except per share amounts)
    
    2006
    
    2005Net sales
    
    $
    2,884,110
    
    
    $
    2,645,122Net earnings
    
    
    123,444
    
    
    
    94,440Diluted earnings per share
    
    $
    1.57
    
    
    $
    1.23
 Fiscal 2005
  OtherAcquisitionsand Holdback(In thousands)
    
    BOC
    
    
    Settlements
    
    
    TotalCurrent assets, net
    
    $
    47,394
    
    
    $
    1,437
    
    
    $
    48,831Property and equipment
    
    
    159,080
    
    
    
    12,627
    
    
    
    171,707Goodwill
    
    
    
    
    
    
    6,494
    
    
    
    6,494Other intangible assets
    
    
    1,105
    
    
    
    1,119
    
    
    
    2,224Current liabilities
    
    
    (7,154
    )
    
    
    (616
    )
    
    
    (7,770
    )Contingent consideration
    
    
    (25,000
    )
    
    
    
    
    
    
    (25,000
    )Long-term liabilities
    
    
    (1,225
    )
    
    
    (3,441
    )
    
    
    (4,666
    )Total cash consideration
    
    $
    174,200
    
    
    $
    17,620
    
    
    $
    191,820
 F-21




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Divestitures
 Fiscal 2006
   Years Ended March 31,(Amounts in thousands)
    
    2006
    
    2005Net sales
    
    $
    32,738
    
    
    $
    43,627Earnings (loss) before income taxes
    
    
    (2,391
    )
    
    
    786
 Fiscal 2005
  Pending Acquisition
    F-22




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Years Ended March 31,(In thousands, except per share amounts)
    
    2007
    
    
    2006
    
    
    2005Basic Earnings per Share ComputationNumerator:Income from continuing operations
    
    $
    154,416
    
    
    $
    127,515
    
    
    $
    91,558Income (loss) from discontinued operations
    
    
    
    
    
    
    (1,424
    )
    
    
    464Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (2,540
    )
    
    
    Net earnings
    
    $
    154,416
    
    
    $
    123,551
    
    
    $
    92,022Denominator:Basic shares outstanding
    
    
    78,025
    
    
    
    76,624
    
    
    
    74,911Basic earnings per share from continuing operations
    
    $
    1.98
    
    
    $
    1.66
    
    
    $
    1.22Basic earnings (loss) per share from discontinued
operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.01Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (0.03
    )
    
    
    Basic net earnings per share
    
    $
    1.98
    
    
    $
    1.61
    
    
    $
    1.23
 Years Ended March 31,2007
    
    
    2006
    
    
    2005 (4)Diluted Earnings per Share ComputationNumerator:Income from continuing operations
    
    $
    154,416
    
    
    $
    127,515
    
    
    $
    91,558Plus: Preferred stock dividends (1) (2)
    
    
    2,845
    
    
    
    2,845
    
    
    
    Plus: Income taxes on earnings of National Welders (3)
    
    
    1,166
    
    
    
    730
    
    
    
    Income from continuing operations assuming preferred
stock conversion
    
    
    158,427
    
    
    
    131,090
    
    
    
    91,558Income (loss) from discontinued operations
    
    
    
    
    
    
    (1,424
    )
    
    
    464Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (2,540
    )
    
    
    Net earnings assuming preferred stock conversion
    
    $
    158,427
    
    
    $
    127,126
    
    
    $
    92,022Denominator:Basic shares outstanding
    
    
    78,025
    
    
    
    76,624
    
    
    
    74,911Incremental shares from assumed conversions:Stock options and warrants
    
    
    2,214
    
    
    
    2,201
    
    
    
    2,046Preferred stock of National Welders (1)
    
    
    2,327
    
    
    
    2,327
    
    
    
    Diluted shares outstanding
    
    
    82,566
    
    
    
    81,152
    
    
    
    76,957Diluted earnings per share from continuing operations
    
    $
    1.92
    
    
    $
    1.62
    
    
    $
    1.19Diluted earnings (loss) per share from discontinued
operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.01Diluted loss from the cumulative effect of a
change in accounting principle
    
    
    
    
    
    
    (0.03
    )
    
    
    Diluted net earnings per share
    
    $
    1.92
    
    
    $
    1.57
    
    
    $
    1.20
 F-23




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (1)
    
    Pursuant to a joint venture agreement between the Company and the holders of the
preferred stock of National Welders, until June 30, 2009, the preferred stockholders have
the option to exchange their 3.2 million shares of National Welders voting redeemable
preferred stock with a 5% annual dividend either for cash at a price of $17.78 per share or
to tender them to the joint venture in exchange for approximately 2.3 million shares of
Airgas common stock (see Note 15). If Airgas common stock has a market value of $24.45 per
share, the stock and cash redemption options are equivalent.(2)
    
    If the preferred stockholders of National Welders convert their preferred stock to Airgas
common stock, the 5% preferred stock dividend, recognized as Minority interest in earnings
of consolidated affiliate, would no longer be paid to the preferred stockholders, resulting
in additional net earnings for Airgas.(3)
    
    The earnings of National Welders for tax purposes are treated as a deemed dividend to
Airgas, net of an 80% dividend exclusion. Upon the assumed conversion of National Welders
preferred stock to Airgas common stock, National Welders would become a wholly owned
subsidiary of Airgas. As a wholly owned subsidiary, the net earnings of National Welders
would not be subject to additional tax at the Airgas level.(4)
    
    In Fiscal 2005, the assumed conversion of National Welders preferred stock to Airgas
common stock is not presented because it was anti-dilutive.
    March 31,(In thousands)
    
    2007
    
    2006Hardgoods
    
    $
    218,348
    
    
    $
    202,894Gases
    
    
    31,960
    
    
    
    26,629$
    250,308
    
    
    $
    229,523
  F-24




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Depreciable
    
    March 31,(In thousands)
    
    Lives (Yrs)
    
    2007
    
    2006Land and land improvements
    
    
    
    
    
    $
    89,521
    
    
    $
    75,528Buildings and leasehold improvements
    
    
    25
    
    
    
    265,146
    
    
    
    219,229Cylinders
    
    
    30
    
    
    
    972,487
    
    
    
    890,789Machinery and equipment, including bulk tanks
    
    
    7 to 30
    
    
    
    1,101,674
    
    
    
    719,086Computers and furniture and fixtures
    
    
    3 to 10
    
    
    
    130,755
    
    
    
    133,821Transportation equipment
    
    
    3 to 15
    
    
    
    178,152
    
    
    
    142,466Construction in progress
    
    
    
    
    
    
    18,012
    
    
    
    10,754$
    2,755,747
    
    
    $
    2,191,673
   All OtherDistribution
    
    Operations(In thousands)
    
    Segment
    
    Segment
    
    TotalBalance at March 31, 2005
    
    $
    380,468
    
    
    $
    130,728
    
    
    $
    511,196Acquisitions
    
    
    21,409
    
    
    
    32,723
    
    
    
    54,132Other adjustments
    
    
    705
    
    
    
    41
    
    
    
    746Balance at March 31, 2006
    
    $
    402,582
    
    
    $
    163,492
    
    
    $
    566,074Acquisitions
    
    
    156,899
    
    
    
    103,695
    
    
    
    260,594Other adjustments
    
    
    (157
    )
    
    
    300
    
    
    
    143SAB 108 adjustments
    
    
    5,351
    
    
    
    
    
    
    
    5,351Balance at March 31, 2007
    
    $
    564,675
    
    
    $
    267,487
    
    
    $
    832,162
  F-25




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   March 31,(In thousands)
    
    2007
    
    
    2006Accrued payroll and employee benefits
    
    $
    71,685
    
    
    $
    57,555Business insurance reserves
    
    
    26,390
    
    
    
    20,930Health insurance reserves
    
    
    8,446
    
    
    
    9,734Accrued interest expense
    
    
    4,721
    
    
    
    14,910Taxes other than income taxes
    
    
    14,771
    
    
    
    13,590Cash overdraft
    
    
    57,056
    
    
    
    40,155Other accrued expenses and current liabilities
    
    
    58,206
    
    
    
    43,127$
    241,275
    
    
    $
    200,001
    March 31,(In thousands)
    
    2007
    
    
    2006Revolving credit borrowings
    
    $
    489,398
    
    
    $
    112,009Term loan
    
    
    577,500
    
    
    
    81,250Money market loans
    
    
    30,000
    
    
    
    25,000Medium-term notes
    
    
    
    
    
    
    100,751Senior subordinated notes
    
    
    150,000
    
    
    
    376,532Acquisition and other notes
    
    
    17,440
    
    
    
    3,025National Welders debt
    
    
    85,677
    
    
    
    69,060Total long-term debt
    
    
    1,350,015
    
    
    
    767,627Less current portion of long-term debt
    
    
    (40,296
    )
    
    
    (131,901
    )Long-term debt, excluding current portion
    
    $
    1,309,719
    
    
    $
    635,726
 F-26




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Debt Refinancing
     Money Market Loan
  F-27




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Senior Subordinated Notes
    Acquisition and Other Notes
  Debt of the National Welders Joint Venture
  March 31,(In thousands)
    
    2007
    
    
    2006Revolving credit borrowings
    
    $
    73,004
    
    
    $
    51,393Term loan A
    
    
    11,992
    
    
    
    15,042Term loan C
    
    
    
    
    
    
    1,622Acquisition notes and other debt obligations
    
    
    681
    
    
    
    1,003Total long-term debt
    
    
    85,677
    
    
    
    69,060Less current portion of long-term debt
    
    
    (3,652
    )
    
    
    (5,589
    )Long-term debt, excluding current portion
    
    $
    82,025
    
    
    $
    63,471
 F-28




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Aggregate Long-term Debt Maturities
  National(In thousands)
    
    Airgas, Inc (1)
    
    
    Welders
    
    
    TotalYears Ending
March 31,2008
    
    $
    36,644
    
    
    $
    3,652
    
    
    $
    40,2962009
    
    
    95,469
    
    
    
    3,048
    
    
    
    98,5172010
    
    
    94,184
    
    
    
    76,052
    
    
    
    170,2362011
    
    
    236,294
    
    
    
    2,925
    
    
    
    239,2192012
    
    
    649,967
    
    
    
    
    
    
    
    649,967Thereafter
    
    
    151,780
    
    
    
    
    
    
    
    151,780$
    1,264,338
    
    
    $
    85,677
    
    
    $
    1,350,015
 
 (1)
    
    The Company has the ability and intention of refinancing current maturities related
to the term loan under its Credit Facility with its long-term revolving credit line.
Therefore, the term loan has been reflected as long term in the aggregate maturity
schedule. F-29




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    2007
    
    2007
    
    2006
    
    2006Carrying
    
    Fair
    
    Carrying
    
    Fair(In thousands)
    
    Value
    
    Value
    
    Value
    
    ValueFinancial Instruments:Revolving credit borrowings
    
    $
    489,398
    
    
    $
    489,398
    
    
    $
    112,009
    
    
    $
    112,009Term loan
    
    
    577,500
    
    
    
    577,500
    
    
    
    81,250
    
    
    
    81,250Money market loans
    
    
    30,000
    
    
    
    30,000
    
    
    
    25,000
    
    
    
    25,000Medium-term notes
    
    
    
    
    
    
    
    
    
    
    100,751
    
    
    
    101,0502001 senior subordinated notes
    
    
    
    
    
    
    
    
    
    
    226,532
    
    
    
    237,9382004 senior subordinated notes
    
    
    150,000
    
    
    
    146,250
    
    
    
    150,000
    
    
    
    147,750Acquisition and other notes
    
    
    17,440
    
    
    
    17,440
    
    
    
    3,025
    
    
    
    3,025Interest rate swap agreements:- Cash flow hedge  (asset) liability
    
    
    (379
    )
    
    
    (379
    )
    
    
    (1,441
    )
    
    
    (1,441
    )
  2007
    
    2007
    
    2006
    
    2006Carrying
    
    Fair
    
    Carrying
    
    Fair(In thousands)
    
    Value
    
    Value
    
    Value
    
    ValueNational Welders Financial Instruments:Revolving credit borrowings
    
    $
    73,004
    
    
    $
    73,004
    
    
    $
    51,393
    
    
    $
    51,393Term loan A
    
    
    11,992
    
    
    
    11,992
    
    
    
    15,042
    
    
    
    15,042Term loan C
    
    
    
    
    
    
    
    
    
    
    1,622
    
    
    
    1,631Acquisition notes and other debt obligations
    
    
    681
    
    
    
    681
    
    
    
    1,003
    
    
    
    1,003
 F-30




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        ,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 F-31




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Common Stock
  Preferred Stock and Redeemable Preferred Stock
 Stockholder Rights Plan
  Dividends
  F-32




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Stockholder Rights Plan
    Warrants
  Share Repurchase Plan
  F-33




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Prior Period Pro Forma Earnings
 Accounting for Stock Based
Compensation,
 Years Ended March 31,(In thousands, except per share amounts)
    
    2006
    
    
    2005Net earnings, as reported
    
    $
    123,551
    
    
    $
    92,022Deduct: Total stock-based employee
compensation expense determined under fair
value based methods for all awards, net of
related tax effects
    
    
    (8,035
    )
    
    
    (6,868
    )Pro forma net earnings
    
    $
    115,516
    
    
    $
    85,154Earnings per share:Basic  as reported
    
    $
    1.61
    
    
    $
    1.23Basic  pro forma
    
    $
    1.51
    
    
    $
    1.14Diluted  as reported
    
    $
    1.57
    
    
    $
    1.20Diluted  pro forma
    
    $
    1.47
    
    
    $
    1.11
 2006 Equity Incentive Plan
  F-34




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Fair Value
  Fiscal 2007
    
    Fiscal 2006
    
    Fiscal 2005Expected volatility
    
    
    36.2
    %
    
    
    35.3
    %
    
    
    38.9
    %Expected dividend yield
    
    
    0.80
    %
    
    
    0.83
    %
    
    
    0.85
    %Expected term
    
    5.4 years
    
    6.4 years
    
    7.3 yearsRisk-free interest rate
    
    
    5.0
    %
    
    
    3.9
    %
    
    
    3.9
    %
  F-35




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Summary of Stock Option Activity
  Weighted-AverageNumber of
    
    
    Exercise Price
    
    
    AggregateStock Options
    
    
    Per Share
    
    
    Intrinsic ValueOutstanding at March 31, 2004
    
    
    8,126,403
    
    
    $
    13.64Granted
    
    
    1,067,500
    
    
    $
    21.18Exercised
    
    
    (1,648,368
    )
    
    $
    12.21Forfeited
    
    
    (182,234
    )
    
    $
    18.56Outstanding at March 31, 2005
    
    
    7,363,301
    
    
    $
    14.95
    
    
    $
    65,827,911Granted
    
    
    1,063,200
    
    
    $
    24.30Exercised
    
    
    (1,337,944
    )
    
    $
    14.73Forfeited
    
    
    (94,739
    )
    
    $
    17.86Outstanding at March 31, 2006
    
    
    6,993,818
    
    
    $
    16.37
    
    
    $
    158,899,545Granted
    
    
    991,440
    
    
    $
    36.19Exercised
    
    
    (967,590
    )
    
    $
    15.91Forfeited
    
    
    (134,694
    )
    
    $
    26.09Outstanding at March 31, 2007
    
    
    6,882,974
    
    
    $
    19.12
    
    
    $
    158,514,891Vested or expected to vest as of
March 31, 2007
    
    
    6,194,677
    
    
    $
    19.12
    
    
    $
    142,663,411
 F-36




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Stock Options OutstandingWeighted AverageNumber of Stock Options

    Remaining Contractual
    
    Weighted AverageOutstanding

    Life of Options - Years
    
    Exercise Price1,294,949
    
    
    3.51
    
    
    $
    7.34852,294
    
    
    2.12
    
    
    $
    13.121,040,224
    
    
    3.69
    
    
    $
    16.32853,095
    
    
    6.09
    
    
    $
    19.13793,026
    
    
    7.15
    
    
    $
    21.15154,703
    
    
    7.36
    
    
    $
    21.59878,268
    
    
    8.15
    
    
    $
    24.091,016,415
    
    
    7.23
    
    
    $
    35.776,882,974
    
    
    5.33
    
    
    $
    19.12
 Stock Options ExercisableWeighted AverageNumber of Stock Options

    
    
    Exercise PriceExercisable
    
    
    Per Share1,294,949
    
    
    
    
    
    $
    7.34852,294
    
    
    
    
    
    $
    13.121,039,899
    
    
    
    
    

    $
    16.32633,999
    
    
    
    
    
    $
    19.09366,081
    
    
    
    
    
    $
    21.15106,528
    
    
    
    
    
    $
    21.55203,303
    
    
    
    
    
    $
    24.09114,603
    
    
    
    
    
    $
    32.634,611,656
    
    
    
    
    
    $
    14.84
 F-37




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Employee Stock Purchase Plan
    Fiscal 2007
    
    Fiscal 2006
    
    Fiscal 2005Expected volatility
    
    
    30.8
    %
    
    
    27.1
    %
    
    
    29.7
    %Expected dividend yield
    
    
    0.73
    %
    
    
    0.90
    %
    
    
    0.83
    %Expected term
    
    
    2 to 8 months
    
    
    
    3 to 12 months
    
    
    
    3 to 12 monthsRisk-free interest rate
    
    
    5.0
    %
    
    
    3.1
    %
    
    
    1.1
    %
 F-38




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Weighted-AverageNumber of
    
    

    Exercise Price

    
    AggregatePurchase Options
    
    

    Per Share

    
    Intrinsic ValueOutstanding at March 31, 2004
    
    
    148,198
    
    
    
    $
    15.70Granted
    
    
    552,841
    
    
    
    $
    17.37Exercised
    
    
    (564,681
    )
    
    
    $
    17.54Forfeited
    
    
    
    
    
    
    $
    Outstanding at March 31, 2005
    
    
    136,358
    
    
    
    $
    18.45
    
    
    $
    741,788Granted
    
    
    533,245
    
    
    
    $
    20.33Exercised
    
    
    (531,916
    )
    
    
    $
    19.80Forfeited
    
    
    
    
    
    
    $
    Outstanding at March 31, 2006
    
    
    137,687
    
    
    
    $
    20.50
    
    
    $
    2,609,169Granted
    
    
    395,587
    
    
    
    $
    31.10Exercised
    
    
    (430,519
    )
    
    
    $
    27.76Forfeited
    
    
    
    
    
    
    $
    Outstanding at March 31, 2007
    
    
    102,755
    
    
    
    $
    30.86
    
    
    $
    1,160,104
    F-39




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Consolidation of Variable Interest Entities
 Years Ended March 31,(In thousands)
    
    2007
    
    2006Total assets of National Welders
    
    $
    302,597
    
    
    $
    267,240Total liabilities of National Welders
    
    $
    213,222
    
    
    $
    190,276
 Years Ended March 31,(In thousands)
    
    2007
    
    2006
    
    2005Net sales
    
    $
    228,320
    
    
    $
    188,314
    
    
    $
    167,473Operating income
    
    
    32,490
    
    
    
    22,046
    
    
    
    15,662Earnings before income taxes, minority interest
and equity earnings
    
    
    29,514
    
    
    
    19,919
    
    
    
    12,418Income taxes
    
    
    (12,037
    )
    
    
    (8,536
    )
    
    
    (4,712
    )Minority interest in earnings of consolidated affiliate
    
    
    (2,845
    )
    
    
    (2,656
    )
    
    
    (1,808
    )Income from continuing operations
    
    $
    14,632
    
    
    $
    8,727
    
    
    $
    5,898
 F-40




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Years Ended March 31,(In thousands)
    
    2007
    
    2006
    
    2005Interest expense
    
    $
    62,095
    
    
    $
    55,740
    
    
    $
    52,836Interest and finance charge (income)
    
    
    (1,915
    )
    
    
    (1,928
    )
    
    
    (1,591
    )$
    60,180
    
    
    $
    53,812
    
    
    $
    51,245
   Years Ended March 31,(In thousands)
    
    2007
    
    
    2006
    
    
    2005United States
    
    $
    246,699
    
    
    $
    200,039
    
    
    $
    140,662Foreign
    
    
    10,445
    
    
    
    7,998
    
    
    
    6,965$
    257,144
    
    
    $
    208,037
    
    
    $
    147,627
  Years Ended March 31,(In thousands)
    
    2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    41,760
    
    
    $
    26,551
    
    
    $
    19,666Foreign
    
    
    2,725
    
    
    
    2,673
    
    
    
    2,027State
    
    
    3,487
    
    
    
    1,494
    
    
    
    92947,972
    
    
    
    30,718
    
    
    
    22,622Deferred:Federal
    
    
    46,440
    
    
    
    43,672
    
    
    
    29,327Foreign
    
    
    491
    
    
    
    98
    
    
    
    303State
    
    
    4,980
    
    
    
    3,378
    
    
    
    2,00951,911
    
    
    
    47,148
    
    
    
    31,639$
    99,883
    
    
    $
    77,866
    
    
    $
    54,261
 F-41




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Years Ended March 31,(In thousands)
    
    2007
    
    2006
    
    2005Taxes at U.S. federal statmutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increase/(Decrease) in income taxes resulting from:State income taxes, net of federal benefit
    
    
    2.9
    %
    
    
    2.2
    %
    
    
    1.9
    %Stock-based compensation expense
    
    
    0.5
    %
    
    
    
    
    
    
    Change in state tax law
    
    
    (0.8
    %)
    
    
    
    
    
    
    Other, net
    
    
    1.2
    %
    
    
    0.2
    %
    
    
    (0.1
    %)38.8
    %
    
    
    37.4
    %
    
    
    36.8
    %
  March 31,2007
    
    2006Deferred Tax Assets:Inventories
    
    $
    9,177
    
    
    $
    9,586Deferred rental income
    
    
    12,468
    
    
    
    5,347Insurance reserves
    
    
    10,466
    
    
    
    9,554Restructuring Charge
    
    
    175
    
    
    
    Litigation settlement and other reserves
    
    
    2,745
    
    
    
    1,972Asset Retirement Obligations
    
    
    792
    
    
    
    2,361Net operating loss carryforwards
    
    
    20,217
    
    
    
    36,592Stock Based Compensation
    
    
    4,263
    
    
    
    Other
    
    
    10,029
    
    
    
    7,865Valuation allowance
    
    
    (5,432
    )
    
    
    (6,347
    )64,900
    
    
    
    66,930Deferred Tax Liabilities:Accounts receivable
    
    
    (2,683
    )
    
    
    (1,785
    )Plant and equipment
    
    
    (338,431
    )
    
    
    (307,036
    )Intangible assets
    
    
    (49,323
    )
    
    
    (39,993
    )Other
    
    
    (16,705
    )
    
    
    (15,793
    )(407,142
    )
    
    
    (364,607
    )Net deferred tax liability
    
    $
    (342,242
    )
    
    $
    (297,677
    )
 F-42




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   March 31,(In thousands)
    
    2007
    
    
    2006Current deferred tax asset, net
    
    $
    31,004
    
    
    $
    30,141Non-current deferred tax liability, net
    
    
    (373,246
    )
    
    
    (327,818
    )Net deferred tax liability
    
    $
    (342,242
    )
    
    $
    (297,677
    )
      F-43




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Transactions by National Welders
   Separation Agreement
    F-44




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   National(In thousands)
    
    Airgas, Inc.
    
    
    Welders
    
    
    TotalYears Ended March 31,2007
    
    $
    57,739
    
    
    $
    2,018
    
    
    $
    59,7572008
    
    
    47,832
    
    
    
    1,775
    
    
    
    49,6072009
    
    
    39,624
    
    
    
    1,586
    
    
    
    41,2102010
    
    
    28,648
    
    
    
    1,483
    
    
    
    30,1312011
    
    
    18,074
    
    
    
    1,341
    
    
    
    19,415Thereafter
    
    
    10,582
    
    
    
    2,187
    
    
    
    12,769$
    202,499
    
    
    $
    10,390
    
    
    $
    212,889
  (a) Legal
  Insurance Coverage
   F-45




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Supply Agreements
      (d) Construction Commitments
  Commitments and Contingencies of National Welders
   F-46




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Years Ended March 31,(In thousands)
    
    2007
    
    2006
    
    2005Interest expense
    
    $
    72,418
    
    
    $
    56,361
    
    
    $
    49,480Discount on securitization
    
    
    13,630
    
    
    
    9,371
    
    
    
    4,711Income taxes (net of refunds)
    
    
    50,021
    
    
    
    21,641
    
    
    
    30,104
  Years Ended March 31,(In thousands)
    
    2007
    
    2006
    
    2005Acquisition liabilities assumed
    
    $
    51,220
    
    
    $
    18,295
    
    
    $
    37,436
  Years Ended March 31,(In thousands)
    
    2007
    
    
    2006
    
    
    2005Net cash provided by operating activities
    
    $
    34,455
    
    
    $
    23,497
    
    
    $
    19,612Net cash used in investing activities
    
    
    (47,507
    )
    
    
    (45,628
    )
    
    
    (29,240
    )Net cash provided by financing activities
    
    
    13,527
    
    
    
    21,309
    
    
    
    9,500Change in cash
    
    $
    475
    
    
    $
    (822
    )
    
    $
    (128
    )Management fee paid to the Company,
which is eliminated in consolidation
    
    $
    1,454
    
    
    $
    1,234
    
    
    $
    1,089
 F-47




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      F-48




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   All Other(In thousands)
    
    Distribution
    
    
    Operations
    
    
    Eliminations
    
    
    CombinedFiscal 2007Gas and rent
    
    $
    1,399,186
    
    
    $
    485,209
    
    
    $
    (60,934
    )
    
    $
    1,823,461Hardgoods
    
    
    1,292,628
    
    
    
    94,462
    
    
    
    (5,500
    )
    
    
    1,381,590Total net sales
    
    
    2,691,814
    
    
    
    579,671
    
    
    
    (66,434
    )
    
    
    3,205,051Cost of products sold, excluding depreciation
expense
    
    
    1,355,367
    
    
    
    278,157
    
    
    
    (66,434
    )
    
    
    1,567,090Selling, distribution, and administrative expenses
    
    
    953,858
    
    
    
    195,308
    
    
    
    
    
    
    
    1,149,166Depreciation expense
    
    
    109,455
    
    
    
    29,363
    
    
    
    
    
    
    
    138,818Amortization expense
    
    
    6,426
    
    
    
    2,099
    
    
    
    
    
    
    
    8,525Operating income
    
    
    266,708
    
    
    
    74,744
    
    
    
    
    
    
    
    341,452Assets
    
    
    2,401,500
    
    
    
    931,957
    
    
    
    
    
    
    
    3,333,457Capital expenditures
    
    
    196,569
    
    
    
    47,014
    
    
    
    
    
    
    
    243,583
 All Other(In thousands)
    
    Distribution
    
    
    Operations
    
    
    Eliminations
    
    
    CombinedFiscal 2006Gas and rent
    
    $
    1,238,612
    
    
    $
    415,560
    
    
    $
    (54,242
    )
    
    $
    1,599,930Hardgoods
    
    
    1,157,326
    
    
    
    77,870
    
    
    
    (5,516
    )
    
    
    1,229,680Total net sales
    
    
    2,395,938
    
    
    
    493,430
    
    
    
    (59,758
    )
    
    
    2,829,610Cost of products sold, excluding depreciation
expense
    
    
    1,223,435
    
    
    
    238,301
    
    
    
    (59,758
    )
    
    
    1,401,978Selling, distribution, and administrative expenses
    
    
    864,192
    
    
    
    167,140
    
    
    
    
    
    
    
    1,031,332Depreciation expense
    
    
    95,615
    
    
    
    26,781
    
    
    
    
    
    
    
    122,396Amortization expense
    
    
    4,230
    
    
    
    916
    
    
    
    
    
    
    
    5,146Operating income
    
    
    208,466
    
    
    
    60,292
    
    
    
    
    
    
    
    268,758Assets
    
    
    1,931,205
    
    
    
    543,207
    
    
    
    
    
    
    
    2,474,412Capital expenditures
    
    
    176,019
    
    
    
    38,174
    
    
    
    
    
    
    
    214,193
 F-49




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  All Other(In thousands)
    
    Distribution
    
    
    Operations
    
    
    Eliminations
    
    
    CombinedFiscal 2005Gas and rent
    
    $
    1,056,661
    
    
    $
    318,748
    
    
    $
    (49,300
    )
    
    $
    1,326,109Hardgoods
    
    
    978,451
    
    
    
    66,863
    
    
    
    (3,641
    )
    
    
    1,041,673Total net sales
    
    
    2,035,112
    
    
    
    385,611
    
    
    
    (52,941
    )
    
    
    2,367,782Cost of products sold, excluding depreciation
expense
    
    
    1,030,284
    
    
    
    174,439
    
    
    
    (52,941
    )
    
    
    1,151,782Selling, distribution, and administrative expenses
    
    
    761,227
    
    
    
    141,241
    
    
    
    
    
    
    
    902,468Depreciation expense
    
    
    81,419
    
    
    
    24,195
    
    
    
    
    
    
    
    105,614Amortization expense
    
    
    4,943
    
    
    
    521
    
    
    
    
    
    
    
    5,464Operating income
    
    
    157,239
    
    
    
    45,215
    
    
    
    
    
    
    
    202,454Assets
    
    
    1,872,213
    
    
    
    419,650
    
    
    
    
    
    
    
    2,291,863Capital expenditures
    
    
    133,310
    
    
    
    34,667
    
    
    
    
    
    
    
    167,977
   (In thousands, except per share amounts)
    
    First
    
    Second
    
    Third
    
    Fourth2007Net sales
    
    $
    773,036
    
    
    $
    790,747
    
    
    $
    787,407
    
    
    $
    853,861Operating income (b)
    
    
    78,906
    
    
    
    84,263
    
    
    
    85,330
    
    
    
    92,953Net earnings
(b),(c)
    
    
    38,652
    
    
    
    39,547
    
    
    
    32,483
    
    
    
    43,735Basic earnings per share (a),(b),(c)
    
    $
    0.50
    
    
    $
    0.51
    
    
    $
    0.42
    
    
    $
    0.56Diluted earnings per share (a),(b),(c)
    
    $
    0.48
    
    
    $
    0.49
    
    
    $
    0.40
    
    
    $
    0.542006Net sales
    
    $
    678,125
    
    
    $
    702,182
    
    
    $
    702,407
    
    
    $
    746,896Operating income (d)
    
    
    63,004
    
    
    
    63,023
    
    
    
    68,989
    
    
    
    73,742Net earnings
(d),(e)
    
    
    29,647
    
    
    
    29,622
    
    
    
    30,825
    
    
    
    33,458Basic earnings per share (a),(d),(e)
    
    $
    0.39
    
    
    $
    0.39
    
    
    $
    0.40
    
    
    $
    0.43Diluted earnings per share (a),(d),(e)
    
    $
    0.38
    
    
    $
    0.38
    
    
    $
    0.39
    
    
    $
    0.42
 
 a)
    
    Earnings per share calculations for each of the quarters are based on the weighted average
number of shares outstanding in each quarter. Therefore, the sum of the quarterly earnings
per share does not necessarily equal the full year earnings per share disclosed on the
Consolidated Statement of Earnings.b)
    
    The quarterly results for fiscal 2007 include stock based compensation expense of
approximately $3.9 million ($2.7 million after tax), or $0.03 per diluted share per quarter,
due to the adoption of SFAS 123R, Share- Based Payment,utilizing the modified prospective
method, no stock based compensation expense was reflected in prior periods. Additionally, the
results include a charge of $12.1 million ($7.9 million after tax), or approximately $0.10 per
diluted share, in the fiscal third quarter for the early extinguishment of debt.c)
    
    The
quarterly results for fiscal 2007 also include a one-time tax benefit in the first fiscal
quarter of $1.8 million, or $0.02 per diluted share, related to a change in the state income
tax law in Texas. F-50




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  d)
    
    The quarterly results for fiscal 2006 include a second quarter loss of $2.8 million ($1.7
million after tax), or $0.02 per diluted share, from hurricanes Katrina and Rita.
 e)
    
    The quarterly results for fiscal 2006 also include a third quarter loss of $3.1 million ($1.9
million after tax), or $0.02 per diluted share, from the divestiture of Rutland Tool; and a
fourth quarter after tax charge of $2.5 million, or $0.03 per diluted share, recorded as a
cumulative effect of a change in accounting principle reflecting the adoption of FIN 47.
     Acquisitions and
Divestitures
 F-51




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet
March 31, 2007
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedASSETSCurrent AssetsCash
    
    $
    
    
    
    $
    24,652
    
    
    $
    1,279
    
    
    $
    
    
    
    $
    25,931Trade receivables, net
    
    
    
    
    
    
    8,885
    
    
    
    184,779
    
    
    
    
    
    
    
    193,664Intercompany
receivable/(payable)
    
    
    
    
    
    
    1,177
    
    
    
    (1,177
    )
    
    
    
    
    
    
    Inventories, net
    
    
    
    
    
    
    232,790
    
    
    
    17,518
    
    
    
    
    
    
    
    250,308Deferred income tax asset, net
    
    
    22,342
    
    
    
    10,383
    
    
    
    (1,721
    )
    
    
    
    
    
    
    31,004Prepaid expenses and other
current assets
    
    
    17,878
    
    
    
    27,156
    
    
    
    3,558
    
    
    
    
    
    
    
    48,592Total current assets
    
    
    40,220
    
    
    
    305,043
    
    
    
    204,236
    
    
    
    
    
    
    
    549,499Plant and equipment, net
    
    
    15,990
    
    
    
    1,642,278
    
    
    
    207,150
    
    
    
    
    
    
    
    1,865,418Goodwill
    
    
    
    
    
    
    742,114
    
    
    
    90,048
    
    
    
    
    
    
    
    832,162Other intangible assets, net
    
    
    
    
    
    
    58,037
    
    
    
    4,898
    
    
    
    
    
    
    
    62,935Investments in subsidiaries
    
    
    2,558,871
    
    
    
    
    
    
    
    
    
    
    
    (2,558,871
    )
    
    
    Other non-current assets
    
    
    8,408
    
    
    
    12,176
    
    
    
    2,859
    
    
    
    
    
    
    
    23,443Total assets
    
    $
    2,623,489
    
    
    $
    2,759,648
    
    
    $
    509,191
    
    
    $
    (2,558,871
    )
    
    $
    3,333,457LIABILITIES AND
STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable, trade
    
    $
    849
    
    
    $
    129,179
    
    
    $
    16,357
    
    
    $
    
    
    
    $
    146,385Accrued expenses and other
current liabilities
    
    
    89,651
    
    
    
    128,366
    
    
    
    23,258
    
    
    
    
    
    
    
    241,275Current portion of long-term debt
    
    
    30,000
    
    
    
    5,915
    
    
    
    4,381
    
    
    
    
    
    
    
    40,296Total current liabilities
    
    
    120,500
    
    
    
    263,460
    
    
    
    43,996
    
    
    
    
    
    
    
    427,956Long-term debt, excluding
current portion
    
    
    1,198,400
    
    
    
    9,910
    
    
    
    101,409
    
    
    
    
    
    
    
    1,309,719Deferred income tax liability, net
    
    
    (3,704
    )
    
    
    333,599
    
    
    
    43,351
    
    
    
    
    
    
    
    373,246Intercompany
(receivable)/payable
    
    
    176,448
    
    
    
    (70,778
    )
    
    
    (105,670
    )
    
    
    
    
    
    
    Other non-current liabilities
    
    
    6,463
    
    
    
    25,712
    
    
    
    7,788
    
    
    
    
    
    
    
    39,963Minority interest in affiliate
    
    
    
    
    
    
    
    
    
    
    57,191
    
    
    
    
    
    
    
    57,191Commitments and contingenciesStockholders EquityPreferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, par value $0.01
per share
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    799Capital in excess of par value
    
    
    341,101
    
    
    
    1,294,816
    
    
    
    71,952
    
    
    
    (1,366,768
    )
    
    
    341,101Retained earnings
    
    
    792,433
    
    
    
    902,320
    
    
    
    286,138
    
    
    
    (1,188,458
    )
    
    
    792,433Accumulated other
comprehensive income
    
    
    4,183
    
    
    
    609
    
    
    
    3,406
    
    
    
    (4,015
    )
    
    
    4,183Treasury stock
    
    
    (13,134
    )
    
    
    
    
    
    
    (370
    )
    
    
    370
    
    
    
    (13,134
    )Total stockholders equity
    
    
    1,125,382
    
    
    
    2,197,745
    
    
    
    361,126
    
    
    
    (2,558,871
    )
    
    
    1,125,382Total liabilities and
stockholders equity
    
    $
    2,623,489
    
    
    $
    2,759,648
    
    
    $
    509,191
    
    
    $
    (2,558,871
    )
    
    $
    3,333,457
 F-52




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet
March 31, 2006
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedASSETSCurrent AssetsCash
    
    $
    
    
    
    $
    30,061
    
    
    $
    4,924
    
    
    $
    
    
    
    $
    34,985Trade receivables, net
    
    
    
    
    
    
    7,149
    
    
    
    125,096
    
    
    
    
    
    
    
    132,245Intercompany
receivable/(payable)
    
    
    
    
    
    
    (4,113
    )
    
    
    4,113
    
    
    
    
    
    
    
    Inventories, net
    
    
    
    
    
    
    211,319
    
    
    
    18,204
    
    
    
    
    
    
    
    229,523Deferred income tax asset, net
    
    
    21,988
    
    
    
    9,239
    
    
    
    (1,086
    )
    
    
    
    
    
    
    30,141Prepaid expenses and other
current assets
    
    
    7,289
    
    
    
    20,713
    
    
    
    3,620
    
    
    
    
    
    
    
    31,622Total current assets
    
    
    29,277
    
    
    
    274,368
    
    
    
    154,871
    
    
    
    
    
    
    
    458,516Plant and equipment, net
    
    
    18,285
    
    
    
    1,194,523
    
    
    
    185,949
    
    
    
    
    
    
    
    1,398,757Goodwill
    
    
    
    
    
    
    488,317
    
    
    
    77,757
    
    
    
    
    
    
    
    566,074Other intangible assets, net
    
    
    
    
    
    
    22,362
    
    
    
    3,886
    
    
    
    
    
    
    
    26,248Investments in subsidiaries
    
    
    1,940,670
    
    
    
    
    
    
    
    
    
    
    
    (1,940,670
    )
    
    
    Other non-current assets
    
    
    15,491
    
    
    
    6,394
    
    
    
    2,932
    
    
    
    
    
    
    
    24,817Total assets
    
    $
    2,003,723
    
    
    $
    1,985,964
    
    
    $
    425,395
    
    
    $
    (1,940,670
    )
    
    $
    2,474,412LIABILITIES AND
STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable, trade
    
    $
    3,057
    
    
    $
    122,078
    
    
    $
    18,617
    
    
    $
    
    
    
    $
    143,752Accrued expenses and other
current liabilities
    
    
    112,396
    
    
    
    66,241
    
    
    
    21,364
    
    
    
    
    
    
    
    200,001Current portion of long-term debt
    
    
    125,751
    
    
    
    561
    
    
    
    5,589
    
    
    
    
    
    
    
    131,901Total current liabilities
    
    
    241,204
    
    
    
    188,880
    
    
    
    45,570
    
    
    
    
    
    
    
    475,654Long-term debt, excluding
current portion
    
    
    549,382
    
    
    
    2,450
    
    
    
    83,894
    
    
    
    
    
    
    
    635,726Deferred income tax liability, net
    
    
    4,372
    
    
    
    280,404
    
    
    
    43,042
    
    
    
    
    
    
    
    327,818Intercompany
(receivable)/payable
    
    
    257,995
    
    
    
    (148,123
    )
    
    
    (109,872
    )
    
    
    
    
    
    
    Other non-current liabilities
    
    
    3,611
    
    
    
    25,242
    
    
    
    2,011
    
    
    
    
    
    
    
    30,864Minority interest in affiliate
    
    
    
    
    
    
    
    
    
    
    57,191
    
    
    
    
    
    
    
    57,191Commitments and contingenciesStockholders EquityPreferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, par value $0.01
per share
    
    
    786
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    786Capital in excess of par value
    
    
    289,598
    
    
    
    894,898
    
    
    
    71,955
    
    
    
    (966,853
    )
    
    
    289,598Retained earnings
    
    
    665,158
    
    
    
    741,623
    
    
    
    228,662
    
    
    
    (970,285
    )
    
    
    665,158Accumulated other
comprehensive income
    
    
    4,751
    
    
    
    590
    
    
    
    3,312
    
    
    
    (3,902
    )
    
    
    4,751Treasury stock
    
    
    (13,134
    )
    
    
    
    
    
    
    (370
    )
    
    
    370
    
    
    
    (13,134
    )Total stockholders equity
    
    
    947,159
    
    
    
    1,637,111
    
    
    
    303,559
    
    
    
    (1,940,670
    )
    
    
    947,159Total liabilities and
stockholders equity
    
    $
    2,003,723
    
    
    $
    1,985,964
    
    
    $
    425,395
    
    
    $
    (1,940,670
    )
    
    $
    2,474,412
 F-53




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Earnings
Year Ended
March 31, 2007
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet Sales
    
    $
    
    
    
    $
    2,939,912
    
    
    $
    265,139
    
    
    $
    
    
    
    $
    3,205,051Costs and ExpensesCosts of products sold
(excluding depreciation)
    
    
    
    
    
    
    1,454,162
    
    
    
    112,928
    
    
    
    
    
    
    
    1,567,090Selling, distribution and
administrative expenses
    
    
    6,593
    
    
    
    1,039,066
    
    
    
    103,507
    
    
    
    
    
    
    
    1,149,166Depreciation
    
    
    6,074
    
    
    
    115,202
    
    
    
    17,542
    
    
    
    
    
    
    
    138,818Amortization
    
    
    
    
    
    
    7,958
    
    
    
    567
    
    
    
    
    
    
    
    8,525Operating Income (Loss)
    
    
    (12,667
    )
    
    
    323,524
    
    
    
    30,595
    
    
    
    
    
    
    
    341,452Interest (expense) income, net
    
    
    (74,369
    )
    
    
    19,146
    
    
    
    (4,957
    )
    
    
    
    
    
    
    (60,180
    )(Discount) gain on
securitization of trade
receivables
    
    
    
    
    
    
    (81,487
    )
    
    
    67,857
    
    
    
    
    
    
    
    (13,630
    )Loss on the extinguishment of debt
    
    
    (12,099
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,099
    )Other income (expense), net
    
    
    (82
    )
    
    
    (1,543
    )
    
    
    3,226
    
    
    
    
    
    
    
    1,601Earnings (loss) before income
taxes and minority interest
    
    
    (99,217
    )
    
    
    259,640
    
    
    
    96,721
    
    
    
    
    
    
    
    257,144Income tax benefit (expense)
    
    
    34,555
    
    
    
    (98,941
    )
    
    
    (35,497
    )
    
    
    
    
    
    
    (99,883
    )Minority interest in earnings of
consolidated affiliate
    
    
    
    
    
    
    
    
    
    
    (2,845
    )
    
    
    
    
    
    
    (2,845
    )Equity in earnings of
subsidiaries
    
    
    219,078
    
    
    
    
    
    
    
    
    
    
    
    (219,078
    )
    
    
    Net Earnings
    
    $
    154,416
    
    
    $
    160,699
    
    
    $
    58,379
    
    
    $
    (219,078
    )
    
    $
    154,416
 F-54




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Earnings
Year Ended
March 31, 2006
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet Sales
    
    $
    
    
    
    $
    2,608,146
    
    
    $
    221,464
    
    
    $
    
    
    
    $
    2,829,610Costs and ExpensesCosts of products sold
(excluding depreciation)
    
    
    
    
    
    
    1,306,924
    
    
    
    95,054
    
    
    
    
    
    
    
    1,401,978Selling, distribution and
administrative expenses
    
    
    24,135
    
    
    
    912,700
    
    
    
    94,497
    
    
    
    
    
    
    
    1,031,332Depreciation
    
    
    7,518
    
    
    
    98,984
    
    
    
    15,894
    
    
    
    
    
    
    
    122,396Amortization
    
    
    
    
    
    
    4,992
    
    
    
    154
    
    
    
    
    
    
    
    5,146Operating Income (Loss)
    
    
    (31,653
    )
    
    
    284,546
    
    
    
    15,865
    
    
    
    
    
    
    
    268,758Interest (expense) income, net
    
    
    (72,767
    )
    
    
    22,781
    
    
    
    (3,826
    )
    
    
    
    
    
    
    (53,812
    )(Discount) gain on
securitization of trade
receivables
    
    
    
    
    
    
    (73,990
    )
    
    
    64,619
    
    
    
    
    
    
    
    (9,371
    )Other income (expense), net
    
    
    19,784
    
    
    
    (18,006
    )
    
    
    684
    
    
    
    
    
    
    
    2,462Earnings (loss) before income
taxes and minority interest
    
    
    (84,636
    )
    
    
    215,331
    
    
    
    77,342
    
    
    
    
    
    
    
    208,037Income tax benefit (expense)
    
    
    29,623
    
    
    
    (79,415
    )
    
    
    (28,074
    )
    
    
    
    
    
    
    (77,866
    )Minority interest in earnings of
consolidated affiliate
    
    
    
    
    
    
    
    
    
    
    (2,656
    )
    
    
    
    
    
    
    (2,656
    )Equity in earnings of
subsidiaries
    
    
    178,564
    
    
    
    
    
    
    
    
    
    
    
    (178,564
    )
    
    
    Loss from discontinued
operations,net of tax
    
    
    
    
    
    
    (1,424
    )
    
    
    
    
    
    
    
    
    
    
    (1,424
    )Cumulative effect of a change in
accounting principle, net of tax
    
    
    
    
    
    
    (2,296
    )
    
    
    (244
    )
    
    
    
    
    
    
    (2,540
    )Net Earnings
    
    $
    123,551
    
    
    $
    132,196
    
    
    $
    46,368
    
    
    $
    (178,564
    )
    
    $
    123,551
 F-55




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Earnings
Year Ended
March 31, 2005
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet Sales
    
    $
    
    
    
    $
    2,173,444
    
    
    $
    194,338
    
    
    $
    
    
    
    $
    2,367,782Costs and ExpensesCosts of products sold
(excluding depreciation)
    
    
    
    
    
    
    1,069,711
    
    
    
    82,071
    
    
    
    
    
    
    
    1,151,782Selling, distribution and
administrative expenses
    
    
    31,690
    
    
    
    786,050
    
    
    
    84,728
    
    
    
    
    
    
    
    902,468Depreciation
    
    
    7,410
    
    
    
    84,093
    
    
    
    14,111
    
    
    
    
    
    
    
    105,614Amortization
    
    
    99
    
    
    
    5,269
    
    
    
    96
    
    
    
    
    
    
    
    5,464Operating Income (Loss)
    
    
    (39,199
    )
    
    
    228,321
    
    
    
    13,332
    
    
    
    
    
    
    
    202,454Interest (expense) income, net
    
    
    (70,493
    )
    
    
    23,228
    
    
    
    (3,980
    )
    
    
    
    
    
    
    (51,245
    )(Discount) gain on
securitization of trade
receivables
    
    
    
    
    
    
    (61,185
    )
    
    
    56,474
    
    
    
    
    
    
    
    (4,711
    )Other income (expense), net
    
    
    21,249
    
    
    
    (20,686
    )
    
    
    566
    
    
    
    
    
    
    
    1,129Earnings (loss) before income
taxes and minority interest
    
    
    (88,443
    )
    
    
    169,678
    
    
    
    66,392
    
    
    
    
    
    
    
    147,627Income tax benefit (expense)
    
    
    30,955
    
    
    
    (61,538
    )
    
    
    (23,678
    )
    
    
    
    
    
    
    (54,261
    )Minority interest in earnings of
consolidated affiliate
    
    
    
    
    
    
    
    
    
    
    (1,808
    )
    
    
    
    
    
    
    (1,808
    )Equity in earnings of
subsidiaries
    
    
    149,510
    
    
    
    
    
    
    
    
    
    
    
    (149,510
    )
    
    
    Income from discontinued
operations, net of tax
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    464Net Earnings
    
    $
    92,022
    
    
    $
    108,604
    
    
    $
    40,906
    
    
    $
    (149,510
    )
    
    $
    92,022
 F-56




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended
March 31, 2007
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (102,808
    )
    
    $
    390,032
    
    
    $
    30,931
    
    
    $
    
    
    
    $
    318,155CASH FLOWS FROM
INVESTING ACTIVITIESCapital expenditures
    
    
    (4,012
    )
    
    
    (215,532
    )
    
    
    (24,039
    )
    
    
    
    
    
    
    (243,583
    )Proceeds from sale of plantand equipment
    
    
    177
    
    
    
    6,835
    
    
    
    1,673
    
    
    
    
    
    
    
    8,685Proceeds from divestiture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business acquisitions, holdbacks and
settlements of acquisition related
liabilities
    
    
    
    
    
    
    (657,286
    )
    
    
    (30,606
    )
    
    
    
    
    
    
    (687,892
    )Other, net
    
    
    (572
    )
    
    
    25
    
    
    
    73
    
    
    
    
    
    
    
    (474
    )Net cash used in investing
activities
    
    
    (4,407
    )
    
    
    (865,958
    )
    
    
    (52,899
    )
    
    
    
    
    
    
    (923,264
    )CASH FLOWS FROM
FINANCING ACTIVITIESProceeds from borrowings
    
    
    1,480,984
    
    
    
    15,743
    
    
    
    94,737
    
    
    
    
    
    
    
    1,591,464Repayment of debt
    
    
    (926,827
    )
    
    
    (2,930
    )
    
    
    (78,429
    )
    
    
    
    
    
    
    (1,008,186
    )Financing costs
    
    
    (5,103
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,103
    )Premium paid on call of senior
subordinated notes
    
    
    (10,267
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,267
    )Minority interest in earnings
    
    
    
    
    
    
    
    
    
    
    (2,845
    )
    
    
    
    
    
    
    (2,845
    )Proceeds from the exercise of stock
options
    
    
    15,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,107Stock issued
for employee stock purchase plan
    
    
    
    
    
    
    11,951
    
    
    
    
    
    
    
    
    
    
    
    11,951Tax benefit realized from
the exercise of stock options
    
    
    9,013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,013Dividends paid to stockholders
    
    
    (21,980
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,980
    )Cash overdraft
    
    
    16,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,901Inter-company
    
    
    (450,613
    )
    
    
    445,753
    
    
    
    4,860
    
    
    
    
    
    
    
    Net cash provided by
financing activities
    
    
    107,215
    
    
    
    470,517
    
    
    
    18,323
    
    
    
    
    
    
    
    596,055CHANGE IN CASH
    
    $
    
    
    
    $
    (5,409
    )
    
    $
    (3,645
    )
    
    $
    
    
    
    $
    (9,054
    )Cash  Beginning of year
    
    
    
    
    
    
    30,061
    
    
    
    4,924
    
    
    
    
    
    
    
    34,985Cash  End of year
    
    $
    
    
    
    $
    24,652
    
    
    $
    1,279
    
    
    $
    
    
    
    $
    25,931
 F-57




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended
March 31, 2006
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (13,484
    )
    
    $
    261,618
    
    
    $
    103,501
    
    
    $
    
    
    
    $
    351,635CASH FLOWS FROM
INVESTING ACTIVITIESCapital expenditures
    
    
    (3,161
    )
    
    
    (183,651
    )
    
    
    (27,381
    )
    
    
    
    
    
    
    (214,193
    )Proceeds from sale of plant
and equipment
    
    
    104
    
    
    
    5,143
    
    
    
    2,955
    
    
    
    
    
    
    
    8,202Proceeds from divestiture
    
    
    
    
    
    
    14,562
    
    
    
    
    
    
    
    
    
    
    
    14,562Business acquisitions, holdbacks and other
settlements of acquisition related liabilities
    
    
    
    
    
    
    (128,742
    )
    
    
    (24,686
    )
    
    
    
    
    
    
    (153,428
    )Other, net
    
    
    749
    
    
    
    (390
    )
    
    
    (189
    )
    
    
    
    
    
    
    170Net cash used in investing
activities
    
    
    (2,308
    )
    
    
    (293,078
    )
    
    
    (49,301
    )
    
    
    
    
    
    
    (344,687
    )CASH FLOWS FROM
FINANCING ACTIVITIESProceeds from borrowings
    
    
    478,848
    
    
    
    2,363
    
    
    
    87,168
    
    
    
    
    
    
    
    568,379Repayment of debt
    
    
    (512,718
    )
    
    
    (6,388
    )
    
    
    (87,426
    )
    
    
    
    
    
    
    (606,532
    )Purchase of treasury stock
    
    
    (12,771
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,771
    )Minority interest in earnings
    
    
    
    
    
    
    
    
    
    
    (2,656
    )
    
    
    
    
    
    
    (2,656
    )Minority stockholder note repayment
    
    
    
    
    
    
    
    
    
    
    21,000
    
    
    
    
    
    
    
    21,000Proceeds from exercise of stock options
    
    
    19,707
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,707Stock issued
for employee stock purchase plan
    
    
    
    
    
    
    10,534
    
    
    
    
    
    
    
    
    
    
    
    10,534Dividends paid to stockholders
    
    
    (18,449
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,449
    )Cash overdraft
    
    
    16,530
    
    
    
    
    
    
    
    (345
    )
    
    
    
    
    
    
    16,185Inter-company
    
    
    44,645
    
    
    
    25,672
    
    
    
    (70,317
    )
    
    
    
    
    
    
    Net cash provided by (used in)
financing activities
    
    
    15,792
    
    
    
    32,181
    
    
    
    (52,576
    )
    
    
    
    
    
    
    (4,603
    )CHANGE IN CASH
    
    $
    
    
    
    $
    721
    
    
    $
    1,624
    
    
    $
    
    
    
    $
    2,345Cash  Beginning of year
    
    
    
    
    
    
    29,340
    
    
    
    3,300
    
    
    
    
    
    
    
    32,640Cash  End of year
    
    $
    
    
    
    $
    30,061
    
    
    $
    4,924
    
    
    $
    
    
    
    $
    34,985
 F-58




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended
March 31, 2005
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (35,408
    )
    
    $
    234,841
    
    
    $
    12,977
    
    
    $
    
    
    
    $
    212,410CASH FLOWS FROM
INVESTING ACTIVITIESCapital expenditures
    
    
    (3,890
    )
    
    
    (136,231
    )
    
    
    (27,856
    )
    
    
    
    
    
    
    (167,977
    )Proceeds from sale of plant
and equipment
    
    
    50
    
    
    
    3,761
    
    
    
    1,550
    
    
    
    
    
    
    
    5,361Proceeds from divestiture
    
    
    
    
    
    
    828
    
    
    
    
    
    
    
    
    
    
    
    828Business acquisitions, holdbacks and other
settlements of acquisition related liabilities
    
    
    
    
    
    
    (186,000
    )
    
    
    (5,820
    )
    
    
    
    
    
    
    (191,820
    )Other, net
    
    
    267
    
    
    
    
    
    
    
    (96
    )
    
    
    
    
    
    
    171Net cash used in investing
activities
    
    
    (3,573
    )
    
    
    (317,642
    )
    
    
    (32,222
    )
    
    
    
    
    
    
    (353,437
    )CASH FLOWS FROM
FINANCING ACTIVITIESProceeds from borrowings
    
    
    547,762
    
    
    
    2,069
    
    
    
    71,619
    
    
    
    
    
    
    
    621,450Repayment of debt
    
    
    (436,768
    )
    
    
    (1,321
    )
    
    
    (56,595
    )
    
    
    
    
    
    
    (494,684
    )Financing costs
    
    
    (2,531
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,531
    )Termination of interest rate
hedge
    
    
    3,948
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,948Minority interest in earnings
    
    
    
    
    
    
    
    
    
    
    (1,808
    )
    
    
    
    
    
    
    (1,808
    )Proceeds from exercise of stock options
    
    
    20,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,374Stock issued for employee stock purchase plan
    
    
    
    
    
    
    9,907
    
    
    
    
    
    
    
    
    
    
    
    9,907Dividends paid to stockholders
    
    
    (13,643
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,643
    )Cash overdraft
    
    
    5,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,592Inter-company
    
    
    (85,753
    )
    
    
    77,917
    
    
    
    7,836
    
    
    
    
    
    
    
    Net cash provided by
financing activities
    
    
    38,981
    
    
    
    88,572
    
    
    
    21,052
    
    
    
    
    
    
    
    148,605CHANGE IN CASH
    
    $
    
    
    
    $
    5,771
    
    
    $
    1,807
    
    
    $
    
    
    
    $
    7,578Cash  Beginning of year
    
    
    
    
    
    
    23,569
    
    
    
    1,493
    
    
    
    
    
    
    
    25,062Cash  End of year
    
    $
    
    
    
    $
    29,340
    
    
    $
    3,300
    
    
    $
    
    
    
    $
    32,640
 F-59




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##### Table of Contents



SCHEDULE II
 AIRGAS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
 Column A
    
    Column B
    
 Column C
    
    Column D
    
    Column EAdditionsBalance at
    
    Charged to
    
    Charged
    
    
    
    
    
    BalanceBeginning
    
    Costs and
    
    to Other
    
    
    
    
    
    at End ofDescription
    
    of Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    Period2007Accounts receivable  allowances
for doubtful
accounts
    
    $
    14,782
    
    
    $
    11,150
    
    
    $
    1,938
    (1)
    
    $
    (12,178
    ) (2)
    
    $
    15,692Insurance
reserves
    
    
    30,664
    
    
    
    87,357
    
    
    
    
    
    
    
    (83,175
    ) (3)
    
    
    34,846Deferred tax asset valuation
allowance
    
    
    6,347
    
    
    
    
    
    
    
    
    
    
    
    (915
    ) (4)
    
    
    5,4322006Accounts receivable  allowances
for doubtful
accounts
    
    $
    11,108
    
    
    $
    12,747
    
    
    $
    1,496
    (1)
    
    $
    (10,569
    ) (2)
    
    $
    14,782Insurance
reserves
    
    
    30,924
    
    
    
    73,529
    
    
    
    
    
    
    
    (73,789
    ) (3)
    
    
    30,664Deferred tax asset valuation
allowance
    
    
    8,437
    
    
    
    
    
    
    
    
    
    
    
    (2,090
    ) (4)
    
    
    6,3472005Accounts receivable  allowances
for doubtful
accounts
    
    $
    7,294
    
    
    $
    7,714
    
    
    $
    3,796
    (1)
    
    $
    (7,696
    ) (2)
    
    $
    11,108Insurance
reserves
    
    
    29,451
    
    
    
    72,045
    
    
    
    
    
    
    
    (70,572
    ) (3)
    
    
    30,924Deferred tax asset valuation
allowance
    
    
    9,922
    
    
    
    
    
    
    
    
    
    
    
    (1,485
    ) (4)
    
    
    8,437
 
 (1)
    
    Principally reflects collections on accounts previously written-off less the allowance for
doubtful accounts of businesses sold.(2)
    
    Write-off of uncollectible accounts.(3)
    
    Payments of insurance premiums and claims.(4)
    
    Represents revised estimates of the realizability of certain tax benefits associated with
state tax net operating loss carryforwards along with changes due to the utilization and
expiration of net operating loss carryforwards. F-60