1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 1999

[ ] 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.
______________________________________________________
(Exact name of registrant as specified in its charter)

Delaware 56-0732648
_______________________________ ____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

259 North Radnor-Chester Road, Suite 100
Radnor, Pennsylvania 19087-5283
________________________________________ __________
(Address of principal executive offices) (Zip Code)

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

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

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

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

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

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

The aggregate market value of the 60,683,736 shares of voting stock
held by non-affiliates of the Registrant was approximately $683 million
computed by reference to the closing price of such stock on the New York
Stock Exchange on June 4, 1999. For purposes of this calculation, only
executive officers and directors were deemed to be affiliates.

The number of shares of Common Stock outstanding as of June 4, 1999
was 70,661,906.

DOCUMENTS INCORPORATED BY REFERENCE
The Company's Proxy Statement for the Annual Meeting of Stockholders
to be held August 2, 1999 is partially incorporated by reference into Part
III. Those portions of the Proxy Statement included in response to Item
402(k) and Item 402(l) of Regulation S-K are not incorporated by reference
into Part III.

2
AIRGAS, INC.

TABLE OF CONTENTS

PART I

ITEM NO.
PAGE

1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Gas Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Airgas Growth Strategies . . . . . . . . . . . . . . . . . . . . . 6
Regulatory and Environmental Matters . . . . . . . . . . . . . . . 6
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Patents, Trademarks and Licenses . . . . . . . . . . . . . . . . . 7
Executive Officers of the Company . . . . . . . . . . . . . . . . . 7

2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 9

4. Submission of Matters to a Vote of Security Holders . . . . . . . . .10

PART II

5. Market for the Company's Common Stock and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . .11

7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . .13

7A. Quantitative and Qualitative Disclosures About Market Risk . . . . .29

8. Financial Statements and Supplementary Data . . . . . . . . . . . . .31

9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . .31

PART III

10. Directors and Executive Officers of the Company . . . . . . . . . .31

11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . .31

12. Security Ownership of Certain Beneficial Owners and Management . . .31

13. Certain Relationships and Related Transactions . . . . . . . . . . .31

PART IV

14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . .32

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

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PART I
ITEM 1. BUSINESS.

GENERAL

Airgas, Inc. ("Airgas" or the "Company") is the largest
distributor of industrial, medical and specialty gases (delivered in
packaged or cylinder form) and related welding supplies and
equipment, and the third largest distributor of safety products, in
the United States. Airgas also produces and distributes liquid
carbon dioxide and dry ice in the United States. Airgas' integrated
distribution network consists of approximately 700 locations in 44
states, including branch locations, distribution centers, catalog
operations, inbound call centers and outbound telemarketing
operations. Sales were $1.56 billion, $1.45 billion and $1.16
billion in fiscal years 1999, 1998 and 1997, respectively.

The Company has redefined its operating segments and is
reporting its results of operations based on the management structure
established under the "Repositioning Airgas For Growth" initiative
which commenced in fiscal year 1998. Comparative prior year
information has been reclassified to conform to the current
presentation. The new operating segments consist of Distribution and
Gas Operations. Financial information by business segment can be
found in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" ("MD&A"), "Financial Statements
and Supplementary Data", and Note 21 to the Company's consolidated
financial statements for the three years ended March 31, 1999 under
Item 8. Descriptions of the new operating segments are as follows:

DISTRIBUTION

The Distribution segment accounts for 90% of consolidated sales
and reflects the integration of the traditional industrial gas
distribution companies (formerly reported under the "Distribution
segment") and the safety products and industrial tool and supplies
distribution companies (formerly reported under the "Airgas Direct
Industrial segment"). These companies have been combined to reflect
management's approach to evaluating segment performance and
allocating resources in the future as the Company continues to
develop its centralized purchasing, shared distribution facilities
and multi-channel marketing initiatives begun under the
"Repositioning Airgas for Growth" initiative. The Distribution
segment also includes a 47% joint venture with National Welders
Supply Company, Inc., which is a producer and distributor of
industrial, medical and specialty gases and related welding supplies
and equipment.

Principal Products and Services

The Distribution segment's principal products and services
include packaged and small bulk gases, gas cylinder and welding
equipment rental and hardgoods. Gas sales include industrial,
medical and specialty gases such as: nitrogen, oxygen, argon, helium,
acetylene, carbon dioxide, nitrous oxide, hydrogen, welding gases,
ultra high purity grades and special application blends. Rent is
derived from gas cylinders, cryogenic liquid containers, bulk storage
tanks and through the rental of welding equipment. In fiscal year
1999, 1998 and 1997, gas and rent represent approximately 40%, 40%
and 45% of the Distribution segment's sales, respectively. Hardgoods
consist of welding supplies and equipment, safety products, and
industrial tools and supplies, which can be classified as
Maintenance, Repair and Operations ("MRO") products. In fiscal year
1999, 1998 and 1997, hardgoods sales represent approximately 60%, 60%
and 55% of the Distribution segment's sales, respectively (see Note
21 of the Company's Consolidated Financial Statements for disclosure
related to segment sales).

Principal Markets and Methods of Distribution

The Company believes the North American market for industrial,
medical and specialty gases to be approximately $9.5 billion
annually. The industry has three principal modes of distribution: on-
site supply, bulk or merchant supply and cylinder ("packaged gas")
supply. On-site supply accounts for approximately 74% of the gas
volume delivered in North America. Bulk or merchant supply accounts
for 23% of the volume, and packaged gas supply accounts for 3% of the
volume delivered annually. However, the packaged gas supply mode
accounts for 34% of the value, or $3.2 billion, of gas sold in North
America. The bulk or merchant supply mode accounts for an additional
34% of the value of gas sales annually. Airgas' market focus has
been on the packaged gas segment of the market and on small bulk
customers.

Airgas is the largest distributor of packaged gases in North
America with approximately a 14% market share. The Company's primary
competitors in the packaged gases market are approximately 900
independent distributors that serve approximately 45% of the market
through a fragmented distribution network. Large distributors,
including vertically integrated gas producers such as Praxair, Inc.
("Praxair"), Air Products and Chemicals, Inc. ("Air Products"),
Liquid Air Corporation of America ("Air Liquide"), and BOC Gases
Group ("BOC Gases"), serve the remaining 41% of the packaged gas
market.

The Company estimates the United States market for hardgoods
products, including welding supplies and equipment, safety products,
and industrial tools and supplies to be approximately $55 billion
annually. The market for hardgoods products is highly fragmented and
is serviced through multiple distribution channels. Airgas offers
its lines of hardgoods products through branch stores, direct sales
representatives, telemarketing and catalogs. The Company believes
its share of the hardgoods market is less than 2%. Competition at
the local level consists primarily of small, branch-based
distribution companies. At the national level, Airgas competes with
large, branch-based and direct marketers, such as W.W. Grainger,
Inc., Vallen Corporation and MSC Industrial Direct, Inc., as well as
the large integrated gas producers.

Customer Base

The Company's customer base is broad and includes most major
industries. As a percentage of sales, the Company estimates that the
following industry segments account for approximately 75% of total
Distribution sales: metal fabrication (19%), medical and health
services (11%), metal processing (8%), construction (8%), defense
(8%), agriculture (7%), wholesale distributors (7%) and petro-
chemical (7%). This diverse customer base purchases a wide variety
of gases and hardgoods offered through the Company's distribution
network.

Suppliers

The Company purchases industrial, medical and specialty gases
pursuant to requirements contracts from national and regional
producers of industrial gases. The Company also manufacturers the
majority of the segment's acetylene gas and a portion of its nitrous
oxide, nitrogen, oxygen and argon volumes. The Company believes that
if a contractual arrangement with any supplier of gases or other raw
materials was terminated, it would be able to locate alternative
sources of supply without significant cost increases and without
disruption of service. The Company purchases hardgoods from major
manufacturers and suppliers. For certain products, the Company has
negotiated national purchasing arrangements.

GAS OPERATIONS

The Gas Operations segment consists of domestic and foreign
operating companies which produce and distribute certain gas
products, principally dry ice, carbon dioxide, specialty gases and
nitrous oxide. Until a divestiture in December 1998, the segment
also included sales of calcium carbide and carbon products. The
Company also operates two air separation plants which produce oxygen,
nitrogen and argon which are sold to the Distribution segment. These
operating companies were formerly reported under the "Manufacturing
segment." A description of the businesses included in the Gas
Operations segment are as follows:

Dry Ice

The Company is a producer and distributor of dry ice in the
United States. Customers include food processors, transportation
companies and general retail customers. The dry ice business
generally experiences a higher level of sales in the second and third
quarters of the fiscal year due to weather related demand. The
Company's carbon dioxide requirements (dry ice is the solid form of
carbon dioxide) are purchased from internal sources and the major
producers of carbon dioxide. The Company believes that if a
contractual arrangement with any supplier was terminated, it would
not have a material adverse effect on the business.

Carbon Dioxide

The Company is a producer and distributor of liquid carbon
dioxide and produces more than 90% of the carbon dioxide sold by this
business. Carbon dioxide requirements are primarily obtained from
carbon dioxide reserves owned by the Company and through a 50% joint
venture. The joint venture also produces and sells liquid carbon
dioxide to other producers of industrial gases. The Company
operates carbon dioxide reserves and a related pipeline which are
located in Mississippi and Louisiana. The Company believes the
United States bulk supply market for liquid carbon dioxide is
approximately $400 million annually. The largest customer segments
include food and beverage producers and water treatment facilities.
The Company primarily competes with three major carbon dioxide
companies: Praxair, BOC Gases and Air Liquide. These three companies
produce over 80% of the United States merchant carbon dioxide
volumes.

Specialty and Other Gases

The Company operates six "A grade" labs which blend various
special application gas mixes, ultra high purity grade gases, pure
hydrocarbon mixtures, EPA protocol gases, and vehicle emission
standard gases. Gas mixtures are used in process control, final
product qualification and emissions monitoring. The Company believes
the United States specialty gas market is approximately $750 million
annually. Airgas believes its share of the market for specialty
gases is approximately 8%. Specialty gases produced are primarily
sold to the Distribution segment (see Note 21 of the Company's
Consolidated Financial Statements for disclosure related to segment
sales). The third-party customer base for these products
consists primarily of research facilities and biotechnology,
pharmaceutical, food processing and environmental companies. Gas
Operations also provides technical support to 30 "B grade" labs which
are operated by the Distribution segment. The "A grade" and "B
grade" labs perform testing and certification services for gas
purity. Certain of the specialty gas operations have been ISO 9002
certified.

Nitrous Oxide

The Company is a manufacturer of nitrous oxide gas. Nitrous
oxide is used as an anesthetic in the medical and dental fields, as a
propellant in the packaged food business and is utilized in the
manufacturing process of certain high technology electronics industries.
The Company's market focus includes bulk customers as well as sales to
the Distribution segment. Sales of nitrous oxide are not material to
total Distribution sales (see Note 21 of the Company's Consolidated
Financial Statements for disclosure related to segment sales). The Company

purchases the raw materials utilized in its nitrous oxide production
pursuant to contracts with major manufacturers and suppliers. The
Company believes that if a contractual arrangement with any supplier
was terminated, it would not have a material adverse effect on
operations.

Calcium Carbide and Carbon Products

Until the divestiture of the Company's calcium carbide and
carbon products operations in December 1998, the Company manufactured
carbon electrode paste, carbon ramming paste and electrically
calcined anthracite ("ECA"), collectively referred to as carbon
products. Carbon electrode paste is used as a consumable electrode
in the production of special alloy nickel and other metals. ECA is
used as an ingredient in carbon mixes used in the aluminum industry
and as an additive in the production of certain metals. Prior to the
divestiture, the Company also operated a manufacturing facility which
produced calcium carbide for sale to a joint venture, whose
customers included some of the Company's Distribution operations.
Calcium carbide is a primary raw material for the production of
acetylene gas. In connection with the divestiture of the calcium
carbide and carbon products operations, the Company entered into a
calcium carbide supply agreement with the purchaser to supply raw
material for its acetylene production.

Foreign Operations

The Company's foreign operations are majority owned and equity
investments in industrial gas companies located in Poland, India,
and Thailand. In January 1999, Airgas announced the signing of a
letter of intent to sell its operations in Poland and Thailand.
The sale, which is subject to regulatory approval, completion of due
diligence and definitive documentation, is expected to close early
in the second quarter of fiscal year 2000. The Company is actively
marketing its remaining foreign operations in India.

AIRGAS GROWTH STRATEGIES

The Company's strategy is to focus on internal growth,
supplemented by distributor acquisitions. To enhance internal
growth, the Company intends to selectively add complementary product
offerings in order to leverage its distribution network.

From April 1, 1996 through March 31, 1999, the Company acquired
67 businesses with annual sales of approximately $550 million. The
industrial gas distribution industry continues to undergo a
consolidation, which Airgas believes will present opportunities to
acquire industrial gas distributors. The Company believes that its
principal competitive advantages in acquiring distributors are its
extensive distribution network, its well-organized acquisition
program, its flexibility in structuring acquisitions to meet sellers'
needs and its ability to offer sellers and their employees a
continuing role in the Company. In seeking to acquire gas
distributors, the Company competes with the large vertically
integrated gas producers and other independent distributors.

The Company has financed distributor acquisitions primarily with
debt and internally generated funds. The Company has been able to
obtain debt financing due, in part, to its ability to generate cash
flow from operating activities and to the long useful lives and
relatively stable market values of its fixed assets, principally
cylinders. The cost and terms of any future financing arrangement
depend on the market conditions and the Company's financial position
at that time.

REGULATORY AND ENVIRONMENTAL MATTERS

The Company's subsidiaries are subject to federal and state laws
and regulations adopted for the protection of the environment and the
health and safety of employees and users of the Company's products.
The Company has programs for the operation and design of its
facilities to achieve compliance with applicable environmental
regulations. The Company believes that it is in compliance, in all
material respects, with such laws and regulations. Expenditures for
environmental purposes during fiscal 1999 were not material.

INSURANCE

The Company has established insurance programs to cover workers'
compensation, business automobile, general and product liability.
These programs have self-insured retentions of $500,000 per
occurrence. Losses are accrued based upon the Company's estimates,
developed with third party insurance adjusters, of the aggregate
liability for claims incurred, claims incurred but not reported and
on Company experience. The Company has established insurance
reserves that management believes are adequate.

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

EMPLOYEES

On March 31, 1999, the Company employed approximately 8,000
employees of whom approximately 5% were covered by collective
bargaining agreements. The Company believes it has good relations
with its employees and has not experienced a significant strike or
work stoppage in the past 12 years.

PATENTS, TRADEMARKS AND LICENSES

The Company holds trademark registrations for "Airgas,"
"Carbonic Reserves," "Red-D-Arc," "RED-D-ARC WELDERENTAL," "Dyna-
Switch," "Gold Gas," "Stainless Mix," "Steelmix" and "Alummix." The
Company holds patent registrations for "Fluid Bed Air Cooling
System," a method and apparatus for conveying dry ice. The Company
believes that its businesses as a whole are not materially dependent
upon any single patent, trademark or license.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company are as follows:

Name Age Position

Peter McCausland (1) 49 Chairman of the Board and Chief Executive
Officer
William A. Rice, Jr. 52 President and Chief Operating Officer
Scott M. Melman 42 Senior Vice President and Chief Financial
Officer
Ted R. Schulte 48 Vice President - Gas Operations
Michael L. Molinini 48 Vice President - Hardgoods Operations
Alfred B. Crichton 51 Division President - West
John Musselman 50 Division President - East
Gordon L. Keen, Jr. 54 Senior Vice President - Law and Corporate
Development
Rudi G. Endres 55 Vice President - International
Andrew R. Cichocki 36 Senior Vice President - Business Operations
and Planning
Samuel H. Goldstein 40 Senior Vice President - Information Services
Patrick M. Visintainer 35 Senior Vice President - Sales
__________________
(1) Member of the Board of Directors

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

Mr. Rice has been President and Chief Operating Officer since
January 1999. Prior to 1999, he served as Group President - Airgas
Direct Industrial from April 1997 to December 1998, Airgas' Division
President - Industrial Distribution and Purchasing from April 1995 to
March 1997 and served as Vice President - Purchasing from August 1993
to March 1995. Before August 1993, Mr. Rice was President of
Virginia Welding Supply, which was acquired by the Company in July
1992.

Mr. Melman has been Senior Vice President and Chief Financial
Officer since May 1998. Prior to that, Mr. Melman served as Vice
President - Administration from April 1995 to May 1998, Vice
President and Corporate Controller from August 1994 to March 1995 and
Corporate Controller from August 1986 to July 1994.

Mr. Schulte has been Vice President - Gas Operations since
November 1998. Prior to that, Mr. Schulte served as President of
Airgas Carbonic from November 1997 to October 1998. Before October
1997, Mr. Schulte served as Senior Vice President of Energetic
Solutions, the US subsidiary of ICI Explosives.

Mr. Molinini has been Vice President - Hardgoods Operations
since joining the Company in 1997. Prior to that, Mr. Molinini
served as Vice President of Marketing of National Welders Supply
Company since 1991.

Mr. Crichton has been Division President - West since February
1993. Prior to that, Mr. Crichton served as a Regional Vice President
from May 1991 to February 1993.

Mr. Musselman has been Division President - East since April
1997. Prior to that, Mr. Musselman served as President of Northeast
Airgas from January 1989 to March 1997.

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

Mr. Endres has been Vice President - International since January
1993. Prior to that, Mr. Endres served in various positions since
joining Airgas in 1987.

Mr. Cichocki has been Senior Vice President - Business
Operations and Planning since January 1999. Prior to that, Mr.
Cichocki served as Vice President - Corporate Development from April
1997 to December 1998 and as Assistant Vice President - Corporate
Development from August 1992 to March 1997. Prior to that, he served
in various corporate development and finance positions from April
1988 to July 1992.

Mr. Goldstein has been Senior Vice President-Information
Services since January 1999. Prior to that, Mr. Goldstein served as
Vice President-Information Services from September 1996 to December
1998. He joined Airgas from KPMG LLP, where he served as a National
Service Leader for the Consulting Division from June 1991 to
September 1996.

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

ITEM 2. PROPERTIES.

The Company's Distribution segment operates an integrated
network of approximately 650 branch stores, 29 "B grade" gas
laboratories, 18 acetylene manufacturing facilities, seven regional
distribution centers, cylinder fill plants and customer call centers.
The Distribution segment conducts business in 44 states. The Company
owns approximately 37% of these facilities. The remaining facilities
are primarily leased from third parties. Facilities leased from
employees are on terms consistent with commercial rental rates
prevailing in the surrounding rental market. The Company's fill
plants, acetylene production facilities and "B grade" gas
laboratories operated at an estimated average capacity of 70% during
fiscal 1999.

The Company's Gas Operations segment consists of companies,
located throughout the United States, which operate approximately 50
branch locations, several liquid carbon dioxide and dry ice
production facilities, six "A grade" gas laboratories, two nitrous
oxide production facilities and a carbon dioxide pipeline. The
Company owns 37% of the production facilities and "A grade" gas
laboratories. The remaining facilities are leased from third
parties. The Company owns one nitrous oxide production facility and
leases the other facility under a long-term lease. The Company owns
its two air separation plants. The estimated average production
capacities of the liquid carbon dioxide operations, dry ice
facilities, "A grade" gas laboratories and the nitrous oxide
production plants were approximately 70%, 85%, 60% and 85%,
respectively. The carbon dioxide reserves and pipeline average flow
rate was approximately 60% of capacity. The air separation plants
operated at an estimated average capacity of approximately 70%.

The principal executive offices of the Company are located in
leased space in Radnor, Pennsylvania. The Company believes that its
facilities are adequate for its present needs and that its properties
are generally in good condition, well maintained and suitable for
their intended use.

ITEM 3. LEGAL PROCEEDINGS.

In July 1996, Praxair, Inc. ("Praxair") filed suit against the
Company in the Circuit Court of Mobile County, Alabama. The
complaint alleged tortuous interference with business or contractual
relations with respect to Praxair's Right of First Refusal contract
with the majority shareholders of National Welders Supply Company,
Inc. ("National Welders") by the Company in connection with the
Company's formation of a joint venture with National Welders. In
June 1998, Praxair filed a motion to dismiss its own action in
Alabama and commenced another action in the Superior Court of
Mecklenburg County, North Carolina, alleging substantially the same
tortuous interference by the Company. The North Carolina action also
alleges breach of contract against National Welders and certain
shareholders of National Welders and unfair trade practices and
conspiracy against all the defendants. In the North Carolina action
Praxair seeks compensatory damages in excess of $10,000, punitive
damages and other unspecified relief. The Company believes that
Praxair's claims are without merit and intends to defend vigorously
against such claims.

On September 9, 1996, the Company filed suit against Praxair in
the Court of Common Pleas of Philadelphia County, Pennsylvania. The
complaint alleges breach of contract, fraud, conversion and
misappropriation of trade secrets with respect to an agreement
between Praxair and the Company, pursuant to which Praxair induced
the Company to provide Praxair valuable information and conclusions
developed by the Company concerning CBI Industries, Inc. ("CBI") in
exchange for Praxair's promise not to acquire CBI without the
Company's participation. The Company has alleged that it became
entitled, pursuant to such agreement, to acquire certain of CBI's
assets having a value in excess of $800 million. The Company is
seeking compensatory and punitive damages.

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

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

None.

PART II

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

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

High Low
Fiscal 1999

First Quarter $18.81 $13.94
Second Quarter 14.25 11.50
Third Quarter 12.56 8.50
Fourth Quarter 10.13 8.13

Fiscal 1998

First Quarter $20.88 $13.50
Second Quarter 20.44 16.75
Third Quarter 17.50 13.38
Fourth Quarter 18.19 13.88
________________

The closing sale price of the Company's Common Stock as reported
by the New York Stock Exchange on June 4, 1999, was $11.25 per share.
As of June 4, 1999, there were approximately 14,000 shareholders of
record of the Company's Common Stock.

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

ITEM 6. SELECTED FINANCIAL DATA

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

(In thousands, except per share amounts):

Years Ended March 31, (4)
1999 (1) 1998 (2) 1997 (3) 1996 1995

Operating Results:
Net sales $1,561,218 $1,447,990 $1,158,894 $838,144 $687,983
Depreciation & amortization 87,926 76,670 62,491 45,762 36,868
Operating income 112,996 118,948 82,285 92,985 72,600
Interest expense, net 60,298 53,290 39,752 24,862 17,625
Income taxes 34,437 29,989 21,080 28,522 23,894
Net earnings 51,924 40,540 23,266 39,720 31,479

Basic earnings per share (5) $ .74 $ .59 $ .35 $ .63 $ .51

Diluted earnings per share (5) $ .72 $ .57 $ .34 $ .60 $ .48

Balance Sheet Data:
Working capital $ 165,416 $ 141,276 $ 124,849 $ 81,588 $ 54,084
Total assets 1,698,472 1,641,474 1,291,031 883,642 645,637
Current portion of
long-term debt 19,645 12,150 25,158 12,179 11,780
Long-term debt 847,841 830,845 629,931 385,832 259,970
Other non-current liabilities 23,585 36,842 29,601 34,490 11,116
Stockholders' equity (6) $ 470,945 $ 426,873 $ 336,657 $ 236,209 $189,652

_______________
(1) As discussed in Notes 2 and 3 to the Company's consolidated financial
statements, the results for fiscal 1999 include: (a) a $25.5 million
($15 million after-tax or $.21 per diluted share) non-recurring gain
related to the divestiture of its calcium carbide and carbon products
operations, and (b) non-recurring gains of $2.8 million ($2.4 million
after-tax or $.03 per diluted share) related to other special items.
Excluding the effects of special charges and non-recurring gains, net
earnings were $34.5 million or $.48 per diluted share.
(2) As discussed in Notes 2 and 3 to the Company's consolidated
financial statements, the results for fiscal 1998 include: (a)
fourth quarter special charges which totaled $22.4 million ($14.3
million after-tax or $.20 per diluted share) which consisted of
severance, exit costs for the closure of duplicate facilities, the
impairment write-down of property, equipment and related goodwill and
a write-down related to the divestiture of several non-core
businesses, offset by a one-time net gain related to an acquisition
break-up fee of $3 million ($1.9 million after-tax or $.03 per
diluted share), (b) a non-recurring gain of $14.5 million ($9.4
million after-tax or $.13 per diluted share) from the partial
recovery of refrigerant losses, and (c) a non-recurring gain on the
sale of a non-core business. Excluding the effects of special
charges and non-recurring gains, net earnings were $42.6 million or
$.60 per diluted share.

(3) As discussed in Notes 2 and 3 to the Company's consolidated financial
statements, the Company recorded special charges totaling $31.4
million ($20.2 million after-tax or $.30 per diluted share) related
to the fraudulent breach of contract by a third-party supplier of
refrigerant gas and an after-tax loss on the sale of a non-core
business. Excluding the effects of special charges and the loss, net
earnings were $44.3 million or $.65 per diluted share.
(4) During fiscal 1995 through 1999, the Company acquired a total of
135 businesses.
(5) The earnings per share presentation reflects a two-for-one stock
split which occurred on April 15, 1996.
(6) The Company has not paid any dividends on its Common Stock.

13
Item 7.
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS: 1999 COMPARED TO 1998

The Company has redefined its operating segments and is reporting
its results of operations based on the management structure established
under the "Repositioning Airgas For Growth" initiative (the "Repositioning
Plan") which commenced in the fourth quarter of fiscal year 1998.
Effective with the fiscal year ended March 31, 1999, the Company implemented
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information," ("SFAS 131"). SFAS 131
requires the disclosure of segment information on the same basis used by
management for evaluating segment performance and allocating resources.

The Company's new operating segments consist of Distribution and
Gas Operations. The Distribution segment accounts for 90% of
consolidated sales and reflects the integration of the traditional
industrial gas distribution companies (formerly reported under the
"Distribution segment") and the safety products and industrial tool
and supplies distribution companies (formerly reported under the
"Airgas Direct Industrial segment"). These companies have been
combined to reflect management's approach to evaluating segment
performance and allocating resources in the future as the Company
continues to develop its centralized purchasing, shared distribution
facilities and multi-channel marketing initiatives begun under the
Repositioning Plan. The segment entitled Gas Operations consists of
domestic and foreign operating companies which produce and distribute
certain gas products, principally dry ice and carbon dioxide. These
companies were formerly reported under the "Manufacturing segment."
Comparative 1998 and 1997 information has been reclassified to
conform to the current presentation.

OVERVIEW

The Company's net sales for the fiscal year ended March 31, 1999
increased 8% to a record $1.56 billion, compared to $1.45 billion in
the prior year. Net earnings for fiscal 1999 were $51.9 million, or
$.72 per diluted share, compared to $40.5 million, or $.57 per
diluted share, in fiscal 1998. Net earnings were $34.5 million, or
$.48 per diluted share, compared to $42.6 million, or $.60 per
diluted share, in the prior year, excluding special charges and non-
recurring gains recognized in both periods. Net earnings in fiscal
1999 were impacted by a general slowing in the manufacturing and
industrial sectors and higher operating expenses, including expenses
associated with the Company's Repositioning initiative.

Non-recurring gains in 1999 consist of a $25.5 million ($15
million after-tax) non-recurring gain related to the divestiture of
the Company's calcium carbide and carbon products operations and non-
recurring gains of $2.8 million ($2.4 million after-tax) related to
other special items. Special charges and non-recurring gains in 1998
consist of special charges which totaled $22.4 million ($14.3 million
after-tax) which included severance, exit costs for the closure of
duplicate facilities, the impairment write-down of property,
equipment and related goodwill and a write-down related to the
divestiture of several non-core businesses, offset by non-recurring
gains related to an acquisition break-up fee of $3 million ($1.9
million after-tax), and a $14.5 million ($9.4 million after-tax)
partial recovery of refrigerant losses.

During fiscal year 1999, the Company made substantial progress
towards completing the goals and initiatives established in its
Repositioning Plan. The Repositioning Plan includes the
consolidation of subsidiaries into larger regional companies, the
standardizing of information systems, the implementation of a

14
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

national information, procurement and logistics infrastructure and
communications system, the consolidation of certain warehouse
facilities into regional distribution centers and the divestiture of
several non-core businesses. In addition, the Repositioning Plan
included the sale, closure or downsizing of approximately 30
distribution locations and a reduction in the Company's workforce.
Fiscal year 1998 special charges totaled $22.4 million ($14.3 million
after-tax or $.20 per diluted share) which consisted of an impairment
write-down of property, equipment and goodwill of $11.4 million,
divestiture reserves of $6.9 million, facility exit costs of $2.6
million and severance of $1.6 million. During fiscal year 1999,
progress was made in the following areas:
- 34 businesses were merged into 15 regional companies;
- computer systems are being standardized and resulted in
approximately 40 computer conversions;
- the Company completed three of its planned divestitures and, in
January 1999, announced the signing of a letter of intent with Linde
AG, for the sale of the Company's operations in Poland and Thailand
for approximately $50 million (the transaction, which is subject to
regulatory approvals, completion of due diligence and definitive
documentation, is expected to close early in the second quarter of
fiscal 2000);
- certain branches and distribution centers were closed and/or
consolidated; and
- workforce reductions were made as planned.

In connection with changes in the business, primarily related to
a slowing in the industrial and manufacturing sectors, the Company
modified its plans related to exiting certain facilities and adjusted
facility exit reserves by $763 thousand. In addition, adjustments to
divestiture reserves were made to reflect differences between
previous estimates, amounts related to completed transactions and
pending divestitures. The income statement effect of the adjustments
to reserves for facility exit costs and divestitures was an increase
in earnings of $1 million ($570 thousand after-tax) which was
recorded in the quarter ended June 30, 1998.

During fiscal 1999, the Company incurred approximately $16.3
million of expenses associated with the Repositioning Plan, of which
approximately 60% are expected to be ongoing in future periods in
support of the established infrastructure. In response to a slowing
economy during 1999 and the increase in expenses associated with the
Repositioning Plan, the Company embarked on a cost improvement
program that it believes will yield approximately $12 - $15 million
in annual savings beginning in fiscal year 2000. The cost
improvements are expected to impact many areas of the Company's
expense structure. The savings are expected to result from
administrative cost reductions, consolidation of back offices, the
closure of certain branch locations and lower interest costs through
working capital improvements and reduced capital expenditures.

On December 31, 1998, the Company completed the divestiture of
its calcium carbide and carbon products operations to Elkem Metals
Company L.P. ("Elkem"), a subsidiary of Elkem ASA. In conjunction
with the sale, the Company and Elkem terminated the Elkem-American
Carbide Company joint venture which marketed calcium carbide
throughout the United States. The divestiture resulted in a non-
recurring gain of $25.5 million ($15 million after-tax). The calcium
carbide and carbon products operations generated annual sales of
approximately $30 million which are reflected in the Company's Gas
Operations segment.

During fiscal 1999, the Company acquired 11 distributors of
industrial gas and related equipment (Distribution segment) with
aggregate annual sales of approximately $31 million and four
manufacturers and distributors of dry ice (Gas Operations segment)
with annual sales of approximately $20 million.

15
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

INCOME STATEMENT COMMENTARY

Net Sales

Net sales increased 8% in fiscal 1999 compared to 1998.

(In thousands) 1999 1998 Increase

Distribution $1,406,184 $1,321,958 $ 84,226
Gas Operations 155,034 126,032 29,002
$1,561,218 $1,447,990 $ 113,228

The Distribution segment's principal products and services
include: industrial gases, equipment rental and hardgoods.
Industrial gases and rent consist of packaged and small bulk gases
and rent on cylinders, cryogenic liquid containers, bulk tanks and
welding equipment. Hardgoods consist of welding supplies and
equipment, safety products, and industrial tools and supplies. For
fiscal 1999, Distribution sales increased approximately $88 million
as a result of 33 acquisitions since April 1, 1997 and approximately
$11.7 million from same-store sales growth. Offsetting the increase
in sales were the divestitures of three businesses in fiscal 1999.
Sales in fiscal 1999 and 1998 for these three businesses were
approximately $10.3 million and $25.8 million, respectively. The
increase in Distribution same-store sales of .8% resulted from growth
in gas and rent of $21.4 million (4%) and safety products of $11.2
million (6.9%), offset by same-store sales declines of welding
supplies and equipment of $12.4 million (-2.1%) and industrial tools
and supplies of $8.5 million (-9.1%). Gas and rent sales
growth was attributable to the Company's focus on national and
regional accounts, expansion of its rental welder fleet, gas sales
resulting from the Company's two air separation plants and higher
small bulk and medical gas sales. Growth in gas sales was primarily
attributable to increased volumes. Sales growth of safety products
was driven by growth in national and regional accounts business, an
expanded telemarketing sales force and selling initiatives that
leverage the Distribution segment's customer base. Sales of welding
supplies and equipment and industrial tools and supplies were
negatively impacted during fiscal 1999 by a general slowing in
certain manufacturing and industrial sectors including: metal
fabrication, petro-chemical, agriculture, pulp and paper, and mining.

The Gas Operations segment's sales primarily include dry ice
and carbon dioxide. In addition, the segment includes the Company's
foreign operations and businesses that produce and distribute
specialty gases and nitrous oxide. Until the divestiture in December
1998, the segment also included sales of calcium carbide and carbon
products. Sales increased $29 million as a result of $38.6 million
of carbon dioxide and dry ice acquisitions completed during fiscal
1998 and 1999, gas sales volume growth of $1.4 million and a decrease
of $11.0 million as a result of the divestiture of the Company's
calcium carbide and carbon products operations. Liquid carbon
dioxide sales volumes, including pipeline volumes, increased during
fiscal 1999; however, the increase was largely offset by lower prices
due to increased industry production which exceeded growth in demand.
Nitrous oxide sales declined approximately 4% in fiscal 1999 compared
to the prior year due to the general slowing in the manufacturing and
industrial sectors. Gas Operations sales to the Distribution segment
in 1999 and 1998 totaled approximately $14.7 million and $9.5 million,
respectively, and are eliminated in consolidation.

16
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company estimates same-store sales based on a comparison of
current period sales to the prior period's sales, adjusted for
acquisitions and divestitures. Future same-store sales growth is
dependent on the economy, competition from other companies, the
Company's ability to implement price increases and the Company's
ability to sell additional products and services to existing
customers. The Company continues to focus on internal sales growth
through leveraging the Company's customer base, the addition of new
products and product-line extensions, including rental welders, tool
and safety hardgoods items, specialty gases, carbon dioxide and
refrigerant gases in returnable containers.

Gross Profits

Gross profits increased 8% in fiscal 1999 compared to 1998.

(In thousands) 1999 1998 Increase

Distribution $637,616 $605,240 $ 32,376
Gas Operations 85,547 63,212 22,335
$723,163 $668,452 $ 54,711

The increase in Distribution gross profits of approximately
$32.4 million resulted from acquisitions which contributed
approximately $35.1 million and same-store gross profit growth of
approximately $5.1 million (.8%), offset by the divestiture of three
businesses which contributed gross profits of approximately $7.8
million in the prior year. Same-store gross profit growth consisted
of increases in gas and rent of $13.3 million (3.3%) and safety
products of $4.4 million (12.5%), offset by same-store gross profit
declines in welding supplies and equipment of $7.7 million (-4.6%)
and industrial tools and supplies of $4.9 million (-14.5%). Same-
store gross profits of gases and rent increased as a result of higher
gas volumes, helped by the Company's two air separation plants and
increased rent associated with welding equipment, cylinders and bulk
tanks. Same-store gross profits for safety products increased
primarily due to sales volume growth. Same-store gross profit
declines in industrial tools and welding supplies and equipment
resulted primarily from a general slowing in the manufacturing and
industrial sectors during fiscal 1999 and from price reductions in
certain regions to retain market share. Overall, gross margins of
45.3% in fiscal 1999 declined 50 basis points from 45.8% in fiscal
1998 due primarily to pricing pressures of hardgoods products. Gas
margins were relatively consistent year-over-year. Acquisitions,
which had an average gross margin of approximately 41% partially
contributed to the gross margin decline.

The increase in Gas Operations gross profits of approximately
$22.3 million resulted primarily from acquisitions, partially offset
by the divestiture of the Company's calcium carbide and carbon
products operations. Gas Operations' gross margin increased to 55.2%
in fiscal 1999 compared to 50.2% in the prior year. The increase was
due to the divestiture of the lower margin calcium carbide and carbon
products operations and the acquisitions of higher margin carbon
dioxide and dry ice companies with an average gross margin of 62%.

17
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Expenses

Selling, distribution and administrative expenses ("operating
expenses") consist of personnel and related costs, distribution and
warehouse costs, occupancy expenses and other selling and general
administrative expenses. Operating expenses increased approximately
$55 million compared to fiscal 1998 primarily as a result of
acquisitions and higher operating expenses which included direct
repositioning expenses. Repositioning expenses were estimated to
total $16.3 million in fiscal 1999 as a result of computer
conversions, relocation and other personnel expenses and facility-
related costs. Ongoing costs which are included in the Repositioning
expense amounts total $10.1 million and are primarily related to the
costs of operating a national computer center and communications
system, regional distribution centers and additional salary expense
related to new product line sales personnel. As a percentage of net
sales, operating expenses increased 120 basis points to 33.5% in
fiscal 1999 compared to the prior year.

Depreciation and amortization totaled $87.9 million in fiscal
1999 and increased approximately $11.3 million compared to the prior
year primarily due to business acquisitions and capital projects
completed during the previous 24 months. Consolidated depreciation
and amortization as a percentage of sales increased 30 basis points
as compared to fiscal 1998. For the Distribution and Gas Operations
segments, depreciation and amortization relative to sales was 5.3%
and 8.4%, respectively.

Operating Income

Operating income, excluding special charges, decreased 10% in
fiscal 1999 compared to 1998. The decrease in operating income was
primarily due to higher operating expenses, including repositioning-
related expenses and lower gross profits from a decline in hardgoods
sales.

(In thousands) 1999 1998 Increase/(Decrease)

Distribution $ 98,447 $111,472 $ (13,025)
Gas Operations 13,549 12,426 1,123
Special Charges 1,000 (4,950) 5,950
$112,996 $118,948 $ (5,952)

The Distribution segment's operating income margin decreased to
7% in fiscal 1999 compared to 8.4% in fiscal 1998. The decrease
resulted primarily from higher operating expenses, including expenses
associated with the Company's Repositioning Plan and higher selling
expenses related to expansion of safety products, specialty gases and
welder rentals. The Distribution segment was burdened by essentially
all of the aforementioned $16.3 million of Repositioning expenses.

The Gas Operations segment's operating margin decreased to 8.7%
in fiscal 1999 compared to 9.9% in the prior year primarily as a
result of carbon dioxide and dry ice acquisitions and related
integration expenses.

18
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Interest Expense

Interest expense, net, totaled $60.3 million and increased $7
million compared to fiscal 1998. The increase in interest expense was
primarily attributable to increased debt associated with completing
43 acquisitions since April 1, 1997. Interest expense was also
impacted by capital expenditures, an increase in working capital and
the repurchase of Common Stock. As discussed in "Liquidity and
Capital Resources" below, the Company manages interest rate exposure
of certain borrowing instruments through participation in interest
rate swap agreements.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates of $7 million
increased $4.1 million compared to fiscal 1998 primarily as a result
of a non-recurring insurance gain of $1.8 million, an increase in
earnings from the Company's liquid carbon dioxide joint venture which
was included in the Company's results for a full year in fiscal 1999
and higher joint venture earnings of National Welders Supply.
Earnings were helped at the Company's liquid carbon dioxide joint
venture as a result of a plant expansion which came on-line in
September 1997. National Welders Supply reported higher earnings as
a result of increased spot sales of bulk liquid gases.

Income Tax Expense

Income tax expense represented 39.9% of pre-tax earnings for
fiscal 1999, compared to 42.5% in 1998. Income tax expense, before
special charges and non-recurring gains, represented 39.5% of pre-tax
earnings for fiscal 1999, compared to 42.6% in 1998. The decrease in
the effective income tax rate was primarily a result of an increase
in earnings of unconsolidated equity affiliates and from the
implementation of tax planning strategies.

Net Earnings

Net earnings for fiscal 1999 were $51.9 million, or $.72 per
diluted share, compared to $40.5 million, or $.57 per diluted share,
in fiscal 1998. Net earnings before special charges and non-
recurring gains were $34.5 million, or $.48 per diluted share, in
fiscal 1999 compared to $42.6 million, or $.60 per diluted share, in
fiscal 1998.

EBITDA

Operating income, excluding special charges, plus depreciation
and amortization ("EBITDA") was approximately $200 million in both
fiscal 1999 and 1998.

19
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS: 1998 COMPARED TO 1997

OVERVIEW

During fiscal 1998, the Company continued to grow through
acquisitions and internal growth. During fiscal 1998, the Company
completed 28 acquisitions with aggregate annual sales of $265
million.

During the fourth quarter of fiscal 1998, the Company announced
its "Repositioning Airgas for Growth" restructuring plan (the
"Repositioning Plan"). The Repositioning Plan involves: consolidating
certain hubs into larger regional companies; consolidating certain
warehouse facilities into regional distribution centers; restructuring
the carbon dioxide businesses in the Gas Operations segment; standardizing
and integrating information systems; and building a national information,
procurement and logistics infrastructure to support expanded product lines
and distribution channels, and to strengthen national sales and marketing.
To focus on its core business, the Company announced its intent to divest
certain non-core businesses and to sell or seek joint venture partners for
several non-U.S. operations. The Company anticipated that the Repositioning
Plan would be substantially completed by June 30, 1999.

In connection with the Repositioning Plan, the Company recorded
special charges in the fourth quarter ("1998 Special Charges") totaling
$22.4 million ($14.3 million after-tax or $.20 per diluted share) which
consisted of the following:

(In thousands) 1998

Impairment write-down of property,
equipment and goodwill $11,423
Divestiture charges 6,851
Facility exit costs 2,577
Severance costs 1,578
Special charges 22,429

Refrigerant recovery (14,500)
Acquisition break-up fee, net (2,979)

Special charges, net $ 4,950

The Repositioning Plan required the sale, closure or downsizing
of approximately 30 distribution locations and a workforce reduction
of approximately 200 employees.

20
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

As a result, the Company wrote-down to fair value, less the cost
to dispose of, certain property, equipment and related goodwill by
$11.4 million. Fair value was based on the estimated future
undiscounted cash flows to be generated from the sale of these
assets. The write-down primarily related to: computer equipment as a
result of standardizing information systems; buildings and
improvements related to facilities to be closed; machinery and
equipment related to discontinued product lines; and the goodwill
associated with related business combinations.

The Company established reserves of approximately $6.9 million
for the divestiture of certain non-strategic businesses. The write-
down was based on an evaluation of the estimated fair value of these
assets which indicated that these assets were impaired. Fair value
was based on the estimated future undiscounted cash flows to be
generated from the sale of these assets. Sales associated with such
businesses totaled approximately $25 million.

Other costs including leased facility termination costs and
severance, totaled $2.6 million and $1.6 million, respectively.

The 1998 Special Charges were offset by a non-recurring gain of
$14.5 million ($9.4 million after-tax) from a partial recovery of
refrigerant losses related to the fiscal 1997 fraudulent breach of
contract by a third-party supplier and a net gain of $3 million ($1.9
million after-tax) related to an acquisition break-up fee.

Cash outflows related to the 1998 Special Charges, before the
acquisition break-up fee, were $600 thousand in fiscal 1998.

INCOME STATEMENT COMMENTARY

Net Sales

Net sales increased 25% in fiscal 1998 compared to 1997.

(In thousands) 1998 1997 Increase

Distribution $1,321,958 $1,098,771 $ 223,187
Gas Operations 126,032 60,123 65,909
$1,447,990 $1,158,894 $ 289,096

21
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

sales growth. The overall increase in Distribution same-store sales
of 5.7% was heavily weighted towards hardgoods. Same-store sales
growth consisted of: gas and rent $16.1 million (3.1%); welding
supplies and equipment $28.6 million (5.3%); safety products $17.7
million (14.5%) and industrial tools and supplies $9.6 million
(12.7%). Sales gains were mostly a result of volume growth. As a
result of low inflation, price increases during 1998 were modest.
The Company estimates same-store sales based on a comparison of
current period sales to the prior period's sales, adjusted for
acquisitions and divestitures.

The Gas Operations segment's sales primarily include dry ice,
carbon dioxide and calcium carbide and carbon products. In addition,
the segment includes the Company's foreign operations and businesses
that produce and distribute specialty gases and nitrous oxide. Sales
increased approximately $66 million primarily due to six carbon
dioxide and dry ice acquisitions completed during fiscal 1998. Same-
store sales related to nitrous oxide, calcium carbide and carbon
products increased $1.5 million (4%), offset by specialty gas sales
of refrigerants and sulfur hexafluoride which were down compared to
the prior year. Gas Operations sales to the Distribution segment in
fiscal 1998 and fiscal 1997 totaled approximately $9.5 million and
$6.5 million, respectively, and are eliminated in consolidation.

Gross Profits

Gross profits increased 22% in fiscal 1998 compared to 1997.

(In thousands) 1998 1997 Increase

Distribution $605,240 $522,758 $ 82,482
Gas Operations 63,212 24,753 38,459
$668,452 $547,511 $120,941

The increase in Distribution gross profits of approximately $82
million resulted from acquisitions which contributed approximately
$51 million and from same-store gross profit growth of 5.7% or
approximately $31 million. Same-store gross profit growth consisted
of: gas and rent $14.9 million (4.0%); welding supplies and
equipment $7.7 million (5.2%); safety products $5 million (19.8%) and
industrial tools and supplies $3.4 million (12.3%). Distribution's
gross margin of 45.8% in 1998 declined 180 basis points due to a
change in sales mix weighted more heavily toward lower margin
hardgoods. Additionally, acquisitions which had an average gross
margin of approximately 34% contributed to the gross margin decline.

The increase in Gas Operations gross profits of approximately
$38 million was primarily due to acquisitions which had an average
gross margin of 56%. Gas Operations gross margin increased from
41.2% to 50.2%. Gross margins were also adversely impacted by about
100 basis points as a result of a $1.5 million fourth quarter 1998
inventory write-down of specialty gases.

22
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Expenses

Selling, distribution and administrative expenses ("operating
expenses") consist primarily of personnel and related costs,
distribution and warehouse costs, occupancy expenses and other
selling and general administrative expenses. Operating expenses
increased approximately $97 million compared to 1997 primarily as a
result of acquisitions. Operating expenses also increased
approximately $3.8 million as a result of direct costs associated
with the Company's Repositioning Plan and from higher Corporate
operating costs. As a percentage of net sales, operating expenses
increased 30 basis points to 32.3%.

Depreciation and amortization increased approximately $14
million compared to 1997 primarily as a result of acquisitions and,
to a lesser extent, from higher capital expenditures. Consolidated
depreciation and amortization as a percentage of sales decreased 10
basis points as compared to 1997. For the Distribution and Gas
Operations segments, depreciation and amortization relative to sales
was 5.1% and 7.3%, respectively.

Operating Income

Operating income, excluding special charges, increased 9% in
fiscal 1998 compared to 1997. In connection with the Repositioning
Plan, fiscal 1998 operating income was negatively impacted by $5.7
million of direct repositioning costs for relocating employees and
other personnel expenses, exiting certain product lines and computer
conversion costs.

(In thousands) 1998 1997 Increase

Distribution $111,472 $103,376 $ 8,096
Gas Operations 12,426 10,334 2,092
Special Charges (4,950) (31,425) 26,475
$118,948 $ 82,285 $ 36,663

The Distribution segment's operating income margin decreased 100
basis points to 8.4% compared to 1997. The decrease resulted
primarily from acquisitions, which had average estimated operating
margins of 4%, from higher operating costs and expenses associated
with the Company's Repositioning Plan and the integration of
acquisitions. The Repositioning related operating costs included non-
recurring moving costs associated with new hardgoods distribution
centers in Southern California and Georgia.

The Gas Operations segment's operating margin decreased from
17.2% to 9.9% primarily as a result of lower operating margins
associated with 1998 carbon dioxide and dry ice acquisitions. Direct
repositioning costs, combined with an inventory write-down, totaled
$1.6 million and adversely impacted margins.

Interest Expense

Interest expense, net, totaled $53.3 million and increased $13.5
million compared to 1997. The increase in interest cost was
attributable to debt associated with completing 52 acquisitions since
April 1, 1996, costs associated with the refrigerant fraud and the
repurchase of Common Stock.

23
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates of $2.9 million
increased $2 million compared to 1997 primarily as a result of a full
year's earnings associated with the Company's joint venture with
National Welders Supply and earnings from a carbon dioxide joint
venture which was acquired in June 1997.

Income Tax Expense

Income tax expense represented 42.5% of pre-tax earnings for
fiscal 1998, compared to 47.5% in 1997. Income tax expense, before
special charges and divestitures represented 42.6% of pre-tax
earnings for 1998, compared to 41% in 1997. The increase in the
effective income tax rate was primarily a result of an increase in
non-deductible goodwill relative to pre-tax earnings.

Net Earnings

Net earnings for 1998 were $40.5 million, or $.57 per diluted
share. Net earnings before special charges and divestitures decreased
4% to $42.6 million, or $.60 per diluted share, from $44.3 million,
or $.65 per diluted share in 1997.

EBITDA

Operating income, excluding special charges, plus depreciation
and amortization ("EBITDA") in fiscal 1998, increased $24 million to
$200 million compared to 1997. The increase was primarily related to
acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The Company has financed its operations, capital expenditures,
stock repurchases and acquisitions with borrowings, the issuance of
common stock and funds provided by operating activities.

Cash flows from operating activities for fiscal 1999 totaled
$102.1 million. Depreciation and amortization represented $87.9
million of cash flows from operating activities. Deferred income
taxes of $16 million resulted from temporary differences. Cash flows
from working capital components decreased $9.9 million as a result of
an increase in accounts receivable, inventory, and other assets and
liabilities, net, offset by an increase in accounts payable and
accrued expenses. Accounts receivable days' sales outstanding
increased from 44 to 47 days and hardgoods days' supply of inventory
levels also increased from 74 to 77 days compared to March 31, 1998
levels. Higher working capital levels resulted partially from the
increased demand on the Company's personnel as a result of
Repositioning-related changes in management, computer conversions and
other operational factors related to the Repositioning Plan which was
substantially completed during fiscal 1999.

After-tax cash flow (net earnings, excluding special charges and
non-recurring gains, plus depreciation, amortization and deferred
income taxes) increased 4% to $138.3 million compared to $132.8 million
in the prior year.

24
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Cash used by investing activities totaled $96.9 million in
fiscal 1999. Investing activities which used cash during the period
primarily included capital expenditures of $101.6 million and
acquisitions of $52.1 million. Proceeds from divestitures provided
cash of $53.7 million.

Capital expenditures associated with the purchase of cylinders,
bulk tanks, rental welders and machinery and equipment totaled
approximately $61 million and helped facilitate strategic product
sales growth. During fiscal 1999, the Company also incurred capital
expenditures totaling approximately $9.2 million related to purchases
of computer and related equipment in connection with standardizing
information systems.

Financing activities used cash of $5.2 million, with total debt
outstanding increasing by $24.5 million since March 31, 1998. The
cash overdraft, the float of the Company's outstanding checks,
decreased by $14.7 million since March 31, 1998. Funds used by
financing activities were primarily for acquisitions, capital
expenditures, working capital needs and the repurchase of Common
Stock.

The Company will continue to look for appropriate acquisitions
of distributors. Future acquisitions and capital expenditures are
expected to be funded through the use of cash flow from operations,
debt, common stock for certain acquisition candidates, funds from the
divestiture of certain businesses and other available sources. The
Company believes that its sources of financing are adequate for its
anticipated needs and that it could arrange additional sources of
financing for unanticipated requirements. The cost and terms of any
future financing arrangement depend on the market conditions and the
Company's financial position at that time.

The Company does not currently pay dividends.

Financial Instruments

The Company has unsecured revolving credit facilities totaling
$725 million and $100 million Canadian (US$67 million) under a credit
agreement with a final maturity date of December 5, 2002. The credit
agreement contains covenants which include the maintenance of certain
financial ratios, restrictions on additional borrowings and
limitations on dividends. At March 31, 1999, the Company had
borrowings under the agreement of approximately $528 million and $42
million Canadian (US$27 million). The Company also has commitments
under letters of credit supported by the agreement of approximately
$71 million. Availability under the credit facilities was approximately
$165 million at March 31, 1999. At March 31, 1999, the effective
interest rate on borrowings under the credit facilities was 5.44% on
U.S. borrowings and 5.11% on Canadian borrowings.

At March 31, 1999, the Company had the following long-term debt
outstanding under medium-term notes: $50 million of unsecured notes
due September 2001 bearing interest at a fixed rate of 7.15%; $75
million of unsecured notes due March 2004 at a fixed rate of 7.14%;
and $100 million of unsecured notes due September 2006 bearing
interest at a fixed rate of 7.75%. Additionally, at March 31, 1999,
long-term debt of the Company included acquisition notes and other
long-term debt instruments of approximately $87 million with interest
rates ranging from 6.00% to 9.00%. The Company also has a shelf
registration with a capacity of approximately $175 million for the
issuance of debt and other types of securities.

In managing interest rate exposure, principally under the
Company's floating rate revolving credit facilities, the Company
participates in 23 interest rate swap agreements. The swap
agreements are with major financial institutions and aggregate $475
million in notional principal amount at March 31, 1999. Sixteen swap
agreements with approximately $238 million in notional principal
amount require fixed interest payments based

25
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

on an average effective rate of 6.79% for remaining periods ranging
between one and five years. Seven swap agreements with approximately
$237 million in notional principal amount require variable interest
payments based on an average rate of 5.04% at March 31, 1999. Under
the terms of five swap agreements, the Company has elected to receive
the discounted value of the counterparty's interest payments
up-front. At March 31, 1999, approximately $8.7 million of such
payments were included in other non-current liabilities. The Company
monitors its positions and the credit ratings of its counterparties,
and does not anticipate non-performance by the counterparties.
Subsequent to March 31, 1999 the Company entered into two swap
agreements with an aggregate notional principal amount of $100 million
requiring fixed rate interest payments at an effective rate of 5.48%
for two years.

Share Repurchase Programs

In March 1999, the Airgas Board of Directors authorized the
repurchase of up to seven million shares of the Company's outstanding
Common Stock (the "new program"). The shares may be repurchased in
the open market or in privately negotiated transactions depending on
market conditions and other factors. The Company has financed its
repurchase programs with borrowings and funds provided by operating
activities. During fiscal 1999, the Company repurchased
approximately 1.4 million shares at an average cost of $11.89 per
share. The effect of the fiscal 1999 share repurchases on earnings
per share was not material. Subsequent to March 31, 1999, the
Company repurchased approximately 630 thousand shares, including 175
thousand shares to complete the previous repurchase program, for
total consideration of approximately $7 million. At June 4, 1999,
approximately 6.5 million shares may be repurchased under the new
program.

Shares in Employee Benefits Trust

On March 30, 1999, the Company established a grantor trust (the
"Trust") to fund certain future obligations of the Company's employee
benefit and compensation plans. The Company, pursuant to a Common
Stock Purchase Agreement, will sell to the Trust shares of Common
Stock. Such Common Stock will consist of shares the Company has
purchased or will purchase on the open market or in private
transactions. The Common Stock may also consist of shares issued
directly to the trust. On March 31, 1999, the Trust purchased 826
thousand shares of Common Stock previously held as treasury stock,
from the Company, for approximately $7 million (based on the average
market closing price for the preceding five days). The Company holds
a promissory note from the Trust in the amount of the purchase.
Shares held by the Trust serve as collateral for the promissory note
and are available to fund certain employee benefit plan obligations
as the promissory note is repaid. The shares held by the Trust are
not considered outstanding for earnings per share purposes until they
are released from serving as collateral for the promissory note. An
independent third-party financial institution serves as the Trustee.
The Trustee will vote or tender shares held by the Trust in
accordance with instructions received from the participants in the
employee benefit and compensation plans funded by the Trust.
Subsequent to March 31, 1999, the Trust purchased 625 thousand
shares of Common Stock from the Company.

Inflation

The Company's inflation risks are managed on an entity-by-entity
basis through price increases, productivity increases and
cost-containment measures. Management does not believe that inflation
risk is material to the Company's business or its consolidated financial
position, results of operations or liquidity.

26
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

YEAR 2000 READINESS DISCLOSURE

Year 2000 Issues

The Company is aware of the issues associated with the Year 2000
matter. The "Year 2000" matter relates to whether computer hardware
and software and equipment will properly recognize date sensitive
information referring to the Year 2000. Potential computer system
and equipment failures arising from years beginning with "20" rather
than "19" are a known risk. The Company's exposure to Year 2000
issues rests primarily in three main areas: information systems
hardware and application software, embedded chip technology which may
be found in a wide variety of operating equipment and third party
Year 2000 readiness.

Information Systems Hardware and Application Software

With respect to information systems hardware and application
software, the Company's businesses generally do not utilize "home
grown" programs or systems that require programming to become Year
2000 compliant. The Company typically uses "out of the box" or
"shrink wrap" software for its business needs. Standardized software
and computer systems are being implemented across the Company in
connection with the Company's Repositioning Plan. Although vendors
for such software have advised the Company that their software is
Year 2000 compliant, the Company has completed time dimensional
testing for one critical system, with no instances of non-compliance
identified and expects to complete testing of the remaining critical
systems and software by June 30, 1999. Although execution of the
Repositioning Plan addresses certain significant Year 2000 issues, it
was not undertaken primarily as a remediation initiative. The Company
believes that standardized operating platforms will help provide for
an effective multi-channel distribution network. The Company
estimates expenditures related to the system conversion and
standardization project will total approximately $20-$25 million over
the duration of the project, of which approximately $15 million is
expected to be capitalized. On a project-to-date basis, the Company
has incurred approximately $16 million in costs and expenses to
standardize systems, of which approximately $11 million represents
new capital equipment and software. While the Company believes that
it is on target for completion of the project by August 31, 1999, if
such standardization is not completed prior to the Year 2000, the
Year 2000 matter could have a material impact on the business,
results of operations and financial condition of the Company as well
as on customers of the Company. The Company has not determined the
extent to which its business and customers might be affected in that
event.

In conjunction with the Repositioning Plan, the Company has
established a national data center equipped with systems hardware and
software which its vendors have indicated are Year 2000 compliant.
Time dimensional testing of data center hardware has been completed
and no compliance exceptions were identified. In addition, the
Company has substantially completed testing of its desktop personal
computers with very few failures noted.

Embedded Chips

The Company's Year 2000 project team includes designated
subsidiary-company managers responsible for directing Year 2000
remediation efforts at the business unit level. These managers, in
cooperation with the Company's national information services
personnel, have completed the inventories and risk assessments of

27
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

critical processes and equipment containing embedded chips. Testing
has been substantially completed with regard to certain critical
processes and equipment of the Company's Gas Operations segment. No
significant instances of non-compliance were identified. Additionally,
the Company has completed its assessment of its phone systems and
anticipates completing the necessary repairs and replacements by
September 1999. The Year 2000 project team is also in the process of
contacting suppliers to obtain Year 2000 readiness product information
for less significant equipment containing embedded chips. The Company
estimates expenditures for remediation of non-compliant embedded chip
equipment will total approximately $1.1 million. Of this total, the
Company expects approximately $1 million will be for capital upgrades
and replacements. Although the Company believes it is on target for
completing remediation efforts with regard to embedded chip equipment
and processes, if repair, replacement or contingency plans are not
completed before the Year 2000, the Year 2000 matter could have a
material impact on the business, results of operations and financial
condition of the Company.

Third Parties

The Company's Year 2000 issues relate not only to its own
business systems and equipment but also to those of its customers,
vendors and suppliers. To mitigate the risk to the Company arising
from third parties, the Company is contacting significant suppliers,
customers and other critical business partners to determine if they
have effective Year 2000 plans in place. The Company anticipates
that this evaluation will be ongoing through calendar year 1999.
Responses from approximately 65% of suppliers have been received and
evaluated by the Company, with the majority indicating that they have
active Year 2000 compliance programs. In addition, audits of certain
key suppliers have been initiated to confirm Year 2000 readiness.
As a result of the supplier contact and audit programs, alternative
suppliers will be identified as deemed necessary. However, there can
be no assurance that the Company's customers, vendors, suppliers and
other third parties will successfully resolve their own Year 2000
issues in a timely manner sufficient to prevent impact to the
Company.

Contingency Plans

Certain contingency plans have been developed related to the
Year 2000 matter. These plans address potential disruptions of the
Company's business including administrative and supply chain
functions. Administrative contingency plans provide for back-up data
processing facilities and encompass the national data center,
critical business software and communications networks. Supply chain
contingency plans include identifying alternative suppliers and
arranging for back-up or alternative transportation for shipping the
Company's products. Contingency planning will continue through the
remainder of calendar year 1999, as deemed necessary, based upon the
Company's ongoing assessment of potential Year 2000 risks,
particularly those related to third parties.

Resources

The Company is funding the computer conversion and standardization
project as well as non-compliant equipment repairs and replacements
from cash flow generated by operations and other available financing
sources. Substantially all of the effort to accomplish the remediation
objectives with regard to the computer conversion and standardization
project, embedded chip equipment, and evaluating third party readiness
has been performed by internal Company personnel.

28
AIRGAS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

OTHER

New Accounting Pronouncements

In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). This statement standardizes the accounting
for derivative instruments by requiring that an entity recognize
those items as assets or liabilities in the statement of financial
position and measure them at fair value. The statement is scheduled
to be effective for fiscal years beginning after June 15, 1999,
however, the FASB recently proposed that the effective date of the
statement be delayed for one year. Management has evaluated the
impact of the new Standard in connection with the Company's use of
derivatives in managing interest rate risk. The Company's exposure
to derivatives is limited to interest rate swap agreements which are
highly effective in managing the Company's interest rate exposure. A
high correlation exists between the terms of the interest rate swaps
and the underlying debt obligations of the Company. As such,
fluctuations in the fair value of the swaps are offset by an equal
and opposite fluctuation in the carrying value of the underlying debt
obligations. Consequentially, the implementation of SFAS 133 is not
expected to have a material impact on the net earnings of the
Company. The recognition of the interest rate swap agreements and
corresponding debt obligations at fair value could reduce the
Company's availability under its revolving credit facility. The
reduction in availability could negatively effect liquidity of the
Company depending on market interest rates at the time of
implementation.

Forward-looking Statements

This report contains statements that are forward looking, as
that term is defined by Private Securities Litigation Reform Act of
1995 or by the Securities and Exchange Commission in rules,
regulations and releases. 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 the making of such statements
should not be regarded as a representation by Airgas 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, but are not
limited to, underlying market conditions, growth in same-store sales,
costs and potential disruptive effects of the Repositioning, the
success of the Repositioning Plan, the success of the Company's cost
improvement program, the Company's ability to reduce costs,
implementation and standardization of information systems projects,
any potential problems relating to Year 2000 matters (including
without limitation, those relating to Airgas' ability to identify and
timely remediate Year 2000 problems, unanticipated remediation costs,
timely resolution of Year 2000 problems by significant vendors,
suppliers, customers and other similar third parties, and Airgas'
ability to develop and implement contingency plans, if necessary),
the success and timing of intended divestitures, the effects of
competition from independent distributors and vertically integrated
gas producers on products and pricing, growth and acceptance of new
product lines through the Company's sales and marketing programs,
changes in product prices from gas producers and name-brand
manufacturers and suppliers of hardgoods, uncertainties regarding
accidents or litigation which may arise in the ordinary course of
business and the effects of, and changes in the economy, monetary and
fiscal policies, laws and regulations, inflation and monetary
fluctuations and fluctuations in interest rates, both on a national
and international basis. The Company does not undertake to update any
forward-looking statement made herein or that may be made from time
to time by or on behalf of the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company's primary market risk exposure is from changes in
interest rates. The Company's policy is to manage interest rate risk
exposure through the use of a combination of fixed and floating rate
debt and interest rate swap agreements. Interest rate swap
agreements are used to adjust interest rate exposures. An interest
rate swap is a contractual exchange of interest payments between two
parties. A standard interest rate swap involves the payment of a
fixed rate times a notional amount by one party in exchange for a
floating rate times the same notional amount from another party. The
Company enters into interest rate swaps to manage the fixed/variable
interest rate mix of its debt portfolio. The Company maintains the
ratio of fixed to variable rate debt within parameters established by
management under policies approved by the Board of Directors.
Counterparties to interest rate swap agreements are major financial
institutions. The Company has established counterparty credit
guidelines and only enters into transactions with financial
institutions with long-term credit ratings of `A' or better. In
addition, the Company monitors its positions and the credit ratings
of its counterparties, thereby minimizing the risk of non-performance
by the counterparties. The Company does not enter into derivative
financial instruments for trading purposes.

The table below summarizes the Company's market risks associated
with long-term debt obligations and interest rate swaps as of March
31, 1999. For long-term debt obligations, the table presents cash
flows related to payments of principal and interest by expected
fiscal year of maturity. For interest rate swaps, the table presents
the notional amounts underlying the interest rate swaps by year of
maturity. The notional amounts are used to calculate contractual
payments to be exchanged and are not actually paid or received. Fair
values were computed using market quotes, if available, or based on
discounted cash flows using market interest rates as of the end of
the period.

Expected Fiscal Year of Maturity
(In millions) Fair
Fixed Rate Debt: 2000 2001 2002 2003 2004 Thereafter Total Value

Medium-term notes $ -- $ -- $ 50 $ -- $ 75 $100 $225 $214
Interest expense $ 17 $ 17 $ 15 $ 13 $ 10 $ 15 $ 87
Average interest rate 7.41% 7.41% 7.45% 7.49% 7.49% 7.75%

Acquisition notes $ 15 $ 13 $ 21 $ 1 $ 20 $ 2 $ 72 $ 70
Interest expense $ 5 $ 4 $ 3 $ 2 $ 1 $ -- $ 15
Average interest rate 7.47% 7.47% 7.47% 7.47% 7.47% 7.47%

Other notes $ 4 $ 1 $ 1 $ 1 $ -- $ -- $ 7 $ 7
Average interest rate 6.90% 6.90% 6.90% 6.90%

Variable Rate Debt:

Revolving credit facilities $ -- $ -- $ -- $555 $ -- $ -- $555 $555
Interest expense $ 35 $ 35 $ 35 $ 35 $ -- $ -- $140
Interest rate (a) 5.44% 5.44% 5.44% 5.44%

Other notes $ -- $ 1 $ 7 $ -- $ -- $ -- $ 8 $ 8
Average interest rate 8.75% 8.75% 8.75%

Expected Fiscal Year of Maturity
(In millions)
Fair
Interest Rate Swaps: 2000 2001 2002 2003 2004 Thereafter Total Value

US $ denominated Swaps:
13 Swaps Receive
Variable/Pay Fixed $ 15 $ 55 $ 20 $100 $ -- $ 40 $230 $(15.7)
Variable Receive rate
(3 month LIBOR) = 4.97%
Weighted average
pay rate = 6.78%

7 Swaps Receive
Fixed/Pay Variable $ 57 $ 50 $ 50 $ -- $ 30 $ 50 $237 $ 7.8
Weighted average
receive rate = 6.60 %
Variable pay rate
(6 month LIBOR) = 5.04%

Canadian $ denominated Swaps:
3 Swaps Receive
Variable/Pay Fixed $ 3.3 $ 3.3 $ 1.7 $ -- $ -- $ -- $ 8.3 $ (.3)
Variable Receive rate
(3 month CAD BA) = 5.14%
Weighted average
pay rate = 7.14%

Other LIBOR based agreements:

Operating leases with trust $14.7 $ -- $ -- $ -- $ -- $ -- $14.7 $14.7
Variable rate
(3 month LIBOR plus 110
basis points = 6.07%)

(a) The variable rate of long-term debt obligations is based on the
London Interbank Offered Rate ("LIBOR") as of March 31, 1999. For
future periods, the variable interest rate is assumed to remain at
5.44% with the principal balance of long-term debt obligations held
constant at $555 million. However, the variable rate and borrowing
levels of long-term debt may fluctuate materially from those presented
above.

Limitations of the tabular presentation

As the table incorporates only those interest rate risk
exposures that exist as of March 31, 1999, it does not consider those
exposures or positions that could arise after that date including
interest rate swap agreements entered into in May 1999. In addition,
actual cash flows of financial instruments in future periods may
differ materially from prospective cash flows presented in the table
due to future fluctuations in variable interest rates and Company
debt levels.

Foreign Currency Rate Risk

Certain subsidiaries of the Company are located in foreign
countries. The Company does not hedge its exposure to translation
gains and losses relating to foreign currency net asset exposures.
The Company considers its exposure to foreign currency exchange
fluctuations to be immaterial to its consolidated results of
operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements, supplementary information
and financial statement schedule of the Company are set forth at
pages F-1 to F-42 of the report.

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

The biographical information relating to the Company's directors
appearing in the Proxy Statement relating to the Company's 1999
Annual Meeting of Stockholders is incorporated herein by reference.
Biographical information relating to the Company's executive officers
set forth in Item 1 of Part I of this Form 10-K Report is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information under "Board of Directors and Committees,"
"Executive Compensation" and "Certain Transactions" appearing in the
Proxy Statement relating to the Company's 1999 Annual Meeting of
Stockholders is incorporated herein by reference.

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

The information required by this Item is set forth in the
section headed "Security Ownership" appearing in the Company's Proxy
Statement relating to the Company's 1999 Annual Meeting of
Stockholders and such information is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information under "Certain Transactions" appearing in the
Proxy Statement relating to the Company's 1999 Annual Meeting of
Stockholders is incorporated herein by reference.

PART IV

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

(a)(1) and (2):

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

(a)(3) Exhibits.

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

(b) Reports on Form 8-K.

On January 29, 1999, the Company filed a current report on Form
8-K pursuant to Item 5, reporting its earnings for the third quarter
and nine months ended December 31, 1998.

On February 2, 1999, the Company filed a current report on Form
8-K pursuant to Item 5, announcing certain organizational changes and
management appointments of Company personnel.

On March 12, 1999, the Company filed a current report on Form 8-
K pursuant to Item 5, announcing that its Board of Directors
authorized the repurchase of up to seven million shares, or
approximately 10% of the Company's outstanding Common Stock.

Exhibit No. Description

3.1 Amended and Restated Certificate of Incorporation of
Airgas, Inc. dated as of August 7, 1995 (Incorporated by
reference to Exhibit 3.1 to the Company's September 30, 1995
Quarterly Report on Form 10-Q).

3.2 Airgas, Inc. By-Laws Amended and Restated through November 12,
1998. (Incorporated by reference to Exhibit 3 to the Company's
September 30, 1998 Report on Form 10-Q).

4.1 Ninth Amended and Restated Credit Agreement dated as of
December 5, 1997 among Airgas, Inc., Airgas Canada, Inc.,
Red-D-Arc Limited and Airgas Ontario Inc., Nationsbank, 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, 1997 Quarterly Report on Form 10-Q).

4.2 First Amendment, dated April 13, 1998, to the Ninth Amended
and Restated Credit Agreement dated as of December 5, 1997
among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited and
Airgas Ontario Inc., Nationsbank, 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, 1998 Quarterly Report on Form 10-Q).

Exhibit No. Description

4.3 Indenture dated as of August 1, 1996 of Airgas, Inc. to Bank
of New York, Trustee. (Incorporated by reference to
Exhibit 4.5 to the Company's Registration Statement on Form
S-4 No. 333-23651 dated March 20, 1997).

4.4 Form of Airgas, Inc. Medium-Term Note (Fixed Rate).
(Incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-4 No. 333-23651 dated
March 20, 1997).

4.5 Form of Airgas, Inc. Medium-Term Note (Floating Rate).
(Incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-4 No. 333-23651 dated
March 20, 1997).

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.

4.6 Rights Agreement, dated as of April 1, 1997, between Airgas,
Inc. and The Bank of New York, N.A., as Rights Agent, which
includes as Exhibit B thereto the Form of Right Certificate.
(Incorporated by reference to Exhibit 1.1 to the Company's
Form 8-A filed on April 28, 1997).

4.7 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 Agreement between the Company and Peter McCausland, dated
January 8, 1991, and form of Common Stock Purchase Warrant.
(Incorporated by reference to Exhibit 10.16 to the Company's
March 31, 1992 report on Form 10-K).

* 10.2 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).

* 10.3 1989 Non-Qualified Stock Option Plan for Directors
(Non-Employees), as amended. (Incorporated by reference to
Exhibit 10.7 to the Company's March 31, 1992 report on Form
10-K).

* 10.4 Amendment to the 1989 Non-Qualified Stock Option Plan for
Directors (Non-Employees) as amended through August 7, 1995
(Incorporated by reference to Exhibit 10.2 to the Company's
September 30, 1995 Quarterly Report on Form 10-Q).

* 10.5 1994 Employee Stock Purchase Plan. (Incorporated by
reference to Exhibit 10.19 to the Company's March 31, 1993
report on Form 10-K).

* 10.6 1998 Employee Stock Purchase Plan. (Incorporated by
reference to Exhibit 4 to the Company's Registration Statement
on Form S-8 No. 333-60999 dated August 7, 1998).

Exhibit No. Description

* 10.7 Airgas, Inc. Management Incentive Plan (Incorporated by
reference to Exhibit 10.3 to the Company's September 30, 1995
Quarterly Report on Form 10-Q).

* 10.8 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).

* 10.9 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.

* 10.10 1997 Stock Option Plan (Incorporated by reference to Exhibit
10.1 to the Company's September 30, 1997 Quarterly Report on
Form 10-Q).

* 10.11 1997 Directors' Stock Option Plan (Incorporated by reference
to Exhibit 10.2 to the Company's September 30, 1997 Quarterly
Report on Form 10-Q).

* 10.12 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.

*10.13 Change of Control Agreement between Airgas, Inc. and William
A. Rice, Jr. dated March 17, 1999. Nine other Executive
Officers, including Peter McCausland, are parties to
substantially identical agreements.

*10.14 2000 Management Incentive Plan for Corporate Employees dated
April 1, 1999.

*10.15 2000 Management Incentive Plan for Business Unit Employees
dated April 1, 1999.

(11) Statement re: computation of earnings per share.
(21) Subsidiaries of the Company.
(23.1) Consent of KPMG LLP.
(27) Financial data schedule - March 31, 1999
(27.1) Financial data schedule - March 31, 1998
_____________
* A management contract or compensatory plan required to be filed by
Item 14(c) of this Report.

SIGNATURES

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

Dated: June 11, 1999

Airgas, Inc.
(Registrant)

By: /s/ Peter McCausland
_________________________
Peter McCausland
Chairman and Chief Executive Officer

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

Signature Title Date

/s/ Peter McCausland Director, Chairman of the Board, June 11, 1999
__________________________ and Chief Executive Officer
(Peter McCausland)

/s/ Scott M. Melman Senior Vice President and Chief June 11, 1999
__________________________ Financial Officer (Principal
Financial Officer)
(Scott M. Melman)

/s/ Jeffrey P. Cornwell Vice President and Corporate June 11, 1999
__________________________ Controller (Principal Accounting
Officer)
(Jeffrey P. Cornwell)

/s/ W. Thacher Brown Director June 11, 1999
__________________________
(W. Thacher Brown)

/s/ Frank B. Foster, III Director June 11, 1999
__________________________
(Frank B. Foster, III)

/s/ Rajiv L. Gupta Director June 11, 1999
__________________________
(Rajiv L. Gupta)

/s/ Robert E. Naylor Director June 11, 1999
__________________________
(Robert E. Naylor)

/s/ John A.H. Shober Director June 11, 1999
__________________________
(John A.H. Shober)

/s/ Lee M. Thomas Director June 11, 1999
__________________________
(Lee M. Thomas)

/s/ Robert L. Yohe Director June 11, 1999
__________________________
(Robert L. Yohe)

AIRGAS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

Page
Reference In
Report On
Form 10-K

Financial Statements:

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F-2

Statement of Management's Financial Responsibility . . . . . . . . . F-3

Consolidated Balance Sheets at March 31, 1999 and 1998 . . . . . . . F-4

Consolidated Statements of Earnings for the Years Ended
March 31, 1999, 1998 and 1997. . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1999, 1998 and 1997. . . . . . . . . . . . . F-6

Consolidated Statements of Cash Flows for the Years Ended
March 31, 1999, 1998 and 1997 . . . . . . . . . .. . . . . . . . . F-7

Notes to Consolidated Financial Statements . . . . . . . . . . . . . F-8

Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . F-42

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

F-1
38

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Airgas, Inc.:

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

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

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Airgas, Inc. and subsidiaries as of March 31, 1999 and
1998, and the results of their operations and their cash flows for
each of the years in the three-year period ended March 31, 1999, in
conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.

KPMG LLP

Philadelphia, Pennsylvania
May 12, 1999

F-2
39

STATEMENT OF MANAGEMENT'S FINANCIAL RESPONSIBILITY

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

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

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

The Audit Committee of the Board of Directors meets with the
independent auditors, the internal auditors and management to satisfy
itself that they are properly discharging their responsibilities.
The auditors have direct access to the Audit Committee.

Airgas, Inc.

/s/ Scott M. Melman /s/ Peter McCausland
________________________ _______________________
Scott M. Melman Peter McCausland
Senior Vice President and Chairman and
Chief Financial Officer Chief Executive Officer

May 12, 1999

F-3
40

AIRGAS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31,
(In thousands, except per share amounts) 1999 1998

ASSETS
Current Assets
Trade receivables, less allowances for doubtful
accounts of $6,092 in 1999 and $5,676 in 1998 . . . . . .$ 195,708 $ 186,342
Inventories, net (Note 5). . . . . . . . . . . . . . . . . 154,424 154,937
Deferred income tax asset, net (Note 14) . . . . . . . . . 7,549 6,952
Prepaid expenses and other current assets . . . . . . . . 21,161 18,603
Total current assets . . . . . . . . . . . . . . . . . 378,842 366,834

Plant and equipment, at cost (Note 6). . . . . . . . . . . 993,496 923,635
Less accumulated depreciation. . . . . . . . . . . . . . . (275,637) (236,331)
Plant and equipment, net . . . . . . . . . . . . . . . 717,859 687,304
Goodwill, net of accumulated amortization of
$54,986 in 1999 and $42,147 in 1998 . . . . . . . . . . . 428,349 410,753
Other non-current assets (Note 7) . . . . . . . . . . . . 173,422 176,583

Total Assets $1,698,472 $1,641,474

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade . . . . . . . . . . . . . . . . .$ 85,486 $ 84,602
Accrued expenses and other current liabilities (Note 8). . 108,295 128,806
Current portion of long-term debt (Note 9) . . . . . . . . 19,645 12,150
Total current liabilities . . . . . . . . . . . . . . . 213,426 225,558

Long-term debt (Note 9) . . . . . . . . . . . . . . . . . 847,841 830,845
Deferred income tax liability, net (Note 14) . . . . . . . 142,675 121,356
Other non-current liabilities. . . . . . . . . . . . . . . 23,585 36,842
Commitments and contingencies (Notes 17 and 18) . . . . . -- --

Stockholders' Equity (Note 10)
Preferred stock, no par value, 20,000 shares authorized,
no shares issued or outstanding in 1999 and 1998. . . . . -- --
Common stock, par value $.01 per share, 200,000 shares
authorized, 72,024 and 71,357 shares issued in 1999
and 1998, respectively. . . . . . . . . . . . . . . . . . 720 714
Capital in excess of par value . . . . . . . . . . . . . . 190,175 192,358
Retained earnings . . . . . . . . . . . . . . . . . . . . 289,090 237,166
Accumulated other comprehensive loss . . . . . . . . . . . (910) (779)
Treasury stock, 130 and 176 common shares at cost in
1999 and 1998, respectively . . . . . . . . . . . . . . . (1,129) (2,586)
Shares in employee benefits trust, 826 common shares at
cost in 1999. . . . . . . . . . . . . . . . . . . . . . . (7,001) --
Total stockholders' equity. . . . . . . . . . . . . . . 470,945 426,873

Total liabilities and stockholders' equity $1,698,472 $1,641,474

See accompanying notes to consolidated financial statements.

F-4

AIRGAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Years Ended March 31,
(In thousands, except per share amounts) 1999 1998 1997

Net Sales
Distribution . . . . . . . . . . . . . . . $1,406,184 $1,321,958 $1,098,771
Gas Operations . . . . . . . . . . . . . . 155,034 126,032 60,123
Total net sales . . . . . . . . . . . 1,561,218 1,447,990 1,158,894

Costs and Expenses
Cost of products sold (excluding
depreciation and amortization)
Distribution . . . . . . . . . . . . . . 768,568 716,718 576,013
Gas Operations. . . . . . . . . . . . . . 69,487 62,820 35,370
Selling, distribution and administrative
expenses . . . . . . . . . . . . . . . . 523,241 467,884 371,310
Depreciation and amortization. . . . . . . 87,926 76,670 62,491
Special charges, net (Note 3). . . . . . . (1,000) 4,950 31,425
Total costs and expenses . . . . . . . 1,448,222 1,329,042 1,076,609

Operating Income
Distribution. . . . . . . . . . . . . . . 98,447 111,472 103,376
Gas Operations . . . . . . . . . . . . . 13,549 12,426 10,334
Special charges, net (Note 3) . . . . . . 1,000 (4,950) (31,425)
Total operating income . . . . . . . . 112,996 118,948 82,285

Interest expense, net (Note 13). . . . . . (60,298) (53,290) (39,752)
Other income, net (Note 2) . . . . . . . . 26,714 2,813 1,672
Equity in earnings of unconsolidated
affiliates (Note 12) . . . . . . . . . . 7,042 2,931 958
Minority interest (Note 20). . . . . . . . (93) (873) (817)
Earnings before income taxes . . . . . 86,361 70,529 44,346
Income taxes (Note 14) . . . . . . . . . . 34,437 29,989 21,080

Net Earnings. . . . . . . . . . . . . . . $ 51,924 $ 40,540 $ 23,266

Basic earnings per share (Note 4) . . . . $ .74 $ .59 $ .35
Diluted earnings per share (Note 4) . . . $ .72 $ .57 $ .34

Weighted average shares outstanding:
Basic (Note 4) . . . . . . . . . . . . . 70,000 68,700 65,900
Diluted (Note 4) . . . . . . . . . . . . 71,700 70,800 68,600

Comprehensive income . . . . . . . . . . . $ 51,793 $ 40,229 $ 23,208

See accompanying notes to consolidated financial statements.

F-5
42

AIRGAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY

Years Ended March 31, 1999, 1998 and 1997
Shares of Accumulated
Common Capital in Other Employee
Stock $.01 Common Excess of Retained Comprehensive Treasury Benefits
(In thousands) Par Value Stock Par Value Earnings Loss Stock Trust

Balance--March 31, 1996 . . . . . . 66,313.7 $663 $ 91,512 $173,360 $(410) $(28,916) $ --

Net earnings . . . . . . . . . . . 23,266
Foreign currency translation
adjustment . . . . . . . . . . . . (58)
Purchase of treasury stock (Note 10) (15,732)
Reissuance of treasury stock (Note 10) 28,916
Issuance of stock in connection
with acquisitions (Note 2) . . . . 1,102.9 11 49,556
Stock warrants and options
exercised (Note 11). . . . . . . . 872.6 9 3,370
Tax benefit associated with exercise
of stock options (Note 14) . . . . 4,229
Shares issued upon acquisition of
minority interests (Note 11). . . 76.5 1 1,724
Shares issued in connection with
Employee Stock Purchase
Plan (Note 11) . . . . . . . . . . 395.9 4 5,152
Balance--March 31, 1997.. . . . . . 68,761.6 $688 $155,543 $196,626 $(468) $(15,732) $ --

Net earnings . . . . . . . . . . . 40,540
Foreign currency translation
adjustment . . . . . . . . . . . . (311)
Purchase of treasury stock (Note 10) (33,120)
Reissuance of treasury stock (Note 10) 5,207 46,266
Issuance of stock in connection
with acquisitions (Note 2) . . . . 1,440.0 14 18,524
Stock options exercised (Note 11) . 704.5 7 3,329
Tax benefit associated with exercise
of stock options (Note 14) . . . . 3,807
Shares issued in connection with
Employee Stock Purchase
Plan (Note 11) . . . . . . . . . . 450.7 5 5,948
Balance--March 31, 1998 . . . . . . 71,356.8 $714 $192,358 $237,166 $(779) $ (2,586) $ --

Net earnings. . . . . . . . . . . . 51,924
Foreign currency translation
adjustment . . . . . . . . . . . . (131)
Purchase of treasury stock (Note 10) (16,579)
Issuance of stock in connection
with acquisitions (Note 2) . . . . 53.2 (425)
Reissuance of treasury stock for
stock options exercised (Note 10) (5,877) 7,798
Tax benefit associated with exercise
of stock options (Note 14) . . . . 1,648
Shares issued in connection with
Employee Stock Purchase
Plan (Note 11) . . . . . . . . . . 613.7 6 5,708
Shares of treasury stock sold to Employee
Benefits Trust (Note 10). . . . . (3,237) 10,238 (7,001)
Balance--March 31, 1999 . . . . . . 72,023.7 $ 720 $190,175 $289,090 $ (910) $ (1,129) $(7,001)

See accompanying notes to consolidated financial statements.

F-6
43

AIRGAS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended March 31,
(In thousands) 1999 1998 1997

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings. . . . . . . . . . . . . . . . . . . . . $ 51,924 $ 40,540 $ 23,266
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization,
including special charges. . . . . . . . . . . . . 87,926 88,092 66,421
Deferred income taxes . . . . . . . . . . . . . . . 16,045 10,649 (170)
Equity in earnings of unconsolidated affiliates . . (7,911) (4,409) (2,314)
Gains on divestitures . . . . . . . . . . . . . . . (25,468) (1,452) --
(Gain)/Loss on sale of plant and equipment . . . . (222) (504) 616
Minority interest in earnings . . . . . . . . . . . 93 873 817
Stock issued for employee stock purchase plan . . . 5,750 5,953 5,156
Changes in assets and liabilities, excluding effects of
business acquisitions and divestitures:
Trade receivables, net . . . . . . . . . . . . . . (10,477) (8,108) (6,661)
Inventories, net. . . . . . . . . . . . . . . . . . (3,829) (7,336) (12,090)
Prepaid expenses and other current assets . . . . . (2,236) 637 3,687
Accounts payable, trade . . . . . . . . . . . . . . 1,052 (7,072) 10,534
Accrued expenses and other current liabilities. . . 5,607 19,761 6,247
Other assets and liabilities, net . . . . . . . . . (16,191) (3,224) (14,262)
Net cash provided by operating activities . . . . 102,063 134,400 81,247

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures. . . . . . . . . . . . . . . . . (101,638) (124,725) (74,358)
Proceeds from sale of plant and equipment . . . . . . 3,279 3,534 3,551
Proceeds from divestitures. . . . . . . . . . . . . . 53,682 4,000 6,586
Business acquisitions, net of cash acquired . . . . . (47,246) (154,395) (168,666)
Business acquisitions, holdback settlements . . . . . (4,839) (6,750) (7,943)
Investment in unconsolidated affiliates . . . . . . . (3,180) (25,220) (33,995)
Dividends from unconsolidated affiliates. . . . . . . 4,533 4,165 1,729
Other, net. . . . . . . . . . . . . . . . . . . . . . (1,467) 3,957 (2,949)
Net cash used by investing activities . . . . . . (96,876) (295,434) (276,045)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings. . . . . . . . . . . . . . . 449,833 450,051 916,677
Repayment of debt . . . . . . . . . . . . . . . . . . (426,995) (275,450) (707,401)
Purchase of treasury stock. . . . . . . . . . . . . . (15,285) (34,433) (14,419)
Exercise of stock options and warrants . . . . . . . 1,943 4,360 3,162
Cash overdraft. . . . . . . . . . . . . . . . . . . . (14,662) 16,875 (960)
Other financing activities. . . . . . . . . . . . . . (21) (369) (2,261)
Net cash provided/(used) by financing activities. (5,187) 161,034 194,798

CASH INCREASE (DECREASE). . . . . . . . . . . . . . . $ -- $ -- $ --
Cash--Beginning of year . . . . . . . . . . . . . . . -- -- --
Cash--End of year . . . . . . . . . . . . . . . . . . $ -- $ -- $ --

For supplemental cash flow disclosures see Note 19.
See accompanying notes to consolidated financial statements.

F-7
44

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The consolidated financial statements include the accounts
of Airgas, Inc. and subsidiaries (the "Company"). Unconsolidated
affiliates are accounted for on the equity method and generally
consist of 20-50% owned operations where control does not exist
or is considered temporary. The excess of the cost of these
affiliates over the Company's share of their net assets at the
acquisition date is being amortized over 40 years. Intercompany
accounts and transactions are eliminated in consolidation.

The Company has made estimates and assumptions relating to
the reporting of assets and liabilities and disclosure of
contingent assets and liabilities to prepare these statements in
conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

(b) Inventories

Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method for
approximately 85% and 88% of the inventories at March 31, 1999
and 1998, respectively. Cost for the remainder of inventories
was determined using the last-in, first-out (LIFO) method.

Plant and equipment are stated at cost. Depreciation is
computed using the straight-line method based on the estimated
useful lives of the related assets.

(d) Goodwill

Goodwill represents costs in excess of net assets of
businesses acquired and is amortized on a straight-line basis
over the expected periods to be benefited, which is principally
40 years. The Company assesses the recoverability of goodwill in
accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed Of" ("SFAS 121"). The Company assesses the recoverability
of goodwill by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through projected
undiscounted future cash flows.

In making such determination with respect to goodwill, the
Company evaluates the performance of underlying businesses which
give rise to such assets. The assets acquired in connection with
these acquisitions continue to generate a significant portion of
the Company's net sales, total operating income and cash flow.

F-8
45

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

(e) Other Intangible Assets

Costs related to the issuance of long-term debt are deferred
and amortized over the term of the related debt. Costs and
payments pursuant to non-competition arrangements entered into in
connection with business acquisitions are amortized over the
terms of the arrangements which are principally over 5 years.
The Company assesses the recoverability of non-competition
arrangements by determining whether the amortization of the asset
balance can be recovered through projected undiscounted future
cash flows of the related business over its remaining life.

(f) Income Taxes

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

(g) Foreign-Currency Translation

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

(h) Concentrations of Credit Risk

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

F-9

46
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

(i) Financial Instruments

In managing interest rate risk exposure, the Company enters
into interest rate swap agreements. An interest rate swap is a
contractual exchange of interest payments between two parties. A
standard interest rate swap involves the payment of a fixed rate
times a notional amount by one party in exchange for a floating
rate times the same notional amount from another party. As
interest rates change, the difference to be paid or received is
accrued and recognized as interest expense over the life of the
agreement. These instruments are not entered into for trading
purposes and the Company has the ability and intent to hold these
instruments to maturity. The fair value of the interest rate swap
agreements is not recognized in the financial statements.
Counterparties to the Company's interest rate swap agreements are
major financial institutions.

The carrying amounts for accounts receivable and accounts
payable approximate fair value because of the short-term maturity
of these financial instruments.

(j) Shares in Employee Benefits Trust

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

(k) Revenue Recognition

Sales are recorded upon shipment to the customer.

(l) Accounting and Disclosure Changes

Effective April 1, 1998, the Company implemented Statement
of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income." This statement requires items recognized
under accounting standards as components of comprehensive income
to be reported in a financial statement that is displayed with
the same prominence as other financial statements. Prior period
financial statements have been restated to conform to the current
presentation.

Effective with the year ended March 31, 1999, the Company
implemented Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). This statement modifies the standards for reporting
information about operating segments in annual financial statements
and requires selected information about operating segments in interim
financial reports issued to shareholders. Under the new standard,
operating segments are defined based on a "management approach"
rather than an on an "industry segment" basis. The Company has
combined the former Airgas Direct Industrial ("ADI") segment with
the former Distribution segment to

F-10

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

reflect the centralized purchasing, shared distribution
facilities and multi-channel marketing initiatives begun under
the "Repositioning Airgas for Growth" initiative. In addition,
the Company's former Manufacturing segment has been renamed "Gas
Operations." Comparative fiscal 1998 and 1997 financial
information has been reclassified to conform to the current
presentation.

Effective with the year ended March 31, 1999, the Company
adopted Statement of Financial Accounting Standards No. 135,
"Rescission of FASB Statement No. 75 and Technical Corrections."
This statement rescinds the Financial Accounting Standards Board
Statement No. 75, "Deferral of the Effective Date of Certain
Accounting Requirements for Pension Plans of State and Local
Governmental Units," and amends other existing authoritative
literature to make various technical corrections, clarify
meanings or describe applicability under changed conditions.
The adoption of this standard did not impact earnings, financial
condition or liquidity.

(m) Reclassifications

Certain reclassifications have been made to previously
issued financial statements to conform to the current
presentation.

(2) ACQUISITIONS & DIVESTITURES

(a) Acquisitions

Acquisitions have been recorded using the purchase method of
accounting, and, accordingly, results of their operations have
been included in the Company's consolidated financial statements
since the effective dates of the respective acquisitions. Also,
as discussed in Note 20, the Company has accounted for the
acquisition of subsidiary minority interests in fiscal 1998 and
1997 using the purchase method of accounting.

1999 - During fiscal 1999, the Company purchased 15
businesses. The largest of these acquisitions and their
effective dates included Abel Carbonic Products, Inc. (May 1,
1998), Gas House Welding Supply, Inc. (July 1, 1998), Carbonic
Products, Inc. (September 1, 1998) and Pacific Dry Ice, Inc.
(September 1, 1998). The aggregate purchase price for these
acquisitions amounted to approximately $49 million. The purchase
price for the remaining 11 businesses amounted to approximately
$17 million.

1998 - During fiscal 1998, the Company purchased 28
businesses. The largest of these acquisitions and their
effective dates included Carbonic Industries Corporation (June 5,
1997), Lyons Safety, Inc. (July 1, 1997), Industrial Gas
Products & Supply, Inc. (October 1, 1997), Carbonic Reserves,
Inc. (October 14, 1997), JWS Technologies, Inc. (November 1,
1997) and The Hoprich Company (February 1, 1998). The
aggregate purchase price for these acquisitions amounted to
approximately $224 million. The purchase price for the
remaining 22 businesses amounted to approximately $59 million.

1997 - During fiscal 1997, the Company purchased 24
businesses. The largest of these acquisitions and their
effective dates included IPCO Safety Products Company (April 1,
1996), American Welding Supply (June 1, 1996), Rutland Tool &
Supply Co., Inc. (September 1, 1996), Findley Welding Supply,

F-11
48
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(2) ACQUISITIONS & DIVESTITURES - (Continued)

Inc. (October 1, 1996) and Northeast Jackson Dome (December 1,
1996). The aggregate purchase price for these acquisitions
amounted to approximately $233 million. The purchase price for
the remaining 19 businesses amounted to approximately $76 million.

In connection with the above acquisitions, the total
purchase price, fair value of assets acquired, cash paid and
liabilities assumed were as follows:

Years Ended March 31,
(In thousands) 1999 1998 1997

Cash paid . . . . . . . . . . . . . . . $47,246 $154,395 $168,666
Issuance of Common Stock . . . . . . . -- 55,608 78,671
Notes issued to sellers . . . . . . . . 2,361 17,781 30,104
Notes payable and capital leases
assumed. . . . . . . . . . . . . . . . 553 5,947 2,103
Other liabilities assumed and accrued
acquisition costs . . . . . . . . . . 15,475 49,407 29,733

Total purchase price allocated to
assets acquired . . . . . . . . . . . $65,635 $283,138 $309,277

Included in the fiscal 1998 aggregate purchase price is the
issuance of approximately 3.4 million shares of the Company's
Common Stock (including approximately 2 million shares which were
issued out of treasury stock), issued in connection with the
acquisitions of Carbonic Industries Corporation, Kendeco Supply
Company and Industrial Gas Products.

Included in the fiscal 1997 aggregate purchase price is the
issuance of approximately 3.4 million shares of the Company's
Common Stock (including approximately 2.4 million shares which
were issued out of treasury stock), issued in connection with the
acquisition of Rutland Tool and Supply Co.

In connection with a previous acquisition, the Company is
required to issue additional shares of Common Stock if the market
value on the settlement date in fiscal 2001 is less than $13.10
per share. At March 31, 1999, approximately 616 thousand shares
were contingently issuable. Common Stock subsequently issued in
connection with such a contingency reduces additional paid in
capital and increases Common Stock for the par value of the
additional shares issued. During 1999, the Company issued
approximately 53 thousand shares of Common Stock and paid $425
thousand in connection with the resolution of contingencies
related to previous acquisitions.

The purchase price for business acquisitions and minority
interests was allocated to the assets acquired and liabilities
assumed based on their estimated fair values at the date of
acquisition. Such allocations have been based on preliminary
estimates of fair value at the date of acquisition, which may be
revised at a later date. Costs in excess of net assets acquired
(goodwill) for fiscal 1999, 1998 and 1997 amounted to $29.3
million, $130.6 million and $144.0 million, respectively.

F-12

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(2) ACQUISITIONS & DIVESTITURES - (Continued)

The following presents unaudited estimated pro forma
operating results as if the fiscal 1999 and 1998 acquisitions had
been consummated on April 1, 1997. These pro forma results have
been prepared for comparative purposes only and do not purport to
be indicative of what would have occurred had the acquisitions
been made as of April 1, 1997 or of results which may occur in
the future.

Years Ended March 31,
(In thousands, except per share amounts) 1999 1998

Net sales. . . . . . . . . . . . . . . . $1,574,222 $1,593,274
Net earnings . . . . . . . . . . . . . . 51,827 37,555
Diluted earnings per share . . . . . . . .72 .52

(b) Divestitures

During fiscal 1999, the Company sold certain beverage
service operations, its eastern Canadian industrial gas
distribution business and its calcium carbide and carbon products
operations. After-tax proceeds from the sales amounted to
approximately $42 million. The beverage service and Canadian
operations were sold at a loss which was provided for in the 1998
Special Charges (Note 3). The Company's calcium carbide and
carbon products operations were sold, resulting in a pre-tax gain
of $25.5 million, included in "Other income, net." The following
table sets forth selected financial data related to the divested
operations:

Years Ended March 31,
(In thousands) 1999 1998 1997

Sales . . . . . . . . . . . . $32,415 $57,622 $48,059
Gross profits . . . . . . . . 11,228 21,836 17,756
Depreciation and amortization 1,611 2,761 2,165
Operating income. . . . . . . 3,672 1,239 3,010

In January 1999, the Company announced the signing of a
letter of intent with Linde AG related to the divestiture of the
Company's operations in Poland and Thailand for approximately $50
million. The transaction, which is subject to regulatory
approvals, completion of due diligence and definitive
documentation, is expected to close early in the second quarter
of fiscal 2000.

In September 1997, the Company recorded a gain, included in
"other income, net," of $1.5 million ($980 thousand after-tax)
related to the sale of a non-core business. During fiscal 1997,
the Company reported a net loss of $780 thousand related to the
sale of a non-core business.

F-13

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(3) SPECIAL CHARGES

(a) 1998 Special Charges

During the fourth quarter of fiscal 1998, the Company
announced its "Repositioning Airgas for Growth" restructuring
plan (the "Repositioning Plan"). In connection with the
Repositioning Plan, the Company recorded special charges in 1998
totaling $22.4 million ($14.3 million after-tax). The
Repositioning Plan includes the consolidation of subsidiaries
into larger regional companies; consolidating certain warehouse
facilities into regional distribution centers; standardizing and
integrating information systems; building a national information,
procurement and logistics infrastructure to support expanded
product lines and distribution channels; and the divestiture of
several non-core businesses. The major components of the fiscal
1998 special charges were as follows:

(In thousands) 1998
Impairment write-down of property,
equipment and goodwill (1). . . . . . . $11,423
Divestiture charges (2) . . . . . . . . . 6,851
Facility exit costs (3) . . . . . . . . . 2,577
Severance costs (3) . . . . . . . . . . . 1,578
Special charges . . . . . . . . . . . 22,429

Refrigerant recovery. . . . . . . . . . . (14,500)
Acquisition break-up fee, net . . . . . . (2,979)

Special charges, net. . . . . . . . . $ 4,950

(1) Certain property, equipment and related goodwill were written
down to fair value, less the cost to dispose, by $11.4 million.
Fair value was based on the estimated future undiscounted cash
flows to be generated from the sale of such assets.
(2) Estimated reserves of $6.9 million were established in connection
with the planned divestiture of certain non-core businesses. The
write-down was based on an evaluation of the estimated fair value
of these assets which indicated that these assets were impaired.
Fair value was based on the estimated future undiscounted cash
flows to be generated from the sale of these assets.
(3) Reserves were established for facility exit costs of $2.6 million
and severance of $1.6 million. Estimated reserves were related
to the closure of facilities and a workforce reduction of
approximately 200 employees.

F-14

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(3) SPECIAL CHARGES - (Continued)

During fiscal 1999, the Company made substantial progress
towards completing its Repositioning Plan. Progress was made in
the following areas:
- 34 businesses were merged into 15 regional companies;
- computer systems were standardized and resulted in
approximately 40 computer conversions;
- the Company completed three of its planned divestitures and
in January 1999, announced the signing of a letter of intent
with Linde AG, for the sale of the Company's operations in
Poland and Thailand for approximately $50 million (the
transaction, which is subject to regulatory approvals,
completion of due diligence and definitive documentation, is
expected to close early in the second quarter of fiscal 2000);
- certain branches and distribution centers were closed and/or
consolidated; and
- workforce reductions were made as planned.

Accrued Balances: March 31, March 31,
(In thousands) 1998 Cash Noncash 1999

Divestiture charges. . . . . . $ 6,851 $ -- $(2,775) $4,076
Facility exit costs . . . . . 2,292 (590) (763) 939
Severance costs. . . . . . . . 1,286 (1,214) -- 72
$10,429 $(1,804) $(3,538) $5,087

In connection with changes in the business, primarily
related to a slowing in the industrial and manufacturing sectors,
the Company modified its plans related to exiting certain
facilities and adjusted facility exit reserves by $763 thousand.
In addition, adjustments to divestiture reserves were made to
reflect differences between original estimates and completed or
pending divestitures. The income statement effect of the
adjustments to reserves for facility exit costs and divestitures
was an increase in pre-tax earning of $1 million ($570 thousand
after-tax) which was recorded in the quarter ended June 30, 1998.

The 1998 Special Charges were offset by a non-recurring gain
of $14.5 million ($9.4 million after-tax) from a partial recovery
of refrigerant losses related to the 1997 fraudulent breach of
contract by a third-party supplier and a net gain of $3 million
($1.9 million after-tax) related to an acquisition break-up fee.

F-15

52
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(3) SPECIAL CHARGES - (Continued)

(b) 1997 Special Charges

The Company recorded a non-recurring charge during the
fourth quarter of fiscal 1997 of $26.4 million ($17 million
after-tax) for product losses and costs associated with the
fraudulent breach of contract by a third-party supplier of
refrigerant gas. In addition, the Company recorded a non-cash
charge of approximately $5 million ($3.2 million after-tax)
primarily related to the write-down of machinery, equipment,
goodwill and other intangible assets of a non-core business which
was divested during fiscal 1998. The write-down was based on an
evaluation of the estimated fair value of the assets associated
with the business which indicated that these assets were
impaired. Fair value was based on the estimated future
undiscounted cash flows to be generated from the sale of the
assets.

(4) EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net
earnings by the weighted average number of shares of the
Company's Common Stock outstanding during the period. Diluted
earnings per share is calculated by adjusting the weighted
average common shares outstanding for the dilutive effect of
common stock equivalents related to stock options and
contingently issuable shares.

The table below reconciles basic weighted average common
shares outstanding to diluted weighted average common shares
outstanding for the three years ended March 31, 1999, 1998 and
1997:

Years Ended March 31,
(In thousands) 1999 1998 1997

Weighted average common
shares outstanding:
Basic . . . . . . . . . . . . . . 70,000 68,700 65,900
Stock options . . . . . . . . . 1,400 2,100 2,700
Contingently issuable shares. . 300 -- --

Diluted . . . . . . . . . . . . . 71,700 70,800 68,600

F-16

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(5) INVENTORIES

Inventories consist of:

March 31,
(In thousands) 1999 1998

Finished goods FIFO. . . . . . . . . $135,708 $142,150
Finished goods LIFO. . . . . . . . . 25,652 20,207
Raw materials. . . . . . . . . . . . 853 2,380
LIFO reserve . . . . . . . . . . . . (1,582) (1,446)
Obsolescence reserve . . . . . . . . (6,207) (8,354)

$154,424 $154,937

(6) PLANT AND EQUIPMENT

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

March 31,
Depreciable
(In thousands) Lives (Yrs) 1999 1998

Land and land improvements . . . . . -- $ 23,965 $ 26,050
Buildings and leasehold improvements 25 92,943 88,130
Cylinders. . . . . . . . . . . . . . 30 422,560 404,198
Machinery and equipment, including
bulk tanks. . . . . . . . . . . . . 7 to 30 329,619 300,599
Computers and furniture and fixtures 3 to 10 64,961 52,051
Transportation equipment . . . . . . 3 to 15 50,923 48,720
Construction in progress . . . . . . -- 8,525 3,887

$ 993,496 $ 923,635

F-17

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(7) OTHER NON-CURRENT ASSETS

Other non-current assets include:

March 31,
(In thousands) 1999 1998

Investments in unconsolidated affiliates (Note 12) $100,834 $ 98,522
Non-compete agreements and other intangible
assets, at cost, net of accumulated amortization
of $85.5 million in 1999 and $73.2 million
in 1998. . . . . . . . . . . . . . . . . . . . . 55,894 63,205
Other assets . . . . . . . . . . . . . . . . . . . 16,694 14,856

$173,422 $176,583

(8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities include:

March 31,
(In thousands) 1999 1998

Cash overdraft . . . . . . . . . . . . . . . . . . $ 16,959 $ 31,621
Restructuring reserves . . . . . . . . . . . . . . 5,087 10,429
Insurance payable and related reserves . . . . . . 9,584 7,248
Customer cylinder deposits . . . . . . . . . . . . 8,233 8,668
Accrued interest . . . . . . . . . . . . . . . . . 8,190 8,918
Other accrued expenses and current liabilities . . 60,242 61,922

$108,295 $128,806

F-18

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(9) INDEBTEDNESS

(a) Long-term Debt

Long-term debt consists of:

March 31,
(In thousands) 1999 1998

Revolving credit borrowings. . . . . . . . . . . . $554,954 $519,736
Medium-term notes. . . . . . . . . . . . . . . . . 225,000 225,000
Acquisition and investment notes . . . . . . . . . 72,577 79,521
All other notes, at various rates and maturities . 14,955 18,738

Total long-term debt . . . . . . . . . . . . . . . 867,486 842,995
Less current portion of long-term debt . . . . . . (19,645) (12,150)

Long-term debt, excluding current portion . . . . $847,841 $830,845

The Company has unsecured revolving credit facilities
totaling $725 million and $100 million Canadian (US$67 million).
The Company may borrow under these facilities until the final
maturity date of December 5, 2002. The agreement contains
covenants which include the maintenance of a minimum equity
level, maintenance of certain financial ratios, restrictions on
additional borrowings and limitations on dividends. At March 31,
1999, the Company had borrowings under the agreement of $528
million and $42 million Canadian (US$27 million). The Company
also had commitments under letters of credit supported by the
agreement of approximately $71 million. Based on restrictions
related to cash flow to funded debt coverage, the Company had
additional borrowing capacity under the agreement of
approximately $165 million. At March 31, 1999, the effective
interest rates related to outstanding borrowings under the lines
were approximately 5.44% on U.S. borrowings and 5.11% on Canadian
borrowings.

At March 31, 1999, the Company had the following long-term
debt outstanding under medium-term notes: $50 million of
unsecured notes due September 2001 bearing interest at a fixed
rate of 7.15%; $75 million of unsecured notes due March 2004 at a
fixed rate of 7.14%; and, $100 million of unsecured notes due
September 2006 bearing interest at a fixed rate of 7.75%. The
Company also has a shelf registration with a capacity of
approximately $175 million for the issuance of debt and other
types of securities.

Acquisition notes represent notes issued to sellers of
businesses acquired and are repayable in periodic installments
including interest at an average rate of 7.47%. Some acquisition
notes require balloon payments which are included in the
aggregate maturity schedule.

F-19

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(9) INDEBTEDNESS - (Continued)

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

In thousands

Years Ending March 31, Aggregate Maturity

2000 . . . . . . . . . . . . . $ 19,645
2001 . . . . . . . . . . . . . 14,632
2002 . . . . . . . . . . . . . 78,370
2003 . . . . . . . . . . . . . 556,550
2004 . . . . . . . . . . . . . 95,573
Thereafter . . . . . . . . . . 102,716

$ 867,486

The fair value of long-term debt as of March 31, 1999 was
approximately $854 million based on current rates offered to the
Company by financial institutions for similar type instruments.

(b) Swap Agreements

In managing interest rate exposure, the Company participates
in 23 interest rate swap agreements with a total notional
principal amount of $475 million at March 31, 1999. Counterparties
to the interest rate swap agreements are major financial institutions.
The Company monitors its positions and the credit ratings of its
counterparties, and does not anticipate nonperformance by the
counterparties.

Sixteen swap agreements with approximately $238 million in
notional principal amount require fixed interest payments based
on an average effective rate of 6.79% for remaining periods
ranging between one and five years. Seven swap agreements with
approximately $237 million in notional principal amount require
variable interest payments based on an average rate of 5.04% at
March 31, 1999. Under the terms of five of the swap agreements,
the Company has elected to receive the discounted value of the
counterparty's interest payments up front. At March 31, 1999,
approximately $8.7 million of such payments were included in
other non-current liabilities. The market value of these other
non-current liabilities was $8.2 million at March 31, 1999. The
effect of the swap agreements was to increase interest expense
$1.1 million, $1.0 million and $1.4 million in 1999, 1998 and
1997, respectively. Subsequent to March 31, 1999 the Company
entered into two swap agreements with an aggregate notional
principal amount of $100 million requiring fixed rate interest
payments at an effective rate of 5.48% for two years.

F-20

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(9) INDEBTEDNESS - (Continued)

The aggregate maturities of the Company's interest rate
swaps by type of swap for the five years ending March 31, 2004
and thereafter are as follows:

In thousands
Notional Principal Amounts
Years Ending March 31, Pay-Fixed Receive-Fixed

2000 . . . . . . . . . . . . $ 18,311 $ 57,000
2001 . . . . . . . . . . . . 58,311 50,000
2002 . . . . . . . . . . . . 21,656 50,000
2003 . . . . . . . . . . . . 100,000 --
2004 . . . . . . . . . . . . -- 30,000
Thereafter . . . . . . . . . 40,000 50,000

$238,278 $237,000

(10) STOCKHOLDERS' EQUITY

(a) Common Stock

The Company is authorized to issue 200 million shares of
Common Stock with a par value of $.01 per share. At March 31,
1999, the number of shares of Common Stock outstanding was
71,067,666, excluding 130 thousand shares of common stock held as
treasury stock and 826 thousand shares of Common Stock held in a
grantor trust as described under Note 10(d).

(b) Preferred Stock and Redeemable Preferred Stock

The Company is authorized to issue 20 million shares of
preferred stock. Of the 20 million shares authorized, 200
thousand shares have been designated as Series A Junior
Participating Preferred Stock and 200 thousand shares have been
designated as Series B Junior Participating Preferred Stock (see
Note 10(e) for further discussion). At March 31, 1999 and 1998,
no shares of the preferred stock were outstanding. The preferred
stock may be issued from time to time by the Board of Directors
in one or more series. The Board of Directors is authorized to
fix the dividend rights and terms, conversion rights, voting
rights, rights and terms of redemption, liquidation preferences,
and any other rights, preferences, privileges and restrictions of
any series of preferred stock, and the number of shares
constituting each such series and designation thereof.

Additionally, the Company is authorized to issue 30 thousand
shares of redeemable preferred stock. At March 31, 1999 and 1998,
no shares were outstanding.

F-21

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(10) STOCKHOLDERS' EQUITY - (Continued)

In March 1999, the Company's Board of Directors authorized
the repurchase of up to seven million shares, or approximately
10%, of the Company's outstanding Common Stock. The shares may
be repurchased in the open market or in privately negotiated
transactions depending on market conditions and other factors.
Under previous share repurchase programs, the Company acquired
1.4 million, 2.2 million and 800 thousand shares of Common Stock
in 1999, 1998 and 1997, respectively. In 1999, the Company
reissued 826 thousand shares of Common Stock to the Company's
Employee Benefits Trust (the "Trust"), as discussed in Note
10(d), and issued 598 thousand shares for stock option exercises.
In 1998, the Company reissued approximately 2 million shares in
connection with its acquisition program, 707 thousand shares
related to the purchase of subsidiary minority interests as
described in Note 20, and 209 thousand shares for stock option
exercises. As of March 31, 1999, the total remaining shares
authorized for repurchase under all programs totaled
approximately 7.2 million shares. When treasury shares are
reissued, the Company uses an average cost method and the excess
of the repurchase cost over the reissuance price is treated as a
charge to capital in excess of par value. Subsequent to March
31, 1999, the Company repurchased approximately 630 thousand
shares of Common Stock, including 175 thousand shares to complete
all previous repurchase programs, for total consideration of
approximately $7 million.

(d) Shares in Employee Benefits Trust

On March 30, 1999, the Company established a grantor trust
(the "Trust") to fund certain future obligations of the Company's
employee benefit and compensation plans. On March 31, 1999, the
Trust purchased 826 thousand shares of Common Stock from the
Company at a per share price of the average market close for the
preceding five days, which totaled approximately $7 million. The
Company holds a promissory note from the Trust in the amount of
the purchase. Shares held by the Trust serve as collateral for
the promissory note and are available to fund employee benefit
plan obligations as the promissory note is repaid. The shares
held by the Trust are not considered outstanding for earnings per
share purposes until they are released from serving as collateral
for the promissory note. An independent third-party financial
institution serves as the Trustee. The Trustee will vote or
tender shares held by the Trust in accordance with instructions
received from the participants in the employee benefit and
compensation plans to be funded by the Trust. Subsequent to
March 31, 1999, the Trust purchased 625 thousand shares of Common
Stock from the Company.

(e) Stockholder Rights Plan

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

Rights become exercisable only following the acquisition by
a person or group of 15 percent (or 20 percent in the case of the
Chairman and certain of his affiliates) or more of the Company's
common stock or after the announcement of a tender offer or
exchange offer to acquire 15 percent (or 20 percent in the

F-22

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(10) STOCKHOLDERS' EQUITY - (Continued)

case of the Chairman and certain of his affiliates) or more of
the outstanding Common Stock. If such a person or group acquires
15 percent or more (or 20 percent or more, as the case may be) of
the Common Stock, each right (other than such person's or group's
rights, which will become void) will entitle the holder to
purchase, at the exercise price, Common Stock having a market
value equal to twice the exercise price. In certain circumstances,
the rights may be redeemed by the Company. If not redeemed, they
will expire on April 1, 2007.

On August 1, 1988, the Company's Board of Directors adopted
a preferred share purchase rights plan (the "1988 Rights Plan")
that entitled Company stockholders to purchase from the Company a
unit consisting of one-hundredth of a share of Series A Junior
Participating Preferred Shares, or a combination of securities
and assets of equivalent value, at a purchase price of $65.00 per
unit, subject to adjustment. The 1988 Rights Plan expired in
August 1998.

(11) STOCK-BASED COMPENSATION

The Company has elected to continue to account for its stock-
based compensation plans in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued," as permitted
by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123").
Accordingly, no compensation expense has been recognized for its
stock option plans and its stock purchase plan. However, pro
forma information regarding net income and earnings per share is
required. Had compensation expense for the Company's stock-based
compensation plans been determined based on the fair value at the
grant date, the Company's pro forma net earnings and earnings per
share for 1999, 1998 and 1997 would be as follows:

Years Ended March 31,
(In thousands, except per share amounts) 1999 1998 1997

Net earnings As reported $51,924 $40,540 $23,266
Pro forma $46,636 $36,240 $20,028

Diluted earnings per share As reported $ .72 $ .57 $ .34
Pro forma $ .65 $ .51 $ .29

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

F-23

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(11) STOCK-BASED COMPENSATION - (Continued)

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

(a) Employee Stock Option Plans

The Company has a stock plan under which officers and key
employees may be granted options. In May 1997, the Company
adopted the 1997 Stock Option Plan (the "1997 Plan"). The 1997
Plan contains essentially the same terms and conditions as the
Company's previous 1984 Stock Option Plan (the "1984 Plan"). The
1984 Plan was terminated upon approval of the 1997 Plan by the
Company's stockholders. Under the 1984 Plan, 948,855 options
were granted in fiscal 1998 with an exercise price equal to the
market price at the date of grant. Options under the 1984 Plan
vest 25% annually and have a maximum term of ten years.

Under the 1997 Plan, at March 31, 1999 and 1998, 6,309,368
and 7,900,850 options, respectively, were available for issuance.
In fiscal 1999 and 1998, 1,665,007 and 99,150 options,
respectively, were granted with an exercise price equal to market
price at the date of grant. Options under the 1997 Plan are
generally granted in May each year, vest 25% annually and have a
maximum term of ten years.

The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the
following weighted average assumptions used for 1999, 1998 and
1997 option grants, respectively: expected volatility of 42.6%,
39.9% and 38.5%, risk-free interest rate of 5.54%, 6.48% and
6.42%, and expected life of 4.81, 4.47 and 4.37 years. The
weighted average fair value of the options granted during 1999,
1998 and 1997 was $5.82, $6.55 and $8.95, respectively.

In connection with the fiscal 1998 acquisition of Carbonic
Industries Corporation ("CIC"), the Company assumed the Carbonic
Industries Corporation 1994 Stock Option Plan (the "CIC Plan").
The CIC Plan provided grants to certain key officers and
employees of CIC. At the date of acquisition, 196,572 options
were exercisable to purchase Company Common Stock. The fair
value of these options was recorded at the date of acquisition.

F-24

61
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the activity of the employee
stock option plans during the three years ended March 31, 1999:

Exercise
Number Price Per
of Shares Share

March 31, 1997
Outstanding, beginning of year . . . 6,199,460 $ 1.83 - $17.31
Granted. . . . . . . . . . . . . . . 785,685 11.44 - 23.25
Exercised. . . . . . . . . . . . . . (530,390) 1.83 - 17.31
Expired. . . . . . . . . . . . . . . (173,080) 3.30 - 22.00
March 31, 1998
Outstanding, beginning of year . . . 6,281,675 1.83 - 23.25
Granted. . . . . . . . . . . . . . . 1,244,577 13.50 - 17.38
Exercised. . . . . . . . . . . . . . (897,358) 1.83 - 14.82
Expired. . . . . . . . . . . . . . . (269,787) 10.69 - 22.00
March 31, 1999
Outstanding, beginning of year . . . 6,359,107 1.83 - 23.25
Granted. . . . . . . . . . . . . . . 1,665,007 8.13 - 15.94
Exercised. . . . . . . . . . . . . . (557,647) 1.83 - 15.63
Expired. . . . . . . . . . . . . . . (256,947) 6.31 - 22.00
Outstanding, end of year . . . . . . 7,209,520 $ 1.83 - $23.25

Options for 4,439,900, 4,266,095 and 4,077,069 shares were
exercisable at March 31, 1999, 1998 and 1997, respectively.

(b) Board of Directors Stock Option Plans

The Company also maintains stock option plans covering
directors who are not employees. In May 1997, the Company
adopted the 1997 Directors' Stock Option Plan (the "1997
Directors' Plan"). The 1997 Directors' Plan reserved 500
thousand shares for issuance. The 1997 Directors' Plan contains
essentially the same terms and conditions as the Company's
previous 1989 Board of Directors' Stock Option Plan (the "1989
Directors' Plan"). The 1989 Directors' Plan was terminated upon
approval of the 1997 Directors' Plan by the Company's
stockholders.

Under the 1997 Directors' Plan, at March 31, 1999, 416,000
options were available for issuance. During 1999 and 1998,
48,000 and 36,000 options, respectively, were granted with an
exercise price equal to the market price at the date of grant.

The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the
following weighted average assumptions used for 1999, 1998 and
1997 option grants, respectively: expected volatility of 42.2%,
39.5% and 37.8%, risk-free interest rate of 5.52%, 6.12% and
6.42%, and expected life of 5.48, 5.35 and 5.35 years. The
weighted average fair value of the stock options granted during
1999, 1998 and 1997 was $6.36, $8.68 and $8.68, respectively.

F-25

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(11) STOCK-BASED COMPENSATION - (Continued)

The following table summarizes the activity of the Board of
Directors stock option plans during the three years ended March
31, 1999:

Exercise
Number Price Per
of Shares Share

March 31, 1997
Outstanding, beginning of year . . . 352,000 $ 2.10 - $13.82
Granted. . . . . . . . . . . . . . . 32,000 19.25
Exercised. . . . . . . . . . . . . . (98,000) 2.09 - 13.82
March 31, 1998
Outstanding, beginning of year . . . 286,000 2.09 - 19.25
Granted. . . . . . . . . . . . . . . 36,000 19.00
Exercised. . . . . . . . . . . . . . (16,000) 2.09 - 2.14
March 31, 1999
Outstanding, beginning of year . . . 306,000 2.09 - 19.25
Granted. . . . . . . . . . . . . . . 48,000 13.50
Exercised. . . . . . . . . . . . . . (40,000) 2.09 - 4.16
Outstanding, end of year . . . . . . 314,000 $ 2.09 - $19.25

Options for 314,000, 306,000 and 286,000 shares were
exercisable at March 31, 1999, 1998 and 1997, respectively.

F-26

63
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(11) STOCK-BASED COMPENSATION - (Continued)

The following table summarizes information about options
outstanding and exercisable for the employee, CIC and Board of
Directors stock option plans at March 31, 1999:

Options Outstanding
Exercise
Weighted Average Number Price
Remaining Life-Years Outstanding Per Share

1.90 797,920 $ 1.83 - $ 2.14
2.50 909,200 2.20 - 3.30
4.33 780,039 3.48 - 6.31
8.45 824,860 6.32 - 8.50
5.63 954,049 8.56 - 13.32
5.92 603,638 13.50 - 15.25
8.12 805,461 15.63 - 15.63
9.12 898,425 15.94 - 15.94
6.96 914,628 16.63 - 22.00
7.43 35,300 22.87 - 23.25

5.91 7,523,520 $ 1.83 - $23.25

Number of Options Weighted Average
Exercisable Exercise Price Per Share

797,920 $ 1.92
909,200 3.10
780,039 6.06
202,660 7.81
825,982 12.04
467,763 14.37
203,445 15.63
549,237 20.03
17,654 23.25

4,753,900 $ 8.82

F-27

64
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In August 1998, the Company established the Airgas, Inc.
1998 Employee Stock Purchase Plan (the "1998 Plan") to encourage
and assist employees in acquiring an equity interest in the
Company. The 1998 Plan is authorized to issue up to 3 million
shares of Common Stock. Effective January 1, 1999, eligible
employees may elect to have up to 15% of their annual gross
earnings withheld to purchase Common Stock at 85% of the market
value. Market value under the 1998 Plan is defined as either the
closing share price on the New York Stock Exchange as of the
employees' enrollment date or the closing price on the last
business day of a fiscal quarter, whichever is lower. An
employee may lock-in a purchase price for up to 27 months. The
1998 Plan is designed to comply with the requirements of Sections
421 and 423 of the Internal Revenue Code. The 1998 Plan replaces
the previous 1994 Employee Stock Purchase Plan.

The Company established the 1994 Employee Stock Purchase
Plan (the "1994 Plan") to encourage and assist employees in
acquiring an equity interest in the Company. The 1994 Plan is
authorized to issue up to 2 million shares of Common Stock at
terms generally consistent with the 1998 Plan. The Company issued
614 thousand shares, 451 thousand shares and 396 thousand shares
under the 1994 Plan at an average purchase price of $9.30, $13.20
and $13.02 per share during 1999, 1998, and 1997, respectively.
During fiscal 2000, the Company intends to terminate the 1994
Plan.

Compensation expense under SFAS 123 is estimated for the
fair value of the employees' option to purchase shares of common
stock, which was estimated using the Black-Scholes model with the
following assumptions for 1999, 1998 and 1997, respectively:
expected volatility of 46%, 38% and 38% risk-free interest rate
of 4.8%, 5.8% and 6.2%, and expected term of 27 months for each
period. The weighted average fair value of the purchase options
granted in fiscal 1999, 1998 and 1997 was $4.79, $6.55 and $6.51,
respectively.

(12) INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company's investments in unconsolidated affiliates
totaled approximately $101 million at March 31, 1999, and $99
million at March 31, 1998. The Company's investments include a
47% joint venture interest in the voting capital stock of
National Welders Supply Company, Inc. ("National Welders").
National Welders is a producer and distributor of industrial,
medical and specialty gases and related equipment based in
Charlotte, North Carolina. The investment in National Welders
totaled approximately $55 million and $52 million at March 31,
1999 and 1998, respectively. The Company's other investments in
unconsolidated affiliates totaled approximately $46 million and
$47 million at March 31, 1999 and 1998, respectively. The
Company's other investments primarily consist of a 25.5% interest
in Bhoruka Gases, Ltd. (India), a 51% interest in Superior Air
Products, Ltd. (India), a 50% partnership interest in AC
Industries (U.S.) (acquired in connection with the fiscal 1998
acquisition of CIC), and other investments.

F-28
65
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(12) INVESTMENTS IN UNCONSOLIDATED AFFILIATES - (Continued)

The Company accounts for investments in unconsolidated
affiliates by the equity method of accounting. The Company's
share of earnings from all unconsolidated affiliates was $7.9
million, $4.4 million and $2.3 million for the years ended March
31, 1999, 1998 and 1997, respectively. Equity in earnings from
the Elkem JV of $.9 million, $1.5 million and $1.4 million in
1999, 1998, and 1997 are included in Gas Operations' net sales.
Taxes relating to the earnings of partnership interests included
in the equity earnings of unconsolidated affiliates are provided
for in consolidated income taxes. The investments in unconsolidated
affiliates include goodwill of approximately $30 million as of
March 31, 1999 which is being amortized to earnings over 40 years.

A summary of financial information for investments in
unconsolidated affiliates for the years ended March 31, 1999 and
1998 were as follows:

March 31,
(In thousands) 1999 1998

Current assets $ 47,221 $ 55,177
Non-current assets 138,344 147,281
Total assets $185,565 $202,458

Current liabilities $ 27,557 $ 32,036
Non-current liabilities 86,066 92,864
Mandatory redeemable preferred stock 57,577 57,577
Stockholders' equity 14,365 19,981
Total liabilities and
Stockholders' equity $185,565 $202,458

Years Ended March 31,
(In thousands) 1999 1998 1997

Net sales $200,017 $188,640 $134,972
Cost of sales 137,406 113,793 95,334
Gross profit 62,611 74,847 39,638

Operating income 16,995 20,243 7,742

Earnings before taxes 17,266 14,493 8,691

Net earnings 13,463 11,339 6,243

Preferred stock dividends
and equity adjustments (5,553) (6,937) (3,929)
Equity in earnings of Elkem JV (868) (1,471) (1,356)

Equity in earnings of
unconsoliated affiliates $ 7,042 $ 2,931 $ 958

F-29

66
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(13) INTEREST EXPENSE, NET

Interest expense, net, consists of:

Years Ended March 31,
(In thousands) 1999 1998 1997

Interest expense. . . . . . . . . . . $62,588 $55,403 $41,777
Interest and finance charge income. . (2,290) (2,113) (2,025)

$60,298 $53,290 $39,752

(14) INCOME TAXES

Pre-tax earnings (losses) were derived from the following sources:

Years Ended March 31,
(In thousands) 1999 1998 1997

United States. . . . . . . . . . . . . $83,548 $71,810 $44,199
Foreign. . . . . . . . . . . . . . . . 2,813 (1,281) 147

$86,361 $70,529 $44,346

Income tax expense consists of:

Years Ended March 31,
(In thousands) 1999 1998 1997

Current:
Federal. . . . . . . . . . . . . . $15,220 $16,025 $17,337
Foreign. . . . . . . . . . . . . . 599 385 1,224
State. . . . . . . . . . . . . . . 2,573 2,930 2,689
18,392 19,340 21,250
Deferred:
Federal. . . . . . . . . . . . . . 13,870 10,748 (1,483)
Foreign. . . . . . . . . . . . . . 446 (260) 634
State. . . . . . . . . . . . . . . 1,729 161 679
16,045 10,649 (170)
$34,437 $29,989 $21,080

F-30
67
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(14) INCOME TAXES - (Continued)

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

Years Ended March 31,
1999 1998 1997

Taxes 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. . . 2.3% 3.4% 3.2%
Amortization of non-deductible goodwill . . . . 4.6% 3.6% 2.6%
Special charges (Note 3). . . . . . . . . . . . -- 0.7% 3.7%
Divestitures. . . . . . . . . . . . . . . . . . 0.4% 0.6% 1.7%
Equity accounting for unconsolidated affiliates (3.1%) (1.6%) 0.7%
Other, net. . . . . . . . . . . . . . . . . . . 0.7% 0.8% 0.6%

39.9% 42.5% 47.5%

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

March 31,
(In thousands) 1999 1998

Deferred Tax Assets:
Inventories . . . . . . . . . . . . . . . $ 4,720 $ 2,455
Accounts receivable . . . . . . . . . . . 414 1,928
Deferred rental income. . . . . . . . . . 481 401
Insurance reserves. . . . . . . . . . . . 3,245 2,889
Special charges (Note 3). . . . . . . . . 3,790 3,933
Divestiture of non-core businesses. . . . 705 2,621
Other reserves. . . . . . . . . . . . . . 2,238 3,468
Intangible assets . . . . . . . . . . . . 1,382 842
Other . . . . . . . . . . . . . . . . . . 6,760 6,472
Valuation allowance . . . . . . . . . . . (1,672) (1,329)
22,063 23,680
Deferred Tax Liabilities:
Property and equipment. . . . . . . . . . (139,329) (129,009)
Other . . . . . . . . . . . . . . . . . . (17,860) (9,075)
(157,189) (138,084)

Net deferred tax liability. . . . . . . . . $(135,126) $(114,404)

F-31

68
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(14) INCOME TAXES - (Continued)

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

March 31,
(In thousands) 1999 1998

Current deferred tax assets, net. . . . $ 7,549 $ 6,952
Non-current deferred tax liability, net (142,675) (121,356)

Net deferred tax liability. . . . . . . $(135,126) $(114,404)

The Company has recorded tax benefits amounting to $1.6
million, $3.8 million and $4.2 million in 1999, 1998 and 1997,
respectively, resulting from the exercise of stock options and
warrants. This benefit has been recorded in capital in excess of
par value.

In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in
which those temporary differences become deductible. Management
considers the reversal of deferred tax liabilities and projected
future taxable income in making this assessment. Based upon the
level of historical taxable income and projections for future
taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible
differences, net of the existing valuation allowances, at March
31, 1999. Valuation allowances primarily relate to state tax net
operating loss carry-forwards.

The Internal Revenue Service is currently conducting an
examination of the Company's federal income tax return for the
fiscal years ended March 31, 1998, 1997 and 1996. Management
believes that the results of this examination will not have a
material effect on the Company's earnings, financial condition or
liquidity.

(15) BENEFIT PLANS

The Company has a defined contribution 401(k) plan covering
substantially all full-time employees. Under the terms of the
plan, the Company makes matching contributions up to two percent
of participants' wages plus additional discretionary profit
sharing contributions based upon the profitability of the
Company. Amounts expensed under the plan for fiscal 1999, 1998
and 1997 were $4.7 million, $6.4 million and $5.9 million,
respectively.

F-32

69
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(15) BENEFIT PLANS - (Continued)

Certain subsidiaries of the Company participate in
multi-employer pension and post-retirement plans which provide
defined benefits to union employees. Contributions are made to
the plans in accordance with negotiated labor contracts. The
Company has not taken any action to terminate or withdraw from
these plans. Management believes that the Company's liability,
if any, for multi-employer plan withdrawal liability will not
have a material effect on the Company's financial condition,
results of operations or liquidity. Amounts expensed under the
pension plans for fiscal 1999, 1998 and 1997 were $611 thousand,
$660 thousand and $751 thousand, respectively.

(16) RELATED PARTIES

During the years ended March 31, 1999, 1998 and 1997,
National Welders, an unconsolidated affiliate, paid $818
thousand, $1.2 million and $1.1 million, respectively, to the
Elkem JV for the purchase of calcium carbide. National Welders
also paid $1.4 million, $1.7 million and $574 thousand to the
Company for other gas and hardgoods purchases in fiscal 1999,
1998 and 1997, respectively. In addition, National Welders had
gas and hardgoods sales to the Company of $552 thousand, $390
thousand and $121 thousand in fiscal 1999, 1998 and 1997,
respectively.

The Company paid $8.4 million and $5.9 million to AC
Industries, an unconsolidated affiliate, for the purchase of
liquid carbon dioxide during the years ended March 31, 1999 and
1998, respectively. In addition, the Company had a net payable
balance to AC Industries totaling $1.3 million and $1.2 million,
at March 31, 1999 and 1998, respectively.

(17) LEASES

The Company leases certain distribution facilities and
equipment under long-term operating leases with varying terms.
Most leases contain renewal options and in some instances,
purchase options. Rentals under these long-term leases for the
years ended March 31, 1999, 1998 and 1997, amounted to $35.4
million, $30.4 million and $24.0 million, respectively. Certain
operating facilities are leased at market rates from employees of
the Company who were previous owners of businesses acquired.

The Company has entered into certain operating leases for
real estate with a trust established by a commercial bank. The
trust holds title to the properties and leases the properties to
the Company. The rental payments are based on LIBOR plus an
applicable margin and the cost of the property acquired by the
trust. At the expiration of the leases in September 1999, the
Company has the option to purchase the real properties at fair
value, assist in the sale of the properties to a third party or
renew the leases. At March 31, 1999, the Company's residual
value guarantee was approximately $10.6 million related to the
leased facilities.

F-33

70
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(17) LEASES - (Continued)

At March 31, 1999, future minimum lease payments under
noncancelable operating leases are as follows:

(In thousands)

2000 . . . . . . . . . . . . $ 28,630
2001 . . . . . . . . . . . . 23,100
2002 . . . . . . . . . . . . 18,650
2003 . . . . . . . . . . . . 15,619
2004 . . . . . . . . . . . . 9,924
Thereafter . . . . . . . . . 23,489

$119,412

(18) COMMITMENTS AND CONTINGENCIES

(a) Legal

In July 1996, Praxair, Inc. ("Praxair") filed suit against
the Company in the Circuit Court of Mobile County, Alabama. The
complaint alleged tortuous interference with business or
contractual relations with respect to Praxair's Right of First
Refusal contract with the majority shareholders of National
Welders by the Company in connection with the Company's formation
of a joint venture with National Welders. In June 1998, Praxair
filed a motion to dismiss its own action in Alabama and commenced
another action in the Superior Court of Mecklenburg County, North
Carolina, alleging substantially the same tortuous interference
by the Company. The North Carolina action also alleges breach of
contract against National Welders and certain shareholders of
National Welders and unfair trade practices and conspiracy
against all the defendants. In the North Carolina action Praxair
seeks compensatory damages in excess of $10,000, punitive damages
and other unspecified relief. The Company believes that
Praxair's claims are without merit and intends to defend
vigorously against such claims.

On September 9, 1996, the Company filed suit against Praxair
in the Court of Common Pleas of Philadelphia County,
Pennsylvania. The complaint alleges breach of contract, fraud,
conversion and misappropriation of trade secrets with respect to
an agreement between Praxair and the Company, pursuant to which
Praxair induced the Company to provide Praxair valuable
information and conclusions developed by the Company concerning
CBI Industries, Inc. ("CBI") in exchange for Praxair's promise
not to acquire CBI without the Company's participation. The
Company has alleged that it became entitled, pursuant to such
agreement, to acquire certain of CBI's assets having a value in
excess of $800 million. The Company is seeking compensatory and
punitive damages.

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

F-34

AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(18) COMMITMENTS AND CONTINGENCIES - (Continued)

(b) Insurance Coverage

The Company has established insurance programs to cover
workers' compensation, business automobile, general and products
liability. These programs have self-insured retentions of $500
thousand per occurrence. Losses are accrued based upon the
Company's estimates, developed with third party insurance
adjusters, of the aggregate liability for claims incurred, claims
incurred but not reported and based on Company experience. The
Company has established insurance reserves that management
believes are adequate.

(19) SUPPLEMENTAL CASH FLOW INFORMATION

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

Years Ended March 31,
(In thousands) 1999 1998 1997

Interest $63,316 $51,910 $38,993

Income taxes (net of refunds) 10,452 15,099 13,254

Significant non-cash transactions were as follows:

Years Ended March 31,
(In thousands) 1999 1998 1997

Acquisition related
transactions (also see Note 2):

Debt assumed $ 553 $ 5,486 $ 1,536
Liabilities assumed 15,475 49,407 29,733
Debt issued 2,361 17,781 30,104
Common stock issued -- 55,608 78,671

Capital lease additions -- 461 567

Capitalized interest 271 1,200 622

The Company capitalized interest in connection with the
construction of two air separation plants during 1998 and 1997.

F-35

72
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(20) MINORITY INTEREST IN SUBSIDIARIES

Minority interests in subsidiaries represent the minority
shareholders' proportionate share of the equity and the results
of operations of the domestic and foreign subsidiaries. The
Company sold minority interests in its domestic subsidiaries to
employees based on the estimated fair market value of the
subsidiary shares. These sales of subsidiary shares were
accounted for as capital transactions and, therefore, no gain or
loss was recorded.

In December 1997, the Board of Directors approved a Mandatory
Exchange in accordance with the exchange rights agreements
between the Company and the domestic minority shareholders. The
number of shares issued from treasury stock was determined based
upon the valuation of the minority interest and the price of the
Company's Common Stock as of February 28, 1998. The market price
on February 28, 1998, was $17.94 per share. The Mandatory
Exchange required that all domestic minority shareholders
exchange their minority interests for an aggregate of 707
thousand shares of Common Stock. The acquisition of these
minority interests under the Mandatory Exchange was recorded
using the purchase method of accounting.

On December 31, 1996, in connection with optional exchanges,
certain domestic minority shareholders elected to exchange their
minority interests for an aggregate of 77 thousand newly issued
shares of Common Stock. The acquisition of the minority
interests was recorded using the purchase method of accounting.

(21) SUMMARY BY BUSINESS SEGMENT

Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131"), was adopted by the Company beginning
with this annual report. SFAS 131 requires the disclosure of
segment information on the same basis used by management for
evaluating segment performance and allocating resources. The
Company has redefined its operating segments based on the new
management structure established under the "Repositioning Airgas
For Growth" initiative. The Company has aggregated its
operations, based on products and services, into two reportable
segments, Distribution and Gas Operations. Comparative fiscal
1998 and 1997 information has been reclassified to conform to the
current presentation.

The Distribution segment accounts for 90% of consolidated
sales and reflects the integration of the traditional gas
distribution companies and the safety products and industrial
tool and supplies distribution companies. These companies have
been combined to reflect management's approach to evaluating
performance and allocating resources as the Company continues to
develop its centralized purchasing, shared distribution
facilities and multi-channel marketing initiatives begun under
the Repositioning Plan. The Distribution segment's principal
products and services are packaged gases, equipment rental and
hardgoods. Gas sales include industrial, medical and specialty
gases such as: nitrogen, oxygen, argon, helium, acetylene, carbon
dioxide, nitrous oxide, hydrogen, welding gases, ultra high
purity grades and special application blends. Rent is derived
from compressed gas cylinders, cryogenic liquid containers and
bulk storage tanks rented to customers and through welding
equipment rentals. Hardgoods consist of welding supplies,
equipment, safety products, and industrial tools and supplies.

The segment entitled Gas Operations consists of certain
domestic operating companies, principally dry ice and carbon
dioxide, and the Company's foreign operations. These companies,
which do not meet the criteria of SFAS 131, were formally
reported under the "Manufacturing segment." The products and
services of this segment consist of the production of dry ice and
liquid carbon dioxide, the operation of

F-36

73
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(21) SUMMARY BY BUSINESS SEGMENT - (Continued)

specialty gas laboratories and the manufacture of nitrous oxide.
In addition, until the December 1998 divestiture, Gas Operations
also manufactured calcium carbide and carbon products.

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

In general, the accounting policies of the segments are the
same as those described in the Summary of Significant Accounting
Policies (Note 1). Exceptions are as follows: Corporate
operating results are allocated to each segment pro rata based on
sales dollars; Corporate assets have been allocated to the
Distribution segment; intercompany sales are recorded on the same
basis as sales to third parties and intercompany transactions are
eliminated in consolidation; and special charges are not
allocated to the business segments.

(In thousands) Distribution Gas Operations Combined

1999
Gas and rent $ 569,406 $ 128,740 $ 698,146
Hardgoods 836,778 4,227 841,005
Other -- 22,067 22,067
Total net sales 1,406,184 155,034 1,561,218

Intersegment sales -- 14,656 14,656

Gross profit 637,616 85,547 723,163
Gross profit margin 45.3% 55.2% 46.3%

Depreciation and amortization expense 74,958 12,968 87,926

Operating income, excluding special charges 98,447 13,549 111,996

Interest expense 49,995 12,593 62,588
Interest income 1,339 951 2,290

Equity earnings of unconsolidated affiliates 4,525 2,517 7,042

Earnings before income taxes,
excluding special charges 53,455 31,906 85,361

EBITDA, excluding special charges (1) 173,405 26,517 199,922
EBITDA margin 12.3% 17.1% 12.8%

Assets 1,451,792 246,680 1,698,472
Investment in equity method investees 57,680 43,154 100,834
Capital expenditures, excluding acquisitions 86,114 15,524 101,638

Other significant non-cash transactions:
Acquisitions 6,762 11,627 18,389
Capitalized interest 271 -- 271

(1) EBITDA - Operating income, excluding special charges, plus
depreciation and amortization, is a measure of the Company's
ability to generate cash flow and should be considered in
addition to, but not as a substitute for, other measures of
financial performance reported in accordance with generally
accepted accounting principles.

F-37

74
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(21) SUMMARY BY BUSINESS SEGMENT - (Continued)

(In thousands)
Distribution Gas Operations Combined

1998
Gas and rent $ 531,166 $ 91,315 $ 622,481
Hardgoods 790,792 1,649 792,441
Other -- 33,068 33,068
Total net sales 1,321,958 126,032 1,447,990

Intersegment sales -- 9,494 9,494

Gross profit 605,240 63,212 668,452
Gross profit margin 45.8% 50.2% 46.2%

Depreciation and amortization expense 67,418 9,252 76,670

Operating income, excluding special charges 111,472 12,426 123,898

Interest expense 45,081 10,322 55,403
Interest income 1,460 653 2,113

Equity earnings of unconsolidated affiliates 1,581 1,350 2,931

Earnings before income taxes,
excluding special charges 69,525 5,954 75,479

EBITDA, excluding special charges (1) 178,890 21,678 200,568
EBITDA margin 13.5% 17.2% 13.9%

Assets 1,396,906 244,568 1,641,474
Investment in equity method investees 52,918 45,604 98,522
Capital expenditures, excluding acquisitions 79,741 44,984 124,725

Other significant non-cash transactions:
Acquisitions 78,137 50,606 128,743
Capitalized interest -- 1,200 1,200

F-38

75
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(21) SUMMARY BY BUSINESS SEGMENT - (Continued)

(In thousands) Distribution Gas Operations Combined

1997
Gas and rent $ 492,337 $ 27,944 $ 520,281
Hardgoods 606,434 461 606,895
Other -- 31,718 31,718
Total net sales 1,098,771 60,123 1,158,894

Intersegment sales -- 6,528 6,528

Gross profit 522,758 24,753 547,511
Gross profit margin 47.6% 41.2% 47.2%

Depreciation and amortization expense 59,542 2,949 62,491

Operating income, excluding special charges 103,376 10,334 113,710

Interest expense 39,143 2,634 41,777
Interest income 1,640 385 2,025

Equity earnings of unconsolidated affiliates 935 23 958

Earnings before income taxes,
excluding special charges 66,349 9,422 75,771

EBITDA, excluding special charges (1) 163,213 12,988 176,201
EBITDA margin 14.9% 21.6% 15.2%

Assets 1,192,630 98,401 1,291,031
Investment in equity method investees 49,591 15,401 64,992
Capital expenditures, excluding acquisitions 69,356 5,002 74,358

Other significant non-cash transactions:
Acquisitions 140,485 126 140,611
Capitalized interest -- 622 622

F-39

76
AIRGAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(21) SUMMARY BY BUSINESS SEGMENT - (Continued)

A reconciliation of the combined operating segments to the
applicable line items on the consolidated financial statements
follows:

Years Ended March 31,
(In thousands) 1999 1998 1997

Segment operating income $ 111,996 $ 123,898 $ 113,710
Special charges 1,000 (4,950) (31,425)
Operating income $ 112,996 $ 118,948 $ 82,285

Segment earnings before
income taxes $ 85,361 $ 75,479 $ 75,771
Special charges 1,000 (4,950) (31,425)
Earnings before income taxes $ 86,361 $ 70,529 $ 44,346

(22) SUPPLEMENTARY INFORMATION (UNAUDITED)

This table summarizes the unaudited results of operations
for each quarter of 1999 and 1998:

(In thousands, except per share amounts) First Second Third Fourth

1999
Net sales. . . . . . . . . . . . . . $400,773 $396,592 $380,323 $383,530
Operating income . . . . . . . . . . 33,429 31,791 25,173 22,603
Net earnings . . . . . . . . . . . . 11,275 10,480 22,088 8,081
Basic earnings per share (a),(b) . . $ .16 $ .15 $ .32 $ .12
Diluted earnings per share (a),(b) . $ .16 $ .15 $ .31 $ .11

1998
Net sales. . . . . . . . . . . . . . $331,412 $360,356 $367,810 $388,412
Operating income . . . . . . . . . . 33,500 47,500 32,702 5,246
Net earnings (loss). . . . . . . . . 12,226 21,675 11,826 (5,187)
Basic earnings (loss)
per share (a),(c) . . . . . . . . . $ .18 $ .32 $ .17 $ (.07)
Diluted earnings (loss)
per share (a),(c) . . . . . . . . . $ .18 $ .31 $ .17 $ (.07)

(a) Earnings per share calculations for each of the quarters are
based on the weighted average number of shares outstanding in
each period. Therefore, the sum of the quarters do not
necessarily equal the full year earnings per share.

F-40

(b) As discussed in Notes 2 and 3 to the Company's consolidated
financial statements, the results for fiscal 1999 include: (1) a
$570 thousand after-tax adjustment related to the first quarter
divestiture of two non-core businesses, (2) a $14.1 million after-
tax non-recurring gain, or $.20 per diluted share, related to the
third quarter divestiture of its calcium carbide and carbon
products operations, (3) a fourth quarter $922 thousand after-tax
non-recurring gain, or $.01 per diluted share, from a settlement
of certain matters related to the December 1998 divestiture of
the Company's calcium carbide and carbon products operations, and
(4) a $1.8 million non-recurring gain, or $.03 per diluted share,
from insurance proceeds recorded by an equity affiliate in the
third quarter.

(c) As discussed in Notes 2 and 3 to the Company's consolidated
financial statements, the results for fiscal 1998 include:
(1) a second quarter after-tax non-recurring gain of $9.4
million, or $.13 per diluted share, from the partial recovery
of refrigerant losses, (2) a $980 thousand after-tax non-
recurring gain, or $.01 per diluted share, related to the
second quarter divestiture of a non-core business, and (3)
fourth quarter after-tax special charges of $12.4 million, or
$.17 per diluted share, related to the Company's Repositioning
Plan, offset by a net gain related to an acquisition break-up
fee.

F-41

SCHEDULE II

AIRGAS, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended March 31, 1999, 1998 and 1997
(In thousands of dollars)

Column A Column B Column C Column D Column E
Additions
------------------------
Charged
Balance at Charged to (Credited) Balance
Beginning Costs and to Other at End of
Description of Period Expenses Accounts Deductions Period

1999
Accounts receivable -- allowance
for doubtful accounts. . . . . . $ 5,676 $ 5,850 $1,071 (1) $ (6,505) (2) $ 6,092
Inventory reserves. . . . . . . . 8,354 -- 14 (2,161) 6,207
Insurance reserves. . . . . . . . 7,248 36,155 245 (34,064) (3) 9,584
Restructuring reserves. . . . . . 10,429 -- -- (5,342) 5,087
Deferred tax valuation allowance 1,329 343 -- -- 1,672

1998
Accounts receivable -- allowance
for doubtful accounts. . . . . . $ 4,443 $ 5,311 $ 1,418 (1) $ (5,496) (2) $ 5,676
Inventory reserves. . . . . . . . 7,633 (188) 909 -- 8,354
Insurance reserves. . . . . . . . 5,224 33,217 (802) (30,391) (3) 7,248
Restructuring reserves. . . . . . -- 11,006 -- (577) 10,429
Deferred tax valuation allowance 491 838 -- -- 1,329

1997
Accounts receivable -- allowance
for doubtful accounts. . . . . . $ 3,396 $ 3,860 $ 1,081 (1) $ (3,894) (2) $ 4,443
Inventory reserves. . . . . . . . 4,874 298 2,461 -- 7,633
Insurance reserves. . . . . . . . 5,297 27,821 (1,750) (26,144) (3) 5,224
Deferred tax valuation allowance -- 491 -- -- 491

(1) Includes collections on accounts previously written-off and allowances
for doubtful accounts of businesses acquired less the allowance for doubtful
accounts of businesses sold.

(2) Write-off of uncollectible accounts.

(3) Payments of insurance premiums and claim settlements.

F-42