Airgas 8K Reports Strong Sales and Earnings Momentum in Second Quarter | SEC 29 Oct 04


		Airgas, Inc.
		259 N. Radnor-Chester Road
		Suite 100
		Radnor, PA 19087-5283 www.airgas.com

News Release

Exhibit 99.1


Investor Contact:		Media Contact:
Melissa Nigro (610) 902-6206		James Ely (610) 902-6010
melissa.nigro@airgas.com		jim.ely@airgas.com

For release: Immediately

Airgas Reports Strong Sales and Earnings Momentum in Second Quarter

RADNOR, PA — October 27, 2004 —Airgas, Inc., (NYSE: ARG), the largest U.S. distributor of industrial, medical and specialty gases, welding, safety and related products, today reported strong growth in sales, operating income and net earnings for its second quarter ended September 30, 2004. Net earnings for the quarter grew 19% to $22.8 million, or $0.30 per diluted share, compared to $19.1 million, or $0.26 per diluted share, in the same period a year ago. The current quarter includes integration expenses of $0.02 per diluted share related to the acquisition of the U.S. packaged gas business from The BOC Group. Results for the quarter ended September 30, 2003 include insurance-related losses of $0.02 per diluted share.

Second quarter sales increased 30% to $600 million reflecting continued same-store sales growth, the consolidation of National Welders Supply Company (a joint venture affiliate), as well as acquisitions. Excluding National Welders, sales grew 21%. Total same-store sales were up 10% compared to the same quarter a year ago, with gas and rent up 6% and hardgoods up 16%. These results reflect continued improvement in manufacturing and other industrial market segments.

“Our momentum continued in the second quarter as EPS grew by 15%. We benefited from ongoing strength in the overall industrial markets as well as solid growth in strategic products like bulk, specialty and medical gases,” said Airgas Chairman and Chief Executive Officer Peter McCausland. “In addition to robust hardgoods sales, we saw very good growth in gas and rent sales from the first quarter to the second. The outlook for organic growth in our business is very good and we continue to see acquisition opportunities.”

Airgas 2Q Earnings Release/Page 2 of 10

Year to date, adjusted debt increased by $166 million as a result of the July 30 closing of the BOC acquisition. After-tax cash flow for the six months ended September 30, 2004 was $106 million compared to $90 million in the comparable prior year period. Free cash flow for the comparable periods was negative $8 million versus positive $33 million. The decline in free cash is attributed to increased inventories and accounts receivable in connection with overall sales growth and the BOC acquisition, as well as capital expenditures to support the growth in strategic products like medical gas and bulk. The definition of after-tax cash flow and free cash flow, a reconciliation of each to the attached Consolidated Statement of Cash Flows, the definition of adjusted debt and a reconciliation to the balance sheet are attached.

McCausland continued, “The integration of the acquired BOC U.S. packaged gas business is progressing well and we are very optimistic about the growth opportunities associated with this transaction. We expect earnings of $0.29 to $0.33 per diluted share in our third quarter, including BOC integration costs of up to $0.02 per diluted share.”

The Company will conduct an earnings teleconference on Thursday, October 28, 2004, beginning at 11:00 a.m. Eastern Time. Access the teleconference by calling (800) 811-8824. This press release, slides to be presented during the Company’s teleconference and information about how to access a live and on-demand webcast of the teleconference are available in the ‘Investor Info’ section on the Company’s Internet site www.airgas.com. The telephone replay will be accessible for one week starting October 28 at 1 p.m. Eastern Time by calling (888) 203-1112 and entering passcode 976784.

About Airgas, Inc.

Airgas, Inc. is the largest U.S. distributor of industrial, medical and specialty gases, welding, safety and related products. Its integrated network of nearly 900 locations includes branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also distributes its products and services through eBusiness, catalog and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base. For more information, please visit www.airgas.com.

Airgas 2Q Earnings Release/Page 3 of 10

Forward-Looking Statements

This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. These statements include, but are not limited to, statements regarding: the positive outlook for the business; acquisition opportunities; the growth opportunities resulting from the BOC acquisition and strengthening industrial markets; and earnings per share expectations for the third fiscal quarter. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors and should not be regarded as a representation by the Company or any other person that the results expressed therein will be achieved. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include: the successful integration of the BOC acquisition; the cost of integrating the BOC business into the Company’s operations; the Company’s inability to close and successfully integrate acquisitions; an economic downturn; increased industry competition; adverse changes in customer buying patterns; significant fluctuations in interest rates; political and economic uncertainties associated with current world events; and other factors described in the Company’s reports, including Form 10-K dated March 31, 2004 and Form 10-Q dated June 30, 2004 filed by the Company with the Securities and Exchange Commission.

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

Airgas 2Q Earnings Release/Page 4 of 10

AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands, except per share data)
(Unaudited)


	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2004			2003			2004			2003
Net sales	$	599,783		$	460,452		$	1,143,800		$	921,508

Costs and expenses:
Cost of products sold (excl. deprec.)		293,081			220,361			559,302			441,494
Selling, distribution and administrative expenses		228,386			178,175			432,448			356,636
Depreciation		25,844			19,824			49,773			39,115
Amortization		1,520			1,331			2,953			2,842

Total costs and expenses		548,831			419,691			1,044,476			840,087

Operating income		50,952			40,761			99,324			81,421
Interest expense, net		(12,668	)		(10,295	)		(24,523	)		(20,730	)
Discount on securitization of trade receivables (a)		(1,046	)		(801	)		(1,876	)		(1,669	)
Other income (expense), net		(750	)		(185	)		(576	)		(358	)
Equity in earnings of unconsolidated affiliates		677			1,347			925			2,047

Earnings before income tax expense and minority interest		37,165			30,827			73,274			60,711
Income tax expense		13,936			11,714			27,477			23,070

Earnings before minority interest		23,229			19,113			45,797			37,641
Minority interest (b)		452			—			904			—

Net earnings	$	22,777		$	19,113		$	44,893		$	37,641

Basic earnings per share	$	0.30		$	0.26		$	0.60		$	0.52
Diluted earnings per share	$	0.30		$	0.26		$	0.59		$	0.51
Weighted average shares outstanding:
Basic		74,700			72,600			74,400			72,200
Diluted		76,600			74,400			76,400			74,100

See attached notes.

Airgas 2Q Earnings Release/Page 5 of 10

AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)


	(Unaudited)
	September 30,		March 31,
	2004		2004
ASSETS
Trade accounts receivable, net (a)	$	121,835	$	107,013
Inventories, net		211,265		170,300
Deferred income tax asset, net		27,884		25,519
Prepaids and other current assets		30,064		28,463

TOTAL CURRENT ASSETS		391,048		331,295
Property, plant and equipment, net		1,208,429		1,033,926
Goodwill		508,683		504,207
Other intangible assets, net		17,835		19,733
Investments in unconsolidated affiliates		6,299		6,292
Other non-current assets		32,521		40,091

TOTAL ASSETS	$	2,164,815	$	1,935,544

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, trade	$	112,683	$	114,303
Accrued expenses and other current liabilities		125,789		122,026
Current portion of long-term debt		6,022		6,140

TOTAL CURRENT LIABILITIES		244,494		242,469
Long-term debt		807,102		682,698
Deferred income taxes		270,585		251,575
Other non-current liabilities		53,676		30,710
Minority interest in subsidiary		36,191		36,191
Stockholders’ equity		752,767		691,901

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,164,815	$	1,935,544

See attached notes.

Airgas 2Q Earnings Release/Page 6 of 10

AIRGAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)


	Six Months Ended			Six Months Ended
	September 30, 2004(b)			September 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	44,893		$	37,641
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		49,773			39,115
Amortization		2,953			2,842
Deferred income taxes		16,000			10,600
Equity in earnings of unconsolidated affiliates		(925	)		(2,047	)
Gain on divestiture		(360	)		—
Loss on sales of plant and equipment		13			217
Minority interest in earnings		904			—
Stock issued for employee stock purchase plan		4,712			4,384
Changes in assets and liabilities, excluding effects of business acquisitions and divestitures:
Securitization of trade receivables		37,400			(6,200	)
Trade receivables, net		(22,651	)		(3,404	)
Inventories, net		(24,214	)		(6,569	)
Prepaid expenses and other current assets		(2,001	)		575
Accounts payable, trade		(1,787	)		(7,384	)
Accrued expenses and other current liabilities		(6,521	)		(4,241	)
Other assets		1,803			76
Other liabilities		(535	)		2,340

Net cash provided by operating activities	��	99,457			67,945

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(65,642	)		(42,151	)
Proceeds from sales of plant and equipment		2,200			3,133
Proceeds from divestitures		828			—
Business acquisitions, holdbacks and other settlements of acquisition related liabilities		(180,398	)		(5,852	)
Dividends and fees from unconsolidated affiliates		918			1,098
Other, net		5			(1,728	)

Net cash used in investing activities		(242,089	)		(45,500	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings		342,044			136,461
Repayment of debt		(213,663	)		(151,871	)
Minority interest		(904	)		—
Exercise of stock options		11,387			7,353
Dividends paid to stockholders		(6,771	)		(5,866	)
Cash overdraft		10,539			(8,522	)

Net cash provided by (used in) financing activities		142,632			(22,445	)

Change in cash
Cash - Beginning of period	$	—		$	—
Cash - End of period		—			—

	$	—		$	—

See attached notes.

Airgas 2Q Earnings Release/Page 7 of 10

Notes:

(a)

The Company participates in a securitization agreement with two commercial banks to sell up to $200 million of qualified trade receivables. Net proceeds from the securitization were used to reduce borrowings under the Company’s revolving credit facilities. The amount of outstanding receivables under the agreement was $200 million and $162.6 million at September 30, 2004 and March 31, 2004, respectively.

(b)		Effective December 31, 2003, the Company elected to adopt Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities,” (“FIN 46R”), as it applies to its joint venture with National Welders Supply Company, Inc. (“NWS”), a producer and distributor of industrial gases based in Charlotte, North Carolina. For the six months ended September 30, 2003, NWS’ operating results were reflected as “Equity in Earnings of Unconsolidated Affiliates.” For the six months ended September 30, 2004, the operating results of NWS were reported broadly across the income statement in the “All Other Operations” business segment. NWS contributed $80.1 million to sales and $7.1 million to operating income for the six months ended September 30, 2004. The consolidation of NWS had no impact on the Company’s consolidated net earnings.

		The cash flows of NWS, in excess of a management fee, are not available for the general use of the Company. Rather, these cash flows are used by NWS for operations, capital expenditures, acquisitions and to satisfy financial obligations, which are non-recourse to the Company. The cash flows for the six months ended September 30, 2004 reflect the following sources and uses of cash associated with NWS:


	Six Months Ended
	September 30, 2004
Net cash provided by operating activities	$	10,342
Net cash used by investing activities		(9,165	)
Net cash used by financing activities		(1,177	)
Management fee paid to the Company, which is eliminated in consolidation		530

Airgas 2Q Earnings Release/Page 8 of 10

(c)

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


	Three Months Ended									Three Months Ended
	September 30, 2004									September 30, 2003
			All Other									All Other
(In thousands)	Dist.		Ops.		Elim			Combined		Dist.		Ops.		Elim			Combined
Gas and rent	$	259,060	$	84,002	$	(12,036	)	$	331,026	$	217,481	$	52,154	$	(10,026	)	$	259,609
Hardgoods		253,281		16,371		(895	)		268,757		200,215		1,318		(690	)		200,843

Total net sales		512,341		100,373		(12,931	)		599,783		417,696		53,472		(10,716	)		460,452
Cost of products sold, excl. deprec. expense		261,002		45,010		(12,931	)		293,081		207,195		23,882		(10,716	)		220,361
Selling, distribution and administrative expenses		192,267		36,119					228,386		161,289		16,886					178,175
Depreciation expense		19,800		6,044					25,844		16,645		3,179					19,824
Amortization expense		1,415		105					1,520		1,189		142					1,331

Operating income		37,857		13,095					50,952		31,378		9,383					40,761


	Six Months Ended									Six Months Ended
	September 30, 2004									September 30, 2003
			All Other									All Other
(In thousands)	Dist.		Ops.		Elim			Combined		Dist.		Ops.		Elim			Combined
Gas and rent	$	487,638	$	161,171	$	(22,474	)	$	626,335	$	437,888	$	100,226	$	(19,624	)	$	518,490
Hardgoods		487,090		32,165		(1,790	)		517,465		401,663		2,667		(1,312	)		403,018

Total net sales		974,728		193,336		(24,264	)		1,143,800		839,551		102,893		(20,936	)		921,508
Cost of products sold, excl. deprec. expense		497,098		86,468		(24,264	)		559,302		416,344		46,086		(20,936	)		441,494
Selling, distribution and administrative expenses		363,367		69,081					432,448		323,239		33,397					356,636
Depreciation expense		37,797		11,976					49,773		32,815		6,300					39,115
Amortization expense		2,680		273					2,953		2,546		296					2,842

Operating income		73,786		25,538					99,324		64,607		16,814					81,421

Airgas 2Q Earnings Release/Page 9 of 10

Reconciliation of Non-GAAP Financial Measures (Unaudited)

After-Tax Cash Flow:

Reconciliation of net cash provided by operating activities per the Consolidated Statement of Cash Flows to After-Tax Cash Flow:


	Six Months Ended			Six Months Ended
(Amounts in thousands)	September 30, 2004			September 30, 2003
Net cash provided by operating activities	$	99,457		$	67,945
Less After-Tax Cash Flow of NWS⁽¹⁾		(7,507	)		—
Add back:
Cash used for working capital components and other assets and liabilities		55,906			18,607
Gain on divestiture		360			—
Equity in earnings of unconsolidated affiliates		925			2,047
Less:
Cash (provided) used by the securitization of trade receivables		(37,400	)		6,200
Loss on sales of plant and equipment		(13	)		(217	)
Stock issued for employee stock purchase plan		(4,712	)		(4,384	)
Minority interest in earnings		(904	)		—

After-Tax Cash Flow	$	106,112		$	90,198

After-Tax Cash Flow is defined as net earnings plus depreciation, amortization and deferred tax expense. After-Tax Cash Flow provides investors meaningful insight into the Company’s ability to generate cash from operations to support working capital requirements, capital expenditures and financial obligations.

⁽¹⁾ National Welders Supply Co. (“NWS”) is a corporate joint venture meeting the definition of a variable interest entity and for which the Company is the primary beneficiary as described under FIN 46R. NWS was consolidated effective December 31, 2003 when the Company adopted FIN 46R as permitted by the interpretation. Prior to January 1, 2004, the Company reported the results of NWS below operating income in “Equity in Earnings of Unconsolidated Affiliates.” The liabilities of NWS are non-recourse to the Company. Likewise, the cash flows in excess of the management fee paid by NWS are not available to the Company. Accordingly, the cash flows of NWS have been excluded from the Company’s non-GAAP liquidity measures.

Free Cash Flow:

Reconciliation of net cash provided by operating activities per the Consolidated Statement of Cash Flows to Free Cash Flow:


	Six Months Ended			Six Months Ended
(Amounts in thousands)	September 30, 2004			September 30, 2003
Net cash provided by operating activities	$	99,457		$	67,945
Less net cash provided by operating activities of NWS⁽¹⁾		(10,342	)		—
Plus:
Dividends paid by unconsolidated affiliates		918			1,098
Management fees paid by NWS⁽¹⁾		530			—
Less:
Cash (provided) used by the securitization of trade receivables		(37,400	)		6,200
Capital expenditures		(65,642	)		(42,151	)
Add back capital expenditures of NWS⁽¹⁾		4,429			—

Free Cash Flow		($8,050	)	$	33,092

Free Cash Flow provides investors meaningful insight into the Company’s ability to generate cash from operations, which can be used at management’s discretion for acquisitions, the prepayment of debt or to support other investing and financing activities.

Airgas 2Q Earnings Release/Page 10 of 10

Adjusted Debt:

Reconciliation of the change in debt per the Balance Sheet to the increase in debt adjusted for the non-recourse debt of NWS, off-balance sheet financing and non-cash interest rate hedging (“adjusted debt”):


(Amounts in thousands)	September 30, 2004			March 31, 2004			Change in Adjusted Debt
Debt	$	813,124		$	688,838		$	124,286
Adjustments to Debt:
Securitization of trade receivables		200,000			162,600			37,400
National Welders – non-recourse debt⁽²⁾		(53,566	)		(53,823	)		257
Interest rate swap agreements		(9,737	)		(13,832	)		4,095

Adjusted Debt	$	949,821		$	783,783		$	166,038

⁽²⁾ In calculating the Adjusted Debt measure, the debt of the NWS joint venture has been excluded because the debt is non-recourse to Airgas.

The Company uses Adjusted Debt to provide investors with a more accurate and meaningful measure of the change in the Company’s obligation to repay debt by adjusting for the non-recourse debt of NWS, non-cash interest rate hedging and funds received (or repaid) under the trade receivables securitization program.

Airgas Inactive 8-KAirgas Reports Strong Sales and Earnings Momentum in Second Quarter