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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, 2006or
 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)
 (Registrants telephone number, including area code)
  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
 o
  þ o o
   DOCUMENTS INCORPORATED BY REFERENCE




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AIRGAS, INC.
  
  ITEM NO.
    
    PAGEPART I1. Business
    
    
    31a. Risk Factors
    
    
    91b. Unresolved Staff Comments
    
    
    132. Properties
    
    
    133. Legal Proceedings
    
    
    144. Submission of Matters to a Vote of Security Holders
    
    
    14PART II5. Market for the Companys Common Equity and Related Stockholder Matters
    
    
    156. Selected Financial Data
    
    
    187. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    207a. 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
    
    
    54Statement re: computation of earnings per shareStatement re: computation of the ratio of earnings to fixed chargesSubsidiaries of the CompanyConsent of Independent Registered Public Accounting FirmCertification of Peter McCausland, pursuant to Section 302Certification of Roger F. Millay, pursuant to Section 302Certification of Peter McCausland, pursuant to 18 U.S.C. Section 1350Certification of Roger F. Millay, pursuant to 18 U.S.C. Section 1350
 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 (28%);
 
    
    Repair & Maintenance (27%);
 
    
    Construction (10%);
 
    
    Medical (7%);
 
    
    Wholesale Trade (6%);
 
    
    Food Products (6%);
 
    
    Petrochemical (5%);
 
    
    Utilities and Mining (3%);
 
    
    Analytical (3%);
 
    
    Transportation (2%)
 
    
    Other (3%).
 Suppliers
  4




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Gas Operations Division
  National Welders Supply Company, Inc.
  5




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Suppliers
    
    
    customer service strategies for growing our business with small and medium-sized core customers;
    
    high potential growth areas such as construction, Bulk Gases, Specialty Gases, Medical Sales, Carbon dioxide
and Safety Products.;
    
    improved training, tools and resources for front line associates;
    
    continued account penetration; and
    
    acquisitions to complement and expand the distribution network.
     6




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##### Table of Contents



Name
    
    Age
    
    PositionPeter McCausland (1)
    
    
    56
    
    
    Chairman of the Board, President and Chief Executive OfficerMichael L. Molinini
    
    
    55
    
    
    Executive Vice President and Chief Operating OfficerRoger F. Millay
    
    
    48
    
    
    Senior Vice President and Chief Financial OfficerRobert A. Dougherty
    
    
    48
    
    
    Senior Vice President and Chief Information OfficerPatrick M. Visintainer
    
    
    42
    
    
    Senior Vice President - SalesDwight T. Wilson
    
    
    50
    
    
    Senior Vice President - Human ResourcesMichael E. Rohde
    
    
    59
    
    
    Senior Vice President - Distribution OperationsMax D. Hooper
    
    
    46
    
    
    Division President - WestB. Shaun Powers
    
    
    54
    
    
    Division President - EastTed R. Schulte
    
    
    55
    
    
    Division President - Gas OperationsDean A. Bertolino
    
    
    37
    
    
    Vice President, General Counsel and SecretaryRobert M. McLaughlin
    
    
    49
    
    
    Vice President and Controller
 
 (1)
    
    Member of the Board of Directors   7




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llp
  8




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Code of Ethics and Business Conduct
  
 Corporate Governance Guidelines
  Certifications
   
 ITEM 1a. RISK FACTORS.
  9




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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;
 
    
    making it more difficult to satisfy our obligations with respect to our debt;
 
    
    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, interest expense would increase by $1.2 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.
  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
the industries many of our customers are in, which can cause significant fluctuations in our sales
and results.
 10




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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
 We may not be successful in completing acquisitions, which may adversely affect our growth and
operating results.
 11




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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.
 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.
 12




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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.
 
 ITEM 1b. UNRESOLVED STAFF COMMENTS.
  
 ITEM 2. PROPERTIES.
   13




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ITEM 3. LEGAL PROCEEDINGS.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  14




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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.
  Dividend PerHigh
    
    Low
    
    ShareFiscal 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
    
    
    
    0.060Fiscal 2005First Quarter
    
    $
    23.91
    
    
    $
    20.83
    
    
    $
    0.045Second Quarter
    
    
    24.20
    
    
    
    21.10
    
    
    
    0.045Third Quarter
    
    
    27.05
    
    
    
    23.61
    
    
    
    0.045Fourth Quarter
    
    
    26.96
    
    
    
    23.28
    
    
    
    0.045
   15




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Stock Repurchase Plan
  Maximum DollarTotal Number
    
    
    Value of Sharesof Shares Purchased
    
    
    that May Yet BeTotal Number
    
    
    Average Price Paid
    
    
    as Part of Publicly
    
    
    Purchased Under thePeriod
    
    of Shares Purchased
    
    
    Per Share
    
    
    Announced Plan
    
    
    Plan1/1/06-1/31/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2/1/06-2/28/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3/1/06-3/31/06
    
    
    195,400
    
    
    $
    36.86
    
    
    
    195,400
    
    
    $
    137,229,335Total
    
    
    195,400
    
    
    $
    36.86
    
    
    
    195,400
    
    
    $
    137,229,335
 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
security
holders(1)(2)
    
    
    6,993,818
    
    
    $
    16.36
    
    
    
    243,874
2,272,012
    
    
    ESPP shares (3)
Stock Option PlansEquity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total:
    
    
    6,993,818
    
    
    $
    16.36
    
    
    
    2,515,886
 
 (1)
    
    The Directors Plan, designed to provide equity compensation to directors of
the Company who are not employees of the Company, authorizes the granting of stock
options and restricted stock awards. As of March 31, 2006, no restricted stock awards
have been granted under the Directors Plan. Restricted stock awards under the
Directors Plan cannot exceed 100,000 shares in the aggregate, and restricted stock
awards under the 1997 Stock Option Plan and the Directors Plan in any calendar year may 16




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not exceed, in the aggregate, 0.5% of shares of Common Stock of the Companys issued and
outstanding shares on any date of grant.(2)
    
    The 1997 Stock Option Plan (the 1997 Plan), designed to provide equity
compensation to certain employees and independent contractors of the Company, authorizes
the granting of stock options and restricted stock awards. As of March 31, 2006, no
restricted stock awards had been granted under the 1997 Plan. Restricted stock awards
granted under the 1997 Plan cannot exceed 1,000,000 shares in the aggregate, and
restricted stock awards under the 1997 Plan and the Directors Plan in any calendar year
may not exceed, in the aggregate, 0.5% of shares of Common Stock of the Companys issued
and outstanding shares on any date of grant.(3)
    
    The 2003 Employee Stock Purchase Plan (the ESSP Plan) was adopted by the
Board of Directors in May 2003 and approved by the Companys stockholders in July 2003.
A maximum of 1,500,000 shares of common stock may be purchased under the ESPP Plan.
Through March 31, 2006, 1,256,126 were issued under the ESPP Plan. 17




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ITEM 6. SELECTED FINANCIAL DATA.
  Years Ended March 31,(In thousands, except per share amounts):
    
    2006 (1)
    
    2005 (2)(7)
    
    2004 (3)(7)
    
    2003 (4)(7)
    
    2002 (5)(7)Operating Results:Net sales
    
    $
    2,829,610
    
    
    $
    2,367,782
    
    
    $
    1,855,360
    
    
    $
    1,745,891
    
    
    $
    1,576,328Depreciation and amortization
    
    
    127,542
    
    
    
    111,078
    
    
    
    87,447
    
    
    
    79,279
    
    
    
    71,757Special charges (recoveries), net
    
    
    
    
    
    
    
    
    
    
    (776
    )
    
    
    2,694
    
    
    
    Operating income
    
    
    268,758
    
    
    
    202,454
    
    
    
    168,544
    
    
    
    156,336
    
    
    
    124,938Interest expense, net
    
    
    53,812
    
    
    
    51,245
    
    
    
    42,357
    
    
    
    46,374
    
    
    
    46,775Discount on securitization of trade
receivables
    
    
    9,371
    
    
    
    4,711
    
    
    
    3,264
    
    
    
    3,326
    
    
    
    4,846Other income (expense), net
    
    
    2,462
    
    
    
    1,129
    
    
    
    1,472
    
    
    
    2,132
    
    
    
    5,987Income taxes
    
    
    77,866
    
    
    
    54,261
    
    
    
    47,659
    
    
    
    41,571
    
    
    
    30,051Minority interest in earnings of
consolidated affiliate
    
    
    (2,656
    )
    
    
    (1,808
    )
    
    
    (452
    )
    
    
    
    
    
    
    Equity in earnings of unconsolidated
affiliate
    
    
    
    
    
    
    
    
    
    
    4,365
    
    
    
    2,684
    
    
    
    2,861Income from continuing operations
    
    
    127,515
    
    
    
    91,558
    
    
    
    80,649
    
    
    
    69,881
    
    
    
    52,114Income (loss) from discontinued
operations, net of tax
    
    
    (1,424
    )
    
    
    464
    
    
    
    (457
    )
    
    
    (1,776
    )
    
    
    (3,529
    )Cumulative effect of a change in
accounting
principle, net of tax
    
    
    (2,540
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,000
    )Net earnings (loss)
    
    $
    123,551
    
    
    $
    92,022
    
    
    $
    80,192
    
    
    $
    68,105
    
    
    $
    (10,415
    )NET EARNINGS PER COMMON SHAREBASICEarnings from continuing operations
    
    $
    1.66
    
    
    $
    1.22
    
    
    $
    1.11
    
    
    $
    0.99
    
    
    $
    0.76Earnings (loss) from discontinued
operations
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    (0.02
    )
    
    
    (0.05
    )Cumulative effect of a change in
accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.86
    )Net earnings (loss) per share
    
    $
    1.61
    
    
    $
    1.23
    
    
    $
    1.10
    
    
    $
    0.97
    
    
    $
    (0.15
    )DILUTEDEarnings from continuing operations
    
    $
    1.62
    
    
    $
    1.19
    
    
    $
    1.08
    
    
    $
    0.96
    
    
    $
    0.74Earnings (loss) from discontinued
operations
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    (0.02
    )
    
    
    (0.05
    )Cumulative effect of a change in
accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.84
    )Net earnings (loss) per share
    
    $
    1.57
    
    
    $
    1.20
    
    
    $
    1.07
    
    
    $
    0.94
    
    
    $
    (0.15
    )Dividends per common share declared and
paid (6)
    
    $
    0.24
    
    
    $
    0.18
    
    
    $
    0.16
    
    
    $
    
    
    
    $
    Balance Sheet Data at March 31:Working capital
    
    $
    (17,138
    )
    
    $
    132,969
    
    
    $
    88,826
    
    
    $
    66,027
    
    
    $
    84,645Total assets
    
    
    2,474,412
    
    
    
    2,291,863
    
    
    
    1,960,606
    
    
    
    1,726,004
    
    
    
    1,743,984Current portion of long-term debt
    
    
    131,901
    
    
    
    6,948
    
    
    
    6,140
    
    
    
    2,229
    
    
    
    2,456Long-term debt
    
    
    635,726
    
    
    
    801,635
    
    
    
    682,698
    
    
    
    658,031
    
    
    
    764,124Deferred income tax liability, net
    
    
    327,818
    
    
    
    282,186
    
    
    
    253,529
    
    
    
    207,069
    
    
    
    193,556Other non-current liabilities
    
    
    30,864
    
    
    
    24,391
    
    
    
    28,756
    
    
    
    33,657
    
    
    
    37,395Minority interest in affiliate
    
    
    57,191
    
    
    
    36,191
    
    
    
    36,191
    
    
    
    
    
    
    
    Stockholders equity
    
    
    947,159
    
    
    
    814,172
    
    
    
    691,901
    
    
    
    596,933
    
    
    
    503,086Capital expenditures for years ended
March 31,
    
    
    214,193
    
    
    
    167,977
    
    
    
    93,749
    
    
    
    67,969
    
    
    
    58,297
 
 (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 2006 include an estimated loss of $2.2 million
($1.4 million after tax) related to hurricanes Katrina and Rita
and an after tax loss of $1.9
million on the divestiture of Rutland Tool, which 18




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was reported as a discontinued operation.
Fiscal 2006 results also 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. Working capital
decreased in fiscal 2006 compared to 2005 primarily due to an increase in the current portion
of long-term debt.(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 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 16 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.(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 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 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. See Note 16 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 2003 include special and other charges of $2.9 million ($2.2 million
after tax) primarily consisting of a restructuring charge ($2.7 million) related to the
integration of the business acquired from Air Products & Chemicals, Inc. and costs related to
the consolidation of certain hardgoods procurement functions.(5)
    
    The results for fiscal 2002 include: (a) a non-cash after-tax charge of $59 million
representing the cumulative effect of a change in accounting principle associated with the
adoption of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,, (b) a
litigation settlement charge of $8.5 million ($5.7 million after tax), and (c) a net
non-recurring gain of $1.9 million ($120 thousand after tax) related to divestitures and a
write-down of a business held for sale to its net realizable value.(6)
    
    At the end of each quarter during fiscal 2006, 2005 and 2004, the Company paid its
stockholders regular quarterly cash dividends of $0.06, $0.045 and $0.04 per share,
respectively. In addition, on May 23, 2006, the Companys Board of Directors declared a
regular quarterly cash dividend of $0.07 per share payable June 30, 2006 to stockholders of
record as of June 15, 2006. 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. 19




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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: 2006 COMPARED TO 2005
 OVERVIEW
   Accounting for Conditional Asset Retirement Obligations, an
interpretation of FASB Statement No. 143
  20




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
    
    a loss of $2.2 million ($1.4 million after tax), or $0.02 per diluted share, related to
hurricanes Katrina and Rita.
    
    a net loss of $1.4 million from discontinued operations principally reflecting
an after tax loss of $1.9 million, or $0.02 per diluted share, on the divestiture
of Rutland Tool (see comments above); and
    
    an after tax charge of $2.5 million, or $0.03 per diluted share, resulting from
the adoption of FIN 47, which was recorded as a cumulative effect of a change in
accounting principle.
   Share-Based Payment,
 21




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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
    %
     22




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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
   23




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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
   24




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Income Tax Expense
  Income from Continuing Operations
  Income (loss) from Discontinued Operations
  Cumulative Effect of a Change in Accounting Principle
  Net Earnings
   25




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26




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RESULTS OF OPERATIONS: 2005 COMPARED TO 2004
 OVERVIEW
    §
    
    insurance-related losses of $2.8 million ($1.7 million after tax), or $0.02 per diluted
share, representing the Companys self-insurance retention associated with fire-related
losses;§
    
    a $1.7 million after-tax, or $0.02 per diluted share, non-recurring insurance gain
recognized by National Welders; and§
    
    a special charge recovery of $776 thousand ($480 thousand after tax), or $0.01 per diluted
share, reflecting lower estimates of the ultimate cost of prior years restructuring
activities.
   Consolidation of Variable Interest Entities,
 27




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28




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INCOME STATEMENT COMMENTARY
 Net Sales
  (In thousands)
    
    2005
    
    
    2004
    
    
    IncreaseDistribution
    
    $
    2,035,112
    
    
    $
    1,662,363
    
    
    $
    372,749
    
    
    
    22
    %All Other Operations
    
    
    385,611
    
    
    
    235,926
    
    
    
    149,685
    
    
    
    63
    %Intercompany
eliminations
    
    
    (52,941
    )
    
    
    (42,929
    )
    
    
    (10,012
    )$
    2,367,782
    
    
    $
    1,855,360
    
    
    $
    512,422
    
    
    
    28
    %
  2 Ô
  29




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##### Table of Contents



Gross Profits
  (In thousands)
    
    2005
    
    
    2004
    
    
    IncreaseDistribution
    
    $
    1,004,828
    
    
    $
    842,504
    
    
    $
    162,324
    
    
    
    19
    %All Other Operations
    
    
    211,172
    
    
    
    129,756
    
    
    
    81,416
    
    
    
    63
    %$
    1,216,000
    
    
    $
    972,260
    
    
    $
    243,740
    
    
    
    25
    %
   Operating Expenses
  30




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##### Table of Contents



Operating Income
  (In thousands)
    
    2005
    
    
    2004
    
    
    IncreaseDistribution
    
    $
    157,239
    
    
    $
    137,213
    
    
    $
    20,026
    
    
    
    15
    %All Other Operations
    
    
    45,215
    
    
    
    31,331
    
    
    
    13,884
    
    
    
    44
    %$
    202,454
    
    
    $
    168,544
    
    
    $
    33,910
    
    
    
    20
    %
   Interest Expense and Discount on Securitization of Trade Receivables
  Income Tax Expense
  Minority Interest and Equity Earnings of Unconsolidated Affiliate
   31




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Income from Continuing Operations
  Income (loss) from Discontinued Operations
  Net Earnings
  32




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LIQUIDITY AND CAPITAL RESOURCES
 Fiscal 2006 Cash Flows
     Dividends
  33




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Stock Repurchase Plan
  Financial Instruments
 Senior Credit Agreement
   Money Market Loans
  Medium-Term Notes
  34




---



##### Table of Contents



Senior Subordinated Notes
    Acquisition and Other Notes
  Total Borrowing Capacity
   35




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Financial Instruments of the National Welders Joint Venture
 Consolidation of Variable Interest Entities
    Trade Receivables Securitization
  Interest Rate Swap Agreements
  36




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37




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OTHER
 Critical Accounting Estimates
  Trade Receivables
  Inventories
  38




---



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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
  (In thousands)
    
    
    
    
    
    Payments Due by PeriodContractual and Off-Balance Sheet
    
    
    
    
    
    Less than 1
    
    
    
    
    
    
    
    
    
    More than 5Obligations
    
    Total
    
    Year
    
    1 to 3 Years
    
    3 to 5 Years
    
    YearsObligations reflected on the March 31, 2006 Balance Sheet:Long-term debt (1)
    
    $
    767,627
    
    
    $
    131,901
    
    
    $
    64,664
    
    
    $
    194,453
    
    
    $
    376,609Estimated interest payments on
long-term debt (2)
    
    
    241,595
    
    
    
    49,852
    
    
    
    81,136
    
    
    
    65,736
    
    
    
    44,871Estimated payments (receipts) on
interest rate swap agreements (3)
    
    
    (963
    )
    
    
    (275
    )
    
    
    (550
    )
    
    
    (138
    )
    
    
    Off-balance sheet obligations as of March 31, 2006:Operating leases (4)
    
    
    189,367
    
    
    
    55,825
    
    
    
    79,892
    
    
    
    41,532
    
    
    
    12,118Trade receivables
securitization (5)
    
    
    244,200
    
    
    
    
    
    
    
    244,200
    
    
    
    
    
    
    
    Estimated discount on
securitization (6)
    
    
    23,870
    
    
    
    12,454
    
    
    
    11,416
    
    
    
    
    
    
    
    Letters of credit (7)
    
    
    34,752
    
    
    
    34,752
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations:Liquid bulk gas supply
agreements (8)
    
    
    666,834
    
    
    
    80,588
    
    
    
    112,659
    
    
    
    109,485
    
    
    
    364,102Liquid carbon dioxide supply
agreements (9)
    
    
    160,632
    
    
    
    13,260
    
    
    
    18,416
    
    
    
    15,456
    
    
    
    113,500Ammonia supply agreements (10)
    
    
    9,956
    
    
    
    9,956
    
    
    
    
    
    
    
    
    
    
    
    Other purchase
commitments (11)
    
    
    16,078
    
    
    
    15,661
    
    
    
    278
    
    
    
    139
    
    
    
    Total
    
    $
    2,353,948
    
    
    $
    403,974
    
    
    $
    612,111
    
    
    $
    426,663
    
    
    $
    911,200
 
 (1)
    
    Aggregate long-term debt instruments are reflected in the Consolidated Balance Sheet as
of March 31, 2006. Long-term debt includes capital lease obligations, which were not
material and, therefore, did not warrant separate disclosure. See Note 10 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 as of March 31, 2006. 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 40




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##### Table of Contents



compared to contractual 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, 2006. 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 $109 million in fleet vehicles
under long-term operating leases. The Company guarantees a residual value of $14 million
related to its leased vehicles.(5)
    
    The Company participates in a securitization agreement with two commercial banks to
sell up to $250 million of qualifying trade receivables. The agreement expires in February
2008, but may be renewed subject to provisions contained in the agreement. Under the
securitization agreement, on a monthly basis, eligible trade receivables are sold to two
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 on its
revolving credit facilities. The securitization agreement is a form of off-balance sheet
financing. Also see Note 13 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, 2006. 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. These claims are supported
by an arrangement with a financial institution.(8)
    
    In connection with the Air Products acquisition, the Company entered into a 15-year
take-or-pay supply agreement, expiring September 1, 2017, under which Air Products will
supply at least 35% of the Companys bulk liquid nitrogen, oxygen and argon requirements,
exclusive of the volumes purchased under the BOC supply agreements noted below.
Additionally, the Company has commitments to purchase helium under the terms of the supply
agreement. Based on the volume of fiscal 2006 purchases, the Air Products supply agreement
represents approximately $47 million in annual liquid bulk gas purchases. The purchase
commitments for future periods contained in the table above reflect estimates based on
fiscal 2006 purchases.In July 2004, the Company entered into a 15-year take-or-pay supply agreement with BOC to
purchase oxygen, nitrogen, argon and helium. The agreement was entered into in conjunction
with the July 2004 acquisition of BOCs U.S. packaged gas business. The agreement will
expire in July 2019. The 2004 BOC agreement represents approximately $7 million in annual
bulk gas purchases. Prior to the acquisition, the Company purchased oxygen, nitrogen, argon
and helium under an agreement with BOC which expires in February 2007. Minimum purchases
through February 2007 under the pre-acquisition supply agreement are approximately $19
million.Both the Air Products and BOC supply agreements contain market pricing subject to certain
economic indices and market analysis. The Company believes the minimum product purchases
under the agreements are well 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. 41




---



##### Table of Contents



(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 2006 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 two of those sources, the
Company has minimum purchase commitments under supply agreements. One agreement expires in
June 2006. The other agreement is perpetual pending a 180 day written notification of
termination from either party.(11)
    
    Other purchase commitments primarily include property, plant and equipment expenditures. New Accounting Pronouncements
 Share-Based Payment Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees
 Inventory Costs Inventory Pricing
 Exchanges of Nonmonetary Assets, Accounting for Nonmonetary Transactions
 42




---



##### Table of Contents



Accounting Changes and Error Corrections,
 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
 Forward-looking Statements
  43




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44




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
   Fiscal year of MaturityFair(In millions)
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total
    
    ValueFixed Rate DebtMedium-term notes
    
    $
    100
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    100
    
    
    $
    101Interest expense
    
    $
    4
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4Average interest rate
    
    
    7.75
    %Acquisition and other notes
    
    $
    
    
    
    $
    1
    
    
    $
    
    
    
    $
    2
    
    
    $
    
    
    
    $
    
    
    
    $
    3
    
    
    $
    3Interest expense
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    
    
    
    $
    0.4Average interest rate
    
    
    5.62
    %
    
    
    5.89
    %
    
    
    5.65
    %
    
    
    5.94
    %Senior subordinated
notes due 2011
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    225
    
    
    $
    225
    
    
    $
    238Interest expense
    
    $
    21
    
    
    $
    21
    
    
    $
    21
    
    
    $
    21
    
    
    $
    21
    
    
    $
    10
    
    
    $
    115Interest rate
    
    
    9.125
    %
    
    
    9.125
    %
    
    
    9.125
    %
    
    
    9.125
    %
    
    
    9.125
    %
    
    
    9.125
    %Senior subordinated
notes due 2014
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    150
    
    
    $
    150
    
    
    $
    148Interest expense
    
    $
    9
    
    
    $
    9
    
    
    $
    9
    
    
    $
    9
    
    
    $
    9
    
    
    $
    34
    
    
    $
    79Interest rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %National Welders:Term loan C
    
    $
    2
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2
    
    
    $
    2Interest expense
    
    $
    0.1
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.1Interest rate
    
    
    7.00
    %
 45




---



##### Table of Contents



Fiscal year of MaturityFair(In millions)
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total
    
    ValueVariable Rate DebtRevolving credit facilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    112
    
    
    $
    
    
    
    $
    
    
    
    $
    112
    
    
    $
    112Interest expense
    
    $
    6
    
    
    $
    6
    
    
    $
    6
    
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    23Interest rate (a)
    
    
    5.57
    %
    
    
    5.57
    %
    
    
    5.57
    %
    
    
    5.57
    %Term loan
    
    $
    15
    
    
    $
    15
    
    
    $
    21
    
    
    $
    30
    
    
    $
    
    
    
    $
    
    
    
    $
    81
    
    
    $
    81Interest expense
    
    $
    4
    
    
    $
    4
    
    
    $
    3
    
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    12Interest rate (a)
    
    
    5.93
    %
    
    
    5.93
    %
    
    
    5.93
    %
    
    
    5.93
    %Money market loans
    
    $
    25
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    25
    
    
    $
    25Interest expense
    
    $
    0.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.8Interest rate (a)
    
    
    5.26
    %National Welders:Revolving credit facility
    
    $
    
    
    
    $
    
    
    
    $
    51
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    51
    
    
    $
    51Interest expense
    
    $
    2.9
    
    
    $
    2.9
    
    
    $
    1.2
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7.0Interest rate (a)
    
    
    5.70
    %
    
    
    5.70
    %
    
    
    5.70
    %Term loan A
    
    $
    3
    
    
    $
    12
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    15
    
    
    $
    15Interest expense
    
    $
    0.8
    
    
    $
    0.7
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1.5Interest rate (a)
    
    
    5.70
    %
    
    
    5.70
    %
 Fiscal year of MaturityFair(In millions)
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total
    
    ValueInterest Rate Swaps:US $ denominated Swaps:2 Swaps Receive Variable/Pay FixedNotional amounts
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50
    
    
    $
    (1.4
    )Swap payments/(receipts)
    
    $
    (0.3
    )
    
    $
    (0.3
    )
    
    $
    (0.3
    )
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    
    
    
    $
    (1.0
    )Variable Receive rate = 4.70%
(1-month LIBOR)Weighted average pay rate = 4.15%Other Off-Balance SheetLIBOR-based agreements:Trade receivable securitization (b)
    
    $
    
    
    
    $
    244
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    244
    
    
    
    244Discount on securitization
    
    $
    12
    
    
    $
    11
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23
 
 (a)
    
    The variable rate of U.S. revolving credit facilities and term loan is based on LIBOR as of
March 31, 2006. The variable rate of the Canadian dollar portion of the revolving credit
facilities is the rate on Canadian Bankers acceptances as of March 31, 2006.(b)
    
    The agreement expires in February 2008, but is subject to renewal provisions contained in the
agreement. 46




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##### Table of Contents



Limitations of the tabular presentation
  Foreign Currency Rate Risk
  47




---



##### 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
   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
    
    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).4.8
    
    Form of Airgas, Inc. Medium-Term Note (Fixed Rate). (Incorporated by reference to
Exhibit 4.6 to the Companys Registration Statement on Form S-4 No. 333-23651 dated March
20, 1997).4.9
    
    Form of Airgas, Inc. Medium-Term Note (Floating Rate). (Incorporated by
reference to Exhibit 4.7 to the Companys Registration Statement on Form S-4 No. 333-23651
dated March 20, 1997).4.10
    
    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 April 1, 1997, between Airgas, Inc. and The Bank of New York, N.A., as Rights
Agent, which includes as Exhibit B thereto the Form of Right Certificate. (Incorporated by reference to Exhibit
1.1 to the Companys Form 8-A filed on April 28, 1997).
 51




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##### Table of Contents



Exhibit No.
    
    Description4.15
    
    First Amendment, dated November 12, 1998, to the Rights Agreement dated as of April 1,
1997, between Airgas, Inc. and The Bank of New York. (Incorporated by reference to Exhibit 4
to the Companys December 31, 1998 Quarterly Report on Form 10-Q).*10.1
    
    Amended and Restated 1984 Stock Option Plan, as amended effective May 22, 1995.
(Incorporated by reference to Exhibit 10.1 to the Companys September 30, 1995 Quarterly
Report on Form 10-Q).*10.2
    
    1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) as amended 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
    
    2001 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4 to the
Companys Registration Statement on Form S-8 No. 333-69214 dated September 10, 2001).*10.4
    
    2003 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4 to the
Companys Registration Statement on Form S-8 No. 333-107872 dated August 12, 2003).*10.5
    
    Joint Venture Agreement dated June 28, 1996 between Airgas, Inc. and National Welders
Supply Company, Inc. and J.A. Turner, III, and Linerieux B. Turner and Molo Limited
Partnership, Turner (1996) Limited partnership, Charitable Remainder Unitrust for James A.
Turner, Jr. and Foundation for the Carolinas. (Incorporated by reference to Exhibit 2.1 to
the Companys June 28, 1996 Report on Form 8-K).*10.6
    
    Letter dated July 24, 1992 between Airgas, Inc. (on behalf of the Nominating and
Compensation Committee) and Peter McCausland regarding the severance agreement between the
Company and Peter McCausland. (Incorporated by reference to Exhibit 10.9 to the Companys
March 31, 1997 Report on Form 10-K).*10.7
    
    1997 Stock Option Plan, 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).*10.8
    
    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).*10.9
    
    Employee Benefits Trust Agreement, dated March 30, 1999, between Airgas, Inc. and First
Union National Bank, as Trustee, which includes as Exhibit 1 thereto the Common Stock Purchase
Agreement, dated March 30, 1999, between Airgas, Inc. and First Union National Bank, as
Trustee, and Exhibit 2 thereto the Promissory Note, dated March 31, 1999, between Airgas, Inc.
and First Union National Bank, as Trustee. (Incorporated by reference to Exhibit 10.12 to the
Companys March 31, 1999 Report on Form 10-K).*10.10
    
    Employee Benefits Trust Amendment Letter, dated March 7, 2000, between Airgas, Inc. and First Union National Bank,
as Trustee. (Incorporated by reference to Exhibit 10.13 to the Companys March 31, 2000 Report on Form 10-K).
 52




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##### Table of Contents



Exhibit No.
    
    Description*10.11
    
    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).*10.12
    
    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). Nine other Executive Officers are
parties to substantially identical agreements.*10.13
    
    Separation Agreement and General Release of All Claims between Airgas, Inc. and Glenn M. Fischer effective as
of January 14, 2005. (Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
dated January 13, 2005).*10.14
    
    Airgas, Inc. 2004 Executive Bonus Plan. (Incorporated by reference to Exhibit 10.14 to the Companys March
31, 2005 Form 10-K).11
    
    Statement re: computation of earnings per share.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 Roger F. Millay 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 Roger F. Millay 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,
    
    June 14, 2006President and Chief Executive Officer(Peter McCausland)/s/ Roger F. Millay
    
    Senior Vice President and
    
    June 14, 2006Chief Financial Officer(Roger F. Millay)
    
    (Principal Financial Officer)/s/ Robert M. McLaughlin
    
    Vice President and Controller
    
    June 14, 2006(Principal Accounting Officer)(Robert M. McLaughlin)/s/ William O. Albertini
    
    Director
    
    June 14, 2006(William O. Albertini)/s/ W. Thacher Brown
    
    Director
    
    June 14, 2006(W. Thacher Brown)/s/ James W. Hovey
    
    Director
    
    June 14, 2006(James W. Hovey)
 54




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Richard C. Ill
    
    Director
    
    June 14, 2006(Richard C. Ill)/s/ Paula A. Sneed
    
    Director
    
    June 14, 2006(Paula A. Sneed)/s/ David M. Stout
    
    Director
    
    June 14, 2006(David M. Stout)/s/ Lee M. Thomas
    
    Director
    
    June 14, 2006(Lee M. Thomas)/s/ Robert L. Yohe
    
    Director
    
    June 14, 2006(Robert L. Yohe)
 55




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##### Table of Contents



SIGNATURES
   Airgas East, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ James A. Muller
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(James A. Muller)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    June 14, 2006(B. Shaun Powers)
 56




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##### Table of Contents



SIGNATURES
   Airgas Great Lakes, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Michael Ziegler
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Michael Ziegler)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    June 14, 2006(B. Shaun Powers)
 57




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##### Table of Contents



SIGNATURES
   Airgas Mid America, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ J. Robert Hilliard
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(J. Robert Hilliard)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    June 14, 2006(B. Shaun Powers)
 58




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##### Table of Contents



SIGNATURES
   Airgas North Central, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Ronald Stark
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Ronald Stark)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    June 14, 2006(B. Shaun Powers)
 59




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##### Table of Contents



SIGNATURES
   Airgas South, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ L. Jay Sullivan
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(L. Jay Sullivan)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    June 14, 2006(B. Shaun Powers)
 60




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##### Table of Contents



SIGNATURES
   Airgas Gulf States, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Henry B. Coker, III
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Henry B. Coker, III)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    June 14, 2006(B. Shaun Powers)
 61




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##### Table of Contents



SIGNATURES
   Airgas Mid South, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ D. Michael Duvall
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(D. Michael Duvall)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    June 14, 2006(Max D. Hooper)
 62




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##### Table of Contents



SIGNATURES
   Airgas Intermountain, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Doug Jones
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Doug Jones)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    June 14, 2006(Max D. Hooper)
 63




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##### Table of Contents



SIGNATURES
   Airgas Nor Pac, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Daniel L. Tatro
    
    President and Director
    
    June  14, 2006(Principal Executive Officer)(Daniel L. Tatro)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June  14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    June  14, 2006(Max D. Hooper)
 64




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##### Table of Contents



SIGNATURES
   Airgas Northern California & Nevada, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ James D. McCarthy
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(James D. McCarthy)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    June  14, 2006(Max D. Hooper)
 65




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##### Table of Contents



SIGNATURES
   Airgas Southwest, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ J. Brent Sparks
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(J. Brent Sparks)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ Max D. Hooper
    
    Director
    
    June 14, 2006(Max D. Hooper)
 66




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##### Table of Contents



SIGNATURES
   Airgas West, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Glen Irving
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Glen Irving)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/Max D. Hooper
    
    Director
    
    June 14, 2006(Max D. Hooper)
 67




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##### Table of Contents



SIGNATURES
   Airgas Safety, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Don Carlino
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Don Carlino)/s/ Michael L. Molinini
    
    Director
    
    June 14, 2006(Michael L. Molinini)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)
 68




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##### Table of Contents



SIGNATURES
   Airgas Carbonic, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Philip J. Filer
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Philip J. Filer)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ Peter McCausland
    
    Director
    
    June 14, 2006(Peter McCausland)
 69




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##### Table of Contents



SIGNATURES
   Airgas Specialty Gases, Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ William Russo
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(William Russo)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ Michael E. Rohde
    
    Director
    
    June 14, 2006(Michael E. Rohde)
 70




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##### Table of Contents



SIGNATURES
   Nitrous Oxide Corp.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Ted Schulte
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Ted Schulte)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)
 71




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##### Table of Contents



SIGNATURES
   Red-D-Arc Inc.
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President and Director
  Signature
    
    Title
    
    Date/s/ Mitch M. Imielinski
    
    President and Director
    
    June 14, 2006(Principal Executive Officer)(Mitch M. Imielinski)/s/ Robert M. McLaughlin
    
    Vice President and Director
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)/s/ B. Shaun Powers
    
    Director
    
    June 14, 2006(B. Shaun Powers)
 72




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##### Table of Contents



SIGNATURES
   ATNL, Inc.
(Registrant)By:
    
    /s/ Melanie AndrewsMelanie Andrews
President
  Signature
    
    Title
    
    Date/s/ Melanie Andrews
    
    President
    
    June 14, 2006(Principal Executive Officer/(Melanie Andrews)
    
    Principal Financial Officer/Principal Accounting Officer)/s/ Robert M. McLaughlin
    
    Director
    
    June 14, 2006(Robert M. McLaughlin)/s/ Joseph C. Sullivan
    
    Director
    
    June 14, 2006(Joseph C. Sullivan)/s/ Keith R. Sattesahn
    
    Director
    
    June 14, 2006(Keith R. Sattesahn)/s/ Gordon W. Stewart
    
    Director
    
    June 14, 2006(Gordon W. Stewart)
 73




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##### Table of Contents



SIGNATURES
   Airgas Data, LLC
(Registrant)By:
    
    /s/ Robert M. McLaughlinRobert M. McLaughlin
Vice President
  Signature
    
    Title
    
    Date/s/ Carey M. Verger
    
    President and Member
    
    June 14, 2006(Principal Executive Officer)(Carey M. Verger)/s/ Robert M. McLaughlin
    
    Vice President
    
    June 14, 2006(Principal Financial Officer/(Robert M. McLaughlin)
    
    Principal Accounting Officer)
 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, 2006, 2005 and 2004
    
    F-7Consolidated Balance Sheets as of March 31, 2006 and 2005
    
    F-8Consolidated Statements of Stockholders Equity for the
Years Ended March 31, 2006, 2005 and 2004
    
    F-9Consolidated Statements of Cash Flows for the Years Ended
March 31, 2006, 2005 and 2004
    
    F-10Notes to Consolidated Financial Statements
    
    F-11Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    
    F-58
  F-1




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##### Table of Contents



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




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##### Table of Contents



Internal Control-Integrated
Framework
 Accounting for Conditional Asset Retirement
Obligations, an interpretation of Statement of Financial Accounting Standards No. 143, Accounting
for Asset Retirement Obligations Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51.
 
 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, an interpretation of ARB No. 51
 F-5




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##### Table of Contents



Accounting for Conditional Asset Retirement Obligations, an
interpretation of Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51.
 
 F-6




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##### Table of Contents



AIRGAS,
INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 (In thousands, except per share amounts)
    
    Years Ended March 31,2006
    
    2005
    
    2004Net Sales
    
    $
    2,829,610
    
    
    $
    2,367,782
    
    
    $
    1,855,360Cost and ExpensesCost of products sold (excluding depreciation expense)
    
    
    1,401,978
    
    
    
    1,151,782
    
    
    
    883,100Selling, distribution and administrative expenses
    
    
    1,031,332
    
    
    
    902,468
    
    
    
    717,045Depreciation
    
    
    122,396
    
    
    
    105,614
    
    
    
    82,058Amortization (Note 8)
    
    
    5,146
    
    
    
    5,464
    
    
    
    5,389Special charges (recoveries), net (Note 4)
    
    
    
    
    
    
    
    
    
    
    (776
    )Total costs and expenses
    
    
    2,560,852
    
    
    
    2,165,328
    
    
    
    1,686,816Operating income
    
    
    268,758
    
    
    
    202,454
    
    
    
    168,544Interest expense, net (Note 17)
    
    
    (53,812
    )
    
    
    (51,245
    )
    
    
    (42,357
    )Discount on securitization of trade receivables (Note 13)
    
    
    (9,371
    )
    
    
    (4,711
    )
    
    
    (3,264
    )Other income (expense), net
    
    
    2,462
    
    
    
    1,129
    
    
    
    1,472Earnings from continuing operations before income taxes,
minority interest and equity earnings
    
    
    208,037
    
    
    
    147,627
    
    
    
    124,395Income taxes (Note 18)
    
    
    (77,866
    )
    
    
    (54,261
    )
    
    
    (47,659
    )Minority interest in earnings of consolidated affiliate
    
    
    (2,656
    )
    
    
    (1,808
    )
    
    
    (452
    )Equity in earnings of unconsolidated affiliate
    
    
    
    
    
    
    
    
    
    
    4,365Income from continuing operations before the cumulative effect of
a change in accounting principle
    
    
    127,515
    
    
    
    91,558
    
    
    
    80,649Income (loss) from discontinued operations, net of tax (Note 3)
    
    
    (1,424
    )
    
    
    464
    
    
    
    (457
    )Cumulative effect of a change in accounting principle, net of tax (Note 2)
    
    
    (2,540
    )
    
    
    
    
    
    
    Net Earnings
    
    $
    123,551
    
    
    $
    92,022
    
    
    $
    80,192NET EARNINGS PER COMMON SHARE (NOTE 5)BASICEarnings from continuing operations before the cumulative effect of
a change in accounting principle
    
    $
    1.66
    
    
    $
    1.22
    
    
    $
    1.11Earnings (loss) from discontinued operations
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )Cumulative effect of a change in accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    Net earnings per share
    
    $
    1.61
    
    
    $
    1.23
    
    
    $
    1.10DILUTEDEarnings from continuing operations before the cumulative effect of
a change in accounting principle
    
    $
    1.62
    
    
    $
    1.19
    
    
    $
    1.08Earnings (loss) from discontinued operations
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )Cumulative effect of a change in accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    Net earnings per share
    
    $
    1.57
    
    
    $
    1.20
    
    
    $
    1.07Weighted average shares outstanding:Basic
    
    
    76,624
    
    
    
    74,911
    
    
    
    72,761Diluted
    
    
    81,152
    
    
    
    76,957
    
    
    
    74,672Comprehensive income
    
    $
    125,693
    
    
    $
    97,197
    
    
    $
    82,488
  F-7




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 March 31,(In thousands)
    
    2006
    
    
    2005ASSETSCurrent AssetsCash
    
    $
    34,985
    
    
    $
    32,640Trade receivables, less allowances for doubtful accounts of $14,782 in 2006
and $11,108 in 2005 (Note 13)
    
    
    132,245
    
    
    
    148,834Inventories, net (Note 6)
    
    
    229,523
    
    
    
    221,609Deferred income tax asset, net (Note
18)
    
    
    30,141
    
    
    
    26,263Prepaid expenses and other current assets
    
    
    31,622
    
    
    
    36,911Total current assets
    
    
    458,516
    
    
    
    466,257Plant and equipment at cost (Note 7)
    
    
    2,191,673
    
    
    
    1,971,218Less accumulated depreciation
    
    
    (792,916
    )
    
    
    (701,876
    )Plant and equipment, net
    
    
    1,398,757
    
    
    
    1,269,342Goodwill (Note 8)
    
    
    566,074
    
    
    
    511,196Other intangible assets, net (Note 8)
    
    
    26,248
    
    
    
    16,507Other non-current assets
    
    
    24,817
    
    
    
    28,561Total assets
    
    $
    2,474,412
    
    
    $
    2,291,863LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable, trade
    
    $
    143,752
    
    
    $
    143,208Accrued expenses and other current liabilities (Note 9)
    
    
    200,001
    
    
    
    183,132Current portion of long-term debt (Note 10)
    
    
    131,901
    
    
    
    6,948Total current liabilities
    
    
    475,654
    
    
    
    333,288Long-term debt, excluding current portion (Note 10)
    
    
    635,726
    
    
    
    801,635Deferred income tax liability, net (Note 18)
    
    
    327,818
    
    
    
    282,186Other non-current liabilities
    
    
    30,864
    
    
    
    24,391Minority interest in affiliate (Note 16)
    
    
    57,191
    
    
    
    36,191Commitments and contingencies (Note 22)Stockholders Equity(Note 14)Preferred stock, no par value, 20,000 shares authorized, no shares issued or
outstanding in 2006 and 2005
    
    
    
    
    
    
    Common stock, par value $0.01 per share, 200,000 shares authorized,
78,569 and 77,467 shares issued in 2006 and 2005, respectively
    
    
    786
    
    
    
    775Capital in excess of par value
    
    
    289,598
    
    
    
    257,042Retained earnings
    
    
    665,158
    
    
    
    560,056Accumulated other comprehensive income
    
    
    4,751
    
    
    
    2,609Treasury stock 1,292 and 1,356 common shares at cost in 2006
and 2005, respectively
    
    
    (13,134
    )
    
    
    (3,765
    )Employee benefits trust, no shares and 338 common shares at cost in 2006
and 2005, respectively
    
    
    
    
    
    
    (2,545
    )Total stockholders equity
    
    
    947,159
    
    
    
    814,172Total liabilities and stockholders equity
    
    $
    2,474,412
    
    
    $
    2,291,863
  F-8




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Years Ended March 31, 2006, 2005, and 2004Shares 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, 2003
    
    
    76,373
    
    
    $
    764
    
    
    $
    216,275
    
    
    $
    413,286
    
    
    $
    (3,302
    )
    
    $
    (4,289
    )
    
    $
    (25,801
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,192Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,573
    
    
    
    
    
    
    
    
    
    
    
    1,573Shares
issued in 
connection with
stock 
options exercised 
(Note 15)
    
    
    786
    
    
    
    8
    
    
    
    8,395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,728Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    6,190Airgas common stock owned by
National Welders (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (369
    )Dividends paid on common stock
($0.16 per share) (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,801
    )Shares issued from Employee Benefits Trust
for Employee Stock Purchase Plan
    
    
    
    
    
    
    
    
    
    
    2,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,175Net change in fair value of interest rate swap
agreements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,964
    
    
    
    
    
    
    
    
    
    
    
    1,964Consolidation of National Welders interest rate
swap agreement, net of cumulative
tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,560
    )Net tax expense of comprehensive income items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,241
    )
    
    
    
    
    
    
    
    
    
    
    (1,241
    )Balance  March 31, 2004
    
    
    77,159
    
    
    $
    772
    
    
    $
    233,574
    
    
    $
    481,677
    
    
    $
    (2,566
    )
    
    $
    (4,658
    )
    
    $
    (16,898
    )
    
    $
    82,488Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,022Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,314
    
    
    
    
    
    
    
    
    
    
    
    2,314Shares
issued in 
connection with
stock 
options exercised 
(Note 15)
    
    
    308
    
    
    
    3
    
    
    
    10,278
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,095Shares issued from treasury stock associated
with warrants exercised (Note 14)
    
    
    
    
    
    
    
    
    
    
    (893
    )
    
    
    
    
    
    
    
    
    
    
    893Dividends paid on common stock
($0.18 per share) (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,894
    
    
    
    
    
    
    
    
    
    
    
    2,894Net change in fair value of National Welders
interest rate swap agreement (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 15)
    
    
    570
    
    
    
    6
    
    
    
    14,136
    
    
    
    
    
    
    
    
    
    
    
    3,402
    
    
    
    2,545Purchase of treasury stock (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,771
    )Dividends paid on common stock
($0.24 per share) (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,449
    )Tax benefit associated with exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    7,891Shares
issued in 
connection with the

Employee Stock 
Purchase Plan 
(Note 15)
    
    
    532
    
    
    
    5
    
    
    
    10,529Net change in fair value of interest rate swap
agreements (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    867
    
    
    
    
    
    
    
    
    
    
    
    867Net change in fair value of National Welders
interest rate swap agreement (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    $
    
    
    
    $
    125,693
  F-9




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended March 31,2006
    
    2005
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet earnings
    
    $
    123,551
    
    
    $
    92,022
    
    
    $
    80,192Adjustments to reconcile net earnings to net cash provided by
operating activities:Depreciation
    
    
    122,396
    
    
    
    105,614
    
    
    
    82,058Amortization
    
    
    5,146
    
    
    
    5,464
    
    
    
    5,389Deferred income taxes
    
    
    47,148
    
    
    
    31,639
    
    
    
    23,036Equity in earnings of unconsolidated affiliate
    
    
    
    
    
    
    
    
    
    
    (4,365
    )(Gain)/ loss on divestiture
    
    
    1,900
    
    
    
    (360
    )
    
    
    Gain on sales of plant and equipment
    
    
    (1,330
    )
    
    
    (321
    )
    
    
    (837
    )Minority interest in earnings
    
    
    2,656
    
    
    
    1,808
    
    
    
    452Stock issued for employee stock purchase plan
    
    
    10,534
    
    
    
    9,907
    
    
    
    6,889Cumulative 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
    
    
    54,300
    
    
    
    27,300
    
    
    
    3,700Trade receivables, net
    
    
    (17,021
    )
    
    
    (39,583
    )
    
    
    (15,901
    )Inventories, net
    
    
    (14,087
    )
    
    
    (32,356
    )
    
    
    (5,586
    )Prepaid expenses and other current assets
    
    
    12,603
    
    
    
    (8,149
    )
    
    
    10,146Accounts payable, trade
    
    
    1,533
    
    
    
    27,984
    
    
    
    20,845Accrued expenses and other current liabilities
    
    
    9,323
    
    
    
    (574
    )
    
    
    4,687Other non-current assets
    
    
    3,340
    
    
    
    4,107
    
    
    
    2,399Other non-current liabilities
    
    
    (2,363
    )
    
    
    (2,185
    )
    
    
    (2,425
    )Net cash provided by operating activities
    
    
    362,169
    
    
    
    222,317
    
    
    
    210,679CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (214,193
    )
    
    
    (167,977
    )
    
    
    (93,749
    )Proceeds from sales of plant and equipment
    
    
    8,202
    
    
    
    5,361
    
    
    
    5,347Proceeds from divestitures
    
    
    14,562
    
    
    
    828
    
    
    
    Business acquisitions and holdback settlements
    
    
    (153,428
    )
    
    
    (191,820
    )
    
    
    (34,907
    )Management fees from unconsolidated affiliate
    
    
    
    
    
    
    
    
    
    
    724Other, net
    
    
    170
    
    
    
    171
    
    
    
    (1,369
    )Net cash used in investing activities
    
    
    (344,687
    )
    
    
    (353,437
    )
    
    
    (123,954
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings
    
    
    568,379
    
    
    
    621,450
    
    
    
    414,297Repayment of debt
    
    
    (606,532
    )
    
    
    (494,684
    )
    
    
    (485,004
    )Purchase of treasury stock
    
    
    (12,771
    )
    
    
    
    
    
    
    Financing costs
    
    
    
    
    
    
    (2,531
    )
    
    
    (2,737
    )Termination of interest rate hedge
    
    
    
    
    
    
    3,948
    
    
    
    Minority interest in earnings
    
    
    (2,656
    )
    
    
    (1,808
    )
    
    
    (452
    )Exercise of stock options
    
    
    19,707
    
    
    
    20,374
    
    
    
    13,130Minority stockholder note prepayment
    
    
    21,000
    
    
    
    
    
    
    
    Dividends paid to stockholders
    
    
    (18,449
    )
    
    
    (13,643
    )
    
    
    (11,801
    )Cash overdraft
    
    
    16,185
    
    
    
    5,592
    
    
    
    (10,516
    )Net cash provided by (used in) financing activities
    
    
    (15,137
    )
    
    
    138,698
    
    
    
    (83,083
    )CHANGE IN CASH
    
    $
    2,345
    
    
    $
    7,578
    
    
    $
    3,642Cash  Beginning of year
    
    
    32,640
    
    
    
    25,062
    
    
    
    21,420Cash  End of year
    
    $
    34,985
    
    
    $
    32,640
    
    
    $
    25,062
 
 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
  Cost of Products Sold
  F-14




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##### Table of Contents



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




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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
  FASB Financial Interpretation No. 46
 Consolidation of Variable Interest Entities,
  F-16




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (a) Acquisitions
  Fiscal 2006
  Purchase Price Allocation
  F-17




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  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
  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-18




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal 2004
  Pro Forma Operating Results
  UnauditedYears Ended March 31,(In thousands, except per share amounts)
    
    2006
    
    
    2005
    
    
    2004Net
sales
    
    $
    2,884,110
    
    
    $
    2,645,122
    
    
    $
    2,338,134Net earnings123,444
    
    
    
    94,440
    
    
    
    84,528Diluted earnings per
share
    
    $
    1.57
    
    
    $
    1.23
    
    
    $
    1.13
 Divestitures
 Fiscal 2006
   (Amounts in thousands)
    
    Years Ended March 31,2006
    
    
    2005
    
    
    2004Net
sales
    
    $
    32,738
    
    
    $
    43,627
    
    
    $
    40,108Earnings (loss) before
income taxes
    
    
    (2,391
    )
    
    
    786
    
    
    
    (763
    )
 F-19




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Rutland Tool
 (In thousands)
    
    March 31, 2005Trade receivables, net
    
    $
    6,146Inventories, net
    
    
    15,098Plant and equipment, net
    
    
    1,968$
    23,212Accounts payable and accrued expenses (substantially all
liabilities were not assumed by the purchaser)
    
    $
    4,711
 Fiscal 2005
    F-20




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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)
    
    2006
    
    2005
    
    2004Basic Earnings per Share ComputationNumerator:Income from continuing operations
    
    $
    127,515
    
    
    $
    91,558
    
    
    $
    80,649Income (loss) from discontinued operations
    
    
    (1,424
    )
    
    
    464
    
    
    
    (457
    )Cumulative effect of a change in accounting principle
    
    
    (2,540
    )
    
    
    
    
    
    
    Net earnings
    
    $
    123,551
    
    
    $
    92,022
    
    
    $
    80,192Denominator:Basic shares outstanding
    
    
    76,624
    
    
    
    74,911
    
    
    
    72,761Basic earnings per share from continuing operations
    
    $
    1.66
    
    
    $
    1.22
    
    
    $
    1.11Basic earnings (loss) per share from discontinued
operations
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )Cumulative effect of a change in accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    Basic net earnings per share
    
    $
    1.61
    
    
    $
    1.23
    
    
    $
    1.10
 Years Ended March 31,Diluted Earnings per Share Computation
    
    2006
    
    
    2005 (4)
    
    
    2004 (4)Numerator:Income from continuing operations
    
    $
    127,515
    
    
    $
    91,558
    
    
    $
    80,649Plus: Preferred stock dividends (1) (2)
    
    
    2,845
    
    
    
    
    
    
    
    Plus: Income taxes on earnings of National Welders (3)
    
    
    730
    
    
    
    
    
    
    
    Income from continuing operations assuming preferred
stock conversion
    
    
    131,090
    
    
    
    91,558
    
    
    
    80,649Income (loss) from discontinued operations
    
    
    (1,424
    )
    
    
    464
    
    
    
    (457
    )Cumulative effect of a change in accounting principle
    
    
    (2,540
    )
    
    
    
    
    
    
    Net earnings assuming preferred stock conversion
    
    $
    127,126
    
    
    $
    92,022
    
    
    $
    80,192Denominator:Basic shares outstanding
    
    
    76,624
    
    
    
    74,911
    
    
    
    72,761Incremental shares from assumed conversions:Stock options and warrants
    
    
    2,201
    
    
    
    2,046
    
    
    
    1,911Preferred stock of National Welders (1)
    
    
    2,327
    
    
    
    
    
    
    
    Diluted shares outstanding
    
    
    81,152
    
    
    
    76,957
    
    
    
    74,672Diluted earnings per share from continuing operations
    
    $
    1.62
    
    
    $
    1.19
    
    
    $
    1.08Diluted earnings (loss) per share from discontinued
operations
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.01
    )Diluted loss from the cumulative effect of a
change in accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    Diluted net earnings per share
    
    $
    1.57
    
    
    $
    1.20
    
    
    $
    1.07
 F-21




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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 16). 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)
    
    The assumed conversion of National Welders preferred stock to Airgas common stock is not
presented because it was anti-dilutive.
    March 31,(In thousands)
    
    2006
    
    2005Hardgoods
    
    $
    202,894
    
    
    $
    200,069Gases
    
    
    26,629
    
    
    
    21,540$
    229,523
    
    
    $
    221,609
  F-22




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   March 31,Depreciable(In thousands)
    
    Lives(Yrs)
    
    
    2006
    
    
    2005Land and land improvements
    
    
    
    
    
    $
    75,528
    
    
    $
    65,265Buildings and leasehold improvements
    
    
    25
    
    
    
    219,229
    
    
    
    193,293Cylinders
    
    
    30
    
    
    
    890,789
    
    
    
    835,170Machinery and equipment, including bulk tanks
    
    
    7 to 30
    
    
    
    719,086
    
    
    
    620,902Computers and furniture and fixtures
    
    
    3 to 10
    
    
    
    133,821
    
    
    
    128,111Transportation equipment
    
    
    3 to 15
    
    
    
    142,466
    
    
    
    122,601Construction in progress
    
    
    
    
    
    
    10,754
    
    
    
    5,876$
    2,191,673
    
    
    $
    1,971,218
   All OtherDistribution
    
    Operations(In thousands)
    
    Segment
    
    Segment
    
    TotalBalance at March 31, 2004
    
    $
    372,563
    
    
    $
    131,644
    
    
    $
    504,207Acquisitions
    
    
    5,320
    
    
    
    1,174
    
    
    
    6,494Transfers
    
    
    2,172
    
    
    
    (2,172
    )
    
    
    Other adjustments
    
    
    413
    
    
    
    82
    
    
    
    495Balance 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
    
    
    $
    566,074
  F-23




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   March 31,(In thousands)
    
    2006
    
    
    2005Accrued payroll and employee benefits
    
    $
    57,555
    
    
    $
    51,159Business insurance reserves
    
    
    20,930
    
    
    
    19,809Health insurance reserves
    
    
    9,734
    
    
    
    11,115Accrued interest expense
    
    
    14,910
    
    
    
    15,532Taxes other than income taxes
    
    
    13,590
    
    
    
    9,211Cash overdraft
    
    
    40,155
    
    
    
    23,970Contingent consideration  BOC acquisition
    
    
    
    
    
    
    25,000Other accrued expenses and current liabilities
    
    
    43,127
    
    
    
    27,336$
    200,001
    
    
    $
    183,132
   March 31,(In thousands)
    
    2006
    
    
    2005Revolving credit borrowings
    
    $
    112,009
    
    
    $
    157,832Term loan
    
    
    81,250
    
    
    
    96,250Money market loans
    
    
    25,000
    
    
    
    Medium-term notes
    
    
    100,751
    
    
    
    102,207Senior subordinated notes
    
    
    376,532
    
    
    
    376,741Acquisition and other notes
    
    
    3,025
    
    
    
    9,534National Welders debt
    
    
    69,060
    
    
    
    66,019Total long-term debt
    
    
    767,627
    
    
    
    808,583Less current portion of long-term debt
    
    
    (131,901
    )
    
    
    (6,948
    )Long-term debt, excluding current portion
    
    $
    635,726
    
    
    $
    801,635
 F-24




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Senior Credit Agreement
   Money Market Loans
  Medium-Term Notes
  Senior Subordinated Notes
  F-25




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Acquisition and Other Notes
  Total Borrowing Capacity
  F-26




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Debt of the National Welders Joint Venture
  March 31,(In thousands)
    
    2006
    
    
    2005Revolving credit borrowings
    
    $
    51,393
    
    
    $
    22,189Term loan A
    
    
    15,042
    
    
    
    18,092Term loan B
    
    
    
    
    
    
    21,000Term loan C
    
    
    1,622
    
    
    
    3,572Acquisition notes and other debt obligations
    
    
    1,003
    
    
    
    1,166Total long-term debt
    
    
    69,060
    
    
    
    66,019Less current portion of long-term debt
    
    
    (5,589
    )
    
    
    (6,076
    )Long-term debt, excluding current portion
    
    $
    63,471
    
    
    $
    59,943
    F-27




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Aggregate Long-term Debt Maturities
  (In thousands)Years Ending March 31,
    
    
    
    
    
    NationalAirgas, Inc.(1)
    
    
    Welders
    
    
    Total2007
    
    $
    126,312
    
    
    $
    5,589
    
    
    $
    131,9012008
    
    
    833
    
    
    
    12,001
    
    
    
    12,8342009
    
    
    437
    
    
    
    51,393
    
    
    
    51,8302010
    
    
    194,409
    
    
    
    
    
    
    
    194,4092011
    
    
    44
    
    
    
    
    
    
    
    44Thereafter
    
    
    376,532
    
    
    
    77
    
    
    
    376,609$
    698,567
    
    
    $
    69,060
    
    
    $
    767,627
 
 (1)
    
    The Company has the ability and intention of refinancing current maturities related
to the term loan under its senior credit agreement with its long-term revolving credit
line. Therefore, the term loan has been reflected as long term in the aggregate
maturity schedule.    2006
    
    
    2006
    
    
    2005
    
    
    2005Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(In thousands)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueFinancial Instruments:Revolving credit
borrowings
    
    $
    112,009
    
    
    $
    112,009
    
    
    $
    157,832
    
    
    $
    157,832Term loan
    
    
    81,250
    
    
    
    81,250
    
    
    
    96,250
    
    
    
    96,250Money market loans
    
    
    25,000
    
    
    
    25,000
    
    
    
    
    
    
    
    Medium-term notes
    
    
    100,751
    
    
    
    101,050
    
    
    
    102,207
    
    
    
    103,6252001 senior subordinated
notes
    
    
    226,532
    
    
    
    237,938
    
    
    
    226,741
    
    
    
    244,6882004 senior subordinated
notes
    
    
    150,000
    
    
    
    147,750
    
    
    
    150,000
    
    
    
    150,375Acquisition and other
notes
    
    
    3,025
    
    
    
    3,025
    
    
    
    9,534
    
    
    
    9,534Interest rate swap agreements:- Cash flow hedge  (asset)
liability
    
    
    (1,441
    )
    
    
    (1,441
    )
    
    
    (514
    )
    
    
    (514
    )
 F-28




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   2006
    
    
    2006
    
    
    2005
    
    
    2005Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(In thousands)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueNational Welders Financial Instruments:Revolving credit borrowings
    
    $
    51,393
    
    
    $
    51,393
    
    
    $
    22,189
    
    
    $
    22,189Term loan A
    
    
    15,042
    
    
    
    15,042
    
    
    
    18,092
    
    
    
    18,092Term loan B
    
    
    
    
    
    
    
    
    
    
    21,000
    
    
    
    21,000Term loan C
    
    
    1,622
    
    
    
    1,631
    
    
    
    3,572
    
    
    
    3,624Acquisition notes and other debt
obligations
    
    
    1,003
    
    
    
    1,003
    
    
    
    1,166
    
    
    
    1,166Interest rate swap agreement:- Cash flow hedge  liability
    
    
    
    
    
    
    
    
    
    
    924
    
    
    
    924
     F-29




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      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
  Common Stock
  Preferred Stock and Redeemable Preferred Stock
 Stockholder Rights Plan
  Dividends
  F-31




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Shares in Employee Benefits Trust
  Stockholder Rights Plan
   Warrants
  Share Repurchase Plan
  F-32




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Share-Based Payment Accounting for
Stock-Based Compensation, Accounting for Stock Issued to Employees
 Years Ended March 31,In thousands, except per share amounts)
    
    2006
    
    
    2005
    
    
    2004Net earnings, as reported
    
    $
    123,551
    
    
    $
    92,022
    
    
    $
    80,192Deduct: Total stock-based employee
compensation expense determined under fair
value based methods for all awards, net of
related tax effects
    
    
    (8,035
    )
    
    
    (6,868
    )
    
    
    (5,469
    )Pro forma net earnings
    
    $
    115,516
    
    
    $
    85,154
    
    
    $
    74,723Earnings per share:Basic  as reported
    
    $
    1.61
    
    
    $
    1.23
    
    
    $
    1.10Basic  pro forma
    
    $
    1.51
    
    
    $
    1.14
    
    
    $
    1.03Diluted  as reported
    
    $
    1.57
    
    
    $
    1.20
    
    
    $
    1.07Diluted  pro forma
    
    $
    1.47
    
    
    $
    1.11
    
    
    $
    1.00
  (a) Employee Stock Option Plan
    F-33




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Number ofShares
    
    
    Exercise Price per ShareMarch 31, 2004Outstanding, beginning of year
    
    
    8,185,156
    
    
    $
    4.63
    
    
    
    
    
    
    $
    23.25Granted
    
    
    1,104,800
    
    
    
    
    
    
    
    19.36Exercised
    
    
    (1,364,769
    )
    
    
    5.21
    
    
    
    
    
    
    
    19.00Expired
    
    
    (302,784
    )
    
    
    5.21
    
    
    
    
    
    
    
    22.00March 31, 2005Outstanding, beginning of year
    
    
    7,622,403
    
    
    
    4.63
    
    
    
    
    
    
    
    23.25Granted
    
    
    1,007,500
    
    
    
    
    
    
    
    21.15Exercised
    
    
    (1,605,868
    )
    
    
    5.50
    
    
    
    
    
    
    
    22.87Expired
    
    
    (182,234
    )
    
    
    5.50
    
    
    
    
    
    
    
    22.00March 31, 2006
Outstanding, beginning of year
    
    
    6,841,801
    
    
    
    4.63
    
    
    
    
    
    
    
    23.25Granted
    
    
    1,007,200
    
    
    
    
    
    
    
    24.09Exercised
    
    
    (1,281,944
    )
    
    
    5.44
    
    
    
    
    
    
    
    24.09Expired
    
    
    (94,739
    )
    
    
    5.50
    
    
    
    
    
    
    
    24.09Outstanding, end of year
    
    
    6,472,318
    
    
    $
    4.63
    
    
    
    
    
    
    $
    24.09
  Board of Directors Stock Option Plan
    F-34




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Number ofShares
    
    
    Exercise Price per ShareMarch 31, 2004Outstanding and exercisable, beginning of year
    
    
    492,500
    
    
    $
    5.25
    
    
    
    
    
    
    $
    19.25Granted
    
    
    60,000
    
    
    
    
    
    
    
    18.98Exercised
    
    
    (48,500
    )
    
    
    5.25
    
    
    
    
    
    
    
    13.82March 31, 2005Outstanding and exercisable, beginning of year
    
    
    504,000
    
    
    
    5.25
    
    
    
    
    
    
    
    19.25Granted
    
    
    60,000
    
    
    
    
    
    
    
    21.51Exercised
    
    
    (42,500
    )
    
    
    13.50
    
    
    
    
    
    
    
    19.25March 31, 2006Outstanding and exercisable, beginning of year
    
    
    521,500
    
    
    
    5.25
    
    
    
    
    
    
    
    21.51Granted
    
    
    56,000
    
    
    
    
    
    
    
    29.04Exercised
    
    
    (56,000
    )
    
    
    12.25
    
    
    
    
    
    
    
    19.25Outstanding and exercisable, end of year
    
    
    521,500
    
    
    $
    5.25
    
    
    
    
    
    
    $
    29.04
   Options OutstandingExerciseWeighted Average
    
    Number
    
    
    PriceRemaining Life-Years
    
    Outstanding
    
    
    Per Share4.00
    
    
    803,617
    
    
    $
    4.63
    
    
    
    
    
    
    $
    8.504.36
    
    
    1,162,190
    
    
    
    8.72
    
    
    
    
    
    
    
    11.502.44
    
    
    1,035,217
    
    
    
    12.25
    
    
    
    
    
    
    
    15.946.13
    
    
    809,576
    
    
    
    16.52
    
    
    
    
    
    
    
    16.766.99
    
    
    922,977
    
    
    
    16.86
    
    
    
    
    
    
    
    19.227.99
    
    
    908,052
    
    
    
    19.25
    
    
    
    
    
    
    
    21.157.90
    
    
    1,352,189
    
    
    
    21.25
    
    
    
    
    
    
    
    29.045.74
    
    
    6,993,818
    
    
    $
    4.63
    
    
    
    
    
    
    $
    29.04
 Options ExercisableNumber of Options
    
    Weighted AverageExercisable
    
    Exercise Price Per Share803,617
    
    $
    6.061,162,190
    
    
    9.931,031,456
    
    
    15.16571,139
    
    
    16.53466,710
    
    
    19.15227,469
    
    
    20.96321,416
    
    
    23.094,583,997
    
    $
    13.66
 F-35




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Employee Stock Purchase Plans
      F-36




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Years Ended March 31,(In thousands)
    
    2006
    
    
    2005Total assets of National Welders
    
    $
    267,240
    
    
    $
    230,920Total liabilities of National Welders
    
    $
    190,276
    
    
    $
    162,777
 Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004Net sales
    
    $
    188,314
    
    
    $
    167,473
    
    
    $
    39,170Operating income
    
    
    22,046
    
    
    
    15,662
    
    
    
    3,390Earnings before income taxes, minority interest
and equity earnings
    
    
    19,919
    
    
    
    12,418
    
    
    
    2,719Income taxes
    
    
    (8,536
    )
    
    
    (4,712
    )
    
    
    (1,016
    )Minority interest in earnings of consolidated
affiliate
    
    
    (2,656
    )
    
    
    (1,808
    )
    
    
    (452
    )Equity in earnings of unconsolidated
affiliate
    
    
    
    
    
    
    
    
    
    
    4,365Income from continuing operations
    
    $
    8,727
    
    
    $
    5,898
    
    
    $
    5,616
 F-37




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004Interest expense
    
    $
    55,740
    
    
    $
    52,836
    
    
    $
    43,028Interest and finance charge
(income)
    
    
    (1,928
    )
    
    
    (1,591
    )
    
    
    (671
    )$
    53,812
    
    
    $
    51,245
    
    
    $
    42,357
   Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004United States
    
    $
    200,039
    
    
    $
    140,662
    
    
    $
    119,329Foreign
    
    
    7,998
    
    
    
    6,965
    
    
    
    5,066$
    208,037
    
    
    $
    147,627
    
    
    $
    124,395
  Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    26,551
    
    
    $
    19,666
    
    
    $
    21,978Foreign
    
    
    2,673
    
    
    
    2,027
    
    
    
    2,120State
    
    
    1,494
    
    
    
    929
    
    
    
    52530,718
    
    
    
    22,622
    
    
    
    24,623Deferred:Federal
    
    
    43,672
    
    
    
    29,327
    
    
    
    19,475Foreign
    
    
    98
    
    
    
    303
    
    
    
    198State
    
    
    3,378
    
    
    
    2,009
    
    
    
    3,36347,148
    
    
    
    31,639
    
    
    
    23,036$
    77,866
    
    
    $
    54,261
    
    
    $
    47,659
  F-38




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004Taxes at U.S. federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increase in income taxes resulting from:State income taxes, net of federal
benefit
    
    
    2.2
    %
    
    
    1.9
    %
    
    
    2.2
    %Other, net
    
    
    0.2
    %
    
    
    (0.1
    %)
    
    
    1.1
    %37.4
    %
    
    
    36.8
    %
    
    
    38.3
    %
  March 31,2006
    
    
    2005Deferred Tax Assets:Inventories
    
    $
    9,586
    
    
    $
    8,257Deferred rental income
    
    
    5,347
    
    
    
    3,072Insurance reserves
    
    
    9,554
    
    
    
    9,497Litigation settlement and other reserves
    
    
    1,972
    
    
    
    1,117Asset Retirement Obligations
    
    
    2,361
    
    
    
    Net operating loss carryforwards
    
    
    36,592
    
    
    
    56,256Other
    
    
    7,865
    
    
    
    4,662Valuation allowance
    
    
    (6,347
    )
    
    
    (8,437
    )66,930
    
    
    
    74,424Deferred Tax Liabilities:Accounts receivable
    
    
    (1,785
    )
    
    
    (3,530
    )Plant and equipment
    
    
    (307,036
    )
    
    
    (287,033
    )Intangible assets
    
    
    (39,993
    )
    
    
    (29,205
    )Other
    
    
    (15,793
    )
    
    
    (10,579
    )(364,607
    )
    
    
    (330,347
    )Net deferred tax liability
    
    $
    (297,677
    )
    
    $
    (255,923
    )
 F-39




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (In thousands)
    
    2006
    
    
    2005Current deferred tax asset, net
    
    $
    30,141
    
    
    $
    26,263Non-current deferred tax liability, net
    
    
    (327,818
    )
    
    
    (282,186
    )Net deferred tax liability
    
    $
    (297,677
    )
    
    $
    (255,923
    )
      F-40




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Separation Agreement
  Transactions by National Welders
   F-41




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (In thousands)
    
    
    
    
    
    NationalYears Ended March 31,
    
    Airgas, Inc.
    
    
    Welders
    
    
    Total2007
    
    $
    54,896
    
    
    $
    929
    
    
    $
    55,8252008
    
    
    44,140
    
    
    
    971
    
    
    
    45,1112009
    
    
    34,479
    
    
    
    302
    
    
    
    34,7812010
    
    
    24,161
    
    
    
    207
    
    
    
    24,3682011
    
    
    16,978
    
    
    
    186
    
    
    
    17,164Thereafter
    
    
    11,213
    
    
    
    905
    
    
    
    12,118$
    185,867
    
    
    $
    3,500
    
    
    $
    189,367
  (a) Legal
  Insurance Coverage
  F-42




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Supply Agreements
     Commitments and Contingencies of National Welders
   F-43




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004Interest expense
    
    $
    56,361
    
    
    $
    49,480
    
    
    $
    42,851Discount on securitization
    
    
    9,371
    
    
    
    4,711
    
    
    
    3,264Income taxes (net of refunds)
    
    
    21,641
    
    
    
    30,104
    
    
    
    18,897
  Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004Acquisition liabilities assumed
    
    $
    18,295
    
    
    $
    37,436
    
    
    $
    7,620
  Years Ended March 31,(In thousands)
    
    2006
    
    
    2005
    
    
    2004Net cash provided by operating activities
    
    $
    23,497
    
    
    $
    19,612
    
    
    $
    9,831Net cash used in investing activities
    
    
    (45,628
    )
    
    
    (29,240
    )
    
    
    (1,783
    )Net cash provided by (used in)
financing activities
    
    
    21,309
    
    
    
    9,500
    
    
    
    (8,039
    )Change in cash
    
    $
    (822
    )
    
    $
    (128
    )
    
    $
    9Management fee paid to the Company,
which is eliminated in consolidation
    
    $
    1,234
    
    
    $
    1,089
    
    
    $
    249
 F-44




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      F-45




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   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
 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
 F-46




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  All Other(In thousands)
    
    Distribution
    
    
    Operations
    
    
    Eliminations
    
    
    CombinedFiscal 2004Gas and rent
    
    $
    882,585
    
    
    $
    216,166
    
    
    $
    (39,944
    )
    
    $
    1,058,807Hardgoods
    
    
    779,778
    
    
    
    19,760
    
    
    
    (2,985
    )
    
    
    796,553Total net sales
    
    
    1,662,363
    
    
    
    235,926
    
    
    
    (42,929
    )
    
    
    1,855,360Cost of products sold, excluding depreciation expense
    
    
    819,859
    
    
    
    106,170
    
    
    
    (42,929
    )
    
    
    883,100Selling, distribution, and administrative expenses
    
    
    634,137
    
    
    
    82,908
    
    
    
    
    
    
    
    717,045Depreciation expense
    
    
    66,898
    
    
    
    15,160
    
    
    
    
    
    
    
    82,058Amortization expense
    
    
    5,032
    
    
    
    357
    
    
    
    
    
    
    
    5,389Special charges
    
    
    (776
    )
    
    
    
    
    
    
    
    
    
    
    (776
    )Operating income
    
    
    137,213
    
    
    
    31,331
    
    
    
    
    
    
    
    168,544Assets
    
    
    1,551,653
    
    
    
    408,953
    
    
    
    
    
    
    
    1,960,606Capital expenditures
    
    
    81,247
    
    
    
    12,502
    
    
    
    
    
    
    
    93,749
 F-47




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (In thousands, except per share amounts)
    
    First
    
    
    Second
    
    
    Third
    
    
    Fourth2006Net sales
    
    $
    678,125
    
    
    $
    702,182
    
    
    $
    702,407
    
    
    $
    746,896Operating income (b)
    
    
    63,004
    
    
    
    63,023
    
    
    
    68,989
    
    
    
    73,742Net earnings (b),(c)
    
    
    29,647
    
    
    
    29,622
    
    
    
    30,825
    
    
    
    33,458Basic earnings per share (a),(b),(c)
    
    $
    0.39
    
    
    $
    0.39
    
    
    $
    0.40
    
    
    $
    0.43Diluted earnings per share (a),(b),(c)
    
    $
    0.38
    
    
    $
    0.38
    
    
    $
    0.39
    
    
    $
    0.422005Net sales
    
    $
    533,290
    
    
    $
    589,038
    
    
    $
    601,088
    
    
    $
    644,366Operating income (d)
    
    
    48,338
    
    
    
    50,633
    
    
    
    51,032
    
    
    
    52,451Net earnings (d)
    
    
    22,116
    
    
    
    22,777
    
    
    
    22,973
    
    
    
    24,156Basic earnings per share (a),(d)
    
    $
    0.30
    
    
    $
    0.30
    
    
    $
    0.31
    
    
    $
    0.32Diluted earnings per share (a),(d)
    
    $
    0.29
    
    
    $
    0.30
    
    
    $
    0.30
    
    
    $
    0.31
 
 (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 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.(c)
    
    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.(d)
    
    The quarterly results for fiscal 2005 include: second quarter expense of $2.9 million ($1.8
million after tax), or $0.02 per diluted share, reflecting integration costs related to the
BOC acquisition; third quarter expense of $1.4 million ($906 thousand after tax), or $0.01 per
diluted share, also for integration costs related to the BOC acquisition; and fourth quarter
expenses of $2.1 million ($1.3 million after tax), or $0.02 per diluted share, related to a
separation package for the Companys former President & Chief Operating Officer and
integration costs related to the BOC acquisition.   F-48




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    F-49




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##### 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
    )
    
    
    Intercompany
receivable/(payable)
    
    
    (257,995
    )
    
    
    148,123
    
    
    
    109,872
    
    
    
    
    
    
    
    Other non-current assets
    
    
    15,491
    
    
    
    6,394
    
    
    
    2,932
    
    
    
    
    
    
    
    24,817Total assets
    
    $
    1,745,728
    
    
    $
    2,134,087
    
    
    $
    535,267
    
    
    $
    (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
    
    
    
    
    
    
    
    327,818Other 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
    
    $
    1,745,728
    
    
    $
    2,134,087
    
    
    $
    535,267
    
    
    $
    (1,940,670
    )
    
    $
    2,474,412
 F-50




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##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet
March 31, 2005
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedASSETSCurrent AssetsCash
    
    $
    
    
    
    $
    29,340
    
    
    $
    3,300
    
    
    $
    
    
    
    $
    32,640Trade receivables, net
    
    
    
    
    
    
    6,076
    
    
    
    142,758
    
    
    
    
    
    
    
    148,834Intercompany receivable/(payable)
    
    
    
    
    
    
    (8,589
    )
    
    
    8,589
    
    
    
    
    
    
    
    Inventories, net
    
    
    
    
    
    
    207,810
    
    
    
    13,799
    
    
    
    
    
    
    
    221,609Deferred income tax asset, net
    
    
    22,208
    
    
    
    1,870
    
    
    
    2,185
    
    
    
    
    
    
    
    26,263Prepaid expenses and other current assets
    
    
    3,165
    
    
    
    23,088
    
    
    
    10,658
    
    
    
    
    
    
    
    36,911Total current assets
    
    
    25,373
    
    
    
    259,595
    
    
    
    181,289
    
    
    
    
    
    
    
    466,257Plant and equipment, net
    
    
    23,245
    
    
    
    1,081,001
    
    
    
    165,096
    
    
    
    
    
    
    
    1,269,342Goodwill
    
    
    
    
    
    
    444,605
    
    
    
    66,591
    
    
    
    
    
    
    
    511,196Other intangible assets, net
    
    
    
    
    
    
    15,525
    
    
    
    982
    
    
    
    
    
    
    
    16,507Investments in subsidiaries
    
    
    1,785,903
    
    
    
    
    
    
    
    
    
    
    
    (1,785,903
    )
    
    
    Intercompany receivable/(payable)
    
    
    (254,733
    )
    
    
    233,817
    
    
    
    20,916
    
    
    
    
    
    
    
    Other non-current assets
    
    
    17,773
    
    
    
    7,606
    
    
    
    3,182
    
    
    
    
    
    
    
    28,561Total assets
    
    $
    1,597,561
    
    
    $
    2,042,149
    
    
    $
    438,056
    
    
    $
    (1,785,903
    )
    
    $
    2,291,863LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable, trade
    
    $
    5,783
    
    
    $
    123,709
    
    
    $
    13,716
    
    
    $
    
    
    
    $
    143,208Accrued expenses and other current
liabilities
    
    
    68,155
    
    
    
    98,563
    
    
    
    16,414
    
    
    
    
    
    
    
    183,132Current portion of long-term debt
    
    
    
    
    
    
    765
    
    
    
    6,183
    
    
    
    
    
    
    
    6,948Total current liabilities
    
    
    73,938
    
    
    
    223,037
    
    
    
    36,313
    
    
    
    
    
    
    
    333,288Long-term debt, excluding current portion
    
    
    711,805
    
    
    
    6,002
    
    
    
    83,828
    
    
    
    
    
    
    
    801,635Deferred income tax liability, net
    
    
    (12,288
    )
    
    
    252,307
    
    
    
    42,167
    
    
    
    
    
    
    
    282,186Other non-current liabilities
    
    
    9,934
    
    
    
    11,941
    
    
    
    2,516
    
    
    
    
    
    
    
    24,391Minority interest in affiliate
    
    
    
    
    
    
    
    
    
    
    36,191
    
    
    
    
    
    
    
    36,191Commitments and contingenciesStockholders EquityPreferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, par value $0.01 per share
    
    
    775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    775Capital in excess of par value
    
    
    257,042
    
    
    
    939,025
    
    
    
    71,956
    
    
    
    (1,010,981
    )
    
    
    257,042Retained earnings
    
    
    560,056
    
    
    
    609,426
    
    
    
    163,542
    
    
    
    (772,968
    )
    
    
    560,056Accumulated other comprehensive income
    
    
    2,609
    
    
    
    411
    
    
    
    1,913
    
    
    
    (2,324
    )
    
    
    2,609Treasury stock
    
    
    (3,765
    )
    
    
    
    
    
    
    (370
    )
    
    
    370
    
    
    
    (3,765
    )Employee benefits trust
    
    
    (2,545
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,545
    )Total stockholders equity
    
    
    814,172
    
    
    
    1,548,862
    
    
    
    237,041
    
    
    
    (1,785,903
    )
    
    
    814,172Total liabilities and stockholders
equity
    
    $
    1,597,561
    
    
    $
    2,042,149
    
    
    $
    438,056
    
    
    $
    (1,785,903
    )
    
    $
    2,291,863
 F-51




---



##### 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
    )
    
    
    Income(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-52




---



##### 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(loss) from discontinued
operations, net of tax
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    464Net Earnings
    
    $
    92,022
    
    
    $
    108,604
    
    
    $
    40,906
    
    
    $
    (149,510
    )
    
    $
    92,022
 F-53




---



##### Table of Contents



AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Earnings
Year Ended
March 31, 2004
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet Sales
    
    $
    
    
    
    $
    1,790,898
    
    
    $
    64,462
    
    
    $
    
    
    
    $
    1,855,360Costs and ExpensesCosts of products sold
(excluding depreciation)
    
    
    
    
    
    
    859,556
    
    
    
    23,544
    
    
    
    
    
    
    
    883,100Selling, distribution and
administrative expenses
    
    
    27,196
    
    
    
    654,418
    
    
    
    35,431
    
    
    
    
    
    
    
    717,045Depreciation
    
    
    6,513
    
    
    
    70,613
    
    
    
    4,932
    
    
    
    
    
    
    
    82,058Amortization
    
    
    113
    
    
    
    5,261
    
    
    
    15
    
    
    
    
    
    
    
    5,389Special charges (recoveries)
    
    
    
    
    
    
    (776
    )
    
    
    
    
    
    
    
    
    
    
    (776
    )Operating Income (Loss)
    
    
    (33,822
    )
    
    
    201,826
    
    
    
    540
    
    
    
    
    
    
    
    168,544Interest (expense) income, net
    
    
    (58,414
    )
    
    
    17,932
    
    
    
    (1,875
    )
    
    
    
    
    
    
    (42,357
    )(Discount) gain on
securitization of trade
receivables
    
    
    
    
    
    
    (73,022
    )
    
    
    69,758
    
    
    
    
    
    
    
    (3,264
    )Other income (expense), net
    
    
    24,031
    
    
    
    (23,650
    )
    
    
    1,091
    
    
    
    
    
    
    
    1,472Earnings (loss) before income
taxes and minority interest
    
    
    (68,205
    )
    
    
    123,086
    
    
    
    69,514
    
    
    
    
    
    
    
    124,395Income tax benefit (expense)
    
    
    22,344
    
    
    
    (45,297
    )
    
    
    (24,706
    )
    
    
    
    
    
    
    (47,659
    )Minority interest in earnings of
consolidated affiliate
    
    
    
    
    
    
    
    
    
    
    (452
    )
    
    
    
    
    
    
    (452
    )Equity in earnings of unconsolidated affiliate
    
    
    4,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,365Equity in earnings of
subsidiaries
    
    
    121,688
    
    
    
    
    
    
    
    
    
    
    
    (121,688
    )
    
    
    Income(loss) from discontinued
operations, net of tax
    
    
    
    
    
    
    (457
    )
    
    
    
    
    
    
    
    
    
    
    (457
    )Net Earnings
    
    $
    80,192
    
    
    $
    77,332
    
    
    $
    44,356
    
    
    $
    (121,688
    )
    
    $
    80,192
 F-54




---



##### 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
    )
    
    $
    272,152
    
    
    $
    103,501
    
    
    $
    
    
    
    $
    362,169CASH 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
    
    
    
    
    
    
    
    
    
    
    (2,656
    )
    
    
    
    
    
    
    (2,656
    )Exercise of stock options
    
    
    19,707
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,707Minority stockholder note repayment
    
    
    
    
    
    
    
    
    
    
    21,000
    
    
    
    
    
    
    
    21,000Dividends 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
    
    
    
    21,647
    
    
    
    (52,576
    )
    
    
    
    
    
    
    (15,137
    )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-55




---



##### 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
    )
    
    $
    244,748
    
    
    $
    12,977
    
    
    $
    
    
    
    $
    222,317CASH 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
    
    
    
    
    
    
    
    
    
    
    (1,808
    )
    
    
    
    
    
    
    (1,808
    )Exercise of stock options
    
    
    20,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,374Dividends 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
    
    
    
    78,665
    
    
    
    21,052
    
    
    
    
    
    
    
    138,698CHANGE 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-56




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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, 2004
 Non-
    
    
    Elimination(In thousands)
    
    Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Entries
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (28,991
    )
    
    $
    199,473
    
    
    $
    40,197
    
    
    $
    
    
    
    $
    210,679CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (15,087
    )
    
    
    (71,793
    )
    
    
    (6,869
    )
    
    
    
    
    
    
    (93,749
    )Proceeds from sale of plant and
equipment
    
    
    1,519
    
    
    
    3,436
    
    
    
    392
    
    
    
    
    
    
    
    5,347Business acquisitions, holdbacks and
other settlements of acquisition
related liabilities
    
    
    
    
    
    
    (34,907
    )
    
    
    
    
    
    
    
    
    
    
    (34,907
    )Management fee from unconsolidated
affiliate
    
    
    724
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    724Other, net
    
    
    (1,461
    )
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    (1,369
    )Net cash used in investing activities
    
    
    (14,305
    )
    
    
    (103,264
    )
    
    
    (6,385
    )
    
    
    
    
    
    
    (123,954
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings
    
    
    411,970
    
    
    
    
    
    
    
    2,327
    
    
    
    
    
    
    
    414,297Repayment of debt
    
    
    (471,785
    )
    
    
    (2,469
    )
    
    
    (10,750
    )
    
    
    
    
    
    
    (485,004
    )Financing costs
    
    
    (2,737
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,737
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (452
    )
    
    
    
    
    
    
    (452
    )Exercise of stock options
    
    
    13,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,130Dividends paid to stockholders
    
    
    (11,801
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,801
    )Cash overdraft
    
    
    (14,149
    )
    
    
    2,730
    
    
    
    903
    
    
    
    
    
    
    
    (10,516
    )Inter-company
    
    
    118,668
    
    
    
    (93,741
    )
    
    
    (24,927
    )
    
    
    
    
    
    
    Net cash provided by (used in)
financing activities
    
    
    43,296
    
    
    
    (93,480
    )
    
    
    (32,899
    )
    
    
    
    
    
    
    (83,083
    )CHANGE IN CASH
    
    $
    
    
    
    $
    2,729
    
    
    $
    913
    
    
    $
    
    
    
    $
    3,642Cash  Beginning of year
    
    
    
    
    
    
    20,840
    
    
    
    580
    
    
    
    
    
    
    
    21,420Cash  End of Year
    
    $
    
    
    
    $
    23,569
    
    
    $
    1,493
    
    
    $
    
    
    
    $
    25,062
 F-57




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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
    
    
    
    
    
    
    Period2006Accounts 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
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    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
    )
    
    
    (5
    )
    
    
    8,4372004Accounts receivable  allowances
for doubtful accounts
    
    $
    8,514
    
    
    $
    8,058
    
    
    $
    299
    (1)
    
    $
    (9,577
    )
    
    
    (2
    )
    
    $
    7,294Insurance reserves
    
    
    25,100
    
    
    
    59,787
    
    
    
    966
    (4)
    
    
    (56,402
    )
    
    
    (3
    )
    
    
    29,451Deferred tax asset valuation
allowance
    
    
    9,646
    
    
    
    276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,922
 
 (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 the addition of National Welders reserve for insurance claims of $966 thousand in
connection with the adoption of FIN 46R.(5)
    
    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-58