Exhibit 99.1 - ------------ AIRGAS News Release Airgas, Inc. 259 N. Radnor-Chester Road Suite 100 Radnor, PA 19087-5283 www.airgas.com - ------------------------------------------------------------------------ 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 FOURTH QUARTER EPS OF $0.25 RADNOR, PA - May 7, 2003 -- Airgas, Inc., (NYSE: ARG) today reported earnings for its fourth quarter and fiscal year ended March 31, 2003. Net earnings for the quarter were $18.2 million, or $0.25 per diluted share, compared to $8.7 million, or $0.12 per diluted share, in the same period a year ago. The prior-year fourth quarter included a charge related to a litigation settlement of $8.5 million ($5.7 million after tax) or $.08 per diluted share. The reported net earnings before the cumulative effect of a change in accounting principle for the year ended March 31, 2003 were $68.1 million, or $0.94 per diluted share, compared to $48.6 million, or $0.69 per diluted share for the prior year. Net earnings per diluted share were $0.94 for year ended March 31, 2003 versus a loss of ($0.15) in the prior year, which reflects a change in accounting for goodwill. Fiscal 2003 earnings reflect a first quarter restructuring charge of $2.7 million ($1.7 million after tax) or $.03 per diluted share related to the integration of the Air Products acquisition. "The weak industrial economy created a very tough sales environment in fiscal 2003. However, we remained focused on executing our strategic initiatives, pursuing growth in niches like medical and specialty gas, and integrating acquired assets," said Airgas Chairman and Chief Executive Officer Peter McCausland. "I am very proud of the drive and determination displayed by all Airgas associates during the year." While fourth quarter sales increased 6% to $443 million, total same- store sales declined 1% compared to the same quarter a year ago, reflecting continued weakness in manufacturing and other industrial segments. Same-store sales in the Distribution segment were down 2%, reflecting a 4% decline in hardgoods while gas and rent was flat. Same- store sales for the Gas Operations segment increased 6%. The Company continued to generate strong free cash flow during fiscal 2003, enabling it to reduce adjusted debt by $96 million. In line with the new guidance from the Securities and Exchange Commission on the use of non-GAAP financial measures, the Company has revised the calculation of its liquidity measure "Free Cash Flow", making this useful measure more transparent and traceable to the Statement of Cash Flows. The new definition of Free Cash Flow and a reconciliation to the attached Consolidated Statement of Cash Flows, as well as the definition of adjusted debt and reconciliation to the balance sheet are attached. Free Cash Flow for the year ended March 31, 2003 was $104 million versus $133 million in the prior year. The fiscal 2003 decline in free cash flow reflects an investment in the new liquid CO2 plant in Hopewell, VA; a cash disbursement related to a prior year litigation settlement; and higher cash interest payments on the prior year's subordinated debt issuance resulting from a long first coupon period. McCausland continued, "The year ahead looks like it may not be an easy one as we could face as many challenges as opportunities, but I believe we are a strong organization with the ability to execute in any environment. We expect to continue growing our earnings and project to earn between $1.05 and $1.12 per diluted share in fiscal 2004. The low end of the range reflects a continuation of the current environment and the high end assumes improvement." The Company will conduct an earnings teleconference on Thursday, May 8, 2003, beginning at 8:30 a.m. Eastern Time. Access the teleconference by calling (800) 946-0270. 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 May 8th at approximately 11:00 a.m. Eastern Time by calling (888) 203-1112 and entering passcode 495366. 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 800 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. 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 challenges that the Company may face in fiscal 2004; the Company's ability to execute in any environment; the future growth of the Company's earnings; and, the range of expected earnings per share for fiscal 2004. Airgas 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 success of the Company's ability to execute on its strategic initiatives of improving operational efficiency and growing sales and market share; an economic downturn; increased industry competition; adverse changes in customer buying patterns; significant fluctuations in interest rates; adverse changes in general economic conditions; 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, 2002 and Form 10-Q reports dated June 30, 2002, September 30, 2002 and December 31, 2002, filed by the Company with the Securities and Exchange Commission. Consolidated statements of earnings, consolidated condensed balance sheets and consolidated statements of cash flow follow. AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except per share data) (Unaudited) Three Months Ended Year Ended March 31, March 31, 2003 2002 2003 2002 ---- ---- ---- ---- Net sales $442,904 $415,957 $1,786,964 $1,636,047 Costs and expenses: Cost of products sold (excl. deprec.) 209,756 204,680 850,316 818,753 Selling, distribution and administrative expenses (a) 174,789 165,833 698,228 619,316 Depreciation 17,774 17,288 73,482 64,785 Amortization 1,427 1,940 6,362 8,160 Special charges (b) -- -- 2,694 -- ------- ------- --------- --------- Total costs and expenses 403,746 389,741 1,631,082 1,511,014 ------- ------- --------- --------- Operating income 39,158 26,216 155,882 125,033 Interest expense, net (10,249) (11,802) (46,375) (47,013) Discount on securitization of trade receivables (772) (799) (3,326) (4,846) Other income (expense), net (54) (411) (645) 1,382 Equity in earnings of unconsolidated affiliates 741 960 3,768 3,835 ------- ------- --------- --------- Earnings before income taxes and the cumulative effect of a change in accounting principle 28,824 14,164 109,304 78,391 Income tax expense 10,659 5,428 41,199 29,806 ------- ------- --------- --------- Earnings before the cumulative effect of a change in accounting principle 18,165 8,736 68,105 48,585 Cumulative effect of a change in accounting principle (c) -- -- -- (59,000) ------- ------- --------- --------- Net earnings (loss) $18,165 $8,736 $68,105 $(10,415) ======= ======= ========= ========= Basic earnings (loss) per share: Earnings per share before the cumulative effect of a change in accounting principle $ .26 $ .13 $ .97 $ .71 Cumulative effect per share of a change in accounting principle -- -- -- (.86) ------- ------- ------- ------- Net earnings (loss) per share $ .26 $ .13 $ .97 $ (.15) ======= ======= ======= ======= Diluted earnings (loss) per share: Earnings per share before the cumulative effect of a change in accounting principle $ .25 $ .12 $ .94 $ .69 Cumulative effect per share of a change in accounting principle -- -- -- (.84) ------- ------- ------- ------- Net earnings (loss) per share $ .25 $ .12 $ .94 $ (.15) ======= ======= ======= ======= Weighted average shares outstanding: Basic 71,100 68,900 70,500 68,100 Diluted 73,000 71,400 72,300 69,900 See attached notes. AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in thousands) March 31, March 31, 2003 2002 ---- ---- ASSETS Trade accounts receivable, net (d) $ 71,346 $ 88,634 Inventories, net 151,405 154,045 Deferred income tax asset, net 17,688 13,210 Prepaids and other current assets 30,143 47,654 --------- --------- TOTAL CURRENT ASSETS 270,582 303,543 Property, plant and equipment, net 869,492 893,015 Goodwill 437,709 406,548 Other intangible assets, net 19,832 25,718 Other non-current assets 102,628 88,233 --------- --------- TOTAL ASSETS $1,700,243 $1,717,057 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, trade $ 85,375 $ 82,485 Accrued expenses and other current liabilities 121,292 136,390 Current portion of long-term debt 2,229 2,456 --------- --------- TOTAL CURRENT LIABILITIES 208,896 221,331 Long-term debt (d) 658,031 764,124 Deferred income taxes 209,140 198,173 Other non-current liabilities 27,243 30,343 Stockholders' equity 596,933 503,086 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,700,243 $1,717,057 ========= ========= See attached notes. AIRGAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year Ended Year Ended March 31, March 31, 2003 2002 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) $ 68,105 $(10,415) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation 73,482 64,785 Amortization 6,362 8,160 Deferred income taxes 8,655 34,578 Equity in earnings of unconsolidated affiliates (3,768) (3,835) (Gains) losses on divestitures 241 (1,916) (Gains) losses on sales of plant and equipment (257) 405 Stock issued for employee stock purchase plan 8,951 7,369 Cumulative effect of a change in accounting principle -- 59,000 Other non-cash charges -- 1,068 Changes in assets and liabilities, excluding effects of business acquisitions and divestitures: Securitization of trade receivables 24,900 60,800 Trade receivables, net (8,316) 9,111 Inventories, net 4,675 12,614 Prepaid expenses and other current assets 17,718 (24,743) Accounts payable, trade 2,884 6,148 Accrued expenses and other current liabilities (8,021) 18,300 Other assets 2,068 5,081 Other liabilities (3,280) 2,871 ------- ------- Net cash provided by operating activities 194,399 249,381 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (67,969) (58,297) Proceeds from sales of plant and equipment 4,260 3,216 Proceeds from divestitures 3,167 10,200 Business acquisitions, holdbacks and other settlements of acquisition related liabilities (27,216) (257,556) Dividends and fees from unconsolidated affiliates 2,507 2,583 Other, net (1,719) 5,153 ------- ------- Net cash used in investing activities (86,970) (294,701) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 248,961 680,144 Repayment of debt (367,356) (612,779) Financing costs -- (12,461) Exercise of stock options 9,847 7,442 Cash overdraft 1,119 (17,026) ------- ------- Net cash (used in) provided by financing activities (107,429) 45,320 ------- ------- Change in cash Cash - Beginning of period $ -- $ -- Cash - End of period -- -- ------- ------- $ -- $ -- ======= ======= See attached notes Notes: (a) Selling, distribution, and administrative expenses for the three months and year ended March 31, 2002 reflect the settlement of litigation, net of previously established reserves, of $8.5 million ($5.7 million after-tax) related to litigation brought about by Praxair, Inc. against the Company in July 1996. (b) Special charges of $2.7 million ($1.7 million after-tax) for the year ended March 31, 2003 consist of a first quarter restructuring charge related to the integration of the business acquired from Air Products and costs related to the consolidation of certain of the Company's procurement functions. The special charges include facility exit costs associated with the closure of certain Airgas facilities and severance for approximately 130 employees. On February 28, 2002, the Company completed its acquisition of the majority of the U.S. packaged gas business of Air Products and Chemicals, Inc. (c) In connection with the adoption of SFAS 142, the year ended March 31, 2002 includes a $59 million non-cash charge recorded as the cumulative effect of a change in accounting principle for the write-down of goodwill to its fair value. The impaired goodwill was not deductible for taxes, and consequently, no tax benefit was recorded in relation to the charge. (d) The Company participates in a securitization agreement with two commercial banks to sell up to $175 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 $158.9 million and $134 million at March 31, 2003 and March 31, 2002, respectively. (e) Business segment information for the Company's Distribution and Gas Operations segments is shown below: Three Months Ended Three Months Ended March 31, 2003 March 31, 2002 -------------- -------------- (In thousands) Dist. Gas Ops. Elim Combined Dist. Gas Ops. Elim Combined ---- ------- ---- -------- ---- ------- ---- -------- Gas and rent $216,798 $40,990 $(9,619) $248,169 $189,947 $37,049 $(7,338) $219,658 Hardgoods 193,235 1,500 -- 194,735 195,892 595 (188) 196,299 ------- ------ ------ ------- ------- ------ ------ ------- Total net sales 410,033 42,490 (9,619) 442,904 385,839 37,644 (7,526) 415,957 Cost of Products sold, excl. deprec. expense 198,973 20,402 (9,619) 209,756 195,517 16,689 (7,526) 204,680 Selling, distribution and administrative expenses 159,197 15,592 174,789 150,688 15,145 165,833 Depreciation expense 14,901 2,873 17,774 14,468 2,820 17,288 Amortization expense 1,315 112 1,427 1,805 135 1,940 ------- ------ ------- ------- ------ ------- Operating income 35,647 3,511 39,158 23,361 2,855 26,216 Year Ended Year Ended March 31, 2003 March 31, 2002 -------------- -------------- (In thousands) Dist. Gas Ops. Elim Combined Dist. Gas Ops. Elim Combined ---- ------- ---- -------- ---- ------- ---- -------- Gas and rent $ 863,975 $178,622 $(37,067) $1,005,530 $ 707,435 $170,687 $(31,163) $ 846,959 Hardgoods 778,101 5,227 (1,894) 781,434 786,832 2,907 (651) 789,088 --------- ------- ------- --------- --------- ------- ------- --------- Total net sales 1,642,076 183,849 (38,961) 1,786,964 1,494,267 173,594 (31,814) 1,636,047 Cost of Products sold, excl. deprec. expense 806,320 82,957 (38,961) 850,316 770,094 80,473 (31,814) 818,753 Selling, distribution and administrative expenses 634,580 63,648 698,228 559,468 59,848 619,316 Depreciation expense 62,071 11,411 73,482 53,701 11,084 64,785 Amortization expense 5,877 485 6,362 7,574 586 8,160 Special charges 2,694 -- 2,694 -- -- -- --------- ------- --------- --------- ------- --------- Operating income 130,534 25,348 155,882 103,430 21,603 125,033 The elimination entries represent inter-company sales from the Company's Gas Operations segment to its Distribution segment. The Company previously reflected these elimination entries within the Gas Operations segment. Reconciliation of Non-GAAP Financial Measures - --------------------------------------------- Adjusted Debt Reduction: ----------------------- Reconciliation of the change in debt per the Balance Sheet to debt reduction adjusted for off-balance sheet and non-cash items ("adjusted debt"): Year Ended Amounts in thousands March 31, 2003 -------------- Reduction in debt per the Balance Sheet $(106,320) Increase in funding under the trade receivables securitization program 24,900 Change in fair value of debt related to interest rate swap agreements (non-cash) (13,541) Other (1,066) -------- Adjusted debt reduction $ (96,027) ======== Free Cash Flow: Reconciliation of net cash provided by operating activities per the Consolidated Statement of Cash Flows to Free Cash Flow: Year Ended Year Ended Amounts in thousands March 31, 2003 March 31, 2002 -------------- -------------- Net cash provided by operating activities $194,399 $249,381 Plus: Dividends and fees from equity affiliates 2,507 2,583 Less: Cash provided by the securitization of trade receivables (24,900) (60,800) Capital expenditures (67,969) (58,297) ------- ------- Free Cash Flow $104,037 $132,867 ======= ======= Free Cash Flow is a measure of the Company's ability to generate cash from continuing operations, which can be used at management's discretion for acquisitions, the repayment of debt or to support other investing and financing activities.